Document:

Exhibit 10.1

EMPLOYMENT AGREEMENT

BY AND BETWEEN

FAVRILLE, INC.

AND

RICHARD G. GHALIE, M.D.

TABLE OF
CONTENTS

	
   

  	
   

  	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  EMPLOYMENT

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  LOYAL AND CONSCIENTIOUS PERFORMANCE; EXCLUSIVE
  PROPERTY

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  COMPENSATION OF EXECUTIVE

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  TERMINATION

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  CONFIDENTIAL AND PROPRIETARY INFORMATION

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  ASSIGNMENT AND BINDING EFFECT

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  SURVIVAL

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  NOTICES

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  CHOICE OF LAW

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  INTEGRATION

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  AMENDMENT

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  WAIVER

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  SEVERABILITY

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  INTERPRETATION; CONSTRUCTION

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
   

  	
  COUNTERPARTS

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  REFERENCES

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
   

  	
  ARBITRATION

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
   

  	
  TRADE SECRETS OF OTHERS

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
   

  	
  ADVERTISING; WAIVER

  	
   

  	
  9

  

 

 i

EMPLOYMENT
AGREEMENT

THIS EMPLOYMENT
AGREEMENT (the “Agreement”) is
made and entered into effective as of May 14, 2007 (the “Effective Date”) by and between FAVRILLE, INC., a
Delaware corporation (the “Company”),
and RICHARD GHALIE (“Executive”).  The Company and Executive are collectively
referred to herein as the “Parties,” and each is individually referred to herein as a “Party.”

RECITALS

A.            The Company desires assurance of the
association and services of Executive in order to retain Executive’s experience,
skills, abilities, background and knowledge, and is willing to engage Executive’s
services on the terms and conditions set forth in this Agreement.

B.            Executive desires to be in the employ of the
Company and is willing to accept such employment on the terms and conditions
set forth in this Agreement.

AGREEMENT

In consideration of the
foregoing recitals and the mutual promises and covenants herein contained, and
for other good and valuable consideration, the Parties, intending to be legally
bound, agree as follows:

1.     EMPLOYMENT.

1.1          Term.  The Company hereby employs Executive, and
Executive hereby accepts employment by the Company, upon the terms and
conditions set forth in this Agreement. 
The term of this Agreement shall begin on the Effective Date and shall
continue until it is terminated pursuant to Section 4 (the “Term”).  On the last day of the Term, Executive shall
immediately resign from all positions with the Company.  Notwithstanding anything herein to the
contrary, either Party may terminate Executive’s employment under this
Agreement at any time, with or without Cause (as defined in Subsection 4.5(b)),
subject to the terms and conditions of Sections 4 and  5.

1.2          Title.  Executive
shall have the title of Chief Medical Officer of the Company and shall serve in
such other capacity or capacities as the Board of Directors of the Company (the
“Board”)
may prescribe from time to time. 
Executive shall report to the Chief Executive Officer of the Company
(the “CEO”)
and the Board.

1.3          Duties.  Executive shall do and
perform all services, acts or things necessary or advisable to manage and
conduct the business of the Company and that are normally associated with the
position of Chief Medical Officer, consistent with the bylaws of the Company
and as required by the CEO and the Board.

1.4          Policies and
Practices.  The employment
relationship between the Parties shall be governed by the policies and
practices established by the Company and the Board.  Executive hereby acknowledges that Executive
has read the Company’s Employee Handbook, which, along with this Agreement,
shall govern the terms and conditions of Executive’s

 1
 

employment
with the Company.  In the event that the
terms of this Agreement differ from or are in conflict with the Company’s
policies or practices or the Company’s Employee Handbook, the terms of this
Agreement shall control. Normal working hours are from 8:00 a.m. to
5:00 p.m., Monday through Friday. As an exempt salaried employee, you will
be expected to work additional hours as required by the nature of your work
assignments.

1.5          Location.  Unless the Parties otherwise agree in
writing, during the Term, Executive shall perform the services Executive is
required to perform pursuant to this Agreement at the Company’s offices located
in San Diego, California, or at any other place the Company maintains a
principal office; provided, however,
that the Company may from time to time require Executive to travel temporarily
to other locations in connection with the Company’s business.

2.     LOYAL AND CONSCIENTIOUS PERFORMANCE; EXCLUSIVE
PROPERTY.

2.1          Loyalty.  During Executive’s employment by the Company,
Executive shall devote Executive’s full business energies, interest, abilities
and productive time to the proper and efficient performance of Executive’s
duties under this Agreement.

2.2          Exclusive Property. 
Executive agrees that all business procured by Executive on behalf of
the Company, and all Company-related business opportunities and plans made
known to Executive, while employed by the Company are and shall remain the
exclusive property of the Company.

3.     COMPENSATION
OF EXECUTIVE.

3.1          Base Salary.  The Company shall pay Executive a base salary
of $300,000 per year, less payroll deductions and all required withholdings
payable in regular periodic payments in accordance with Company policy.  Such base salary shall be subject to annual
review and prorated for any partial year of employment on the basis of a
365-day fiscal year.

3.2          Stock Options.  Upon the commencement of Executive’s
employment with the Company  and subject to
approval of the Board or the Compensation Committee and the terms of the
Company’s Amended and Restated 2001  Equity
Incentive Plan, as may be amended from time to time (the “Plan”), Executive will be granted a stock
option (the “Option”)
under the Plan to purchase shares of the Company’s common stock (the “Common Stock”).  To the maximum extent possible, the Option
shall be an Incentive Stock Option as such term is defined in Section 422 (“Section 422”) of the
Internal Revenue Code of 1986, as amended. 
The Option will be governed by and granted pursuant to the Plan and a
separate Grant Notice and Stock Option Agreement, in substantially the form
attached hereto as EXHIBIT A,
as may be amended from time to time upon the approval of the Board or the
Compensation Committee.  The exercise
price per share of the Option will be equal to the fair market value of the
Common Stock established on the date of grant subject to any limitations under
Section 422 and approval by the Board or the Compensation Committee.  The Option will be subject to vesting over
four years so long as Executive provides Continuous Service (as defined in the
Plan) to the Company or an Affiliate in accordance with the Plan, according to
the following schedule: 25% of the shares subject to the Option will vest on
the first anniversary of the date of grant and 1/48th of the shares
subject to the Option will vest monthly thereafter over the next three years.

 2
 

3.3          Employment Taxes.  All of Executive’s compensation shall be subject
to customary withholding taxes and any other employment taxes as are commonly
required to be collected or withheld by the Company.

3.4          Benefits.  Executive shall, in accordance with Company
policy and the terms of the applicable plan documents, be eligible for the
following standard Company benefits: medical, dental and vision insurance, as
well as participation in the Company’s Section 125 flexible spending plan
and participation in the Company’s 401(k) plan, subject to the terms of those
plans. Executive also shall, in accordance with Company policy and the terms of
the applicable plan documents, be eligible to participate in benefits under any
executive benefit plan or arrangement which may be in effect from time to time
and made available to the Company’s executive or key management employees. The
Company reserves the right to modify benefits from time to time as it deems
necessary in its sole discretion. Executive will also be eligible for paid time
off in accordance with the Company’s flexible “time-off” plan. Executive will
accrue flexible “time-off” at a rate of 25 days per year and will be entitled
to 12 holidays per year. The Company reserves the right to modify its policies
from time to time as it deems necessary in its sole discretion.

4.     TERMINATION.

4.1          Termination for
Complete Disability.  Executive’s
employment with the Company shall terminate effective upon the date of
Executive’s Complete Disability
(as defined in Subsection  4.5(a)).

4.2          Termination by the
Company.  Executive’s employment with
the Company may be terminated by the Company as follows:

(a)           For Cause.  The Company may terminate Executive’s
employment under this Agreement at any time for “Cause” (as defined in Subsection  4.5(b)) by delivery of written notice to Executive specifying
the Cause or Causes relied upon for such termination.  Any notice of termination given pursuant to
this Subsection 4.2(a) shall effect termination as of the date specified in
such notice or, in the event no such date is specified, two business days after
written notice is given to Executive.

(b)           Without Cause.  The Company may terminate Executive’s
employment under this Agreement at any time and for any reason by delivery of
written notice of such termination to Executive.  Any notice of termination given pursuant to
this Subsection  4.2(b) shall effect termination
as of the date specified in such notice or, in the event no such date is
specified, two weeks after written notice is given to Executive.

4.3          Termination by
Executive.  Executive
may terminate Executive’s employment with the Company at any time.

4.4          Compensation upon
Termination.

(a)           Death or Complete
Disability.  If
Executive’s employment by the Company is terminated by Executive’s death or
Complete Disability, the Company shall pay to Executive’s heirs or Executive,
as applicable, Executive’s base salary and accrued and unused

 3
 

vacation
benefits earned through the date of termination at the rate in effect at the
time of such termination, less standard deductions and withholdings, and the Company
shall thereafter have no further obligations to Executive and/or Executive’s
heirs under this Agreement.

(b)           With Cause.  If Executive’s employment is
terminated by the Company for Cause, the Company shall pay Executive’s base
salary and accrued and unused vacation benefits earned through the date of
termination at the rate in effect at the time of such termination, less
standard deductions and withholdings, and the Company shall thereafter have no
further obligations to Executive under this Agreement.

(c)           Without Cause.  If the Company terminates
Executive’s employment without Cause, the Company shall pay Executive’s base
salary and accrued and unused vacation earned through the date of termination
at the rate in effect at the time of such termination, less standard deductions
and withholdings.  In addition, subject
to the limitations set forth in Subsection 4.4(d) and upon Executive’s
furnishing to the Company an effective release and waiver of claims, in
substantially the form attached hereto as EXHIBIT B (the “Release and Waiver”), Executive also
shall be entitled to:

i.              The equivalent
of 1/12 of Executive’s annual base salary in effect at the time of termination,
less standard deductions and withholdings, to be paid each month over a period
of nine months after the date of termination (the “Severance Period”), pursuant to the
Company’s standard payroll practices, with each such payment being treated as a
separate “payment” for purposes of Code Section 409A and Treasury Regulation
Sections 1.409A-1(b)(4) and 1.409A-2(b)(2)(iii). Notwithstanding the forgoing,
such payments shall be made in a manner that complies with the requirements of
Code Section 409A, which may include, without limitation, deferring such
payments for 6 months after Executive’s termination of employment;

ii.            In the event
Executive elects continued coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”), the Company shall reimburse
Executive for the same portion of Executive’s COBRA health insurance premium
that it paid during Executive’s employment up until the earlier of either
(i) the last day of the Severance Period or (ii) the date on which
Executive begins full-time employment with another company, organization or
business entity; and

iii.           The accelerated
vesting of the portion of any outstanding option to purchase Common Stock held
by Executive on the date of termination that would have otherwise vested during
the Severance Period, so that each such portion is vested and exercisable as of
the date of termination to the extent such portion would otherwise become
vested and exercisable as of the end of the Severance Period.

(d)           Termination of
Obligations. 
Notwithstanding any provisions in this Agreement to the contrary,
including any provisions contained in this Subsection  4.4,
the Company’s obligations, and Executive’s rights, pursuant to Subsection  4.4(c) shall cease and be rendered a nullity immediately
should Executive violate any provision of Section 2 and Section 5, or should
Executive violate the terms and conditions of either Executive’s Proprietary

 4
 

Information
and Inventions Agreement or Nondisclosure Agreement with the Company (discussed
in Subsection 5.1).

4.5          Definitions.  For purposes of this Agreement, the following
terms shall have the following meanings:

(a)           Complete Disability.  “Complete
Disability”  shall mean the inability of Executive to perform
Executive’s duties under this Agreement because Executive has become
permanently disabled within the meaning of any policy of disability income
insurance covering employees of the Company then in force.  In the event the Company has no policy of
disability income insurance covering employees of the Company in force when
Executive becomes disabled, the term “Complete
Disability”  shall mean the inability of Executive to perform
Executive’s duties under this Agreement by reason of any incapacity, physical
or mental, that the Board, based upon medical advice or an opinion provided by
a licensed physician acceptable to the Board, determines to have incapacitated
Executive from satisfactorily performing all of Executive’s usual services for
the Company for a period of at least 120 days during any 12-month period
(whether or not consecutive).  Based upon
such medical advice or opinion, the determination of the Board shall be final
and binding and the date such determination is made shall be the date of such
Complete Disability for purposes of this Agreement.

(b)           For Cause.  “Cause”
for the Company to terminate Executive’s employment hereunder shall mean
the occurrence of any of the following events:

(i)            Executive’s conviction of any felony or any crime involving fraud or
dishonesty;

(ii)           Executive’s participation (whether by affirmative act or omission) in a
fraud, act of dishonesty or other act of misconduct against the Company and/or
an Affiliate;

(iii)         Conduct by Executive which, based upon a good faith and reasonable
factual investigation by the Board, demonstrates Executive’s gross unfitness to
serve;

(iv)          Executive’s violation of any fiduciary duty or duty of loyalty owed to
the Company and/or an Affiliate;

(v)            Executive’s breach of any material term of any material contract between
Executive and the Company and/or an Affiliate;

(vi)          Executive’s violation of any material Company policy; and

(vii)         Executive’s violation of state or federal law in connection with the
performance of Executive’s job.

The determination that a termination is for Cause shall
be made by the Board in its sole and exclusive judgment and discretion.

 5
 

5.     CONFIDENTIAL AND PROPRIETARY INFORMATION.

5.1          As a condition
of employment, Executive agrees to execute and abide by the terms of
Proprietary Information and Inventions Agreement, in substantially the form
attached hereto as EXHIBIT
C, and a Nondisclosure Agreement, in substantially the form attached hereto
as EXHIBIT D.

5.2          Executive
recognizes that Executive’s employment with the Company will involve contact
with information of substantial value to the Company that is not generally
known in the trade and that gives the Company an advantage over its competitors
who do not know or use it, including but not limited to, techniques, designs,
drawings, processes, inventions know how, strategies, marketing, and/or
advertising plans or arrangements, developments, equipment, prototypes, sales,
supplier, service provider, vendor, distributor and customer information, and
business and financial information relating to the business, products,
services, practices and techniques of the Company (hereinafter referred to as “Confidential and Proprietary
Information”).  Executive
will at all times regard and preserve as confidential such Confidential and
Proprietary Information obtained by Executive from whatever source and will
not, either during Executive’s employment with the Company or thereafter,
publish or disclose any part of such Confidential and Proprietary Information
in any manner at any time, or use the same except on behalf of the Company,
without the prior written consent of the Company.

6.     ASSIGNMENT
AND BINDING EFFECT.  Neither this
Agreement nor any rights or obligations hereunder shall be assignable by
Executive.  This Agreement shall be
binding upon and inure to the benefit of the Company and its successors,
assigns and legal representatives.

7.     SURVIVAL.  Subsections 4.4(c) and
4.4(d) and Sections 5, 6, 7, 8, 9, 18 and 19 shall survive the termination of
this Agreement.

 6
 

8.     NOTICES.  All notices or demands of
any kind required or permitted to be given by the Company or Executive under
this Agreement shall be given in writing and shall be personally delivered (and
receipted for) or faxed during normal business hours or mailed by certified
mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:

Favrille, Inc.

10445 Pacific Center Court

San Diego, CA  92121

Phone: (858) 526-8000

Fax: (858) 597-7040

Attn:  Chief
Financial Officer

If to Executive:

Richard G. Ghalie, M.D.

4755 Natalie Drive

San
Diego, CA 92115

Any such written notice shall be
deemed given on the earlier of the date on which such notice is personally
delivered or three days after its deposit in the United States mail as
specified above.  Either Party may change
its address for notices by giving notice to the other Party in the manner
specified in this Section 8.

9.     CHOICE OF
LAW.  This Agreement is made in
San Diego, California.  This Agreement
shall be construed and interpreted in accordance with the internal laws of the
State of California, excluding its conflicts of laws principles.

10.  INTEGRATION.  Except as provided in
Executive’s Proprietary Information and Inventions Agreement and Nondisclosure
Agreement with the Company, the Plan and the related Plan documents, this
Agreement, including EXHIBIT
B hereto, contains the complete, final and exclusive agreement of
the Parties relating to the terms and conditions of Executive’s employment with
the Company and the termination of Executive’s employment, and supersedes all
prior and contemporaneous oral and written employment agreements or
arrangements between the Parties. To the extent this Agreement conflicts with
the Proprietary Information and Inventions Agreement or the Nondisclosure
Agreement, the terms of such Proprietary Information and Inventions Agreement
or Nondisclosure Agreement, respectively, shall control.

11.  AMENDMENT.  This Agreement cannot be amended or modified
except by a written agreement signed by Executive and the Company.

12.  WAIVER.  No term, covenant or condition of this
Agreement or any breach thereof shall be deemed waived, except with the written
consent of the Party against whom the wavier is claimed, and any waiver or any
such term, covenant, condition or breach shall not be deemed to be a waiver of
any preceding or succeeding breach of the same or any other term, covenant,
condition or breach.

13.  SEVERABILITY.  The finding by a court of competent
jurisdiction of the unenforceability, invalidity or illegality of any provision
of this Agreement shall not render any other provision of this Agreement
unenforceable, invalid or illegal.  Such
court shall have the

 7
 

authority to modify or replace the invalid or unenforceable term or
provision with a valid and enforceable term or provision that most accurately
represents the Parties’ intention with
respect to the invalid or unenforceable term or provision.

14.  INTERPRETATION;
CONSTRUCTION.  The headings
set forth in this Agreement are for convenience of reference only and shall not
be used in interpreting this Agreement. 
This Agreement has been drafted by legal counsel representing the
Company, but Executive has been encouraged to consult with, and has had the
opportunity to consult with, Executive’s own independent counsel and tax
advisors with respect to the terms of this Agreement.  The Parties acknowledge that each Party and
its counsel have reviewed and revised, or had an opportunity to review and
revise, this Agreement, and the normal rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement.

15.  REPRESENTATIONS
AND WARRANTIES.  Executive represents and warrants that
Executive is not restricted or prohibited, contractually or otherwise, from
entering into and performing each of the terms and covenants contained in this
Agreement, and that Executive’s execution and performance of this Agreement
will not violate or breach any other agreements between Executive and any other
person or entity.

16.  COUNTERPARTS.  This Agreement may be executed in two
counterparts, each of which shall be deemed an original, both of which together
shall constitute one and the same instrument.

17.  REFERENCES.  References herein to a “Section” or a “Subsection” shall be
to a Section or a Subsection, respectively, of this Agreement.

18.  ARBITRATION.  To ensure the rapid and
economical resolution of disputes that may arise in connection with Executive’s
employment with the Company, the Parties agree that any and all disputes,
claims, or causes of action, in law or equity, arising from or relating to
Executive’s employment, or the termination of that employment, will be
resolved, to the fullest extent permitted by law, by final, binding and
confidential arbitration in San Diego, California conducted by the Judicial
Arbitration and Mediation Services/Endispute, Inc. (“JAMS”), or its successors, under the then
current rules of JAMS for employment disputes; provided
that the arbitrator shall: 
(a) have the authority to compel adequate discovery for the resolution
of the dispute and to award such relief as would otherwise be permitted by law;
and (b) issue a written arbitration decision including the arbitrator’s
essential findings and conclusions and a statement of the award.  Each Party shall be entitled to all rights
and remedies that such Party would be entitled to pursue in a court of law.  The Company shall pay all arbitration
fees.  Nothing in this Agreement is
intended to prevent either Party from obtaining injunctive relief in court to
prevent irreparable harm pending the conclusion of any such arbitration.

19.  TRADE
SECRETS OF OTHERS.  It is the
understanding of the Parties that Executive shall not divulge to the Company
and/or an Affiliate any confidential information or trade secrets belonging to
others, including Executive’s former employers, nor shall the Company and/or an
Affiliate seek to elicit from Executive any such information.  Consistent with the foregoing,

 8
 

Executive shall not provide to the Company and/or an Affiliate, and the
Company and/or an Affiliate shall not request, any documents or copies of
documents containing such information.

20.  ADVERTISING;
WAIVER.  Executive
agrees to permit the Company and/or an Affiliate, and persons or other
organizations authorized by the Company and/or an Affiliate, to use, publish
and distribute advertising or sales promotional literature concerning the
products and/or services of the Company and/or an Affiliate, or the machinery
and equipment used in the provision thereof, in which Executive’s name and/or
pictures of Executive taken in the course of Executive’s provision of services
to the Company and/or an Affiliate, appear. 
Executive hereby waives and releases any claim or right Executive may
otherwise have arising out of such use, publication or distribution.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 9
 

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

FAVRILLE, INC.

	
  By: 

  	
  /s/ John P.
  Longenecker

  	
   

  	
   

  	
   

  
	
  Name:

  	
  John P.
  Longenecker, Ph.D.

  	
   

  	
   

  	
   

  
	
  Its:

  	
  President and
  Chief Executive Officer

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  /s/April 30,
  2007

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Executive:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/

  	
  Richard G.
  Ghalie, M.D.

  	
   

  	
   

  	
   

  
	
  [EXECUTIVE]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  May 2, 2007

  	
   

  	
   

  	
   

  
												

 

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]

 10

EXHIBIT A

FORM OF
STOCK OPTION AGREEMENT

 11
 

EXHIBIT B

RELEASE
AND WAIVER OF CLAIMS

In
consideration of the payments and other benefits set forth in Section 4 of the
Employment Agreement dated                       ,
to which this form is attached, I, RICHARD
G. GHALIE, M.D., hereby furnish FAVRILLE, INC., a Delaware corporation (the “Company”), with
the following release and waiver (“Release
and Waiver”).

In
exchange for the consideration provided to me by the Employment Agreement that
I am not otherwise entitled to receive, I hereby generally and completely
release the Company and its directors, officers, employees, shareholders,
partners, agents, attorneys, predecessors, successors, parent and subsidiary
entities, insurers, Affiliates, and assigns from any and all claims,
liabilities and obligations, both known and unknown, that arise out of or are
in any way related to events, acts, conduct, or omissions occurring prior to my
signing this Release and Waiver.  This
general release includes, but is not limited to: (1) all claims arising out of
or in any way related to my employment with the Company or the termination of
that employment; (2) all claims related to my compensation or benefits from the
Company, including, but not limited to, salary, bonuses, commissions, vacation
pay, expense reimbursements, severance pay, fringe benefits, stock, stock
options, or any other ownership interests in the Company; (3) all claims
for breach of contract, wrongful termination, and breach of the implied
covenant of good faith and fair dealing; (4) all tort claims, including,
but not limited to, claims for fraud, defamation, emotional distress, and
discharge in violation of public policy; and (5) all federal, state, and local
statutory claims, including, but not limited to, claims for discrimination,
harassment, retaliation, attorneys’ fees, or other claims arising under the
federal Civil Rights Act of 1964 (as amended), the federal Americans with
Disabilities Act of 1990, the federal Age Discrimination in Employment Act of
1967 (as amended) (“ADEA”),
and the California Fair Employment and Housing Act (as amended).

I
also acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows:  “A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.”  I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to any claims I may
have against the Company.

I
acknowledge that, among other rights, I am waiving and releasing any rights I
may have under ADEA, that this Release and Waiver is knowing and voluntary, and
that the consideration given for this Release and Waiver is in addition to
anything of value to which I was already entitled as an executive of the
Company.  If I am 40 years of age or
older upon execution of this Release and Waiver, I further acknowledge that I
have been advised, as required by the Older Workers Benefit Protection Act,
that:  (a) the release and waiver granted
herein does not relate to claims under the ADEA which may arise after this
Release and Waiver is executed; (b) I have the right to consult with an
attorney prior to executing this Release and Waiver (although I may choose
voluntarily not to do so); and (c) I have twenty-one (21) days from the date of
termination of my employment with the Company in which to consider this Release
and Waiver (although I may choose voluntarily to execute this Release and
Waiver earlier); (d) I have seven (7) days following the execution of this
Release and Waiver to revoke my consent to this Release and Waiver; and (e)
this Release and Waiver shall not be effective until the seven (7) day
revocation period has expired.

If I
am less than 40 years of age upon execution of this Release and Waiver, I
acknowledge that I have the right to consult with an attorney prior to
executing this Release and Waiver (although I may choose voluntarily not to do
so); and (c) I have five (5) days from the date of termination of my employment
with the Company in which to consider this Release and Waiver (although I may
choose voluntarily to execute this Release and Waiver earlier).

I acknowledge my continuing
obligations under my Proprietary Information and Inventions Agreement, a copy
of which is attached hereto (the “Proprietary Agreement”).  Pursuant to the Proprietary Information and
Inventions Agreement I understand that among other things, I must not use or
disclose any confidential or proprietary information of the Company and I must
immediately return all Company property and documents (including all
embodiments of proprietary information) and all copies thereof in my possession
or control.  I understand and agree that
my right to the severance pay I am receiving in exchange for my agreement to
the terms of this Release and Waiver is contingent upon my continued compliance
with my Proprietary Information & Inventions Agreement.

This Release and Waiver and the
Proprietary Agreement constitute the complete, final and exclusive embodiment
of the entire agreement between the Company and me with regard to the subject
matter hereof.  I am not

 12
 

relying on any promise or representation by the
Company that is not expressly stated herein. 
This Release and Waiver may only be modified by a writing signed by both
me and a duly authorized officer of the Company.

	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  RICHARD G. GHALIE, M.D.

  

 

 13

EXHIBIT C

FAVRILLE,
INC.

PROPRIETARY INFORMATION AND
INVENTIONS AGREEMENT

In consideration of my
employment or continued employment by FAVRILLE,
INC., a Delaware corporation the “Company”), and the compensation now and hereafter paid to
me, I, RICHARD G. GHALIE, M.D.,
hereby agree as follows:

1.             NONDISCLOSURE

1.1          Recognition of
Company’s Rights; Nondisclosure.  At all times during my employment and
thereafter, I will hold in strictest confidence and will not disclose, use,
lecture upon or publish any of the Company’s and/or its Affiliates’ Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing.  I will obtain Company’s written approval
before publishing or submitting for publication any material (written, verbal,
or otherwise) that relates to my work at Company and/or incorporates any
Proprietary Information.  I hereby assign
to the Company any rights I may have or acquire in such Proprietary Information
and recognize that all Proprietary Information shall be the sole property of
the Company and its assigns.  For
purposes of this Agreement,  “Affiliate” means, with
respect to any specific entity, any other entity that, directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with such specified entity.

1.2          Proprietary
Information.  The term “Proprietary Information” shall mean any and all confidential
and/or proprietary knowledge, data or information of the Company and/or its
Affiliates.  By way of illustration but
not limitation, “Proprietary Information” includes
(a) trade secrets, inventions, mask works, ideas, processes, formulas,
source and object codes, data, programs, other works of authorship, know-how,
improvements, discoveries, developments, designs and techniques (hereinafter
collectively referred to as “Inventions”);
and (b) information regarding plans for research, development, new products,
marketing and selling, business plans, budgets and unpublished financial
statements, licenses, prices and costs, suppliers and customers; and (c)
information regarding the skills and compensation of other employees of the
Company and/or its Affiliates. 
Notwithstanding the foregoing, it is understood that, at all such times,
I am free to use information which is generally known in the trade or industry,
which is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.

1.3          Third Party
Information.  I
understand, in addition, that the Company has received and in the future will
receive from third parties confidential or proprietary information (“Third  Party  Information”)
subject to a duty on the Company’s part to maintain the confidentiality of such
information and to use it only for certain limited purposes.  During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless expressly
authorized by an officer of the Company in writing.

1.4          No Improper Use of
Information of Prior Employers and Others.  During my employment by the Company I will
not improperly use or disclose any confidential information or trade secrets,
if any, of any former employer or any other person to whom I have an obligation
of confidentiality, and I will not bring onto the premises of the Company any
unpublished documents or any property belonging to any former employer or any
other person to whom I have an obligation of confidentiality unless consented
to in writing by that former employer or person.  I will use in the performance of my duties
only information which is generally known and used by persons with training and
experience comparable to my own, which is common knowledge in the industry or
otherwise legally in the public domain, or which is otherwise provided or
developed by the Company.

2.             ASSIGNMENT OF INVENTIONS.

2.1          Proprietary Rights.  The term “Proprietary Rights” shall
mean all trade secret, patent, copyright, mask work and other intellectual
property rights throughout the world.

2.2          Prior Inventions.  Inventions, if any, patented or unpatented,
which I made prior to the commencement of my employment with the Company are
excluded from the scope of this Agreement. 
To preclude any possible uncertainty, I have set forth on

 14
 

Exhibit C-2 (Previous Inventions) attached hereto a complete list
of all Inventions that I have, alone or jointly with others, conceived,
developed or reduced to practice or caused to be conceived, developed or
reduced to practice prior to the commencement of my employment with the
Company, that I consider to be my property or the property of third parties and
that I wish to have excluded from the scope of this Agreement (collectively
referred to as “Prior Inventions”).  If disclosure of any such Prior Invention
would cause me to violate any prior confidentiality agreement, I understand
that I am not to list such Prior Inventions in Exhibit C-2 but am only to
disclose a cursory name for each such invention, a listing of the party(ies) to
whom it belongs and the fact that full disclosure as to such inventions has not
been made for that reason.  A space is
provided on Exhibit C-2 for such purpose. 
If no such disclosure is attached, I represent that there are no Prior
Inventions.  If, in the course of my
employment with the Company, I incorporate a Prior Invention into a Company
product, process or machine, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with
rights to sublicense through multiple tiers of sublicensees) to make, have
made, modify, use and sell such Prior Invention.  Notwithstanding the foregoing, I agree that I
will not incorporate, or permit to be incorporated, Prior Inventions in any
Company Inventions without the Company’s prior written consent.

2.3          Assignment of
Inventions.  Subject to
Sections  2.4 and 2.6, I hereby assign and agree
to assign in the future (when any such Inventions or Proprietary Rights are
first reduced to practice or first fixed in a tangible medium, as applicable)
to the Company all my right, title and interest in and to any and all
Inventions (and all Proprietary Rights with respect thereto) whether or not
patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company.  Inventions assigned to the Company, or to a
third party as directed by the Company pursuant to this Section 2, are hereinafter referred to as “Company  Inventions”.

2.4          Nonassignable
Inventions.  This
Agreement does not apply to an Invention which qualifies fully as a
nonassignable Invention under Section 2870 of
the California Labor Code (hereinafter “Section 2870”). 
I have reviewed the notification on Exhibit C-1 (Limited Exclusion
Notification) and agree that my signature acknowledges receipt of the
notification.

2.5          Obligation to Keep
Company Informed.  During the
period of my employment and for six (6) months after termination of my
employment with the Company, I will promptly disclose to the Company fully and
in writing all Inventions authored, conceived or reduced to practice by me,
either alone or jointly with others.  In
addition, I will promptly disclose to the Company all patent applications filed
by me or on my behalf within a year after termination of employment.  At the time of each such disclosure, I will
advise the Company in writing of any Inventions that I believe fully qualify
for protection under Section 2870; and I will at that time provide to the
Company in writing all evidence necessary to substantiate that belief.  The Company will keep in confidence and will
not use for any purpose or disclose to third parties without my consent any
confidential information disclosed in writing to the Company pursuant to this
Agreement relating to Inventions that qualify fully for protection under the
provisions of Section 2870.  I will
preserve the confidentiality of any Invention that does not fully qualify for
protection under Section 2870.

2.6          Government or Third
Party.  I also agree to assign all my
right, title and interest in and to any particular Company Invention to a third
party, including without limitation the United States, as directed by the
Company.

2.7          Works for Hire.  I acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the
scope of my employment and which are protectable by copyright are “works made for hire”, pursuant to United States Copyright
Act (17 U.S.C., Section 101).

2.8          Enforcement of
Proprietary Rights.  I will
assist the Company in every proper way to obtain, and from time to time
enforce, United States and foreign Proprietary Rights relating to Company
Inventions in any and all countries.  To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably request
for use in applying for, obtaining, perfecting, evidencing, sustaining and
enforcing such Proprietary Rights and the assignment thereof.  In addition, I will execute, verify and
deliver assignments of such Proprietary Rights to the Company or its designee.  My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and
all countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company’s request on such assistance.

In the event the
Company is unable for any reason, after reasonable effort, to secure my
signature on any

 15
 

document needed in
connection with the actions specified in the preceding paragraph, I hereby
irrevocably designate and appoint the Company and its duly authorized officers
and agents as my agent and attorney in fact, which appointment is coupled with
an interest, to act for and in my behalf to execute, verify and file any such
documents and to do all other lawfully permitted acts to further the purposes
of the preceding paragraph with the same legal force and effect as if executed
by me.  I hereby waive and quitclaim to
the Company any and all claims, of any nature whatsoever, which I now or may
hereafter have for infringement of any Proprietary Rights assigned hereunder to
the Company.

3.             RECORDS.  I agree to keep and maintain adequate and
current records (in the form of notes, sketches, drawings and in any other form
that may be required by the Company) of all Proprietary Information developed
by me and all Inventions made by me during the period of my employment at the
Company, which records shall be available to and remain the sole property of
the Company at all times.

4.             ADDITIONAL ACTIVITIES.  I agree that during the period of my
employment by the Company I will not, without the Company’s express written
consent, engage in any employment or business activity which is competitive
with, or would otherwise conflict with, my employment by the Company.  I agree further that for the period of my
employment by the Company and for one (l) year after the date of termination of
my employment by the Company I will not induce any employee of the Company to
leave the employ of the Company.

5.             NO CONFLICTING OBLIGATION.  I represent that my performance of all the
terms of this Agreement and as an executive of the Company does not and will
not breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company.  I have not entered into, and I agree I will
not enter into, any agreement either written or oral in conflict herewith.

6.             RETURN OF COMPANY DOCUMENTS.  When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company
Inventions, Third Party Information or Proprietary Information of the Company.  I further agree that any property situated on
the Company’s premises and owned by the Company, including disks and other
storage media, filing cabinets or other work areas, is subject to inspection by
Company personnel at any time with or without notice.  Prior to leaving, I will cooperate with the
Company in completing and signing the Company’s termination statement.

7.             LEGAL AND EQUITABLE REMEDIES.  Because my services are personal and unique
and because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or
other equitable relief, without bond and without prejudice to any other rights
and remedies that the Company may have for a breach of this Agreement.

8.             NOTICES.  Any notices required or permitted hereunder
shall be given to the appropriate party at the address specified below or at
such other address as the Party shall specify in writing.  Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.

9.             NOTIFICATION OF NEW EMPLOYER.  In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.

10.          GENERAL PROVISIONS.

10.1        Governing Law; Consent
to Personal Jurisdiction.  This
Agreement will be governed by and construed according to the laws of the State
of California, as such laws are applied to agreements entered into and to be
performed entirely within California between California residents.  I hereby expressly consent to the personal
jurisdiction of the state and federal courts located in San Diego County,
California for any lawsuit filed there against me by Company arising from or
related to this Agreement.

10.2        Severability.  In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. 
If moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.

10.3        Successors and
Assigns.  This
Agreement will be binding upon my heirs, executors, administrators and other
legal representatives and will

 16
 

be for the benefit of the Company, its successors, and its assigns.

10.4        Survival.  The provisions of this Agreement shall
survive the termination of my employment and the assignment of this Agreement
by the Company to any successor in interest or other assignee.

10.5        Employment.  I agree and understand that nothing in this
Agreement shall confer any right with respect to continuation of employment by
the Company, nor shall it interfere in any way with my right or the Company’s
right to terminate my employment at any time, with or without Cause.

10.6        Waiver.  No waiver by the Company of any breach of
this Agreement shall be a waiver of any preceding or succeeding breach.  No waiver by the Company of any right under
this Agreement shall be construed as a waiver of any other right.  The Company shall not be required to give
notice to enforce strict adherence to all terms of this Agreement.

10.7        Entire Agreement.  The obligations pursuant to Sections  1 and 2 of this Agreement shall apply to any time during
which I was previously employed, or am in the future employed, by the Company
as a consultant if no other agreement governs nondisclosure and assignment of
inventions during such period.  This
Agreement is the final, complete and exclusive agreement of the Parties with
respect to the subject matter hereof and supersedes and merges all prior
discussions between us.  No modification
of or amendment to this Agreement, nor any waiver of any rights under this
Agreement, will be effective unless in writing and signed by the Party to be
charged.  Any subsequent change or
changes in my duties, salary or compensation will not affect the validity or
scope of this Agreement.

This Agreement
shall be effective as of the first day of my employment with the Company,
namely:  

I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.  I HAVE COMPLETELY FILLED OUT EXHIBIT C-1
TO THIS AGREEMENT.

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Richard
  G. Ghalie, M.D.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCEPTED
  AND AGREED TO:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  FAVRILLE,
  INC.

  	
   

  	
   

  
	
  10445 Pacific
  Center Court

  	
   

  	
   

  
	
  San Diego, CA
  92121

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
						

 

 17

EXHIBIT C-1

LIMITED EXCLUSION NOTIFICATION

THIS IS TO NOTIFY EXECUTIVE in accordance with
Section 2872 of the California Labor Code that the foregoing Agreement between
Executive and the Company does not require Executive to assign or offer to
assign to the Company any invention that Executive developed entirely on your
own time without using the Company’s equipment, supplies, facilities or trade
secret information except for those inventions that either:

1.                                       Relate at the time of conception or reduction
to practice of the invention to the Company’s business, or actual or
demonstrably anticipated research or development of the Company;

2.             Result from any work performed by Executive for the
Company.

To the extent a
provision in the foregoing Agreement purports to require Executive to assign an
invention otherwise excluded from the preceding paragraph, the provision is
against the public policy of this state and is unenforceable.

This limited
exclusion does not apply to any patent or invention covered by a contract
between the Company and the United States or any of its agencies requiring full
title to such patent or invention to be in the United States.

I ACKNOWLEDGE RECEIPT of a copy of this notification.

	
  

  	
   

  
	
  

  	
  [EXECUTIVE]

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  
	
   

  	
   

  
	
  WITNESSED BY:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (PRINTED NAME OF REPRESENTATIVE)

  
				

 

 18
 

EXHIBIT
C-2

	
  TO:

  	
  FAVRILLE, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
  FROM:

  	
  [EXECUTIVE]

  	
   

  
	
   

  	
   

  	
   

  
	
  DATE:

  	
   

  	
  , 2007

  	
   

  
				

 

SUBJECT:      Previous Inventions

1.             Except as listed in Section 2 below, the following is a complete list of all
inventions or improvements relevant to the subject matter of my employment by FAVRILLE, INC. (the “Company”)
that have been made or conceived or first reduced to practice by me alone or
jointly with others prior to my engagement by the Company:

	
  

  	
  o

  	
   

  	
  No inventions or improvements.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  o

  	
   

  	
  See below:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  o

  	
   

  	
  Additional sheets attached.

  

 

2.             Due to a prior confidentiality agreement, I cannot
complete the disclosure under Section 1 above with respect to inventions
or improvements generally listed below, the proprietary rights and duty of
confidentiality with respect to which I owe to the following party(ies):

	
  Invention or Improvement

  	
   

  	
  Party(ies)

  	
   

  	
  Relationship

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
   

  	
   

  	
   

  

 

	
  

  	
  o

  	
   

  	
  Additional sheets attached.

  

 

 19
 

 

EXHIBIT D

FAVRILLE,
INC.

NONDISCLOSURE AGREEMENT

 20Exhibit
10.2

LOAN AGREEMENT

Dated as of February 2,
2007

Among

HRHH HOTEL/CASINO, LLC,

as Hotel/Casino Borrower

and

HRHH CAFE, LLC,

as Café Borrower

and

HRHH DEVELOPMENT, LLC,

as Adjacent Borrower

and

HRHH IP, LLC,

as IP Borrower

and

HRHH GAMING, LLC,

as Gaming Borrower

and

COLUMN FINANCIAL, INC.,

as Lender

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I. DEFINITIONS; PRINCIPLES OF
  CONSTRUCTION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
  Section 1.2

  	
   

  	
  Principles of Construction

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II. GENERAL TERMS

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Loan Commitment; Disbursement to Borrowers

  	
   

  	
  56

  
	
  Section 2.2

  	
   

  	
  Interest Rate

  	
   

  	
  57

  
	
  Section 2.3

  	
   

  	
  Loan Payment

  	
   

  	
  64

  
	
  Section 2.4

  	
   

  	
  Prepayments

  	
   

  	
  65

  
	
  Section 2.5

  	
   

  	
  Release of Property

  	
   

  	
  74

  
	
  Section 2.6

  	
   

  	
  Cash Management

  	
   

  	
  89

  
	
  Section 2.7

  	
   

  	
  Extensions of the Initial Maturity Date

  	
   

  	
  94

  
	
  Section 2.8

  	
   

  	
  Exit Fee

  	
   

  	
  102

  
	
  Section 2.9

  	
   

  	
  Unused Advance Fee

  	
   

  	
  103

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III. CONSTRUCTION LOAN.

  	
   

  	
  104

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Construction Loan Advances

  	
   

  	
  104

  
	
  Section 3.2

  	
   

  	
  Conditions Precedent to Initial Construction Loan
  Advance

  	
   

  	
  106

  
	
  Section 3.3

  	
   

  	
  Conditions Precedent to Subsequent Construction Loan
  Advances

  	
   

  	
  113

  
	
  Section 3.4

  	
   

  	
  Conditions of Final Construction Loan Advance

  	
   

  	
  117

  
	
  Section 3.5

  	
   

  	
  No Reliance

  	
   

  	
  118

  
	
  Section 3.6

  	
   

  	
  Procedures for Loan Advances

  	
   

  	
  118

  
	
  Section 3.7

  	
   

  	
  Direct Advances to Third Parties

  	
   

  	
  119

  
	
  Section 3.8

  	
   

  	
  Loan Advances Do Not Constitute a Waiver

  	
   

  	
  120

  
	
  Section 3.9

  	
   

  	
  Cost Overruns; Reallocation of Line Items

  	
   

  	
  120

  
	
  Section 3.10

  	
   

  	
  Contingency Reallocations

  	
   

  	
  122

  
	
  Section 3.11

  	
   

  	
  Stored Materials

  	
   

  	
  122

  
	
  Section 3.12

  	
   

  	
  Loan Balancing and Shortfalls

  	
   

  	
  123

  
	
  Section 3.13

  	
   

  	
  Quality of Work

  	
   

  	
  124

  
	
  Section 3.14

  	
   

  	
  Imported Materials

  	
   

  	
  124

  
	
  Section 3.15

  	
   

  	
  Approval of Change Orders

  	
   

  	
  124

  
	
  Section 3.16

  	
   

  	
  Construction Covenants

  	
   

  	
  125

  
	
  Section 3.17

  	
   

  	
  Pre-Construction Advances

  	
   

  	
  129

  
	
  Section 3.18

  	
   

  	
  Work at Adjacent Property

  	
   

  	
  134

  
	
  Section 3.19

  	
   

  	
  Administrative Agent

  	
   

  	
  135

  
	
  Section 3.20

  	
   

  	
  Monthly Interest Payments During Construction

  	
   

  	
  137

  
	
  Section 3.21

  	
   

  	
  Construction Loan Advances Once Construction Loan is
  Fully Advanced

  	
   

  	
  138

  
	
  Section 3.22

  	
   

  	
  Right of Borrowers to Halt Construction and Restore.

  	
   

  	
  140

  

 

 i
 

 

	
  ARTICLE IV. REPRESENTATIONS AND WARRANTIES.

  	
   

  	
  143

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Representations of Borrowers

  	
   

  	
  143

  
	
  Section 4.2

  	
   

  	
  Survival of Representations

  	
   

  	
  158

  
	
  Section 4.3

  	
   

  	
  Definition of Borrowers’ Knowledge

  	
   

  	
  158

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V. COVENANTS OF BORROWERS

  	
   

  	
  158

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Affirmative Covenants

  	
   

  	
  158

  
	
  Section 5.2

  	
   

  	
  Negative Covenants

  	
   

  	
  176

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI. INSURANCE; CASUALTY; CONDEMNATION;
  RESTORATION

  	
   

  	
  184

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Insurance

  	
   

  	
  184

  
	
  Section 6.2

  	
   

  	
  Casualty

  	
   

  	
  189

  
	
  Section 6.3

  	
   

  	
  Condemnation

  	
   

  	
  190

  
	
  Section 6.4

  	
   

  	
  Restoration

  	
   

  	
  191

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII. RESERVE FUNDS

  	
   

  	
  195

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Required Repair Fund

  	
   

  	
  195

  
	
  Section 7.2

  	
   

  	
  Tax and Insurance Escrow Fund

  	
   

  	
  198

  
	
  Section 7.3

  	
   

  	
  Replacements and Replacement Reserve

  	
   

  	
  198

  
	
  Section 7.4

  	
   

  	
  Interest Reserve Fund

  	
   

  	
  199

  
	
  Section 7.5

  	
   

  	
  Initial Renovation Reserve Fund

  	
   

  	
  200

  
	
  Section 7.6

  	
   

  	
  General Reserve Fund

  	
   

  	
  204

  
	
  Section 7.7

  	
   

  	
  Construction Loan Reserve Fund

  	
   

  	
  205

  
	
  Section 7.8

  	
   

  	
  Reserve Funds, Generally

  	
   

  	
  205

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII. DEFAULTS

  	
   

  	
  206

  
	
   

  	
   

  	
   

  
	
  Section 8.1

  	
   

  	
  Event of Default

  	
   

  	
  206

  
	
  Section 8.2

  	
   

  	
  Remedies

  	
   

  	
  211

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX. SPECIAL PROVISIONS

  	
   

  	
  215

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1

  	
   

  	
  Sale of Note and Securitization

  	
   

  	
  215

  
	
  Section 9.2

  	
   

  	
  Securitization Indemnification

  	
   

  	
  217

  
	
  Section 9.3

  	
   

  	
  Intentionally Omitted

  	
   

  	
  220

  
	
  Section 9.4

  	
   

  	
  Exculpation

  	
   

  	
  220

  
	
  Section 9.5

  	
   

  	
  Matters Concerning Managers and Liquor Manager

  	
   

  	
  224

  
	
  Section 9.6

  	
   

  	
  Matters Concerning Gaming Operator

  	
   

  	
  225

  
	
  Section 9.7

  	
   

  	
  Servicer

  	
   

  	
  225

  
	
  Section 9.8

  	
   

  	
  Restructuring of Loan

  	
   

  	
  226

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X. MISCELLANEOUS

  	
   

  	
  227

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1

  	
   

  	
  Survival

  	
   

  	
  227

  
	
  Section 10.2

  	
   

  	
  Lender’s Discretion

  	
   

  	
  227

  
	
  Section 10.3

  	
   

  	
  Governing Law

  	
   

  	
  227

  
	
  Section 10.4

  	
   

  	
  Modification, Waiver in Writing

  	
   

  	
  229

  

 

 ii
 

 

	
  Section 10.5

  	
   

  	
  Delay Not a Waiver

  	
   

  	
  229

  
	
  Section 10.6

  	
   

  	
  Notices

  	
   

  	
  229

  
	
  Section 10.7

  	
   

  	
  Trial by Jury

  	
   

  	
  231

  
	
  Section 10.8

  	
   

  	
  Headings

  	
   

  	
  232

  
	
  Section 10.9

  	
   

  	
  Severability

  	
   

  	
  232

  
	
  Section 10.10

  	
   

  	
  Preferences

  	
   

  	
  232

  
	
  Section 10.11

  	
   

  	
  Waiver of Notice

  	
   

  	
  232

  
	
  Section 10.12

  	
   

  	
  Remedies of Borrowers

  	
   

  	
  232

  
	
  Section 10.13

  	
   

  	
  Expenses; Indemnity

  	
   

  	
  232

  
	
  Section 10.14

  	
   

  	
  Schedules and Exhibits Incorporated

  	
   

  	
  234

  
	
  Section 10.15

  	
   

  	
  Offsets, Counterclaims and Defenses

  	
   

  	
  234

  
	
  Section 10.16

  	
   

  	
  No Joint Venture or Partnership; No Third Party
  Beneficiaries

  	
   

  	
  234

  
	
  Section 10.17

  	
   

  	
  Publicity

  	
   

  	
  235

  
	
  Section 10.18

  	
   

  	
  Waiver of Marshalling of Assets

  	
   

  	
  236

  
	
  Section 10.19

  	
   

  	
  Waiver of Counterclaim

  	
   

  	
  236

  
	
  Section 10.20

  	
   

  	
  Conflict; Construction of Documents; Reliance

  	
   

  	
  236

  
	
  Section 10.21

  	
   

  	
  Brokers and Financial Advisors

  	
   

  	
  237

  
	
  Section 10.22

  	
   

  	
  Prior Agreements

  	
   

  	
  237

  
	
  Section 10.23

  	
   

  	
  Joint and Several Liability

  	
   

  	
  237

  
	
  Section 10.24

  	
   

  	
  Certain Additional Rights of Lender (VCOC)

  	
   

  	
  237

  
	
  Section 10.25

  	
   

  	
  Future Funding, Participations and Assignment

  	
   

  	
  238

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI. INTENTIONALLY OMITTED

  	
   

  	
  239

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII. GAMING PROVISIONS

  	
   

  	
  239

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.1

  	
   

  	
  Operation of Casino Component

  	
   

  	
  239

  
	
  Section 12.2

  	
   

  	
  Gaming Liquidity Requirements

  	
   

  	
  241

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII. RIGHT OF FIRST OFFER

  	
   

  	
  242

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.1

  	
   

  	
  Right of First Offer

  	
   

  	
  242

  
	
  Section 13.2

  	
   

  	
  Right of First Offer Procedure

  	
   

  	
  242

  
	
  Section 13.3

  	
   

  	
  Application to Credit Suisse

  	
   

  	
  243

  

 

 iii
 

EXHIBITS AND SCHEDULES

	
  Schedule I-A

  	
   

  	
  —

  	
   

  	
  Legal Description of Hotel/Casino Property

  
	
  Schedule I-B

  	
   

  	
  —

  	
   

  	
  Legal Description of Café Property

  
	
  Schedule I-C

  	
   

  	
  —

  	
   

  	
  Legal Description of Adjacent Property

  
	
  Schedule II

  	
   

  	
  —

  	
   

  	
  Description of Project

  
	
  Schedule III

  	
   

  	
  —

  	
   

  	
  Intentionally Omitted

  
	
  Schedule IV

  	
   

  	
  —

  	
   

  	
  Allocated Loan Amounts

  
	
  Schedule V

  	
   

  	
  —

  	
   

  	
  FF&E, Capital & Equipment Leases

  
	
  Schedule VI

  	
   

  	
  —

  	
   

  	
  Organizational Structure

  
	
  Schedule VII

  	
   

  	
  —

  	
   

  	
  Approximate Release Parcel

  
	
  Schedule VIII

  	
   

  	
  —

  	
   

  	
  Litigation

  
	
  Schedule IX

  	
   

  	
  —

  	
   

  	
  Operating Permits

  
	
  Schedule X

  	
   

  	
  —

  	
   

  	
  Rent Roll

  
	
  Schedule XI

  	
   

  	
  —

  	
   

  	
  IP

  
	
  Schedule XII

  	
   

  	
  —

  	
   

  	
  Required Repairs — Deadlines for Completion

  
	
  Schedule XIII

  	
   

  	
  —

  	
   

  	
  Schedule and Budget for Initial Renovations

  
	
  Schedule XIV

  	
   

  	
  —

  	
   

  	
  Projected Monthly Net Operating Income

  
	
  Schedule XV

  	
   

  	
  —

  	
   

  	
  Net Worth Requirements

  
	
  Schedule XVI

  	
   

  	
  —

  	
   

  	
  Uses of Working Capital Advance

  
	
  Schedule XVII

  	
   

  	
  —

  	
   

  	
  Right of First Offer Terms for Affiliate Release
  Parcel Purchasers and Affiliate Adjacent Parcel Purchasers

  
	
  Schedule XVIII

  	
   

  	
  —

  	
   

  	
  Right of Last Look Terms for Affiliate Release
  Parcel Purchasers and Affiliate Adjacent Parcel Purchasers

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
   

  	
   

  	
  Advance Request

  
	
  Exhibit B

  	
   

  	
   

  	
   

  	
  Anticipated Cost Report

  
	
  Exhibit C

  	
   

  	
   

  	
   

  	
  Architect’s Consent

  
	
  Exhibit D

  	
   

  	
   

  	
   

  	
  Construction Completion Guaranty

  
	
  Exhibit E

  	
   

  	
   

  	
   

  	
  Construction Manager’s Consent

  
	
  Exhibit F

  	
   

  	
   

  	
   

  	
  General Contractor’s Consent

  
	
  Exhibit G

  	
   

  	
   

  	
   

  	
  Major Contractor’s Consent

  
	
  Exhibit H

  	
   

  	
   

  	
   

  	
  Application and Certificate for Payment

  
	
  Exhibit I

  	
   

  	
   

  	
   

  	
  Architect’s Certificate

  
	
  Exhibit J

  	
   

  	
   

  	
   

  	
  Construction Manager’s Certificate

  
	
  Exhibit K

  	
   

  	
   

  	
   

  	
  Contractor’s Certificate

  
	
  Exhibit L-1

  	
   

  	
   

  	
   

  	
  Lien Waiver — Progress Payment/Conditional

  
	
  Exhibit L-2

  	
   

  	
   

  	
   

  	
  Lien Waiver — Progress Payment/Unconditional

  
	
  Exhibit L-3

  	
   

  	
   

  	
   

  	
  Lien Waiver — Final Payment/Conditional

  
	
  Exhibit L-4

  	
   

  	
   

  	
   

  	
  Lien Waiver — Final Payment/Unconditional

  
	
  Exhibit M

  	
   

  	
   

  	
   

  	
  Affirmation of Payment

  
	
  Exhibit N

  	
   

  	
   

  	
   

  	
  General Contractor’s Certificate

  
	
  Exhibit O

  	
   

  	
   

  	
   

  	
  Form of Casino Component Lease

  
	
  Exhibit P

  	
   

  	
   

  	
   

  	
  Letter of Credit Reduction Notice

  

 

 iv

LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of
February 2, 2007 (as amended, restated, replaced, supplemented or otherwise
modified from time to time, this “Agreement”),
among COLUMN FINANCIAL, INC., a Delaware
corporation, having an address at 11 Madison Avenue, New York, New York 10010
(together with its successors and assigns, “Lender”),
and HRHH HOTEL/CASINO, LLC, a Delaware
limited liability company, having its principal place of business c/o Morgans
Hotel Group Co., 475 Tenth Avenue, New York, New York 10018, Attention: Marc
Gordon, Chief Investment Officer (“Hotel/Casino Borrower”),
HRHH CAFE, LLC, a Delaware limited
liability company, having its principal place of business c/o Morgans Hotel
Group Co., 475 Tenth Avenue, New York, New York 10018, Attention: Marc Gordon,
Chief Investment Officer (“Café Borrower”),
HRHH DEVELOPMENT, LLC, a Delaware
limited liability company, having its principal place of business c/o Morgans
Hotel Group Co., 475 Tenth Avenue, New York, New York 10018, Attention: Marc
Gordon, Chief Investment Officer (“Adjacent Borrower”),
HRHH IP, LLC, a Delaware limited
liability company, having its principal place of business c/o Morgans Hotel
Group Co., 475 Tenth Avenue, New York, New York 10018, Attention: Marc Gordon,
Chief Investment Officer (“IP Borrower”),
and HRHH GAMING, LLC, a Nevada limited
liability company, having its principal place of business c/o Morgans Hotel
Group Co., 475 Tenth Avenue, New York, New York 10018, Attention: Marc Gordon,
Chief Investment Officer (“Gaming Borrower”;
and each of Hotel/Casino Borrower, Café Borrower, Adjacent Borrower, IP
Borrower and Gaming Borrower, individually, a “Borrower”,
and collectively, “Borrowers”),
jointly and severally.

W  I  T  N
E
S
S
E
T
H:

WHEREAS, Borrowers desire to
obtain the Loan (as hereinafter defined) from Lender; and

WHEREAS, Lender is willing to
make the Loan to Borrowers, subject to and in accordance with the terms and
conditions of this Agreement and the other Loan Documents (as hereinafter
defined);

NOW, THEREFORE, in consideration
of the making of the Loan by Lender and the covenants, agreements,
representations and warranties set forth in this Agreement, and for Ten Dollars
($10.00) and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto hereby
covenant, agree, represent and warrant as follows:

ARTICLE I.

DEFINITIONS;
PRINCIPLES OF CONSTRUCTION

Section 1.1            Definitions.

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

“Acceptable Counterparty”
shall mean any counterparty to the Interest Rate Cap Agreement that has and
shall maintain, until the expiration of the applicable Interest Rate Cap 

Agreement, a long-term unsecured
debt rating of at least “AA-” by S&P and “Aa3” from Moody’s, which rating
shall not include a “t” or otherwise reflect a termination risk.

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

“Acquisition Loan”
shall mean that portion of the Loan to be made by Lender to Borrowers on the
date hereof pursuant to this Agreement in the principal amount equal to the
Acquisition Loan Amount.

“Acquisition Loan Advance”
shall mean the advance of the Acquisition Loan Amount made on the date hereof
pursuant to the provisions of this Agreement.

“Acquisition Loan Amount”
shall mean an amount equal to $760,000,000.00, which represents the portion of
the principal amount of the Loan advanced pursuant to this Agreement on the
date hereof.

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

“Additional Non-Qualified
Mandatory Prepayment” shall have the meaning set forth in Section
2.4.2(d) hereof.

“Additional Non-Qualified
Prepayment Date” shall mean July 1, 2008.

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

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

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

“Adjacent Parcel Purchaser”
shall have the meaning set forth in Section 2.5.2(a) hereof.

“Adjacent Parcel Release
Price” shall have the meaning set forth in Section 2.5.2(a)(vi)
hereof.

“Adjacent Parcel Sale”
shall have the meaning set forth in Section 2.5.2(a) hereof.

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

 2
 

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

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

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

“Affiliate Adjacent Parcel Purchaser”
shall have the meaning set forth in Section 2.5.2(a).

“Affiliate Adjacent Parcel Release Price”
shall have the meaning set forth in Section 2.5.2(a)(vi).

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

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

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

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

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

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

“Affiliated IP Party”
shall mean (i) any subsidiary of any Borrower hereafter formed with Lender’s
consent, (ii) HRHI, but only from and after the consummation of the
transactions contemplated by the Merger Agreement, and (iii) any subsidiary of
HRHI, but only from and after the consummation of the transactions contemplated
by the Merger Agreement.

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

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

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

“Agreement Regarding Morton
Indemnification and Escrow” shall mean that certain Collateral
Assignment and Acknowledgment (Morton Indemnification), dated as of the date
hereof, made by PM Realty, LLC, Red, White and Blue Pictures, Inc., Peter A.
Morton, 510 Development Corporation, Morgans Hotel Group Co., Morgans Group LLC
and Chicago Title 

 3
 

Agency of Nevada, Inc. in
favor of Lender, (i) acknowledging that Lender is a third party beneficiary of
the Morton Indemnification and the PWR/RWB Escrow Agreement, and (ii)
consenting to Lender’s rights under Section 5.2.11 hereof.

“Allocated Loan Amount”
shall mean, with respect to the Adjacent Property (on a per acre basis) and the
IP, the amount of the Loan allocated to each of the Adjacent Property (on a per
acre basis) and the IP as set forth on Schedule IV attached hereto and
made a part hereof; provided, however, that throughout the term
of the Loan, if applicable, the Allocated Loan Amounts shall be adjusted as
follows: (a) in the event that any Borrower shall make a voluntary prepayment
of the Loan, the Allocated Loan Amount for the Adjacent Property (on a per acre
basis) and/or the IP, to the extent any of the foregoing is then securing the
Loan, shall be reduced by an amount equal to (i) the aggregate amount of such
prepayment multiplied by (ii) the Allocated Loan Percentage for the Adjacent
Property (on a per acre basis) or the IP, as applicable, and (b) in the event
of a Casualty or Condemnation to the Adjacent Property resulting in the
application of Net Proceeds to the Loan in accordance with the provisions of
this Agreement, the Allocated Loan Amount for the Adjacent Property shall be
reduced by the amount of such Net Proceeds up to the amount of the Allocated
Loan Amount for the Adjacent Property (on an aggregate basis), but any excess
Net Proceeds over the Allocated Loan Amount for the Adjacent Property shall not
reduce the Allocated Loan Amount for the IP, it being expressly acknowledged
and agreed by Lender and Borrowers that under no circumstances other than the
foregoing clauses (a) and (b), including the payment of any
Release Parcel Release Price, Adjacent Parcel Release Price or IP Release
Price, shall the payment of any principal of the Loan, or any other event,
result in the reduction of the Allocated Loan Amount for the Adjacent Property
(either on a per acre or aggregate basis) or the IP.

“Allocated Loan Percentage”
shall mean, with respect to the Adjacent Property (on a per acre basis) or the
IP, as applicable, as of any date of determination and calculated prior to the
prepayment with respect to which the Allocated Loan Amount calculation is being
made on such date of determination, a fraction, expressed as a percentage, (i)
the numerator of which is the Allocated Loan Amount for the Adjacent Property
(on a per acre basis) or the IP, as applicable, and (ii) the denominator of
which is the difference between $1,360,000,000.00 less any principal
prepayments made prior to the prepayment with respect to which the Allocated
Loan Amount calculation is being made on such date of determination.

“Alteration Threshold
Amount” shall mean (i) prior to Substantial Completion of the
Project (but excluding any portion of the Project), Two Million and No/100
Dollars ($2,000,000.00), and (ii) following Substantial Completion of the
Project, Three Million and No/100 Dollars ($3,000,000.00).

“Alternative Minimum
Interest Reserve Amount” shall have the meaning set forth in Section
2.4.2(b)(ii) hereof.

“Alternative Minimum
Mandatory Letter of Credit” shall have the meaning set forth in Section
2.4.2(b)(ii) hereof.

 4
 

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

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

“Applicable Exit Fee
Percentage” shall mean one percent (1%), unless Borrowers shall
fully repay the Debt on or prior to the Maturity Date with the proceeds of a
Refinancing Loan which is provided by Credit Suisse or an Affiliate thereof
(whether or not it is Lender), in which case it shall mean one-half of one
percent (0.50%).  Borrowers expressly
acknowledge and agree that neither Lender nor Credit Suisse nor any Affiliate
thereof shall have any obligation to offer or to provide any Refinancing Loan
and the failure to offer or to provide any Refinancing Loan shall not affect
Borrowers’ obligation to pay the Exit Fee.

“Applicable Interest Rate”
shall mean the rate or rates at which the Outstanding Principal Balance bears
interest from time to time in accordance with the provisions of Section
2.2.3 hereof.  The Applicable
Interest Rate for the initial Interest Period is Nine and 47/100ths (9.47)%.

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

“Approved Annual Budget”
shall have the meaning set forth in Section 5.1.11(d) hereof.

“Approved Bank”
shall mean a bank or other financial institution which has a minimum long term
unsecured debt rating of at least “AA” by S&P and Fitch and “Aa2” by Moody’s.

“Approved Pre-Construction
Expenses” shall have the meaning specified in Section 3.17.1(a)
hereof.

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

“Architect’s Certificate”
shall have the meaning set forth in Section 3.2(f)(xi).

 5
 

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

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

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

“Assignment of Contracts”
shall mean that certain Assignment of Contracts, Operating Permits and
Construction Permits, dated as of the date hereof, from Borrowers to Lender, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.

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

“Assignment of Liquor
Management Agreement” shall mean that certain Assignment of Liquor
Management Agreement and Subordination of Management Fees, dated as of the date
hereof, among Lender, Hotel/Casino Borrower and HRHI, in its capacity as the
Liquor Manager, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.

“Assignment of Management
Agreement” shall mean either of the Assignment of Management
Agreement (Adjacent Property) or the Assignment of Management Agreement (All
Properties).

“Assignment of Management
Agreement (Adjacent Property)” shall mean that certain Assignment of
Management Agreement (Adjacent Property), dated as of the date hereof, among
Lender, Adjacent Borrower and Sub-Manager, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

“Assignment of Management
Agreement (All Properties)” shall mean that certain Assignment of
Management Agreement and Subordination of Management Fees (All Properties),
dated as of the date hereof, among Lender, Café Borrower, Hotel/Casino
Borrower, Adjacent Borrower and the Affiliated Manager of such Properties, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.

“Assignment of Restaurant
Management Agreement” shall mean that certain Assignment of
Restaurant Management Agreement, dated as of the date hereof, among Lender,
Hotel/Casino Borrower, EGG, LLC and Kerry Simon, the managers of Simon Kitchen
and Bar at the Hotel/Casino Property, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 6
 

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

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

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

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

“Bonafide Adjacent Parcel Purchaser”
shall have the meaning set forth in Section 2.5.2(a).

“Bonafide Adjacent Parcel Release Price”
shall have the meaning set forth in Section 2.5.2(a)(v).

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

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

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

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

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

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

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

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

 7
 

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

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

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

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

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

“Casino Account”
shall mean, if and when Gaming Borrower becomes the Gaming Operator in
accordance with the terms of this Agreement, individually or collectively, one
or more accounts established and maintained from time to time by Gaming
Borrower and reasonably approved by Lender; provided, however,
that any such Casino Account shall be established and maintained pursuant to,
and in accordance with, all applicable Gaming Laws and shall be subject to a
security interest in favor of Lender pursuant to the Loan Documents.

“Casino Component”
shall mean that portion of the Hotel/Casino Property devoted to the operation
of a casino gaming operation and, as of the date hereof, leased to HRHI
pursuant to the HRHI Lease and subleased to Gaming Operator pursuant to the
Gaming Sublease, including, without limitation, those areas devoted to the
conduct of games of chance, facilities associated directly with gaming
operations, including, without limitation, casino support areas such as
surveillance and security areas, cash cages, counting and accounting areas and
gaming back-of-the-house areas, in each case, to the extent the operation
thereof requires a Gaming License under applicable Gaming Laws, as more
particularly described and set forth in the HRHI Lease and the Gaming Sublease
as the “Premises”.

“Casino Component Lease”
shall mean a lease substantially in the form attached hereto as Exhibit O,
by and between Hotel/Casino Borrower, as lessor, and Gaming Borrower, as
lessee, pursuant to which Hotel/Casino Borrower shall lease the Casino
Component to Gaming Borrower for the operation of the Casino Component as a
casino, which, provided no monetary Default or any Event of Default has
occurred and is continuing, shall be entered into upon (i) Gaming Borrower’s
receipt of all necessary approvals from the Gaming Authorities, (ii) the
termination of the Gaming Sublease pursuant to the terms thereof, (iii) the
surrender of any Gaming Licenses by the existing licensee under applicable
Gaming Laws, if required, (iv) the 

 8
 

issuance to Gaming
Borrower of all Gaming Licenses necessary to operate the Casino Component as a
casino, and (v) the effectiveness of such Gaming Licenses.

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

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

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

“Certificate”
shall have the meaning set forth in Section 7.1.2 hereof.

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

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

“Closing Completion
Guaranty” shall mean that certain Closing Guaranty of Completion, dated
as of the date hereof, from Guarantors to Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

“Closing Date”
shall mean the date of the funding of the Loan.

“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 Borrowers in connection with the Loan for the benefit of Lender, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.

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

 9
 

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

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

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

“Construction Completion
Guaranty” shall mean a Construction Guaranty of Completion from
Guarantors in favor of Lender in the form attached hereto as Exhibit D,
as such agreement may be amended, restated, replaced, supplemented or otherwise
modified from time to time.

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

“Construction Consultant Approval”
shall mean, with respect to any Advance Request delivered hereunder, a
certificate or report of the Construction Consultant approving such Advance
Request and confirming the satisfaction (or waiver in writing by Lender) of the
conditions to the applicable Construction Loan Advance set forth in Section
3.2, 3.3 and/or 3.4, hereof, as applicable, based upon a site
observation of the Project made by the Construction Consultant not more than
thirty (30) days prior to the applicable Requested Disbursement Date, which
shall include, among other things, the following:

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

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

(c)           (i) verification of the portion of the
Project completed as of the date of such site observation, and (ii) an estimate
of (A) the percentage of the construction of the Project completed as of the
date of such site observation on the basis of work in place as part of the
Project and the approved Loan Budget and the value of such completed
construction, (B) the Hard Costs actually incurred for work in place as part of
the Project as of the date of such site 

 10
 

observation, (C) the sum necessary to complete construction of the
Project in accordance with the Plans and Specifications, and (D) the amount of
time from the date of such site observation that will be required to achieve
Substantial Completion of the Project;

(d)           a certification that all amounts requested
under the Advance Request that are for the payment of Hard Costs have been
incurred for work and materials actually performed and delivered and consistent
with the Plans and Specifications for such Project to date, except as set forth
in Section 3.1.11 hereof;

(e)           a certification that no Shortfall then
exists;

(f)            a certification that the Advance Request
does not include any amounts in respect of Stored Materials or, if the Advance
Request does include amounts in respect of Stored Materials, then a
certification (i) as to the value of Stored Materials stored at the Hotel/Casino
Property or the Adjacent Property, (ii) as to the value of Stored Materials
stored off-site, and (iii) that the requirements of Section 3.1.11
hereof are satisfied with respect to all such Stored Materials;

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

(h)           a certification that the Construction
Consultant has reviewed all Advance Requests made prior to the date thereof and
compared the invoices or other documentation supporting such prior Construction
Loan Advances with the Line Item categories presently in effect and that the
total advances to date in each such Line Item category do not exceed the
budgeted amount for such category in any material respect, except as permitted
pursuant to Sections 3.9, 3.10 and/or 3.15 hereof; and

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

“Construction Loan”
shall mean that portion of the Loan to be made by Lender to Borrowers pursuant
to this Agreement in an aggregate principal amount not to exceed the
Construction Loan Amount.

“Construction Loan Advance”
shall mean any advance of any portion of the Construction Loan Amount pursuant
to this Agreement, including, without limitation, (i) any Pre-Construction
Advance once advanced in accordance with Section 3.17 hereof, (ii) the
Second Anniversary Unfunded Construction Loan Advance, if applicable, and/or
(iii) any 

 11
 

subsequent advance of
funds advanced into the Construction Loan Reserve Account pursuant to the
Second Anniversary Unfunded Construction Loan Advance as contemplated under Section
3.1(d) hereof, if applicable, in each of the foregoing instances, in
accordance with the terms hereof.

“Construction Loan Amount”
shall mean, as of any date of determination, an amount equal to the lesser of
(i) $600,000,000.00 or (ii) the amount that, when added to the Outstanding
Principal Balance as of such date of determination, will cause the Total Cost
Ratio to equal 80%, whichever of the foregoing clauses (i) or (ii)
is less being the maximum aggregate amount of Construction Loan Advances that
could be made hereunder as of such date of determination.

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

“Construction Management
Agreement” shall mean an agreement to be entered into by and between
Borrowers and Construction Manager providing for the construction of the
Project in accordance with the Plans and Specifications prepared in accordance
with the requirements of this Agreement and approved by Lender in its
reasonable discretion.

“Construction Manager”
shall mean a construction manager to be engaged by one or more Borrowers or any
Affiliate thereof in connection with the Project and approved by Lender in its
reasonable discretion; provided, that in no event shall the Construction
Manager (a) be an Affiliate of any Restricted Party or (b) have any equity
interest or any equivalent thereof in any of the Properties or in any
Restricted Party.

“Construction Manager’s
Certificate” shall have the meaning set forth in Section
3.2(f)(xi).

“Construction Manager’s
Consent” shall mean a Construction Manager Certification and Consent
Agreement executed and delivered by the Construction Manager in favor of Lender
and substantially in the form attached as Exhibit E.

“Construction Qualification
Date” shall mean April 1, 2008, subject to Excusable Delay not to
exceed fifteen (15) days.

“Construction Restoration Completion Notice” shall
have the meaning set forth in Section 3.22(c) hereof.

“Construction Restoration Payment Statement” shall
have the meaning set forth in Section 3.22(c) hereof.

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

 12
 

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

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

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

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

“Contractor’s Certificate”
shall have the meaning set forth in Section 3.2(f)(xi).

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

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

“Counterparty”
shall mean, with respect to the Interest Rate Cap Agreement, IXIS Financial
Products Inc., and with respect to any Replacement Interest Rate Cap Agreement,
any substitute Acceptable Counterparty.

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

“Debt” shall
mean the outstanding principal amount set forth in, and evidenced by, this
Agreement and the Note together with all interest accrued and unpaid thereon
and all other sums (including, if applicable, any Spread Maintenance Premium,
any Prepayment Fee, the Unused Advance Fee, the Administrative Agent Fee and
the Exit Fee) due to Lender in respect of the Loan under the Note, this
Agreement, the Mortgage and the other Loan Documents.

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

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

(a)           the numerator is the
Pro-Forma Net Cash Flow as of such date of determination; and

(b)           the denominator is the
aggregate amount of interest that is reasonably estimated by Lender to be due
and payable on the Outstanding Principal Balance as of such date of
determination for the following full twelve (12) calendar month period.

 13
 

“Debt Yield”
shall mean:

(a)           for all calculations of
Debt Yield except in connection with the Second Qualified Extension Option, a
ratio (expressed as a percentage) in which: (i) the numerator is the Net Cash
Flow for the trailing twelve (12) calendar month period ending with the last
calendar month prior to the date of determination for which financial reports
have been delivered under Section 5.1.1 hereof, as reasonably determined
by Lender based on the financial statements delivered to Lender pursuant to Section
5.1.11 hereof, and (ii) the denominator is the Outstanding Principal
Balance as of such date of determination, subject, however, to the provisions
of Section 2.7.3 hereof; and

(b)           for the calculation of
Debt Yield in connection with the Second Qualified Extension Option, a ratio
(expressed as a percentage) in which: (i) the numerator is the Net Cash Flow
for a period equal to the lesser of (A) the trailing twelve (12) calendar month
period ending with the last calendar month prior to the date of determination
for which financial reports have been delivered under Section 5.1.1
hereof, or (B) the period commencing on the first (1st) day of the First Full
Operating Month through and including the last day of the last calendar month
prior to the date of determination for which financial reports have been
delivered under Section 5.1.1 hereof, with such Net Cash Flow, in the
case of the foregoing clause (B), then being reasonably annualized by
Lender, and in each of the foregoing cases under clause (A) or (B)
above, as reasonably determined by Lender based on the financial statements
delivered to Lender pursuant to Section 5.1.11 hereof, and (ii) the
denominator is the Outstanding Principal Balance as of such date of determination,
subject, however, to the provisions of Section 2.7.3 hereof.

“Debt Yield Letter of
Credit” shall have the meaning set forth in Section 2.7.3(b)
hereof.

“Deeded Adjacent Property”
shall have the meaning set forth in Section 3.2(u) hereof.

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

“Default Rate”
shall mean a rate per annum equal to the lesser of (a) the Maximum Legal Rate
and (b) four percent (4%) above the Applicable Interest Rate.

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

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

“Disclosure Document”
shall mean a prospectus, prospectus supplement, private placement memorandum,
offering memorandum, offering circular or other offering documents, 

 14
 

in each case in
preliminary or final form, used to offer Securities in connection with a
Securitization.

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

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

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

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

“Eighteen Month Anniversary”
shall mean the date that is eighteen calendar months from the Closing Date.

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

“Eligible Institution”
shall mean a depository institution or trust company, the short term unsecured
debt obligations or commercial paper of which are rated at least “A-1+” by
S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts in which
funds are held for thirty (30) days or less (or, in the case of accounts in
which funds are held for more than thirty (30) days, the long term unsecured
debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2”
by Moody’s).

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

“Environmental Indemnity”
shall mean that certain Borrowers Environmental Indemnity Agreement, dated as
of the date hereof, executed by Borrowers in connection with the Loan for the
benefit of Lender, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.

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

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

 15
 

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

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

“Excess Cash Termination
Conditions” shall mean that (i) as of any Financial Determination
Date, the Properties have achieved and maintained a Debt Service Coverage Ratio
of not less than 1.10 to 1.00 for the immediately preceding two (2) consecutive
calendar quarters, and (ii) no Event of Default shall have occurred and be
continuing.

“Excess Cash Release Date”
shall mean the date upon which the Excess Cash Termination Conditions have been
satisfied.

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

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

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

“Exchange Act”
shall have the meaning set forth in Section 9.2(a) hereof.

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

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

“Excusable Delay”
shall mean a delay due to acts of god, governmental restrictions, stays,
judgments, orders, decrees, enemy actions, civil commotion, fire, casualty,
strikes, work stoppages, shortages of labor or materials or other causes beyond
the reasonable control of any Borrower and not arising out of (a) the
negligence, willful misconduct or illegal act of any 

 16
 

Borrower or any Affiliate
of any Borrower, or (b) any cause or circumstance resulting from the
insolvency, bankruptcy or lack of funds of any Borrower, any Guarantor or any
Affiliate of any Borrower or any Guarantor.

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

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

“Extended Maturity Date”
shall mean, as applicable, either (a) the Qualified Extended Maturity Date as
set forth in Section 2.7.2 hereof, or (b) the Non-Qualified Extended
Maturity Date as set forth in Section 2.7.1 hereof.

“Extension Debt Service
Coverage Ratio” shall mean, with respect to any Extension Term, a
ratio for the applicable twelve (12) month period in which:

(a)           the numerator is the
Projected Underwritten Net Cash Flow for such Extension Term; and

(b)           the denominator is the
aggregate amount of interest that would be payable on the sum of the
Outstanding Principal Balance as of the first day of such Extension Term plus
the amount of any anticipated Construction Loan Advances in accordance with the
Construction Schedule, if any, for the following full twelve (12) calendar
month period at an interest rate equal to the Strike Price applicable to such
Extension Term plus the Spread.

“Extension Interest
Shortfall” shall mean, with respect to each Extension Term, the
difference between: (a) the Required Net Cash Flow with respect to such
Extension Term, less (b) the amount on deposit in the Interest Reserve Fund as
of the day immediately preceding the first (1st) day of such Extension Term.

“Extension Option”
shall mean any Qualified Extension Option or Non-Qualified Extension Option, as
applicable.

“Extension Term”
shall mean any Qualified Extension Term or Non-Qualified Extension Term, as
applicable.

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

“Extraordinary Expense”
shall have the meaning set forth in Section 5.1.11(e) hereof.

“FF&E” shall
mean all furniture, furnishings, fixtures and equipment required for the
operation of any of the Properties, including, without limitation, (i) lobby
furniture, carpeting, draperies, paintings, bedspreads, television sets, office
furniture and equipment such as safes, cash registers, and accounting,
duplicating and communication equipment, telephone systems, back and front of
the house computerized systems, guest room furniture, specialized hotel
equipment such as equipment required for the operation of kitchens, laundries,
the front desk, dry cleaning facilities, bar and cocktail lounges, restaurants,
recreational facilities as they may exist from time to time, and decorative
lighting, material handling equipment and cleaning and 

 17
 

engineering equipment and
all other fixtures, equipment, apparatus and personal property needed for such
purposes, (ii) Gaming Equipment which any Borrower is lawfully permitted to own
or lease, and (iii) rock and roll memorabilia unique to the Hotel/Casino
Property and similar in character to the other rock and roll memorabilia
displayed at the Hotel/Casino Property.

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

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

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

“Financial Determination
Date”  shall have the meaning set forth
in Section 2.6.4 hereof.

“First Anniversary”  shall mean the first anniversary of the Closing Date.

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

“First Non-Qualified
Extended Maturity Date” shall mean February 9, 2010.

“First Non-Qualified
Extension Option”  shall have the
meaning set forth in Section 2.7.1(a) hereof.

“First Non-Qualified
Extension Term”  shall have the
meaning set forth in Section 2.7.1(a) hereof.

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

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

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

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

 18
 

“Fitch”  shall mean Fitch, Inc.

“Fully Prepaid IP Sale”  shall have the meaning set forth in Section 2.4.3(g)
hereof.

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

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

“Gaming Assets”  shall have the meaning set forth in the Gaming Sublease.

“Gaming Assets Note”  shall mean that certain Gaming Asset Note dated as February
2, 2007 made by the Gaming Operator to HRHI, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

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

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

“Gaming Employees”  shall have the meaning set forth in the Gaming Sublease.

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

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

 19

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

“Gaming Liquidity
Requirement”  shall mean, if
and when Gaming Borrower becomes the Gaming Operator in accordance with the
terms of this Agreement, the minimum bankroll requirements for cash and cash
equivalents required to be maintained by Gaming Borrower pursuant to the Gaming
Laws in an amount no greater than is mandated by Nevada Gaming Commission
Regulation 6.150.

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

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

“Gaming Operator”
shall mean (i) for so long as the Gaming Sublease is in effect and all required
Gaming Licenses are maintained in accordance with applicable Gaming Laws,
Golden HRC, LLC, a Nevada limited liability company, the subtenant under the
Gaming Sublease, and (ii) during any time when the Gaming Sublease is not in
effect, a Qualified Gaming Operator who is supervising, managing and operating
all gaming activities at the Hotel/Casino Property.

“Gaming Recognition
Agreement”  shall mean
that certain Recognition Agreement, dated as of the date hereof, executed by
Lender, Hotel/Casino Borrower, HRHI and Golden HRC LLC in connection with the
Gaming Sublease, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.

“Gaming Shortfall Notes”
shall mean the “Shortfall Notes” as defined in the Gaming Sublease.

“Gaming Sublease”  shall mean that certain Casino Sublease, dated as of
November 6, 2006, by and among MHG HR Acquisition Corp., as sublandlord,
Morgans Hotel Group Co., and Golden HRC, LLC, as subtenant (it being
acknowledged and agreed that, upon consummation of the transactions under the
Merger Agreement, HRHI succeeded to the interests 

 20
 

of MHG HR Acquisition
Corp. thereunder), covering the Casino Component of the Hotel/Casino Property
as more particularly described therein, as such Casino Sublease was modified by
that certain First Amendment to Casino Sublease, dated as of January 9, 2007
and by the Gaming Recognition Agreement, and as the same may hereafter be
amended, restated, replaced, supplemented or otherwise modified from time to
time.

“Gaming Surplus Fund
Reserve” shall mean the “Surplus Fund Reserve” as defined in the
Gaming Sublease.

“Gaming Working Capital
Note”  shall mean the “Working Capital
Note” as defined in the Gaming Sublease.

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

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

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

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

“General Reserve Excess
Cash Conditions” shall mean, as of any Financial Determination Date,
that (i) for the prior calendar month, the Net Operating Income from the
Properties exceeded the projected Net Operating Income from the Properties as
set forth on Schedule XIV attached hereto by at least fifteen percent
(15%), and (ii) no Event of Default shall have occurred and be continuing.

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

“Governmental Approvals”
shall mean all approvals, consents, waivers, orders, acknowledgments,
authorizations, permits and licenses required under applicable Legal
Requirements to be obtained from any Governmental Authority for the
construction of any and 

 21
 

all of the Project and/or
the use, occupancy and operation following completion of construction, as the
context requires.

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

“Gross Income from
Operations” shall mean, for any period, all Rents and all other
income and proceeds (whether in cash or on credit, and computed in accordance
with GAAP and, to the extent applicable with respect to the Hotel/Casino
Property, the Uniform System of Accounts), received by any Borrower or by any
Manager (on behalf of any Borrower) or by Sub-Manager (on behalf of any
Borrower or any Manager) for the use, occupancy or enjoyment of any of the
Properties, or any part thereof, or received by any Borrower or any Manager or
Sub-Manager for the sale of any goods, services or other items sold on or
provided from any of the Properties in the ordinary course of such Property’s
operation, including, without limitation: (a) all income and proceeds received
under Leases, including, without limitation, the HRHI Lease; (b) all income and
proceeds received from rental of rooms and commercial, meeting, conference
and/or banquet space within any of the Properties including net parking
revenue; (c) all income and proceeds received from food and beverage operations
and from catering services conducted from any of the Properties even though
rendered outside of any of the Properties; (d) without duplication of the
foregoing clause (a) or the following clause (e), all income,
proceeds and other amounts received by any Borrower under the Gaming Sublease;
(e) without duplication of the foregoing clauses (a) or (d), all income,
proceeds and revenue generated from gaming activities at any Property; (f) any
payments received by or on behalf of any Borrower under the Gaming Assets Note,
the Shortfall Notes or the Working Capital Note or from the Surplus Fund
Reserve; (g) all income and proceeds from business interruption, rental
interruption and use and occupancy insurance with respect to the operation of
any of the Properties (after deducting therefrom all necessary costs and
expenses incurred in the adjustment or collection thereof); (h) all Awards for
temporary use (after deducting therefrom all costs incurred in the adjustment
or collection thereof and in Restoration of any of the Properties); (i) all
income and proceeds from judgments, settlements and other resolutions of
disputes with respect to matters which would be includable in this definition
of “Gross Income from Operations” if received in the ordinary course of any of
the Properties’ operation (after deducting therefrom all necessary costs and
expenses incurred in the adjustment or collection thereof); (j) interest on
credit accounts, rent concessions or credits, and other required pass-throughs
and interest on Reserve Funds; and (k) deposits received for rental of rooms;
and “Gross Income from Operations” shall also include all licensing fees and
other income and receipts generated by the IP; but “Gross Income from Operations”
shall exclude (1) gross receipts received by lessees, licensees or
concessionaires of any of the Properties (but not any percentage rents or
similar payments derived therefrom); (2) income and proceeds from the sale or
other disposition of goods, FF&E, capital assets and other items not in the
ordinary course of the operation of the applicable Property; (3) federal, state
and municipal excise, sales and use taxes collected directly from customers,
patrons or guests of any of the Properties as a part of or based on the sales
price of any goods, services or other items, such as gross receipts, room,
admission, cabaret or equivalent taxes; (4) Awards (except to the extent
provided in clause (h) above); (5) refunds, rebates, discounts and other
similar credits of amounts not included in Operating Expenses at any time and
uncollectible accounts; (6) 

 22
 

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

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

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

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

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

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

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

“HRHI Gaming Agreement”  shall mean that certain HRHI Gaming Agreement, dated as of
the date hereof, executed by Lender, Hotel/Casino Borrower and HRHI in
connection with the Gaming Sublease and the gaming operations at the Hotel/Casino
Property, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.

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

“HRHI Lease”
shall mean that certain Lease, dated the date hereof, between Hotel/Casino
Borrower, as landlord, and HRHI, as tenant, covering the Casino Component of
the Hotel/Casino Property as more particularly described therein, as the same
may be amended, restated, replaced, supplemented or otherwise modified from
time to time.

 23
 

“HRHI Security Agreement”
shall mean that certain HRHI Security Agreement, dated as of the date hereof,
from HRHI to Lender, securing the HRHI Guaranty and covering certain assets of
HRHI described therein, including, without limitation, all of HRHI’s right,
title and interest in and to the Gaming Assets Note, the Gaming Shortfall
Notes, the Gaming Surplus Fund Reserve and the Gaming Working Capital Note, as
such HRHI Security Agreement may be amended, restated, replaced, supplemented
or otherwise modified from time to time.

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

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

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

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

“Indemnified Person”
shall have the meaning set forth in Section 9.2(b) hereof.

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

“Independent Director”
or “Independent Manager” shall mean a
Person who is not at the time of initial appointment, or at any time while
serving as a director or manager, as applicable, and has not been at any time
during the preceding five (5) years: (a) a stockholder, director (with the exception
of serving as the Independent Director or Independent Manager of a Borrower or
Gaming Member), officer, employee, partner, member (other than a “special
member” or “springing member”), manager, attorney or counsel of any Borrower,
Gaming Member, HRHI or any Affiliate of any of them; (b) a customer, supplier
or other person who derives any of its purchases or revenues from its
activities with any Borrower, Gaming Member, HRHI or any Affiliate of any of
them; (c) a Person Controlling or under common Control with any such
stockholder, director, officer, employee, partner, member, manager, customer,
supplier or other Person; or (d) a member of the immediate family of any such
stockholder, director, officer, employee, partner, member, manager, customer,
supplier or other Person.  A natural
Person who satisfies the foregoing definition other than subparagraph (b)
shall not be disqualified from serving as an Independent Director or
Independent Manager of a Borrower or Gaming Member if such natural Person is an
independent director or independent manager 

 24
 

provided by a nationally
recognized company that provides professional independent directors or
independent managers and that also provides other corporate services in the
ordinary course of its business.  A
natural Person who otherwise satisfies the foregoing definition except for
being the independent director or independent manager of a “special purpose
entity” affiliated with any Borrower or Gaming Member that does not own a
direct or indirect equity interest in any Borrower or Gaming Member shall not
be disqualified from serving as an Independent Director or Independent Manager
of a Borrower or Gaming Member if such individual is at the time of initial
appointment, or at any time while serving as a Independent Director of a
Borrower or Gaming Member, an Independent Director or Independent Manager of a “special
purpose entity” affiliated with a Borrower or Gaming Member (other than any
Person that owns a direct or indirect equity interest in any Borrower or Gaming
Member) if such natural Person is an independent director or independent
manager provided by a nationally-recognized company that provides professional
independent directors or independent managers.

“Initial Construction Loan
Advance” shall mean Lender’s first Construction Loan Advance,
excluding, however, any Pre-Construction Advance and the Second Anniversary
Unfunded Construction Loan Advance.

“Initial Maturity Date”
shall mean, as applicable, either (a) the Qualified Initial Maturity Date, in the
event the Qualification Conditions have been satisfied on or prior to the
Construction Qualification Date, or (b) the Non-Qualified Initial Maturity
Date, in the event the Qualification Conditions have not been satisfied on or
prior to the Construction Qualification Date.

“Initial Maturity Extension
Interest Shortfall” shall mean, for purposes of determining the
amount of the interest Line Item in the Loan Budget as set forth in Section
3.2(l)(ii) hereof, the difference between: (a) the difference between (i)
the projected underwritten Net Cash Flow to be earned from and after the date
of the Initial Construction Loan Advance through the last day of the Initial
Maturity Extension Period, as reasonably estimated and underwritten by Lender
based on the Approved Annual Budget then in effect and underwriting criteria
consistent with that used by Lender to determine the amount of the deposit to
the Interest Reserve Fund on the Closing Date, less (ii) the amount of interest
which is anticipated to be due and payable on the Loan from and after the date
of the Initial Construction Loan Advance through the last day of the Initial
Maturity Extension Period, taking into account the anticipated Construction
Loan Advances from and after the date of the Initial Construction Loan Advance
through the last day of the Initial Maturity Extension Period, all as
reasonably estimated by Lender based on the then applicable Spread; less (b)
the amount on deposit in the Interest Reserve Fund in excess of the Minimum
Balance as of the date of the Initial Construction Loan Advance.

“Initial Maturity Extension
Period”  shall mean a
one (1) year extension of the Loan which shall automatically occur, without the
payment of any fee or other sums and without Lender, any Borrower or any other
Person taking any action, upon the satisfaction of the Qualification Conditions
on or prior to the Construction Qualification Date.

“Initial Renovation Costs”  shall mean the costs and expenses of performing the Initial
Renovations as set forth on the budget for the Initial Renovations included in Schedule
XIII attached hereto and made a part hereof.

 25
 

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

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

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

“Initial Renovations Budget”
shall mean a budget, prepared by Borrowers and approved by Lender in its
reasonable discretion, which shall identify the costs and expenses, on a
project-by-project and line item basis, for which the Initial Renovation
Reserve Funds may be used, and all amendments and modifications thereto
reasonably approved by Lender.

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

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

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

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

“Intellectual Property
Security Agreement” shall mean that certain Intellectual Property
Security Agreement, dated as of the date hereof, among IP Borrower and HRHI, as
debtors, and Lender, as secured party, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

“Interest Period”
shall mean, with respect to any Payment Date, the period commencing on the ninth
(9th) day of the preceding calendar month and terminating on and including the
eighth (8th) day of the calendar month in which such Payment Date occurs; provided,
however, that no Interest Period shall end later than the Maturity Date
(other than for purposes of calculating interest at the Default Rate), and the
initial Interest Period shall begin on and include the Closing Date and shall
end on and include February 8, 2007.

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

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

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

“Internal Approvals”
shall have the meaning set forth in Section 13.2(b) hereof.

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

 26
 

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

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

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

“IP Material Adverse Effect”
shall have the meaning ascribed to such term in Section 4.1.37(d)
hereof.

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

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

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

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

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

“Lease” shall
mean any lease, sublease or subsublease, letting, license, concession or other
agreement (whether written or oral and whether now or hereafter in effect)
pursuant to which any Person is granted a possessory interest in, or right to
use or occupy all or any portion of any space in any Property, including,
without limitation, the HRHI Lease, and (a) every modification, amendment or
other agreement relating to such lease, sublease, subsublease, or other
agreement entered into in connection with such lease, sublease, subsublease, or
other agreement, and (b) every guarantee of the performance and observance of
the covenants, conditions and agreements to be performed and observed by the
other party thereto.  The foregoing
definition expressly excludes ordinary course hotel room rentals.

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

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

 27
 

“Lender Monthly Interest
Advance” shall have the meaning set forth in Section 3.20.1
hereof.

“Lender’s Rejection Notice”  shall have the meaning set forth in Section 13.2(c)
hereof.

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

“Letter of Credit”  shall mean an irrevocable, unconditional (other than
ministerial conditions), transferable, clean sight draft letter of credit, as
the same may be replaced, split, substituted, modified, amended, supplemented,
assigned or otherwise restated from time to time, (either an evergreen letter
of credit or a letter of credit which does not expire until at least two (2)
Business Days after the Maturity Date or such earlier date as such Letter of
Credit is no longer required pursuant to the terms of this Agreement) in favor
of Lender and entitling Lender to draw thereon based solely on a statement
purportedly executed by an officer of Lender stating that it has the right to
draw thereon, and issued by a (i) domestic Approved Bank or the U.S. agency or
branch of a foreign Approved Bank, or if there are no domestic Approved Banks
or U.S. agencies or branches of a foreign Approved Bank then issuing letters of
credit, then such letter of credit may be issued by a domestic bank, the long
term unsecured debt rating of which is the highest such rating then given by
the Rating Agency or Rating Agencies, as applicable, to a domestic commercial
bank, or (ii) Credit Suisse, Cayman Islands Branch so long as it has and
maintains a minimum long term unsecured debt rating of at least “A+” by S&P
and Fitch and “A1” by Moody’s.

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

“Liabilities”  shall have the meaning set forth in Section 9.2(b)
hereof.

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

 28
 

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

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

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

“Lien”  shall mean, with respect to each Property, any mortgage,
deed of trust, lien, pledge, hypothecation, assignment, security interest, or
any other encumbrance, charge or transfer of, on or affecting any Borrower, the
related Property, any portion thereof or any interest therein, including,
without limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement, and mechanic’s, materialmen’s
and other similar liens and encumbrances. 
For the avoidance of doubt, “Lien” shall not be deemed to include any
Permitted IP Encumbrances.

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

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

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

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

“Loan”  shall mean the loan made by Lender to Borrowers pursuant to
this Agreement in a maximum principal amount of up to ONE BILLION THREE HUNDRED
SIXTY MILLION and No/100 Dollars ($1,360,000,000.00), which shall be comprised
of the Acquisition Loan and the Construction Loan and shall be evidenced by the
Note.

“Loan Advance”  or “Loan Advances”  shall mean (i) the Acquisition Loan Advance, and (ii) each
Construction Loan Advance made by Lender to or for the account of Borrowers
after the Closing Date pursuant to the terms of this Agreement.

“Loan Budget”  shall mean the budget for total estimated Project Costs
prepared by Borrowers and approved by Lender in its reasonable discretion,
which shall detail all items of 

 29
 

direct and indirect costs
estimated to be incurred in connection with the construction of the Project,
and all amendments and modifications thereto approved by Lender in accordance
with this Agreement.

“Loan Documents”  shall mean, collectively, this Agreement, the Note, the
Mortgage, the Assignment of Leases, the Environmental Indemnity, each O&M
Agreement, each Assignment of Management Agreement, the Assignment of
Restaurant Management Agreement, the Assignment of Liquor Management Agreement,
the Intellectual Property Security Agreement, the Gaming Recognition Agreement,
the HRHI Gaming Agreement, the Agreement Regarding Morton Indemnification and
Escrow, the Assignment of Contracts, the Non-Recourse Guaranty, the
Non-Qualified Prepayment Guaranty, the Closing Completion Guaranty, the
Construction Completion Guaranty (if and when executed and delivered in
accordance with the terms of this Agreement), the HRHI Guaranty, the HRHI
Security Agreement, the Cash Management Agreement, the Collateral Assignment of
Interest Rate Cap Agreement and all other documents executed and/or delivered
in connection with the Loan.

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

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

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

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

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

 30
 

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

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

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

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

“Manager”  shall mean Morgans Hotel Group Management LLC or, if the
context requires, a Qualified Manager who is managing any of the Properties, it
being understood that the foregoing definition shall expressly exclude the
Sub-Manager.

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

“Material Economic Terms”  shall have the meaning set forth in Section 13.1
hereof.

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

“Maximum Legal Rate”  shall mean the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the indebtedness evidenced by the Note and as provided
for herein or the other Loan Documents,

 31
 

under the laws of such
state or states whose laws are held by any court of competent jurisdiction to
govern the interest rate provisions of the Loan.

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

“Minimum Balance”  shall mean, as of any Payment Date, an amount equal to the
amount of the Monthly Interest Payment due on such Payment Date calculated at
the Applicable Interest Rate in effect on such Payment Date.

“Minimum Mandatory Amount”
shall mean, as of any date of determination, (a) if one or more Release Parcel
Sales have not resulted in Release Parcel Release Prices paid to Lender in an
aggregate amount of at least $40,000,000.00 prior to such date of
determination, then the Minimum Mandatory Amount shall mean $110,000,000.00, or
(b) if one or more Release Parcel Sales have resulted in Release Parcel Release
Prices paid to Lender in an aggregate amount in excess of $40,000,000.00 prior
to such date of determination, then the Minimum Mandatory Amount shall mean an
amount equal to the difference between (i) $110,000,000.00 and (ii) the
aggregate amount of Release Parcel Release Prices paid to Lender prior to such
date of determination, but in no event shall such calculation result in a
negative number.

“Minimum Mandatory
Prepayment” shall have the meaning set forth in Section
2.4.2(b)(i) hereof.

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

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

“Monthly Interest Advance”  shall have the meaning set forth in Section 3.20.1
hereof.

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

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

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

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

 32
 

“Mortgage”  shall mean that certain first priority Construction Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Financing
Statement (Fixture Filing), dated the date hereof, executed and delivered by
Borrowers as security for the Loan and encumbering the Properties, as the same
may be amended, restated, replaced, supplemented or otherwise modified from
time to time.

“Morton”  shall mean Peter A. Morton.

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

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

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

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

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

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

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

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

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

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

“Non-Fully Prepaid IP Sale”  shall have the meaning set forth in Section 2.4.3(g)
hereof.

“Non-Qualified Extended
Maturity Date”  shall have the
meaning set forth in Section 2.7.1 hereof.

“Non-Qualified Extension
Option”  shall have the
meaning set forth in Section 2.7.1 hereof.

“Non-Qualified Extension
Term”  shall have the meaning set forth
in Section 2.7.1 hereof.

“Non-Qualified Initial
Maturity Date”  shall mean
February 9, 2009.

 33
 

“Non-Qualified Mandatory
Prepayment”  shall have the
meaning set forth in Section 2.4.2(c) hereof.

“Non-Qualified Prepayment
Guaranty”  shall mean
that certain Guaranty Agreement (Non-Qualified Mandatory Prepayment), dated as
of the date hereof, from Guarantors to Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

“Non-Qualified Prepayment
Letter of Credit”  shall have the
meaning set forth in Section 2.4.2(c) hereof.

“Non-Recourse Guaranty”  shall mean that certain Guaranty Agreement, dated as of the
date hereof, from Guarantors to Lender, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

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

“Note”  shall mean that certain Promissory Note of even date
herewith in the principal amount of up to ONE BILLION THREE HUNDRED SIXTY
MILLION and No/100 Dollars ($1,360,000,000.00), made by Borrowers in favor of
Lender, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.

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

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

“O&M Agreement”
shall mean an Operations and Maintenance Agreement, dated as of the date
hereof, by and among a Borrower and Lender given in connection with the Loan,
as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.  On the
Closing Date, an O&M Agreement shall be entered into by each of
Hotel/Casino Borrower and Lender and Adjacent Borrower and Lender.

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

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

“Operating Expenses”  shall mean, for any period, the total of all expenditures,
computed in accordance with GAAP, of whatever kind during such period relating
to the operation, maintenance and/or management of any of the Properties that
are incurred on a regular monthly or other periodic basis, including without
limitation, utilities, ordinary repairs, maintenance, environmental and
engineering (but excluding utilities) (which ordinary repairs, maintenance,
environmental and engineering (but excluding utilities) for the purposes of
this definition shall be no less than an assumed expense of $400,000.00 per
month, and following the 

 34
 

First Full Operating
Month, such assumed expense shall increase to $600,000.00 per month, insurance,
license fees, property taxes and assessments, advertising expenses, base and
incentive management fees, payroll and related taxes, computer processing
charges, tenant improvements and leasing commissions, operational equipment or
other lease payments as approved by Lender, and other similar costs, but
excluding depreciation and amortization with respect to the Properties, Debt
Service, Capital Expenditures, items that would otherwise constitute Project
Costs, Extraordinary Expenses, the cost of any items incurred at any Manager’s
expense pursuant to any Management Agreement or at the Sub-Manager’s expense
pursuant to the Sub-Management Agreement, non-recurring expenses and
contributions to the Replacement Reserve Fund, the Tax and Insurance Escrow
Fund and any other reserves required under the Loan Documents.  Operating Expenses shall also include the
cost (computed in accordance with GAAP) of any complimentary food, beverages, hotel
room and/or other amenities provided to any customers or guests of the
Hotel/Casino Property, including, without limitation, under the Gaming
Sublease, under the Liquor Management Agreement and/or under any Management
Agreement.

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

“Optional IP Release
Payment”  shall have the
meaning set forth in Section 2.4.3(g) hereof.

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

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

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

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

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

“Partial Adjacent Parcel”  shall have the meaning set forth in Section 2.5.2(a)
hereof.

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

 35
 

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

“Payment Date”  shall mean the ninth (9th) day of each calendar month
during the term of the Loan or, if such day is not a Business Day, the
immediately preceding Business Day.  The
first Payment Date shall be February 9, 2007 for all purposes of this Agreement
other than the payment of the Monthly Interest Payments (because Borrowers and
Lender acknowledge that stub interest through February 9, 2007 is being paid on
the Closing Date) and the required deposits to the Tax and Insurance Escrow
Fund (because Borrowers and Lender acknowledge that the required initial
deposit to the Tax and Insurance Escrow Fund through February 9, 2007 is being
deposited on the Closing Date), and the first Payment Date for purposes of the
Monthly Interest Payments and the required deposits to the Tax and Insurance
Escrow Fund shall be March 9, 2007.

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

“Permitted Encumbrances”  shall mean, with respect to a Property, collectively (a)
the Liens and security interests created by the Loan Documents, (b) all Liens,
encumbrances and other matters disclosed in the Title Insurance Policy relating
to such Property, (c) Liens, if any, for Taxes imposed by any Governmental
Authority not yet delinquent, (d) such other title and survey exceptions,
documents, agreements or instruments as Lender has approved or may approve in
writing in Lender’s reasonable discretion, (e) easements, restrictions,
covenants and/or reservations which are necessary for the operation of such
Property that do not and would not have a material adverse effect on (i) the
business operations, economic performance, assets, financial condition, equity,
contingent liabilities, material agreements or results of operations of any
Borrower, any Guarantor or any Property or (ii) the value of, or cash flow
from, any Property, (f) zoning restrictions and/or laws affecting such Property
that do not and would not have a material adverse effect on (i) the business
operations, economic performance, assets, financial condition, equity,
contingent liabilities, material agreements or results of operations of any
Borrower, any Guarantor or any Property or (ii) the value of, or cash flow
from, any Property, (g) the Liens securing any Existing FF&E Leases and/or
any Permitted Future FF&E Leases, and (h) any other Liens which are being
duly contested in accordance with the provisions of Section 5.1.1 or 5.1.2
hereof or Section 3.6(b) of the Mortgage, but only for so long as such contest
shall be permitted pursuant to said Section 5.1.1 or 5.1.2 hereof
or Section 3.6(b) of the Mortgage, as applicable.

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

“Permitted Investment Fund”  shall have the meaning set forth in the definition of “Qualified
Guarantor Transferee” set forth below.

 36
 

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

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

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

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

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

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

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

“Plans and Specifications”  shall mean the plans and specifications for the Project
prepared by the Architect and reasonably approved by Lender in accordance with
the terms hereof, as the same may be amended and supplemented from time to time
in accordance with the terms of this Agreement.

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

“Pre-Construction Advance”  shall have the meaning set forth in Section 3.17.1
hereof.

“Pre-Construction Budget”  shall mean a budget, prepared by Borrowers and approved by
Lender in its reasonable discretion, which shall identify the costs and
expenses for which the proceeds of any Pre-Construction Advance may be used,
and all amendments and modifications thereto reasonably approved by Lender; provided,
however, that at such time, if ever, as the Loan Budget shall be
approved by Lender in accordance with the terms of this Agreement, the
Pre-Construction Budget shall thereafter be deemed null and void and the
proceeds of all subsequent Pre-Construction Advances, if any, shall be used to
pay costs and expenses set forth in the Loan Budget.

“Pre-Construction Letter of
Credit”  shall have the
meaning set forth in Section 3.17.1(g) hereof.

“Pre-Construction Work”  shall have the meaning set forth in Section 3.17.1(b)
hereof.

 37
 

“Prepayment Fee”  shall mean an amount equal to the following:

(i)            two
percent (2.0%) of each of the Minimum Mandatory Prepayment (or any partial
payment on account thereof), each Release Parcel Release Price, each Adjacent
Parcel Release Price and the IP Release Price, if any of the foregoing are due
and payable in accordance with the terms of this Agreement after the Closing
Date through, but excluding, May 9, 2007;

(ii)           one
and one-half percent (1.5%) of each of the Minimum Mandatory Prepayment (or any
partial payment on account thereof), each Release Parcel Release Price, each
Adjacent Parcel Release Price and the IP Release Price, if any of the foregoing
are due and payable in accordance with the terms of this Agreement on or after
May 9, 2007 through, but excluding, December 9, 2007; and

(iii)          one
percent (1.0%) of each of the Minimum Mandatory Prepayment (or any partial
payment on account thereof), each Release Parcel Release Price, each Adjacent
Parcel Release Price and the IP Release Price, if any of the foregoing are due
and payable in accordance with the terms of this Agreement on or after December
9, 2007 through, but excluding, the Prepayment Fee Release Date.

“Prepayment Fee Release
Date”  shall mean May 9, 2008.

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

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

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

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

 38
 

“Pro-Forma Net Cash Flow”  shall mean, as of any date of determination, (i) Gross
Income from Operations collected for the trailing three (3) month period ending
with the last calendar month for which financial reports are then required to
have been delivered under Section 5.1.11 hereof, multiplied by
four (4), less (ii) actual Operating Expenses for the trailing twelve
(12) month period ending with such last calendar month for which financial
reports are then required to have been delivered under Section 5.1.11
hereof, as adjusted by Lender to reflect any actual increases to Operating
Expenses then known to Lender (i.e., real estate taxes and insurance
premiums) as reflected in the Approved Annual Budget in effect.

“Project”  shall mean those renovations and improvements (exclusive of
the Initial Renovations) expected to be constructed and performed on the
Hotel/Casino Property and the Adjacent Property in accordance with the terms of
this Agreement and the other Loan Documents, including, without limitation, a
parking facility, an expansion of the hotel and casino on the Hotel/Casino
Property and the construction of an approximately 440 room hotel facility, as
generally described on Schedule II attached hereto and as more
particularly described in the Plans and Specifications.

“Project Cost Ceiling”  shall mean an amount equal to the difference between (i)
the amount of the Required Equity Letter of Credit delivered pursuant to Section
3.2(h) in connection with the Initial Construction Loan Advance minus
(ii) $50,000,000.00.

“Project Cost Ceiling Date”  shall mean the date upon which the Project Costs incurred
or expended by Borrowers in connection with the Project reach the Project Cost
Ceiling.

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

“Projected Underwritten Net
Cash Flow”  shall mean,
with respect to each Extension Option, the projected underwritten Net Cash Flow
to be earned during the applicable Extension Term, as reasonably estimated and
underwritten by Lender based on (i) the Approved Annual Budget then in effect
and (ii) underwriting criteria consistent with that used by Lender to determine
the amount of the deposit to the Interest Reserve Fund on the Closing Date.

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

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

 39
 

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

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

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

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

“Qualification Conditions”  shall mean, collectively, that (i) the satisfaction of the
conditions for the Initial Construction Loan Advance set forth in Section
3.2 hereof shall have occurred, (ii) no Event of Default shall have
occurred and be continuing, and (iii) Lender shall have advanced the Initial
Construction Loan Advance; provided, however, that if the
conditions set forth in the foregoing clauses (i) and (ii) have
been satisfied and the failure of Lender to have advanced the Initial
Construction Loan Advance is due to no fault of Borrowers or any Affiliate
thereof, then the Qualification Conditions shall be deemed satisfied
notwithstanding that the Initial Construction Loan Advance has not actually
been advanced.

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

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

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

“Qualified Gaming Operator”  shall mean (a) Golden HRC, LLC, (b) Gaming Borrower, if and
when Gaming Borrower shall become the Gaming Operator for the Hotel/Casino
Property in accordance with the provisions of Article XII hereof, or (c)
a reputable and experienced gaming operator (which may be an Affiliate of any
Borrower) possessing experience in supervising, operating and managing gaming
activities at properties similar in size, scope, use and value as the
Hotel/Casino Property, provided, that with respect to any Person under
any of the foregoing clauses (a), (b) or (c), such Person shall
have, at all times during its engagement as Gaming Operator, all required
approvals and licenses from all applicable Governmental Authorities, including,
without limitation, all Gaming Authorities, and provided, further,
that with respect to the foregoing clause (c): (i) such Person shall be
reasonably acceptable to Lender and such Person shall agree to operate the
gaming operations at the Hotel/Casino Property pursuant to one or more written
agreements previously approved by Lender in its reasonable discretion
(including, by way of example but without limitation, a new lease and/or
sublease and related recognition agreement), (ii) after a Securitization has
occurred, Borrowers shall have obtained prior written confirmation from the
applicable Rating Agencies that the supervision, operation and management of
the gaming activities at the Hotel/Casino

 40

Property by such Person
will not cause a downgrade, withdrawal or qualification of the then current
ratings of the Securities or any class thereof, and (iii) if such Person is an
Affiliate of any Borrower, (A) if such Affiliate was covered in the Insolvency
Opinion or in any subsequent Additional Insolvency Opinion, Borrowers shall
have obtained and delivered to Lender an update of such Insolvency Opinion or
Additional Insolvency Opinion, as applicable, which addresses the new
relationship between such Affiliate and Borrowers, or (B) if such Affiliate was
not covered in the Insolvency Opinion or in any subsequent Additional
Insolvency Opinion, Borrowers shall have obtained and delivered to Lender an
Additional Insolvency Opinion with respect to such Affiliate and Borrowers.

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

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

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

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

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

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

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

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

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

 41
 

such Person will not
cause a downgrade, withdrawal or qualification of the then current ratings of
the Securities or any class thereof, and (B) if such Person is an Affiliate of
any Borrower, (1) if such Affiliate was covered in the Insolvency Opinion or in
any subsequent Additional Insolvency Opinion, Borrowers shall have obtained and
delivered to Lender an update of such Insolvency Opinion or Additional
Insolvency Opinion, as applicable, which addresses the new relationship between
such Affiliate and Borrowers, or (2) if such Affiliate was not covered in the
Insolvency Opinion or in any subsequent Additional Insolvency Opinion,
Borrowers shall have obtained and delivered to Lender an Additional Insolvency
Opinion with respect to such Affiliate and Borrowers.

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

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

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

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

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

“Rating Agencies”
shall mean, prior to the final Securitization of the Loan, each of S&P,
Moody’s and Fitch, or any other nationally recognized statistical rating agency
which has been designated by Lender and, after the final Securitization of the
Loan, shall mean any of the foregoing that have rated any of the Securities.

“Re-Dating”  shall have the meaning set forth in Section 9.1.2
hereof.

 42
 

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

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

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

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

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

“Release Parcel”  shall mean a portion of the Adjacent Property consisting of
approximately, but in no event less than, fifteen (15) acres and substantially
identified on Schedule VII attached hereto and made a part hereof, on
which no portion of the Project is contemplated to be constructed, as such
portion is reasonably approved by Lender prior to the date of the first Release
Parcel Sale.

“Release Parcel Binding
Contract”  shall have the
meaning set forth in Section 2.4.2(b)(i) hereof.

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

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

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

“Relinquishment Effective
Date”  shall have the meaning set forth
in Section 3.1(c) hereof.

“Relinquishment Notice”  shall have the meaning set forth in Section 3.1(c)
hereof.

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

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

“Rents”  shall mean, with respect to each Property, all rents (including,
without limitation, percentage rents), rent equivalents, moneys payable as
damages (including payments by reason of the rejection of a Lease in a
Bankruptcy Action) or in lieu of rent or rent 

 43
 

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

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

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

 44
 

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

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

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

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

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

“Required Equity Amount”
shall have the meaning set forth in Section 3.2(h) hereof.

“Required Equity Letter of
Credit” shall have the meaning set forth in Section 3.2(h)
hereof.

“Required Net Cash Flow”
shall mean, with respect to each Extension Term, the amount of Net Cash Flow
that will need to be generated during such Extension Term in order to achieve
an Extension Debt Service Coverage Ratio of 1.05 to 1.00.

“Required Prepayment”
shall have the meaning set forth in Section 2.4.2(b) hereof.

“Required Repair Account”
shall have the meaning set forth in Section 7.1.1 hereof.

“Required Repair Fund”
shall have the meaning set forth in Section 7.1.1 hereof.

“Required Repairs”
shall have the meaning set forth in Section 7.1.1 hereof.

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

“Restoration”  shall mean the repair and restoration of a Property after a
Casualty or Condemnation as nearly as possible to the condition such Property
was in immediately prior to 

 45
 

such Casualty or
Condemnation, with such alterations as may be reasonably approved by Lender to
the extent required hereunder.

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

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

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

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

“Revised Maturity Date” shall
have the meaning set forth in Section 3.22(b) hereof.

“Right of First Offer”
shall have the meaning set forth in Section 13.1 hereof.

“Right of First Offer
Notice”  shall have the
meaning set forth in Section 13.1 hereof.

“Right of First Offer
Information and Materials” shall have the meaning set forth in Section
13.2(b) hereof.

“ROFO Term Sheet”  shall have the meaning set forth in Section 13.2(d)
hereof.

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

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

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

“Second Anniversary”  shall mean the second anniversary of the Closing Date.

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

 46
 

“Second Non-Qualified
Extended Maturity Date” shall mean February 9, 2011.

“Second Non-Qualified
Extension Option”  shall have the
meaning set forth in Section 2.7.1(b) hereof.

“Second Non-Qualified
Extension Term” shall have the meaning set forth in Section 2.7.1(b)
hereof.

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

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

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

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

“Securities Act”
shall have the meaning set forth in Section 9.2(a) hereof.

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

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

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

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

“Shortfall”
shall mean, at any given time, the amount by which the sum of (i) the unfunded
portion of the then applicable Construction Loan Amount, taking into account
the existing unapplied Contingency Line Items and applying a percentage of
completion analysis with respect thereto, (ii) any General Reserve Funds then
on deposit in the General Reserve Account, if any, and (iii) any Interest
Reserve Funds then on deposit in the Interest Reserve Account in excess of the
Minimum Balance, if any, is less than the actual sum, as reasonably estimated
by Lender (based on advice of Construction Consultant), which will be required
to complete the Project in accordance with the Plans and Specifications, the
Loan Budget and all Legal Requirements, and to pay all unpaid Project Costs in
connection therewith, including, without limitation, the payment of interest
through and including the Qualified Initial Maturity Date (i.e.,
including the Initial Maturity Extension Period).

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

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

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

“Soft Costs”
shall mean, collectively, the costs set forth in the Loan Budget which are not
Hard Costs, including, without limitation, fees and expenses of any architect
or engineer 

 47
 

engaged in connection
with the Project, fees and expenses of Borrowers’ counsel and Lender’s counsel,
fees and expenses of the Construction Consultant and the Administrative Agent,
Debt Service, pre-opening costs and expenses, operating supplies and equipment
and such other costs as are set forth in the Loan Budget.

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

(a)           was, is and will be organized solely
for the purpose of (i) (A) acquiring, developing, constructing, owning,
holding, selling, leasing, transferring, exchanging, managing and operating one
of the Properties or the IP and incidental personal and intangible property
related thereto, (B) operating the gaming and/or liquor operations at the
Hotel/Casino Property and owning incidental personal and intangible property
related thereto, (C) entering into this Agreement with Lender, (D) refinancing
its Property or the IP in connection with repayment of the Loan, and/or (E)
transacting lawful business that is incident, necessary and appropriate to
accomplish any of the foregoing; or (ii) acting as a general partner of the
limited partnership that owns one of the Properties or the IP or that acts as
the gaming operator and/or liquor manager at the Hotel/Casino Property or
managing member of the limited liability company that owns one of the
Properties or the IP or that acts as the gaming operator and/or liquor manager
at the Hotel/Casino Property;

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

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

(d)           has not engaged, sought or consented
to, and to the fullest extent permitted by law, will not engage in, seek or
consent to, any: (i) dissolution, winding up, liquidation, consolidation,
merger or sale of all or substantially all of its assets outside of its
ordinary course of business and other than as expressly permitted in this
Agreement; (ii) other than as expressly permitted in this Agreement, transfer
of partnership or membership interests (if such entity is a general partner in
a limited partnership or a managing member in a limited liability company); or 

 48
 

(iii) amendment of its
limited partnership agreement, articles of organization, certificate of
formation or operating agreement (as applicable) with respect to the matters
set forth in this definition unless Lender issues its prior written consent,
which consent shall not be unreasonably withheld, and, after the occurrence of
a Securitization, the confirmation in writing from the applicable Rating
Agencies that such amendment will not, in and of itself, result in a downgrade,
withdrawal or qualification of the then current ratings assigned to any
Securities or any class thereof in connection with any Securitization;

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

(f)            if such entity is a limited
liability company with more than one member, has had, now has and will have at
least one member that is a Special Purpose Entity that is a corporation that
has at least two (2) Independent Directors or a limited liability company that
has at least two (2) Independent Managers and that, in either instance, owns at
least one-tenth of one percent (.10%) of the equity of the limited liability
company;

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

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

(i)            has been, is and will remain solvent
and has paid and will pay its debts and liabilities (including, as applicable,
shared personnel and overhead expenses) from its assets as 

 49
 

the same have or shall
become due, and has maintained, is maintaining and will maintain adequate
capital for the normal obligations reasonably foreseeable in a business of its
size and character and in light of its contemplated business operations; provided,
however, this provision shall not require the equity owner(s) of such
entity to make any additional capital contributions;

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

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

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

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

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

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

(p)           has maintained and will maintain its
financial statements, accounting records and other entity documents separate
from any other Person and has not permitted and will not permit its assets to
be listed as assets on the financial statement of any other entity except as
required by GAAP (or such other accounting basis acceptable to Lender); provided,
however, that a Borrower’s assets may be included in a consolidated
financial statement of its Affiliate, provided that such assets shall also be
listed on such Single Purpose Entity’s own separate balance sheet;

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

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

 50
 

(s)           has not incurred and will not incur
any Indebtedness other than (i) the Debt, Taxes and Other Charges, (ii)
unsecured trade payables and operational debt not evidenced by a note and in an
aggregate amount not exceeding two percent (2%) of the then Outstanding
Principal Balance (not including any trade payables in an amount not to exceed
$200,000 that are the subject of a good faith dispute by a Borrower, in
appropriate proceedings therefor, and for which adequate reserves have been
established by such Borrower); provided that any Indebtedness incurred
pursuant to subclause (ii) shall be (A) paid within sixty (60) days of
the date incurred (other than attorneys’ and other professional fees) and (B)
incurred in the ordinary course of business, (iii) the FF&E, capital and
equipment leases shown on Schedule V attached hereto and made a part
hereof, provided that the aggregate principal amount payable thereunder
does not exceed $5,000,000 and shall be paid within sixty (60) days of the date
when due (collectively, the “Existing FF&E Leases”),
(iv) any FF&E, capital and equipment leases hereinafter entered into in
connection with any of the Properties in the ordinary course of business, provided
that the aggregate principal amount payable thereunder does not exceed
$15,000,000 and shall be paid within sixty (60) days of the date when due
(collectively, “Permitted Future FF&E Leases”),
and (v) any Letters of Credit required or permitted to be furnished hereunder
or any reimbursement obligation with respect thereto;

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

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

(v)           has allocated and will allocate
fairly and reasonably any overhead expenses that are shared with any Affiliate,
including, but not limited to, paying for shared office space and services
performed by any employee of an Affiliate; provided, however, to
the extent invoices for such services are not allocated and separately billed
to each entity, there is a system in place that provides that the amount
thereof that is to be allocated among the relevant parties will be reasonably
related to the services provided to each such party;

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

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

 51
 

(y)           has held itself out and identified
itself and will hold itself out and identify itself as a separate and distinct
entity under its own name or in a name franchised or licensed to it by an
entity other than an Affiliate of any Borrower and not as a division or 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 such
Borrower;

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

(aa)         has not made and 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);

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

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

(dd)         except with respect to the Independent
Managers, has not had and will not have any obligation to indemnify, and has
not indemnified and will not indemnify, its partners, officers, directors or
members, as the case may be, unless such an obligation was and is fully
subordinated to the Debt and will not constitute a claim against it in the
event that cash flow in excess of the amount required to pay the Debt is
insufficient to pay such obligation;

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

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

“Spread”  shall mean, subject to application of the Default Rate,
4.15%; provided, however, that (a) subject to the following clause
(b), if Substantial Completion has not occurred on or before the date which
is twenty-four (24) months from the date of the Initial Construction Loan
Advance, the Spread shall increase to 4.65% from and including such date which
is twenty-four (24) months from the date of the Initial Construction Loan
Advance through but excluding 

 52
 

the first Payment Date
following Substantial Completion, following which the Spread shall again be
4.15%, and (b) if the Second Non-Qualified Extension Term is exercised in
accordance with the terms of Section 2.7.1 hereof, the Spread in effect
from time to time pursuant to the foregoing clause (a) shall increase by
0.25% throughout the Second Non-Qualified Extension Term and thereafter until
the Obligations are paid in full.

“Spread Maintenance Premium”  shall mean, with respect to any prepayment of the
Outstanding Principal Balance prior to the Spread Maintenance Release Date,
other than any prepayment from the proceeds of any Minimum Mandatory Prepayment
(or any partial payment on account thereof), Non-Qualified Mandatory
Prepayment, Additional Non-Qualified Mandatory Prepayment, Release Parcel
Release Price, Adjacent Parcel Release Price and/or IP Release Price, an amount
equal to the product of (a) the principal amount of such prepayment, multiplied
by (b) the Spread, and multiplied by (c) a fraction, the numerator
of which shall equal the actual number of days from the date of such payment
through the Spread Maintenance Release Date and the denominator of which is
360; provided, however, if any such prepayment shall occur on a
day other than a Payment Date, the numerator of such fraction shall equal the
actual number of days from the next succeeding ninth (9th) day of a calendar
month through the Spread Maintenance Release Date.

“Spread Maintenance Release
Date”  shall mean, as applicable, either
(i) May 9, 2008, in the event the Qualification Conditions have not been
satisfied on or prior to the Construction Qualification Date, or (ii) August 9,
2008, in the event the Qualification Conditions have been satisfied on or prior
to the Construction Qualification Date.

“State”  shall mean the State of Nevada.

“Stop Notice” shall have the
meaning set forth in Section 3.22(a) hereof.

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

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

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

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

“Sub-Management Agreement”  shall mean that certain Paradise Bay Club Apartments
Management Agreement, dated as of September 17, 2004, between PM Realty LLC
(predecessor-in-interest to Adjacent Borrower) and Sub-Manger, with respect to
the Adjacent Property, as the same has been and may be amended, modified or
supplemented from time to time.

“Sub-Manager”  shall mean, with respect to the Adjacent Property, ConAm
Management Corporation.

 53
 

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

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

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

“Tax and Insurance Escrow
Fund”  shall have the meaning set forth
in Section 7.2 hereof.

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

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

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

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

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

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

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

 54
 

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

“Total Cost Ratio”  shall mean, as of any date of determination, a ratio,
expressed as a percentage, in which (i) the numerator is the Outstanding
Principal Balance as of such date of determination, and (ii) the denominator is
the Total Costs as of such date of determination.

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

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

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

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

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

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

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

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

“Zoning Reports”  shall mean the zoning reports regarding each of the
Properties obtained by Lender from The Planning & Zoning Resource Corp. in
connection with making the Loan.

Section 1.2            Principles
of Construction.  All
references to sections, subsections, clauses, exhibits and schedules are to
sections, subsections, clauses, exhibits and schedules in or to this Agreement
unless otherwise specified.  All uses of
the word “including” shall mean “including, without limitation” unless the
context shall indicate otherwise.  Unless
otherwise specified, the words “hereof,” “herein” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.  All uses in this Agreement of the phrase “any
Borrower” shall be deemed to mean “any one or more of the Borrowers including
all of the Borrowers”.  All uses in this
Agreement of the phrase “any Property” or “any of the Properties” shall be
deemed to mean “any one or more of the Properties including all of the
Properties”.  All uses in this Agreement
of the phrase “the IP” shall be deemed to mean “all or any part of the IP”.  Unless otherwise specified, all meanings
attributed to defined terms herein shall be equally applicable to both the
singular and plural forms of the terms so defined.

 55

ARTICLE
II.

GENERAL TERMS

Section 2.1                                   Loan
Commitment; Disbursement to Borrowers.

2.1.1                     Agreement
to Lend and Borrow.  Subject to
and upon the terms and conditions set forth herein, Lender hereby agrees to
make and Borrowers hereby jointly and severally agree to accept the Loan.

2.1.2                     Acquisition
Loan.  Borrowers hereby
acknowledge and agree that, on the date hereof, Lender made the Acquisition
Loan Advance to Borrowers in the principal amount of $760,000,000.00, which
Acquisition Loan Advance represents a full disbursement of all proceeds of the
Acquisition Loan in the maximum principal amount of the Acquisition Loan
Amount.  The Acquisition Loan is
evidenced by the Note and this Agreement, is secured by the Mortgage and the
other Loan Documents and shall be repaid with interest, costs and charges as
more particularly set forth in the Note, this Agreement, the Mortgage and the
other Loan Documents.  Principal amounts
of the Acquisition Loan which are repaid for any reason may not be
reborrowed.  Lender shall not fund any
portion of the Acquisition Loan from any account holding “plan assets” of one
or more plans within the meaning of 29 C.F.R. 2510.3-101 unless such
Acquisition Loan will not constitute a non-exempt prohibited transaction under
ERISA.  Borrowers shall use the proceeds
of the Acquisition Loan to (a) directly or indirectly acquire the Properties
and the IP, (b) repay and discharge any existing loans relating, directly or
indirectly, to any of the Properties and/or the IP, (c) make deposits into the
Reserve Funds on the Closing Date in the amounts provided herein, (d) pay costs
and expenses incurred in connection with the closing of the Loan, as reasonably
approved by Lender, as set forth on a sources and uses of funds schedule
executed by Borrowers and Lender on the Closing Date, and (e) for such other
purposes as shall be reasonably approved by Lender, as set forth on a sources
and uses of funds schedule executed by Borrowers and Lender on the Closing
Date.

2.1.3                     Construction
Loan.  Subject to the conditions
and upon the terms herein provided, Lender hereby agrees to lend to Borrowers,
and Borrowers hereby agree to borrow from Lender, the Construction Loan in a
maximum principal amount not to exceed the Construction Loan Amount.  The Construction Loan is evidenced by the
Note and this Agreement, is secured by the Mortgage and the other Loan
Documents and shall be repaid with interest, costs and charges as more
particularly set forth in the Note, this Agreement, the Mortgage and the other
Loan Documents.  Principal amounts of the
Construction Loan which are repaid for any reason may not be reborrowed.  Lender shall not fund any portion of the
Construction Loan from any account holding “plan assets” of one or more plans
within the meaning of 29 C.F.R. 2510.3-101 unless such Construction Loan will
not constitute a non-exempt prohibited transaction under ERISA.  Borrowers shall use the proceeds of the
Construction Loan to pay Project Costs as contemplated hereunder.  The Construction Loan shall be advanced in
accordance with the provisions of Article III hereof.

2.1.4                     Maximum
Aggregate Loan Amount. 
Notwithstanding anything contained herein or in any other Loan Document
to the contrary, the aggregate amount advanced under the Acquisition Loan and
the Construction Loan shall not under any circumstances exceed the Loan
Amount.  Other than the disbursement of
the Acquisition Loan Advance made on the

 56
 

date hereof and
any Construction Loan Advances made pursuant to this Agreement, Lender shall
have no obligation to loan any additional funds in respect of the Loan.

Section 2.2                                   Interest
Rate

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

2.2.2                     Interest
Calculation.  Interest on the
Outstanding Principal Balance shall be calculated by multiplying (a) the actual
number of days elapsed in the period for which the calculation is being made by
(b) a daily rate based on a three hundred sixty (360) day year by (c) the
Outstanding Principal Balance.  If, at
any time, Lender or Borrowers determine that Lender has miscalculated the Applicable
Interest Rate (whether because of a miscalculation of LIBOR or otherwise), such
party shall notify the other of the necessary correction.  Upon the agreement of the parties as to the
correction, if the corrected Applicable Interest Rate represents an increase in
the applicable monthly payment, Borrowers shall, within ten (10) days after
receipt of notice from Lender, pay to Lender the corrected amount.  Upon the agreement of the parties as to the
correction, if the corrected Applicable Interest Rate represents an overpayment
by Borrowers to Lender and no Event of Default then exists, Lender shall
promptly refund the overpayment to Borrowers or, at Borrowers’ option, credit
such amounts against Borrowers’ payment next due hereunder.

2.2.3                     Determination
of Interest Rate.  (a) The
Applicable Interest Rate with respect to the Loan shall be: (i) LIBOR plus the
Spread with respect to the applicable Interest Period for a LIBOR Loan or (ii)
the Prime Rate plus the Prime Rate Spread for a Prime Rate Loan if the Loan is
converted to a Prime Rate Loan pursuant to the provisions of Section
2.2.3(c) or (f) hereof.

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

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

(d)                                 If, pursuant to the
terms of this Agreement, any portion of the Loan has been converted to a Prime
Rate Loan and Lender shall determine in good faith (which

 57
 

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

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

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

(iii)                               Any
Non-U.S. Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which

 58
 

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

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

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

(f)                                    Except as otherwise
expressly provided in Section 2.2.3(e) hereof, if any requirement of law
or any change therein or in the interpretation or application thereof, shall
hereafter make it unlawful for Lender to make or maintain a LIBOR Loan as
contemplated hereunder (i) the obligation of Lender hereunder to make a LIBOR
Loan or to convert a Prime

 59
 

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

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

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

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

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

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

(h)                                 Each
Borrower agrees to pay to Lender and to hold Lender harmless from any actual
out-of-pocket expense which Lender sustains or incurs as a consequence of (i)
any default by Borrowers in payment of the principal of or interest on a LIBOR
Loan, including, without limitation, any such loss or expense arising from
interest or fees payable by Lender to lenders of funds obtained by it in order
to maintain a LIBOR Loan hereunder, (ii) any prepayment (whether voluntary or
mandatory) of the LIBOR Loan on a day that (A) is not the Payment Date
immediately following the last day of an Interest Period with

 60
 

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

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

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

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

 61
 

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

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

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

(c)                                  In
the event of any downgrade of the rating of the Acceptable Counterparty below “AA-”
by S&P or “Aa3” by Moody’s, Borrowers shall replace the applicable Interest
Rate Cap Agreement(s) with one or more Replacement Interest Rate Cap

 62
 

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

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

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

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

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

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

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

 63
 

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

Section 2.3                                   Loan
Payment.

2.3.1                     Payments
Generally.  Borrowers shall pay
to Lender on each Payment Date the interest accrued on the Loan for the
preceding Interest Period (the “Monthly Interest Payment”),
except that Borrowers shall pay to Lender an amount equal to the interest
accrued on the Outstanding Principal Balance for the initial Interest Period on
the Closing Date.  For purposes of making
payments hereunder, but not for purposes of calculating Interest Periods, if
the day on which such payment is due is not a Business Day, then amounts due on
such date shall be due on the immediately preceding Business Day.  With respect to payments of principal due on
the Maturity Date, interest shall be payable at the Applicable Interest Rate or
the Default Rate, as the case may be, through and including the day immediately
preceding such Maturity Date.  All
amounts due pursuant to this Agreement and the other Loan Documents shall be
payable without setoff, counterclaim, defense or any other deduction
whatsoever, except as otherwise expressly provided in Section 2.2.3(e)
hereof.

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

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

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

2.3.4                     Method and
Place of Payment.  Except as
otherwise specifically provided herein, all payments and prepayments under this
Agreement and the Note shall be made to Lender not later than 2:00 P.M., New
York City time, on the date when due and shall be made in lawful money of the
United States of America in immediately available funds at Lender’s office at
11 Madison Avenue, New York, New York 10010, Attention: Edmund Taylor, or as
otherwise directed by Lender, and any funds received by Lender after such time
shall, for all purposes hereof, be deemed to have been paid on the next
succeeding Business Day.

 64
 

Section 2.4                                   Prepayments.

2.4.1                     Voluntary
Prepayments.  From and after the
date hereof, so long as no Event of Default has occurred and is continuing,
Borrowers may, at their option and upon at least ten (10) days prior written
notice to Lender (or such shorter period as may be permitted by Lender), prepay
the Debt in whole or in part, but in no event shall any partial prepayment be
less than $5,000,000.00; provided that any prepayment is accompanied by
(a) if such prepayment occurs on a date other than a Payment Date, all interest
which would have accrued on the amount of the Loan to be paid through, but not
including, the next succeeding ninth (9th) day of a calendar month, or, if such
prepayment occurs on a Payment Date, through and including the last day of the
Interest Period immediately prior to the applicable Payment Date; (b) if such
prepayment occurs prior to the Spread Maintenance Release Date, the Spread
Maintenance Premium due with respect to the amount prepaid, if any; and (c) all
other sums due and payable under this Agreement, the Note, and the other Loan
Documents, including, but not limited to, the Breakage Costs, if any, the
applicable Prepayment Fee, if any, the Exit Fee (or the applicable portion
thereof), if applicable, and all of Lender’s costs and expenses (including
reasonable attorney’s fees and disbursements) incurred by Lender in connection
with such prepayment.  No Spread
Maintenance Premium or, subject to the proviso at the end of this sentence, any
other prepayment premium or fee shall be due in connection with any prepayment
of the Loan (i) made after the Spread Maintenance Release Date, or (ii) made
from the proceeds of any Minimum Mandatory Prepayment (or any partial payment
on account thereof), Non-Qualified Mandatory Prepayment, Additional
Non-Qualified Mandatory Prepayment, Release Parcel Release Price, Adjacent
Parcel Release Price and/or IP Release Price; provided, however,
that the applicable Prepayment Fee shall be due in connection with any
prepayment of the Loan made from the proceeds of any Minimum Mandatory
Prepayment (or any partial payment on account thereof), Release Parcel Release
Price, Adjacent Parcel Release Price and/or IP Release Price if any such
prepayment shall occur prior to the Prepayment Fee Release Date.  If a notice of prepayment is given by
Borrowers to Lender pursuant to this Section 2.4.1, the amount
designated for prepayment and all other sums required under this Section 2.4
shall be due and payable on the proposed prepayment date; provided, however,
Borrowers shall have the right to postpone or revoke such prepayment upon written
notice to Lender not less than two (2) Business Days prior to the date such
prepayment is due so long as Borrowers pay Lender and/or Servicer all actual
out-of-pocket third party costs and expenses incurred by Lender or Servicer in
connection with such postponement or revocation.

2.4.2                     Mandatory
Prepayments.

(a)                                  Net
Proceeds.  On the next occurring
Payment Date following the date on which Lender actually receives any Net
Proceeds, if Lender is not obligated to, and does not otherwise elect in its
sole discretion to, make such Net Proceeds available to Borrowers for
Restoration in accordance with Section 6.4 hereof, Borrowers shall
prepay, or authorize Lender to apply Net Proceeds as a prepayment of, the
Outstanding Principal Balance in an amount equal to one hundred percent (100%)
of such Net Proceeds.  No Spread
Maintenance Premium or any other penalty or premium shall be due in connection
with any prepayment made pursuant to this Section 2.4.2(a), whether
occurring prior to or after the Spread Maintenance Release Date.  Any partial prepayment under this Section
2.4.2(a) shall be applied to the last payments of principal

 65
 

due under the Loan.  Any Net Proceeds in excess of the amount
required to pay the Debt in full shall be disbursed to Borrowers.

(b)                                 Minimum
Mandatory Prepayment and Alternative Minimum Mandatory Letter of Credit.

(i)                                     In
the event that the entire Release Parcel has not been sold pursuant to one or
more Release Parcel Sales consummated in accordance with the provisions of Section
2.5.1 hereof, including, without limitation, the payment of the Release
Parcel Release Price(s) resulting from any such Release Parcel Sale(s), on or
prior to the First Anniversary, subject to extension as set forth in the
immediately following sentence, Borrowers shall pay to Lender on the First
Anniversary, subject to extension as set forth in the immediately following
sentence, a mandatory prepayment of the Outstanding Principal Balance in the
Minimum Mandatory Amount (the “Minimum Mandatory
Prepayment”).  Notwithstanding
the foregoing, in the event that, on the First Anniversary, the then unsold
portion of the Release Parcel is subject to one or more binding commitments to
sell and/or binding contracts of sale which, in each case, are not subject to
any contingencies other than standard title and similar conditions and under
which any Borrower has received a non-refundable deposit, the amount of which
is consistent with then market standards (subject only to such standard title
and similar conditions and the selling Borrower’s performance) (each a “Release Parcel Binding Contract”), then (i) if the closing
of the Release Parcel Sale(s) pursuant to such Release Parcel Binding
Contract(s) shall occur in accordance with the provisions of Section 2.5.1
hereof, resulting in the entire Release Parcel having been sold in one or more
Release Parcel Sales, including, without limitation, the payment of each
applicable Release Parcel Release Price, within sixty (60) days following the
First Anniversary, then the Minimum Mandatory Prepayment shall not be required
to be made by Borrowers at any time, or (ii) if any Release Parcel Binding
Contracts shall be terminated, or the purchaser thereunder shall notify any
Borrower in writing that it shall not close thereunder, during the sixty (60)
days following the First Anniversary, then Borrowers shall make the Minimum
Mandatory Prepayment within fifteen (15) days following such termination or
receipt of such written notice from the purchaser, or (iii) if the closing of
any Release Parcel Sale pursuant to any such Release Parcel Binding Contract
shall not occur for any other reason within sixty (60) days following the First
Anniversary, then Borrowers shall make the Minimum Mandatory Prepayment within
fifteen (15) days following such sixtieth (60th) day, irrespective of whether
the closing of such Release Parcel Sale pursuant to the Release Parcel Binding
Contract shall close during such fifteen (15) day period.

(ii)                                  Notwithstanding
the foregoing, in lieu of clause (i) above, in the event that the entire
Release Parcel has not been sold pursuant to one or more Release Parcel Sales
consummated in accordance with the provisions of Section 2.5.1 hereof,
including, without limitation, the payment of the Release Parcel Release
Price(s) resulting from any such Release Parcel Sale(s), on or prior to the
First Anniversary, subject to extension as set forth in the foregoing clause
(i), in lieu of making the Minimum Mandatory Prepayment on the First
Anniversary, Borrowers shall have the right, on before the First Anniversary,
to (A) deliver to Lender a Letter of Credit in the Minimum Mandatory Amount (an
“Alternative Minimum Mandatory Letter of Credit”),
and (B) deliver to Lender, for deposit into the Interest Reserve Account and
thereafter to constitute a portion of the Interest Reserve Fund for all
purposes under

 66
 

this Agreement and the other Loan Documents (the “Alternative
Minimum Interest Reserve Amount”), an amount equal to (x) the
Minimum Mandatory Amount multiplied by (y) the Strike Price plus the
Spread and  then (z) such amount divided by two (2).  In the event that, on or prior to the First
Anniversary, Borrowers shall deliver the Alternative Minimum Mandatory Letter
of Credit and the Alternative Minimum Interest Reserve Amount, Borrowers’ obligation
to make the Minimum Mandatory Prepayment shall be extended until the Eighteen
Month Anniversary and the following shall apply:

(1)                                  in
the event that between the First Anniversary and the Eighteen Month Anniversary
Borrowers shall consummate any Release Parcel Sales in accordance with the
provisions of Section 2.5.1 hereof, including, without limitation, the
payment of the Release Parcel Release Price(s) resulting from any such Release
Parcel Sale(s), upon the payment of any such Release Parcel Release Price to
Lender, Lender shall, at Borrowers’ option and at Borrowers’ sole cost and
expense, (aa) accept an amendment to, exchange of or replacement for the
Alternative Minimum Mandatory Letter of Credit in an amount equal to such
Release Parcel Release Price, so long as Lender is not required to relinquish
physical possession of the Alternative Minimum Mandatory Letter of Credit until
such amendment, exchanged item or replacement has been delivered to Lender, and
(bb) return to Borrower a ratable portion of the Alternative Minimum Interest
Reserve Amount, as reasonably determined by Lender;

(2)                                  in
the event that between the First Anniversary and the Eighteen Month Anniversary
Borrowers shall, at their sole election, fully or partially pay the Minimum Mandatory
Prepayment, Lender shall, at Borrowers’ option and at Borrowers’ sole cost and
expense, (aa) accept an amendment to the Alternative Minimum Mandatory Letter
of Credit in an amount equal to the amount of such payment or return such
Alternative Minimum Mandatory Letter of Credit if such payment fully pays the
Minimum Mandatory Prepayment, and (bb) return to Borrowers a ratable portion of
the Alternative Minimum Interest Reserve Amount, as reasonably determined by
Lender, or return the balance of the Alternative Minimum Interest Reserve
Amount to Borrowers if such payment fully pays the Minimum Mandatory
Prepayment; and/or

(3)                                  in
the event that on or before the Eighteen Month Anniversary the entire Release
Parcel has not been sold pursuant to one or more Release Parcel Sales
consummated in accordance with the provisions of Section 2.5.1 hereof,
including, without limitation, the payment of the Release Parcel Release
Price(s) resulting from any such Release Parcel Sale(s), on or after the
Eighteen Month Anniversary, Lender may draw down on the Alternative Minimum
Mandatory Letter of Credit and shall apply the proceeds to prepayment of the
Loan in satisfaction of the Minimum Mandatory Prepayment, it being acknowledged
and agreed by Borrowers that, in such instance, Borrowers shall not receive a
return of any portion of the Alternative Minimum

 67
 

Interest Reserve Amount,
which shall be and remain a portion of the Interest Reserve Fund.

(iii)                               Each payment of or on
account of the Minimum Mandatory Prepayment, whether made pursuant to one or a
combination of the forgoing clauses (a), (b)(I), (b)(II) and/or (b)(III),
shall be accompanied by (1) if such Minimum Mandatory Prepayment (or a partial
payment on account thereof) occurs on a date other than a Payment Date, all
interest which would have accrued on the amount of the Loan to be prepaid
through, but not including, the next succeeding ninth (9th) day of a calendar
month (subject to Section 2.4.5 hereof), or, if such Minimum Mandatory
Prepayment (or a partial payment on account thereof) occurs on a Payment Date,
through and including the last day of the Interest Period immediately prior to
the applicable Payment Date, (2) the applicable Prepayment Fee, and (3) all
other sums due and payable under this Agreement, the Note, and the other Loan
Documents, including, but not limited to the Breakage Costs, if any, and all of
Lender’s costs and expenses (including reasonable attorney’s fees and
disbursements) incurred by Lender in connection with such Minimum Mandatory Prepayment
(or such partial payment on account thereof), but Lender acknowledges and
agrees that (1) no Spread Maintenance Premium shall be due at any time in
connection with the Minimum Mandatory Prepayment (or any partial payment on
account thereof), and (2) no Exit Fee shall be due at any time in connection
with the Minimum Mandatory Prepayment (or any partial payment on account
thereof).  Each payment of or on account
of the Minimum Mandatory Prepayment shall be applied as contemplated by Section
2.4.3 hereof.

(c)                                  Non-Qualified
Mandatory Prepayment.  Without
limiting the foregoing Section 2.4.2(b), in the event that the
Qualification Conditions have not been satisfied on or prior to the
Construction Qualification Date, and whether or not the entire Release Parcel
shall have been sold pursuant to one or more Release Parcel Sales in accordance
with the provisions of Section 2.5.1 hereof, Borrowers shall pay to
Lender on the Construction Qualification Date a mandatory prepayment of the
Outstanding Principal Balance in the amount of $50,000,000.00 (the “Non-Qualified Mandatory Prepayment”).  The payment of the Non-Qualified Mandatory
Prepayment shall be accompanied by (A) if such Non-Qualified Mandatory
Prepayment occurs on a date other than a Payment Date, all interest which would
have accrued on the amount of the Loan to be prepaid through, but not
including, the next succeeding ninth (9th) day of a calendar month (subject to Section
2.4.5 hereof), or, if such Non-Qualified Mandatory Prepayment occurs on a
Payment Date, through and including the last day of the Interest Period
immediately prior to the applicable Payment Date, and (B) all other sums due
and payable under this Agreement, the Note, and the other Loan Documents,
including, but not limited to, the Breakage Costs, if any, and all of Lender’s
costs and expenses (including reasonable attorney’s fees and disbursements)
incurred by Lender in connection with such Non-Qualified Mandatory Prepayment,
but Lender acknowledges and agrees that (1) no Spread Maintenance Premium shall
be due at any time in connection with the Non-Qualified Mandatory Prepayment,
(2) no Prepayment Fee shall be due at any time in connection with the
Non-Qualified Mandatory Prepayment, and (3) no Exit Fee shall be due at any
time in connection with the Non-Qualified Mandatory Prepayment.  The Non-Qualified Mandatory Prepayment shall
be applied as contemplated by Section 2.4.3 hereof.

 68
 

Borrowers and Lender
further agree with respect to the Non-Qualified Mandatory Prepayment that: (x)
in lieu of making the Non-Qualified Mandatory Prepayment if the same shall be
due in accordance with the foregoing paragraph of this Section 2.4.2(c),
Borrowers shall have the right to deliver to Lender, no later than the
Construction Qualification Date, a Letter of Credit in the amount of
$50,000,000.00 (a “Non-Qualified Prepayment
Letter of Credit”); (y) on the Closing Date, Guarantors are
guaranteeing the payment of the Non-Qualified Mandatory Prepayment pursuant to
the Non-Qualified Prepayment Guaranty, which shall be returned to Guarantors
promptly following (I) Borrowers’ payment of the Non-Qualified Mandatory
Prepayment, or (II) Borrowers’ delivery of a Non-Qualified Prepayment Letter of
Credit (or a combination of the foregoing clauses (I) and (II)),
or (III) pursuant to Section 3.22(e) hereof, whichever shall be
applicable and shall first occur; and (z) no Relinquishment Notice sent by
Borrowers, if any, shall be effective unless and until Borrowers shall have
either paid the Non-Qualified Mandatory Prepayment or delivered a Non-Qualified
Prepayment Letter of Credit.  Upon the
satisfaction of clause (I), (II) or (III) above (or satisfaction
by a combination of clauses (I) and (II) above), Lender shall, at
Borrowers’ reasonable expense (including Lender’s reasonable attorneys’ fees),
promptly execute and deliver such documents as may be reasonably requested by
Borrowers or Guarantors to evidence release of the Non-Qualified Prepayment
Guaranty.

(d)                                 Additional
Non-Qualified Mandatory Prepayment. 
Without limiting the foregoing Sections 2.4.2(b) and (c),
in the event that Borrowers were obligated to make the Non-Qualified Mandatory
Prepayment (or deliver a Non-Qualified Prepayment Letter of Credit in lieu
thereof) as provided in the foregoing Section 2.4.2(c), Borrowers shall
pay to Lender on the Additional Non-Qualified Prepayment Date an additional
mandatory prepayment of the Outstanding Principal Balance in the amount of
$75,000,000.00 (the “Additional Non-Qualified
Mandatory Prepayment”).  The
payment of the Additional Non-Qualified Mandatory Prepayment shall be
accompanied by (A) if such Additional Non-Qualified Mandatory Prepayment occurs
on a date other than a Payment Date, all interest which would have accrued on
the amount of the Loan to be prepaid through, but not including, the next
succeeding ninth (9th) day of a calendar month (subject to Section 2.4.5
hereof), or, if such Additional Non-Qualified Mandatory Prepayment occurs on a
Payment Date, through and including the last day of the Interest Period immediately
prior to the applicable Payment Date, and (B) all other sums due and payable
under this Agreement, the Note, and the other Loan Documents, including, but
not limited to, the Breakage Costs, if any, and all of Lender’s costs and
expenses (including reasonable attorney’s fees and disbursements) incurred by
Lender in connection with such Additional Non-Qualified Mandatory Prepayment,
but Lender acknowledges and agrees that (1) no Spread Maintenance Premium shall
be due at any time in connection with the Additional Non-Qualified Mandatory
Prepayment, (2) no Prepayment Fee shall be due at any time in connection with
the Additional Non-Qualified Mandatory Prepayment, and (3) no Exit Fee shall be
due at any time in connection with the Additional Non-Qualified Mandatory
Prepayment.  The Additional Non-Qualified
Mandatory Prepayment shall be applied as contemplated by Section 2.4.3
hereof.

(e)                                  If
Borrowers elect to deliver an Alternative Minimum Mandatory Letter of Credit
pursuant to Section 2.4.2(b) hereof and/or a Non-Qualified Prepayment
Letter of Credit pursuant to Section 2.4.2(b) hereof, the following
shall apply thereto:

 69
 

(i)                                     Borrowers shall
pay to Lender all of Lender’s reasonable out-of-pocket costs and expenses in
connection with such Alternative Minimum Mandatory Letter of Credit and/or
Non-Qualified Prepayment Letter of Credit, as applicable, including, without
limitation, any costs or expenses incurred in drawing down on the same.  Borrowers shall not be entitled to draw from
such Alternative Minimum Mandatory Letter of Credit and/or Non-Qualified
Prepayment Letter of Credit, as applicable. 
Upon five (5) days notice to Lender and provided that no Event of
Default shall have occurred and be continuing, Borrowers may replace such
Alternative Minimum Mandatory Letter of Credit and/or Non-Qualified Prepayment
Letter of Credit, as applicable, with a partial prepayment of the Loan in an
amount equal to such Alternative Minimum Mandatory Letter of Credit and/or
Non-Qualified Prepayment Letter of Credit, as applicable, which prepayment
shall be applied in accordance with Section 2.4.3 hereof as though it
were the Minimum Mandatory Prepayment (or a portion thereof) or the
Non-Qualified Mandatory Prepayment, as applicable, following which prepayment,
Lender shall promptly return such Alternative Minimum Mandatory Letter of
Credit and/or Non-Qualified Prepayment Letter of Credit, as applicable, to
Borrowers.

(ii)                                  Such Alternative
Minimum Mandatory Letter of Credit and/or Non-Qualified Prepayment Letter of
Credit, as applicable, delivered under this Agreement shall be additional
security for the payment of the Debt. 
Upon the occurrence and during the continuance of an Event of Default,
Lender shall have the right, at its option, to draw on such Alternative Minimum
Mandatory Letter of Credit and/or Non-Qualified Prepayment Letter of Credit, as
applicable, and to apply all or any part thereof to the payment of the Debt in
such order, proportion or priority as Lender may determine.

(iii)                               In addition to any other
right Lender may have to draw upon such Alternative Minimum Mandatory Letter of
Credit and/or Non-Qualified Prepayment Letter of Credit, as applicable,
pursuant to the terms and conditions of this Agreement, Lender shall have the
additional rights to draw in full on any Alternative Minimum Mandatory Letter
of Credit and/or Non-Qualified Prepayment Letter of Credit, as applicable: (i)
with respect to any evergreen Alternative Minimum Mandatory Letter of Credit
and/or Non-Qualified Prepayment Letter of Credit, as applicable, if Lender has
received a notice from the issuing bank that such Alternative Minimum Mandatory
Letter of Credit and/or Non-Qualified Prepayment Letter of Credit, as
applicable, will not be renewed and a substitute Alternative Minimum Mandatory
Letter of Credit and/or Non-Qualified Prepayment Letter of Credit, as
applicable, is not provided at least ten (10) Business Days prior to the date
on which the outstanding Alternative Minimum Mandatory Letter of Credit and/or
Non-Qualified Prepayment Letter of Credit, as applicable, is scheduled to
expire; (ii) with respect to any Alternative Minimum Mandatory Letter of Credit
and/or Non-Qualified Prepayment Letter of Credit, as applicable, with a stated
expiration date, if Lender has not received a notice from the issuing bank that
it has renewed such Alternative Minimum Mandatory Letter of Credit and/or
Non-Qualified Prepayment Letter of Credit, as

 70
 

applicable, at least ten (10) Business Days prior to the date on which
such Alternative Minimum Mandatory Letter of Credit and/or Non-Qualified
Prepayment Letter of Credit, as applicable, is scheduled to expire and a
substitute Alternative Minimum Mandatory Letter of Credit and/or Non-Qualified
Prepayment Letter of Credit, as applicable, is not provided at least ten (10)
Business Days prior to the date on which the outstanding Alternative Minimum
Mandatory Letter of Credit and/or Non-Qualified Prepayment Letter of Credit, as
applicable, is scheduled to expire; (iii) upon receipt of notice from the
issuing bank that such Alternative Minimum Mandatory Letter of Credit and/or
Non-Qualified Prepayment Letter of Credit, as applicable, will be terminated
and a substitute Alternative Minimum Mandatory Letter of Credit and/or
Non-Qualified Prepayment Letter of Credit, as applicable, is not provided at
least ten (10) Business Days prior to the date on which the outstanding
Alternative Minimum Mandatory Letter of Credit and/or Non-Qualified Prepayment
Letter of Credit, as applicable, is scheduled to be terminated; or (iv) if
Lender has received notice that the bank issuing any Alternative Minimum
Mandatory Letter of Credit and/or Non-Qualified Prepayment Letter of Credit, as
applicable, shall cease to be an Eligible Institution and within ten (10)
Business Days after Lender notifies Borrowers in writing of such circumstance,
Borrowers shall fail to deliver to Lender a substitute Alternative Minimum
Mandatory Letter of Credit and/or Non-Qualified Prepayment Letter of Credit, as
applicable, issued by an Eligible Institution. 
Notwithstanding anything to the contrary contained in the above, Lender
is not obligated to draw upon any Alternative Minimum Mandatory Letter of
Credit and/or Non-Qualified Prepayment Letter of Credit, as applicable, upon
the happening of an event specified in clause (i), (ii), (iii) or (iv)
above and shall not be liable for any losses sustained by Borrowers due to the
insolvency of the bank issuing any such Alternative Minimum Mandatory Letter of
Credit and/or Non-Qualified Prepayment Letter of Credit, as applicable, if
Lender has not drawn upon such Alternative Minimum Mandatory Letter of Credit
and/or Non-Qualified Prepayment Letter of Credit, as applicable.

(f)                                    Credits
Against Mandatory Prepayments. 
Notwithstanding the foregoing provisions of this Section 2.4.2,
Borrowers shall be given a credit against the Minimum Mandatory Prepayment, the
Non-Qualified Mandatory Prepayment and/or the Additional Non-Qualified
Mandatory Prepayment, and the required amounts thereof shall thereafter be
reduced, as follows and as applicable (but in no event shall any such credit
reduce any such payment below zero dollars): (i) the amount of any Optional IP
Release Payment shall be credited against, at Borrowers’ option, any of the
Minimum Mandatory Prepayment, the Non-Qualified Mandatory Prepayment and/or the
Additional Non-Qualified Mandatory Prepayment, thus reducing the amount
required to be paid on account of such Minimum Mandatory Prepayment,
Non-Qualified Mandatory Prepayment and/or Additional Non-Qualified Mandatory
Prepayment, as applicable, by an equal amount; (ii) the amount of any Adjacent
Parcel Release Price shall be credited against the Additional Non-Qualified
Mandatory Prepayment thus reducing the amount required to be paid on account of
such Additional Non-Qualified Mandatory Prepayment by an equal amount; and
(iii) $40,000,000 of any IP Release Price that arises from an IP Sale occurring
prior to the First Anniversary shall be credited against the

 71
 

Minimum Mandatory Prepayment thus reducing
the Minimum Mandatory Prepayment by an equal amount.

2.4.3                     Application
of Payments of Principal. 
Notwithstanding anything to the contrary contained in this Agreement,
the following principal payments shall be applied as follows:

(a)                                  any
voluntary prepayment, including, without limitation, any prepayment pursuant to
Section 2.7.3(a), 2.7.3(b)(i), 3.2(h), 3.2(h)(A), 3.3(d) or 3.17.2(a)
hereof, shall be applied first, to the Debt, in any order, priority and
proportions as Lender shall elect in its sole discretion from time to time,
until the Debt is paid in full, and then any balance shall be disbursed to
Borrowers;

(b)                                 any
Minimum Mandatory Prepayment (or any partial payment on account thereof),
Non-Qualified Mandatory Prepayment and/or Additional Non-Qualified Mandatory
Prepayment shall be applied first, to the Debt, in any order, priority and
proportions as Lender shall elect in its sole discretion from time to time,
until the Debt is paid in full, and then any balance shall be disbursed to
Borrowers;

(c)                                  all
Net Proceeds not required to be made available for Restoration, and as to which
Lender has not otherwise elected in its sole discretion to make available for
Restoration, shall be applied first, to the Debt, in any order, priority and
proportions as Lender shall elect in its sole discretion from time to time,
until the Debt is paid in full, and then any balance shall be disbursed to
Borrowers;

(d)                                 any
Reserve Funds or other cash collateral held by or on behalf of Lender, whether
in the Cash Management Account, the Tax and Insurance Escrow Account, the
Replacement Reserve Account, the Required Repair Account, the Initial
Renovation Reserve Account, the Interest Reserve Account, the General Reserve
Account, the Construction Loan Reserve Account, the Shortfall Account or otherwise,
including, without limitation, any Net Proceeds and/or any Excess Cash Flow
then being held by Lender, shall, upon the occurrence and during the
continuance of an Event of Default, be applied by Lender as follows or may
continue to be held by Lender as additional collateral for the Loan, all in
Lender’s sole discretion: first, to the Debt, in any order, priority and
proportions as Lender shall elect in its sole discretion from time to time,
until the Debt is paid in full, and then, any balance shall be disbursed to
Borrowers;

(e)                                  subject
to Section 2.5.4 hereof, the proceeds of any Release Parcel Release
Price shall be applied to the Loan;

(f)                                    subject
to Section 2.5.4 hereof, the proceeds of any Adjacent Parcel Release
Price shall be applied to the Loan;

(g)                                 subject
to Section 2.5.4 hereof, (i) the proceeds of any IP Release Price which
is less than or equal to $80,000,000 and arises from an IP Sale (a “Non-Fully Prepaid IP Sale”) occurring at
any time when Borrowers have not paid in full the Minimum Mandatory Prepayment,
the Non-Qualified Mandatory Prepayment and the Additional Non-Qualified
Mandatory Prepayment, shall be applied to the Loan; (ii) the proceeds of any IP

 72
 

Release Price which is less than or equal to
$60,000,000 and arises from an IP Sale (a “Fully
Prepaid IP Sale”) occurring at any time after Borrowers have paid in
full the Minimum Mandatory Prepayment, the Non-Qualified Mandatory Prepayment
and the Additional Non-Qualified Mandatory Prepayment, shall be applied to the
Loan; and (iii) the proceeds of any IP Release Price in excess of $80,000,000
which arise from a Non-Fully Prepaid IP Sale (the “Excess Non-Fully Funded IP Release Proceeds”) or the proceeds
of any IP Release Price in excess of $60,000,000 which arise from a Fully
Prepaid IP Sale (“Excess Fully Funded IP
Release Proceeds”; and whichever of the Excess Fully Funded IP
Release Proceeds or the Excess Non-Fully Funded IP Release Proceeds is
applicable, the “Excess IP Release Price
Proceeds”), shall, at Borrowers’ option, either (A) be deposited in
the General Reserve Account and thereafter constitute a part of the General
Reserve Fund for all purposes under the Loan Agreement, to be held and
disbursed by Lender as set forth in Section 7.6 hereof, or (B) applied
as follows, in such amounts as Borrowers shall elect: (1) up to fifty percent
(50%) of such Excess IP Release Price Proceeds shall be applied to satisfy any
Required Equity Amount or Subsequent Required Equity Amount then due and
payable and/or to pay any Unused Advance Fee, Exit Fee and/or Administrative
Agent Fee then due and payable, and/or (2) the balance of such Excess IP
Release Price Proceeds after application in accordance with the foregoing clause
(1), but in no event less than fifty percent (50%) thereof, to repayment of
the Loan (any repayment of the Loan pursuant to this Section
2.4.3(g)(iii)(B)(2) paid out of Excess Non-Fully Funded IP Release Proceeds
being referred to as the “Optional IP Release
Payment”); and

(h)                                 all
Rents received by Lender upon the occurrence and during the continuance of an
Event of Default pursuant to Section 3.1 of the Assignment of Leases shall be
applied by Lender as follows or may continue to be held by Lender as additional
collateral for the Loan, all in Lender’s sole discretion: first, (i) to the
expenses of managing and securing any of the Properties, as contemplated by
clause (a) of said Section 3.1 of the Assignment of Leases, and/or (ii) to the
Debt, in any order, priority and proportions as Lender shall elect in its sole
discretion from time to time, until the Debt is paid in full, and then the
balance disbursed to Borrowers.

2.4.4                     Prepayments
After Default.  If during the
continuance of an Event of Default payment of all or any part of the Debt is
tendered by Borrowers or otherwise recovered by Lender (including through
application of any Reserve Funds or any Net Proceeds), (a) such tender or
recovery shall be deemed made on the next occurring Payment Date together with
the monthly Debt Service amount calculated at the Default Rate from and after
the date of such Event of Default, (b) if such tender or recovery occurs on or
prior to the Spread Maintenance Release Date, Borrowers shall pay, in addition
to the Debt, the Spread Maintenance Premium due on the amount of the Loan being
prepaid or satisfied, and (c) Borrower shall also pay an amount equal to one
percent (1%) of the amount of the Loan being prepaid or satisfied.

2.4.5                     Prepayments
Made on Dates Other Than Payment Dates. 
With respect to any provision herein or in any other Loan Document
providing that if a payment or prepayment of the Loan is made on a date other
than a Payment Date such payment or prepayment shall be accompanied by all
interest which would have accrued on the amount of the Loan so paid or prepaid
through, but not including, the next succeeding ninth (9th) day of a calendar
month, Borrowers shall be entitled to a credit toward the following month’s
Monthly Interest Payment or any other amounts due under the Loan in an amount
equal to the amount of

 73
 

interest actually
earned by Lender on the portion of such interest payment in excess of the
amount of interest actually accrued on the date of such payment or prepayment
(the “Extra Non-Accrued Interest”).  In order to effectuate the foregoing, upon
any prepayment resulting in any Extra Non-Accrued Interest pursuant to the
terms hereof, Lender shall deposit such Extra Non-Accrued Interest in an
interest-bearing account for the benefit of Lender until the next Payment Date
in order to determine the credit against the next Monthly Interest Payment due
to Borrowers under this Section 2.4.5, following which Payment Date (a)
Lender may withdraw such Extra Non-Accrued Interest, together with all interest
accrued thereon, from such account and apply the amount of the interest accrued
on such Extra Non-Accrued Interest to amounts due and payable to Lender on such
Payment Date, (b) such Extra Non-Accrued Interest, together with all interest
accrued thereon, shall constitute the sole and exclusive property of Lender,
and (c) Lender shall have no further obligations to Borrowers with respect to
such Extra Non-Accrued Interest and/or the interest accrued thereon.  Lender shall not be responsible for obtaining
any particular interest rate with respect to any Extra Non-Accrued Interest.

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

2.5.1                     Releases
of Release Parcel.

(a)                                  Conditions
for Release.  Notwithstanding
anything to the contrary set forth in this Agreement or the other Loan
Documents, Adjacent Borrower shall have the right, without the prior consent of
Lender and without violating the Loan Documents, to (1) sell one or more
portions of the Release Parcel (each, including the entire Release Parcel, a “Partial Release Parcel”) either to a
bonafide third party purchaser (a “Bonafide
Release Parcel Purchaser”) or to an Affiliate of Borrower or any
other Restricted Party (an “Affiliate Release
Parcel Purchaser”; and together with a Bonafide Release Parcel
Purchaser, individually, a “Release Parcel
Purchaser”), or (2) refinance one or more Partial Release Parcels
(each of the foregoing, including a sale or refinancing of the entire Release
Parcel, a “Release Parcel Sale”,
it being agreed that, for purposes of this Section 2.5.1, a refinancing
of a Partial Release Parcel, including the entire Release Parcel, shall be
treated as a Release Parcel Sale thereof to an Affiliate Release Parcel
Purchaser), and obtain a release of such Partial Release Parcel from the Liens
of the Mortgage and the other Loan Documents encumbering such Partial Release Parcel,
provided that all of the following conditions shall be satisfied with
respect to each such Release Parcel Sale:

(i)                                     At least ten (10)
Business Days prior to the anticipated date of such Release Parcel Sale,
Adjacent Borrower shall have submitted to Lender a written request for release
(a “Sale Request”), specifically
identifying and legally describing the Partial Release Parcel that Adjacent
Borrower intends to sell, which proposed Partial Release Parcel shall, unless
it is the entire Release Parcel, be reasonably acceptable to Lender taking into
account its potential impact on the value of the remaining portions of the
Release Parcel and the Remaining Adjacent Parcel, which Sale Request shall
include a copy of the contract of sale relating to such Release Parcel Sale and
an Officer’s Certificate providing a certification that

 74
 

(A) as of the date of such Sale Request, no monetary Default nor any
Event of Default shall have occurred and be continuing, (B) the proposed
purchaser is a Bonafide Release Parcel Purchaser or an Affiliate Release Parcel
Purchaser, as applicable, and (C) the copy of the contract of sale relating to
such Release Parcel Sale attached to such certification is true, correct and
complete;

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

(iii)                               All accrued and unpaid
interest and any unpaid or unreimbursed amounts in respect of the Loan and any
other sum then due hereunder or under any of the other Loan Documents,
including, without limitation, any applicable Breakage Costs, shall have been
paid in full or shall have been arranged to be paid in full contemporaneously
with the closing of such Release Parcel Sale; provided, however,
if such Release Parcel Sale closes on a date which is not a Payment Date,
Borrowers shall also have paid or shall have arranged to be paid
contemporaneously with the closing of such Release Parcel Sale interest on the
Release Parcel Release Price to, but not including, the next succeeding ninth
(9th) day of a calendar month;

(iv)                              If the closing of such
Release Parcel Sale shall occur prior to the Prepayment Fee Release Date,
Borrowers shall have paid or shall have arranged to be paid contemporaneously
with the closing of such Release Parcel Sale the Prepayment Fee based on the
amount of the applicable Release Parcel Release Price;

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

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

 75
 

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

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

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

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

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

 76
 

to Lender and be used as a prepayment of the Loan pursuant to the same
terms and conditions as governed the payment of the Release Parcel Release
Price that was paid in connection with such Partial Release Parcel (it being
understood that any such net proceeds of any such subsequent sale shall be
deemed a part of the previously-paid Release Parcel Release Price for such
Partial Release Parcel for all purposes under this Agreement), and (z) shall
terminate upon the earlier of (I) one (1) year from the date of such Release
Parcel Sale or (II) the repayment in full of the Debt;

(viii)                        If the Release Parcel Purchaser
is a Bonafide Release Parcel Purchaser, if such Bonafide Release Parcel
Purchaser finances such Release Parcel Sale, Borrowers shall have caused such
Bonafide Release Parcel Purchaser to provide to Credit Suisse (whether or not
Credit Suisse or any Affiliate thereof is then “Lender” under this Agreement
and the other Loan Documents), and such Bonafide Release Parcel Purchaser shall
have complied with the terms of, a right of first offer with respect to such
financing, such right to be on the same terms and conditions as are set forth
in Article XIII hereof (except only with respect to the particular
Release Parcel Sale and not with respect to a total Refinancing Loan);

(ix)                                If the Release Parcel
Purchaser is an Affiliate Release Parcel Purchaser, if such Affiliate Release
Parcel Purchaser finances such Release Parcel Sale, Borrowers shall have caused
such Affiliate Release Parcel Purchaser to provide to Credit Suisse (whether or
not Credit Suisse or any Affiliate thereof is then “Lender” under this
Agreement and the other Loan Documents), and such Affiliate Release Parcel
Purchaser shall have complied with the terms of, (A) a right of first offer with
respect to such financing, such right to be on the same terms and conditions as
are set forth in Schedule XVII attached hereto and made a part hereof,
and (B) a right of last look with respect to such financing, such right to be
on the same terms and conditions as are set forth in Schedule XVIII
attached hereto and made a part hereof;

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

(xi)                                No monetary Default nor
any Event of Default shall have occurred and be continuing at the time of the
submission by Adjacent Borrower of a Sale Request or at the time of the closing
of such Release Parcel Sale;

(xii)                             After giving effect to the
sale and release of such Partial Release Parcel, the then remaining portions of
the Release Parcel and the Remaining

 77
 

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

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

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

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

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

 78
 

Parcel Sale will constitute such a “significant modification” or
otherwise violate such REMIC Requirements; and

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

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

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

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

(e)                                  With
respect to a Release Parcel Sale, upon the full execution, delivery and, as
appropriate, recordation or filing of the applicable documents contemplated
under Section 2.5.1(d) hereof, all references in this Agreement to the
terms “Release Parcel” and “Adjacent Property” shall be deemed to exclude the
applicable Partial Release Parcel for all purposes hereunder.

2.5.2                     Releases
of Remaining Adjacent Parcel.

(a)                                  Conditions
for Release.  Notwithstanding
anything to the contrary set forth in this Agreement or the other Loan
Documents, Adjacent Borrower shall have the right, without the prior consent of
Lender and without violating the Loan Documents, to (1) sell one or more
portions of the Remaining Adjacent Parcel (each, including the entire Remaining
Adjacent Parcel, a “Partial Adjacent Parcel”)
either to a bonafide third party purchaser (a “Bonafide
Adjacent Parcel Purchaser”) or to an Affiliate of Borrower or any
other Restricted Party (an “Affiliate
Adjacent Parcel Purchaser”; and together with a Bonafide Adjacent
Parcel Purchaser, individually, an “Adjacent
Parcel Purchaser”), or (2) refinance one or more Partial Adjacent
Parcels (each of the foregoing, including a sale or refinancing of the entire
Remaining

 79

Adjacent Parcel, an “Adjacent Parcel
Sale”, it being agreed that, for purposes of this Section 2.5.2,
a refinancing of a Partial Adjacent Parcel, including the entire Remaining
Adjacent Parcel, shall be treated as an Adjacent Parcel Sale thereof to an Affiliate
Adjacent Parcel Purchaser), and obtain a
release of such Partial Adjacent Parcel from the Liens of the Mortgage and the
other Loan Documents encumbering such Partial Adjacent Parcel, provided
that all of the following conditions shall be satisfied with respect to each
such Adjacent Parcel Sale:

(i)                                     At least ten (10)
Business Days prior to the anticipated date of such Adjacent Parcel Sale,
Adjacent Borrower shall have submitted a Sale Request to Lender, specifically
identifying and legally describing the Partial Adjacent Parcel that Adjacent
Borrower intends to sell, which proposed Partial Adjacent Parcel shall, unless
it is the entire Remaining Adjacent Parcel, be reasonably acceptable to Lender
taking into account its potential impact on the value of the remaining portions
of the Remaining Adjacent Parcel and the Release Parcel, which Sale Request
shall include a copy of the contract of sale relating to such Adjacent Parcel
Sale and an Officer’s Certificate providing a certification that (A) as of the date
of such Sale Request, no monetary Default nor any Event of Default shall have
occurred and be continuing, (B) the proposed purchaser is a Bonafide Adjacent
Parcel Purchaser or an Affiliate Adjacent Parcel Purchaser, as applicable, and
(C) the copy of the contract of sale relating to such Adjacent Parcel Sale
attached to such certification is true, correct and complete;

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

(iii)                               All accrued and unpaid
interest and any unpaid or unreimbursed amounts in respect of the Loan and any
other sum then due hereunder or under any of the other Loan Documents,
including, without limitation, any applicable Breakage Costs, shall have been
paid in full or shall have been arranged to be paid in full contemporaneously
with the closing of such Adjacent Parcel Sale; provided, however,
if such Adjacent Parcel Sale closes on a date which is not a Payment Date,
Borrowers shall also have paid or shall have arranged to be paid
contemporaneously with the closing of such Adjacent Parcel Sale interest on the
Adjacent Parcel Release Price to, but not including, the next succeeding ninth
(9th) day of a calendar month;

(iv)                              If the closing of such
Adjacent Parcel Sale shall occur prior to the Prepayment Fee Release Date,
Borrowers shall have paid or shall have arranged to be paid contemporaneously
with the closing of such Adjacent Parcel Sale the Prepayment Fee based on the
amount of the applicable Adjacent Parcel Release Price;

 80
 

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

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

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

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

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

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

(vii)                           If the Adjacent Parcel
Purchaser is an Affiliate Adjacent Parcel Purchaser, simultaneously with the
closing of such Adjacent Parcel Sale, (A) if such Adjacent Parcel Purchaser is
a Joint Venture, at Lender’s election, the ownership interest(s) of any
Affiliate Joint Venture Counterparty shall be pledged to Lender as additional
collateral for the Obligations, which pledge shall constitute a first priority
Lien thereon, and Borrowers shall have (1) obtained the consent of each
Unaffiliated Joint Venture Counterparty to such pledge, and (2)

 81
 

executed and delivered, and caused any such Affiliate Joint Venture
Counterparty and Unaffiliated Joint Venture Counterparty to execute and
deliver, such documents and instruments, and taken such further actions, and
caused any such Affiliate Joint Venture Counterparty and Unaffiliated Joint
Venture Counterparty to take any such further actions, as reasonably requested
by Lender to evidence, secure and perfect such pledge of the ownership
interest(s) of any Affiliate Joint Venture Counterparty, or (B) if such
Adjacent Parcel Purchaser is an Affiliate Adjacent Parcel Purchaser of any
kind, whether or not a Joint Venture, at Lender’s election, which in the case
of an Adjacent Parcel Purchaser who is a Joint Venture, would be in lieu of the
foregoing clause (A), a security interest in any future sales proceeds
from the sale of such Partial Adjacent Parcel shall be pledged to Lender as
additional collateral for the Obligations, which pledge shall constitute a
first priority Lien thereon, and Borrowers shall have executed such documents
and instruments, and taken such further actions, as reasonably requested by
Lender to evidence, secure and perfect such pledge; provided, however,
that in the case of either clause (A) or clause (B) above, such
pledge (y) shall not prohibit, or require Lender’s consent to, a subsequent
sale by the Adjacent Parcel Purchaser of such Partial Adjacent Parcel, but
shall only require that the net proceeds of any such subsequent sale which are
payable to such Adjacent Parcel Purchaser be delivered to Lender and be used as
a prepayment of the Loan pursuant to the same terms and conditions as governed
the payment of the Adjacent Parcel Release Price that was paid in connection
with such Partial Adjacent Parcel (it being understood that any such net
proceeds of any such subsequent sale shall be deemed a part of the
previously-paid Adjacent Parcel Release Price for such Partial Adjacent Parcel
for all purposes under this Agreement), and (z) shall terminate upon the
earlier of (I) one (1) year from the date of such Partial Adjacent Sale or (II)
the repayment in full of the Debt;

(viii)                        If the Adjacent Parcel
Purchaser is a Bonafide Adjacent Parcel Purchaser, if such Bonafide Adjacent
Parcel Purchaser finances such Adjacent Parcel Sale, Borrowers shall have
caused such Bonafide Adjacent Parcel Purchaser to provide to Credit Suisse
(whether or not Credit Suisse or any Affiliate thereof is then “Lender” under
this Agreement and the other Loan Documents), and such Bonafide Adjacent Parcel
Purchaser shall have complied with the terms of, a right of first offer with
respect to such financing, such right to be on the same terms and conditions as
are set forth in Article XIII hereof (except only with respect to the
particular Adjacent Parcel Sale and not with respect to a total Refinancing Loan);

(ix)                                If the Adjacent Parcel
Purchaser is an Affiliate Adjacent Parcel Purchaser, if such Affiliate Adjacent
Parcel Purchaser finances such Adjacent Parcel Sale, Borrowers shall have
caused such Affiliate Adjacent Parcel Purchaser to provide to Credit Suisse
(whether or not Credit Suisse or any Affiliate thereof is then “Lender” under
this Agreement and the other Loan Documents), and such Affiliate Adjacent
Parcel Purchaser shall have complied with the terms of, (A) a right of first
offer with respect to such financing, such right to be on the same terms and
conditions as are set forth in Schedule XVII attached hereto and made a

 82
 

part hereof, and (B) a right of last look with respect to such
financing, such right to be on the same terms and conditions as are set forth
in Schedule XVIII attached hereto and made a part hereof;

(x)                                   Borrowers shall have
paid all of the actual out-of-pocket reasonable third party legal fees and
actual out-of-pocket reasonable third party expenses incurred by Lender in
connection with (A) reviewing and processing any Sale Request with respect to
an Adjacent Parcel Sale, whether or not the Adjacent Parcel Sale which is the
subject of a Sale Request actually closes, (B) the satisfaction of any of the
conditions set forth in this Section 2.5.2(a), and (C) providing all
release documents in connection with any Adjacent Parcel Sale as provided in Section
2.5.2(d) hereof;

(xi)                                No monetary Default nor
any Event of Default shall have occurred and be continuing at the time of the
submission by Adjacent Borrower of a Sale Request or at the time of the closing
of such Adjacent Parcel Sale;

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

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

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

 83
 

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

(xvi)                         If a Securitization has
occurred and the Adjacent Parcel Sale covers less than the entire Remaining
Adjacent Parcel, Borrowers shall have provided to Lender an opinion letter from
counsel reasonably satisfactory to Lender confirming that such Adjacent Parcel
Sale shall not constitute a “significant modification” of the Loan within the
meaning of Section 1.1001-3 of the regulations of the United States Department
of the Treasury or would otherwise violate any of the REMIC Requirements, and
Lender shall not otherwise have any reasonable belief (based on an opinion of
counsel or a certified public accountant) that such Adjacent Parcel Sale will
constitute such a “significant modification” or otherwise violate such REMIC
Requirements;

(xvii)                      Such Adjacent Parcel Sale shall
not occur until either (A) Borrowers shall have delivered the Relinquishment
Notice, or (B) the Qualification Conditions have not been satisfied on or prior
to the Construction Qualification Date;

(xviii)                   Borrowers shall have paid the
Non-Qualified Mandatory Prepayment or shall have delivered a Non-Qualified
Prepayment Letter of Credit in lieu thereof, in either instance, on or before
the date required under, and otherwise in accordance with the terms of, Section
2.4.2(c) hereof; and

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

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

(c)                                  In
the event that an Adjacent Parcel Sale with respect to which a Sale Request was
submitted to Lender does not close within one hundred thirty-five (135) days
after the date of such Sale Request, if Adjacent Borrower wishes to proceed
with such Adjacent Parcel Sale, Adjacent Borrower shall be required to
re-submit an updated Sale Request to Lender and satisfy the conditions set
forth in Section 2.5.2(a) hereof with respect to the Adjacent Parcel
Sale which is the subject of such resubmitted Sale Request as of the date of
such resubmission.

 84
 

(d)                                 With
respect to any Adjacent Parcel Sale, upon satisfaction of the conditions set
forth in Section 2.5.2(a) hereof, Lender, at the sole cost and expense
of Borrowers, shall execute and deliver to Borrowers releases, satisfactions,
reconveyances, discharges, terminations and/or assignments, as applicable and
as reasonably requested by Borrowers, of the Mortgage and the other Loan
Documents relating to the applicable Partial Adjacent Parcel.

(e)                                  With
respect to an Adjacent Parcel Sale, upon the full execution, delivery and, as
appropriate, recordation or filing of the applicable documents contemplated
under Section 2.5.2(d) hereof, all references in this Agreement to the
terms “Remaining Adjacent Parcel” and “Adjacent Property” shall be deemed to
exclude the applicable Partial Adjacent Parcel for all purposes hereunder.

2.5.3                     Release of
IP.

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

(i)                                     IP Borrower shall
have submitted a Sale Request to Lender at least ten (10) Business Days prior
to the anticipated date of such IP Sale, which shall include a copy of the
contract of sale relating to such IP Sale and an Officer’s Certificate
providing a certification that (A) as of the date of such Sale Request, no
monetary Default nor any Event of Default shall have occurred and be
continuing, (B) the proposed purchaser is a Bonafide IP Purchaser or an
Affiliate IP Purchaser, as applicable, and (C) the copy of the contract of sale
relating to such IP Sale attached to such certification is true, correct and
complete;

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

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

 85
 

such IP Sale, interest on the IP Release Price to, but not including,
the next succeeding ninth (9th) day of a calendar month;

(iv)                              If the closing of such IP
Sale shall occur prior to the Prepayment Fee Release Date, Borrowers shall have
paid or shall have arranged to be paid contemporaneously with the closing of
such IP Sale, the Prepayment Fee based on the IP Release Price;

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

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

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

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

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

(B)                                Eighty Million Dollars
($80,000,000.00);

(vii)                           If the IP Purchaser is an
Affiliate IP Purchaser, simultaneously with the closing of the IP Sale, (A) if
such IP Purchaser is a Joint Venture, at Lender’s election, the ownership
interest(s) of any Affiliate Joint Venture Counterparty shall be pledged to
Lender as additional collateral for the Obligations, which pledge shall
constitute a first priority Lien thereon, and

 86
 

Borrowers shall have (1) obtained the consent of each Unaffiliated
Joint Venture Counterparty to such pledge, and (2) executed and delivered, and
caused any such Affiliate Joint Venture Counterparty and Unaffiliated Joint
Venture Counterparty to execute and deliver, such documents and instruments,
and taken such further actions, and caused any such Affiliate Joint Venture
Counterparty and Unaffiliated Joint Venture Counterparty to take any such
further actions, as reasonably requested by Lender to evidence, secure and
perfect such pledge of the ownership interest(s) of any Affiliate Joint Venture
Counterparty, or (B) if such IP Purchaser is an Affiliate IP Purchaser of any
kind, whether or not a Joint Venture, at Lender’s election, which in the case
of an IP Purchaser who is a Joint Venture, would be in lieu of the foregoing clause
(A), a security interest in any future sales proceeds from the sale of the
IP shall be pledged to Lender as additional collateral for the Obligations,
which pledge shall constitute a first priority Lien thereon, and Borrowers
shall have executed such documents and instruments, and taken such further
actions, as reasonably requested by Lender to evidence, secure and perfect such
pledge; provided, however, that in the case of either clause
(A) or clause (B) above, such pledge (y) shall not prohibit, or
require Lender’s consent to, a subsequent sale by the IP Purchaser of the IP,
but shall only require that the net proceeds of any such subsequent sale which
are payable to the IP Purchaser be delivered to Lender and be used as a
prepayment of the Loan pursuant to the same terms and conditions as governed
the payment of the IP Release Price (it being understood that any such net
proceeds of any such subsequent sale shall be deemed a part of the
previously-paid IP Release Price for all purposes under this Agreement), and
(z) shall terminate upon the earlier of (I) one (1) year from the date of the
IP Sale or (II) the repayment in full of the Debt;

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

(ix)                                No monetary Default nor
any Event of Default shall have occurred and be continuing at the time of the
submission by IP Borrower of a Sale Request or at the time of the closing of an
IP Sale;

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

(xi)                                The IP Purchaser shall
enter into one or more royalty free license agreements, in form and substance
reasonably satisfactory to Borrowers and Lender, applying the standards of a
prudent commercial mortgage loan lender, pursuant to which such IP Purchaser
shall license to each Borrower all of the IP that is reasonably necessary or
desirable to operate its Property as then being operated and as then
contemplated to be operated in the future (collectively, the “Purchaser Licensed IP”), and each
applicable Borrower, at Borrowers’ sole

 87
 

cost and expense, shall execute and deliver, or cause to be executed
and delivered, to and for the benefit of Lender, a security interest agreement
covering such Purchaser Licensed IP, together with such other financing
statements, documents and/or instruments reasonably required by Lender in order
to perfect its security interest in the Purchaser Licensed IP and to enable
Lender to foreclose on such Purchaser Licensed IP upon the occurrence and
during the continuance of an Event of Default, all of the foregoing to be in
form and substance reasonably satisfactory to Lender; and

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

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

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

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

2.5.4                     Sale of
Properties or IP during Event of Default.  Notwithstanding the provisions of the
foregoing Sections 2.5.1, 2.5.2 and 2.5.3 or any other provision
to the contrary in this Agreement or the other Loan Documents, it is expressly
acknowledged and agreed by Borrowers that, upon the occurrence and during the
continuance of an Event of Default: (i) no Borrower shall have any right to
sell any Property or any portion thereof or any IP without, in each instance,
Lender’s prior written consent, which consent may be given or withheld in
Lender’s sole discretion, (ii) any such sale of one or more of the Properties
or any portion thereof and/or any IP shall be on such terms and conditions as
to which Lender and Borrowers shall agree, Lender, however, having the right to
impose such terms and conditions as it shall elect in its sole discretion,
(iii) the provisions of this Section 2.5 (other than this Section
2.5.4) shall not be applicable to any such sale of one or more of the
Properties or any portion thereof and/or any IP consented to by Lender as
aforesaid, and (iv) in the event that, following any such sale of one

 88
 

or more of the Properties or any portion
thereof and/or any IP, the Debt shall have been paid in full, Lender shall
distribute any remaining proceeds to Borrowers.

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

Section 2.6                                   Cash
Management.

2.6.1                     Lockbox
Account.  (a) Borrowers
shall establish and maintain a segregated Eligible Account (the “Lockbox Account”) with Lockbox Bank in
trust for the benefit of Lender, which Lockbox Account shall be under the sole
dominion and control of Lender.  The
Lockbox Account shall be entitled “HRHH Hotel/Casino, LLC, HRHH Cafe, LLC, HRHH
Development, LLC, HRHH IP, LLC and HRHH Gaming, LLC, for the benefit of Column
Financial, Inc., its successors and/or assigns - Lockbox Account” or such other
title as shall be reasonably acceptable to Lender and the applicable Lockbox
Bank.  Each Borrower hereby grants to
Lender a first priority security interest in the Lockbox Account and all
deposits at any time contained therein and the proceeds thereof, and will take
all actions requested by Lender that are necessary to maintain in favor of
Lender a perfected first priority security interest in the Lockbox Account,
including, without limitation, executing and filing UCC-1 Financing Statements
and continuations thereof.  Lender and
Servicer shall have the sole right to make withdrawals from the Lockbox Account
for application pursuant to the terms of this Agreement and all reasonable
costs and expenses for establishing and maintaining the Lockbox Account shall
be paid by Borrowers.

(b)                                 Each
Borrower shall, or shall cause its Manager and/or Sub-Manager, as applicable,
to, deliver irrevocable written instructions to all commercial tenants under
Leases of space at such Borrower’s Property (including, without limitation, the
HRHI Lease) to deliver all Rents payable thereunder directly to the Lockbox
Account.  Hotel/Casino Borrower shall, or
shall cause HRHI to, deliver irrevocable written instructions to the Gaming
Operator to deliver all income and/or proceeds payable under the Gaming
Sublease to HRHI directly to the Lockbox Account on account of the payments due
from HRHI to Hotel/Casino Borrower under the HRHI Lease.  Hotel/Casino Borrower shall deliver
irrevocable written instructions to HRHI, as the Liquor Manager, to deliver an
amount equal to all revenues earned by Liquor Manager pursuant to the Liquor
Management Agreement to the Lockbox Account on account of the payments due from
HRHI to Hotel/Casino Borrower.  Each
Borrower shall, and shall cause its Manager to deposit all amounts received by
such Borrower or its Manager constituting Rents (including Rents from all non-commercial
tenants under Leases of space at such Borrower’s Property) or any other Gross
Income from Operations into the Lockbox Account within one (1) Business Day
after receipt.  Notwithstanding the
foregoing, Adjacent Borrower shall cause Sub-Manager to deposit all amounts
received by Sub-Manager constituting Rents (but excluding security deposits
unless and until applied in accordance with the terms of the applicable Lease)
or any other Gross Income from Operations from the Adjacent Property into the
Lockbox Account within five (5) Business Days after receipt.  Each Borrower shall, or

 89
 

shall cause its Manager to, deliver
irrevocable written instructions to each of the credit card companies or credit
card clearing banks with which such Borrower or its Manager and/or Sub-Manager,
as applicable, has entered into merchant’s agreements to deliver all receipts
payable with respect to any Property directly to the Lockbox Account.

(c)                                  Borrowers
shall obtain from Lockbox Bank its agreement to transfer to the Cash Management
Account in immediately available funds by federal wire transfer all amounts on
deposit in the Lockbox Account once every Business Day throughout the term of
the Loan.

2.6.2                     Cash
Management Account. 
(a) There shall be established and maintained a segregated Eligible
Account (the “Cash Management Account”)
to be held by Servicer in trust for the benefit of Lender, which Cash
Management Account shall be under the sole dominion and control of Lender.  The Cash Management Account shall be entitled
“Column Financial, Inc., its successors and/or assigns – Hard Rock Cash
Management Account” or such other title as shall be reasonably acceptable to
Lender and the bank holding the Cash Management Account.  Each Borrower hereby grants to Lender a first
priority security interest in the Cash Management Account and all deposits at
any time contained therein and the proceeds thereof, and will take all actions
requested by Lender that are necessary to maintain in favor of Lender a
perfected first priority security interest in the Cash Management Account,
including, without limitation, executing and filing UCC-1 Financing Statements
and continuations thereof.  Lender and
Servicer shall have the sole right to make withdrawals from the Cash Management
Account for application pursuant to the terms of this Agreement and the other
Loan Documents and all reasonable costs and expenses for establishing and
maintaining the Cash Management Account shall be paid by Borrowers.

(b)                                 Subject
to Sections 2.6.2(c) and/or 2.6.2(d) hereof, as applicable,
provided no Event of Default shall have occurred and be continuing, on the last
Business Day of each calendar week during an Interest Period (or such other
date as is expressly set forth in the Cash Management Agreement) all funds on
deposit in the Cash Management Account shall be credited towards payment of the
following items (but not disbursed) in the order indicated, it being
acknowledged and agreed by Borrowers and Lender, however, that (1) as soon as
there are sufficient funds in the Cash Management Account to satisfy the
amounts that will be due on the next Payment Date under clauses (i) and (ii)
below, on the last Business Day of each calendar week thereafter during the
remainder of such Interest Period, Servicer shall disburse the funds on deposit
in the Cash Management Account to Borrowers until such time, if ever, during
such Interest Period as the total amounts that will be due on the next Payment
Date under clause (iii) and (iv) below shall have been fully
disbursed, and (2) on each Payment Date, all remaining funds in the Cash
Management Account shall be disbursed in accordance with the following in the
order indicated, except to the extent already disbursed on account of clause
(iii) and/or (iv) below:

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

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

 90
 

(iii)                               Third, payment to
Borrowers of an amount sufficient to pay the monthly Operating Expenses,
including base management fees payable to any Manager but excluding incentive
management fees payable to any Manager, and Capital Expenditures pursuant to
the Approved Annual Budget then in effect (other than (A) Taxes and Insurance
Premiums to be paid for out of the Tax and Insurance Escrow Funds, and (B)
Operating Expenses, Capital Expenditures and/or other expenses to be paid for
out of any Reserve Funds);

(iv)                              Fourth, payment to
Borrowers for Extraordinary Expenses approved by Lender, if any;

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

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

(vii)                           Seventh, payment to Lender
of the Monthly Interest Payment computed at the Applicable Interest Rate;

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

(ix)                                Ninth, payment to
Lender in respect of the Interest Reserve Fund until the Minimum Balance has
been reached;

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

(xi)                                Eleventh, as
applicable, either (A) if the General Reserve Excess Cash Conditions are not
then satisfied and the Excess Cash Release Date has not occurred, payment to
Lender of all Excess Cash Flow for deposit into the Interest Reserve Fund, or
(B) if the General Reserve Excess Cash Conditions are then satisfied but the
Excess Cash Release Date has not occurred, payment to Lender of all Excess Cash
Flow for deposit into the General Reserve Account, or (C) from and after the
Excess Cash Release Date, all amounts remaining in the Cash Management Account
after the application of the amounts required for the payments set forth above
shall be remitted to Borrowers.

(c)                                  Notwithstanding
the provisions of Section 2.6.2(b) hereof, but subject to the provisions
of Section 2.6.2(d) hereof, in the event that Borrowers shall construct
the Project, from and after the earlier to occur of (i) the Payment Date as of
which the interest

 91
 

Line Item has been fully advanced, or (ii)
the Payment Date as of which the Excess Cash Termination Conditions have been
satisfied, and provided no Event of Default shall have occurred and be
continuing, on the last Business Day of each calendar week during an Interest
Period (or such other date as is expressly set forth in the Cash Management
Agreement) all funds on deposit in the Cash Management Account shall be
credited towards payment of the following items (but not disbursed) in the
order indicated, it being acknowledged and agreed by Borrowers and Lender,
however, that (1) as soon as there are sufficient funds in the Cash Management
Account to satisfy the amounts that will be due on the next Payment Date under clauses
(i), (ii), (iii) and (iv) below, on the last Business Day of each
calendar week thereafter during the remainder of such Interest Period, Servicer
shall disburse the funds on deposit in the Cash Management Account to Borrowers
until such time, if ever, during such Interest Period as the total amounts that
will be due on the next Payment Date under clause (v) and (vi)
below shall have been fully disbursed, and (2) on each Payment Date, all
remaining funds in the Cash Management Account shall be disbursed in accordance
with the following in the order indicated, except to the extent already
disbursed on account of clause (v) and/or (vi) below:

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

(ii)                                  Second, payment to
Lender of the Monthly Interest Payment computed at the Applicable Interest
Rate;

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

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

(v)                                 Fifth, payment to
Borrowers of an amount sufficient to pay the monthly Operating Expenses,
including base management fees payable to any Manager but excluding incentive
management fees payable to any Manager, and Capital Expenditures pursuant to
the Approved Annual Budget then in effect (other than (A) Taxes and Insurance
Premiums to be paid for out of the Tax and Insurance Escrow Funds, and (B)
Operating Expenses, Capital Expenditures and/or other expenses to be paid for
out of any Reserve Funds);

(vi)                              Sixth, payment to
Borrowers for Extraordinary Expenses approved by Lender, if any;

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

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

 92
 

(ix)                                Ninth, payment to
Lender in respect of the Interest Reserve Fund until the Minimum Balance has
been reached;

(x)                                   Tenth, payment to
Borrower of any incentive management fees payable to any Manager; and

(xi)                                Eleventh, as
applicable, either (A) if the General Reserve Excess Cash Conditions are not
then satisfied and the Excess Cash Release Date has not occurred, payment to
Lender of all Excess Cash Flow for deposit into the Interest Reserve Fund, or
(B) if the General Reserve Excess Cash Conditions are then satisfied but the
Excess Cash Release Date has not occurred, payment to Lender of all Excess Cash
Flow for deposit into the General Reserve Account, or (C) from and after the
Excess Cash Release Date, all amounts remaining in the Cash Management Account
after the application of the amounts required for the payments set forth above
shall be remitted to Borrowers.

(d)                                 Notwithstanding
anything to the contrary set forth in Section 2.6.2(b) or 2.6.2(c)
hereof, if and when Gaming Borrower shall become the Gaming Operator in
accordance with the terms of this Agreement, on each Payment Date, provided
that no Event of Default shall have occurred and be continuing, the first
disbursement that shall be made from the Cash Management Account, prior to the
disbursement required pursuant to Section 2.6.2(b)(i) or 2.6.2(c)(i)
hereof, as applicable, shall be a transfer of funds into the Casino Account (i)
in an amount equal to any incremental increase in the amount of the Gaming
Liquidity Requirement that is required to be maintained by Gaming Borrower
under applicable Gaming Laws in the Casino Account as a result of any increase
in gaming business at the Casino Component or due to any change in the
applicable requirements under Gaming Laws generally, and/or (ii) in an amount
equal to any incremental increase in the among of the Gaming Operating Reserve
required under the Gaming Laws, in each of the foregoing instances, as set
forth in the applicable Monthly Gaming Requirement Certificate.

(e)                                  Subject
to Sections 2.6.3, 3.20.1, 3.20.2 and 7.4.2 hereof, the
insufficiency of funds on deposit in the Cash Management Account shall not
relieve Borrowers from the obligation to make any payments, as and when due
pursuant to this Agreement and the other Loan Documents, including, without
limitation, the payments set forth in clauses (i) through (ix),
inclusive, in Section 2.6.2(b) or 2.6.2(c) hereof, as applicable,
and such obligations shall be separate and independent, and not conditioned on
any event or circumstance whatsoever.

(f)                                    All
funds on deposit in the Cash Management Account following the occurrence and
during the continuation of an Event of Default may be applied by Lender to the
Debt in any order, priority and proportions as Lender shall elect in its sole
discretion from time to time until the Debt is paid in full, with any amounts
remaining being disbursed to Borrowers. 
Borrowers and Lender hereby agree and acknowledge that if (A) all of the
Obligations have been satisfied, and (B) there are funds remaining in any of
the Reserve Funds, Lender shall deliver such funds to Borrowers.

2.6.3                     Payments
Received Under the Cash Management Agreement.  Notwithstanding anything to the contrary
contained in this Agreement and the other Loan

 93
 

Documents, and provided no Event of Default
has occurred and is continuing, Borrowers’ obligations with respect to amounts
due for the Tax and Insurance Escrow Fund, the Replacement Reserve Fund and any
other payment reserves established pursuant to this Agreement or any other Loan
Document shall be deemed satisfied to the extent sufficient amounts (together
with any amounts paid by or on behalf of Borrowers) are deposited in the Cash
Management Account established pursuant to the Cash Management Agreement to
satisfy such obligations on the dates each such payment is required, regardless
of whether any of such amounts are so applied by Lender.  Provided that sufficient funds are on deposit
in the Tax and Insurance Escrow Fund, Lender shall be responsible for any
penalty or interest resulting from a failure to pay Taxes or Insurance Premiums
when due.

2.6.4                     Financial
Determination Dates.  Borrowers
shall provide evidence to Lender of (i) the Debt Service Coverage Ratio for the
Properties, and (ii) for purposes of determining whether the General Reserve
Excess Cash Conditions have been satisfied, the results of operations at the
Properties for the preceding calendar month, within thirty (30) days after the
end of each calendar month (the “Financial
Determination Date”).  All
calculations of Debt Service Coverage Ratio and results of operations shall be
subject to verification by Lender.

Section 2.7                                   Extensions
of the Initial Maturity Date.

2.7.1                     Non-Qualified
Extensions.  As provided in this Section
2.7.1, in the event the Qualification Conditions have not been satisfied on
or prior to the Construction Qualification Date, Borrowers shall have the
option (each, a “Non-Qualified Extension
Option”) to extend the term of the Loan beyond the Non-Qualified
Initial Maturity Date for two (2) successive terms (each, a “Non-Qualified Extension Term”) of one (1)
year each (the Non-Qualified Initial Maturity Date following the exercise of
each Non-Qualified Extension Option being the “Non-Qualified Extended Maturity Date”).

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

(i)                                     no monetary
Default nor any Event of Default shall have occurred and be continuing at the
time the First Non-Qualified Extension Option is exercised or on the date that
the First Non-Qualified Extension Term commences;

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

(iii)                               if the Interest Rate Cap
Agreement is scheduled to mature prior to the First Non-Qualified Extended
Maturity Date, Borrowers shall obtain and deliver to Lender not later than one
(1) Business Day immediately preceding the

 94
 

first day of the First Non-Qualified Extension Term, one or more
Replacement Interest Rate Cap Agreements (or extension(s) of the existing
Interest Rate Cap Agreement(s)) from an Acceptable Counterparty, which Replacement
Interest Rate Cap Agreement(s) (or extension(s) of the existing Interest Rate
Cap Agreement(s)) shall (i) be effective commencing on the first day of the
First Non-Qualified Extension Term, (ii) have a LIBOR strike price equal to the
applicable Strike Price, and (iii) have a maturity date not earlier than the
First Non-Qualified Extended Maturity Date;

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

(v)                                 not later than one (1)
Business Day immediately preceding the first day of the First Non-Qualified
Extension Term, Borrowers shall have deposited with Lender in immediately
available funds, for deposit by Lender into the Interest Reserve Account, an
amount equal to the Extension Interest Shortfall with respect to the First Non-Qualified
Extension Term, if any, which amount thereafter shall constitute a part of the
Interest Reserve Fund and shall be held and disbursed by Lender as set forth in
Section 7.4 hereof;

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

(vii)                           not later than one (1)
Business Day immediately preceding the first day of the First Non-Qualified
Extension Term, Borrowers shall have deposited with Lender in immediately
available funds, for deposit by Lender into one or more new Reserve Funds, such
other reserves as Lender shall reasonably require in order to cover reasonably
anticipated Operating Expense shortfalls during the First Non-Qualified
Extension Term, if any, which amount thereafter shall constitute a part of the
Reserve Funds and shall be held and disbursed by Lender as set forth in Article
VII hereof and/or in an amendment to this Agreement reasonably negotiated
and executed by Borrowers and Lender at such time and as a condition to the
exercise of the First Non-Qualified Extension Option;

 95
 

(viii)                        the Debt Yield immediately
preceding the commencement of the First Non-Qualified Extension Term shall be
equal to or greater than 10.25%; and

(ix)                                Borrowers shall have
reimbursed Lender for all costs reasonably incurred by Lender in processing the
extension request, including, without limitation, reasonable legal fees and
expenses; provided, however, that in no event shall Borrowers be
required to pay any such fees, costs or expenses in excess of Five Thousand
Dollars ($5,000).

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

(i)                                     no monetary
Default nor any Event of Default shall have occurred and be continuing at the
time the Second Non-Qualified Extension Option is exercised or on the date that
the Second Non-Qualified Extension Term commences;

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

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

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

(v)                                 not later than one (1)
Business Day immediately preceding the first day of the Second Non-Qualified
Extension Term, Borrowers shall have

 96
 

deposited with Lender in immediately available funds, for deposit by
Lender into the Interest Reserve Account, an amount equal to the Extension
Interest Shortfall with respect to the Second Non-Qualified Extension Term, if
any, which amount thereafter shall constitute a part of the Interest Reserve Fund
and shall be held and disbursed by Lender as set forth in Section 7.4
hereof;

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

(vii)                           not later than one (1)
Business Day immediately preceding the first day of the Second Non-Qualified
Extension Term, Borrowers shall have deposited with Lender in immediately
available funds, for deposit by Lender into one or more new Reserve Funds, such
other reserves as Lender shall reasonably require in order to cover reasonably
anticipated Operating Expense shortfalls during the Second Non-Qualified
Extension Term, if any, which amount thereafter shall constitute a part of the
Reserve Funds and shall be held and disbursed by Lender as set forth in Article
VII hereof and/or in an amendment to this Agreement reasonably negotiated
and executed by Borrowers and Lender at such time and as a condition to the
exercise of the Second Non-Qualified Extension Option;

(viii)                        the Debt Yield immediately
preceding the commencement of the Second Non-Qualified Extension Term shall be
equal to or greater than 11.25%; and

(ix)                                Borrowers shall have
reimbursed Lender for all costs reasonably incurred by Lender in processing the
extension request, including, without limitation, reasonable legal fees and
expenses; provided, however, that in no event shall Borrowers be
required to pay any such fees, costs or expenses in excess of Five Thousand
Dollars ($5,000).

2.7.2                     Qualified
Extensions.  As provided in this Section
2.7.2, in the event the Qualification Conditions have been satisfied on or prior
to the Construction Qualification Date, Borrowers shall have the option (each,
a “Qualified Extension Option”) to
extend the term of the Loan beyond the Qualified Initial Maturity Date for two
(2) successive terms (each, a “Qualified
Extension Term”) of one (1) year each (the Qualified Initial
Maturity Date following the exercise of each Qualified Extension Option being
the “Qualified Extended Maturity Date”).

 97
 

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

(i)                                     no monetary
Default nor any Event of Default shall have occurred and be continuing at the
time the First Qualified Extension Option is exercised or on the date that the
First Qualified Extension Term commences;

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

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

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

(v)                                 not later than one (1)
Business Day immediately preceding the first day of the First Qualified
Extension Term, Borrowers shall have deposited with Lender in immediately
available funds, for deposit by Lender into the Interest Reserve Account, an
amount equal to the Extension Interest Shortfall with respect to the First
Qualified Extension Term, if any, which amount thereafter shall constitute a
part of the Interest Reserve Fund and shall be held and disbursed by Lender as
set forth in Section 7.4 hereof;

(vi)                              not later than one (1)
Business Day immediately preceding the first day of the First Qualified
Extension Term, Borrowers shall have deposited with Lender in immediately
available funds, for deposit by Lender into the applicable Reserve Fund(s), any
shortfalls in such Reserve Fund(s) with respect to the First Qualified
Extension Term, if any, as reasonably estimated and underwritten by Lender
based on (A) the Approved Annual Budget then in effect and (B) underwriting
criteria consistent with that used by Lender to determine the amount

 98
 

of the deposit to the applicable Reserve Fund(s) on the Closing Date
(and throughout the term of the Loan), which amount thereafter shall constitute
a part of the applicable Reserve Fund(s) and shall be held and disbursed by
Lender as set forth in Article VII hereof;

(vii)                           not later than one (1)
Business Day immediately preceding the first day of the First Qualified
Extension Term, Borrowers shall have deposited with Lender in immediately
available funds, for deposit by Lender into one or more new Reserve Funds, such
other reserves as Lender shall reasonably require in order to cover reasonably
anticipated Operating Expense shortfalls during the First Qualified Extension
Term, if any, which amount thereafter shall constitute a part of the Reserve
Funds and shall be held and disbursed by Lender as set forth in Article VII
hereof and/or in an amendment to this Agreement reasonably negotiated and
executed by Borrowers and Lender at such time and as a condition to the
exercise of the First Qualified Extension Option;

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

(ix)                                Borrowers shall have
reimbursed Lender for all costs reasonably incurred by Lender in processing the
extension request, including, without limitation, reasonable legal fees and
expenses; provided, however, that in no event shall Borrowers be required to
pay any such fees, costs or expenses in excess of Five Thousand Dollars
($5,000).

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

(i)                                     no monetary
Default nor any Event of Default shall have occurred and be continuing at the
time the Second Qualified Extension Option is exercised or on the date that the
Second Qualified Extension Term commences;

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

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

 99
 

Agreement(s) (or extension(s) of the existing Interest Rate Cap
Agreement(s)) shall (i) be effective commencing on the first day of the Second
Qualified Extension Term, (ii) have a LIBOR strike price equal to the
applicable Strike Price, and (iii) have a maturity date not earlier than the
Second Qualified Extended Maturity Date;

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

(v)                                 not later than one (1)
Business Day immediately preceding the first day of the Second Qualified
Extension Term, Borrowers shall have deposited with Lender in immediately
available funds, for deposit by Lender into the Interest Reserve Account, an
amount equal to the Extension Interest Shortfall with respect to the Second
Qualified Extension Term, if any, which amount thereafter shall constitute a
part of the Interest Reserve Fund and shall be held and disbursed by Lender as
set forth in Section 7.4 hereof;

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

(vii)                           not later than one (1)
Business Day immediately preceding the first day of the Second Qualified
Extension Term, Borrowers shall have deposited with Lender in immediately
available funds, for deposit by Lender into one or more new Reserve Funds, such
other reserves as Lender shall reasonably require in order to cover reasonably
anticipated Operating Expense shortfalls during the Second Qualified Extension
Term, if any, which amount thereafter shall constitute a part of the Reserve
Funds and shall be held and disbursed by Lender as set forth in Article VII
hereof and/or in an amendment to this Agreement reasonably negotiated and
executed by Borrowers and Lender at such time and as a condition to the
exercise of the Second Qualified Extension Option;

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

 100
 

(ix)                                the Debt Yield
immediately preceding the commencement of the Second Qualified Extension Term
shall be equal to or greater than 13%;

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

(xi)                                Borrowers shall have
reimbursed Lender for all costs reasonably incurred by Lender in processing the
extension request, including, without limitation, reasonable legal fees and
expenses; provided, however, that in no event shall Borrowers be
required to pay any such fees, costs or expenses in excess of Five Thousand
Dollars ($5,000).

2.7.3                     Achieving
Required Debt Yields.

(a)                                  Lender
hereby acknowledges and agrees that nothing herein contained shall prohibit
Borrowers, in accordance with the provisions of Section 2.4.1 hereof,
and provided that no Event of Default shall have occurred and be continuing,
from satisfying any Debt Yield requirement set forth in Section 2.7.1 or
2.7.2 hereof by partially prepaying the Loan prior to the commencement
of the First Non-Qualified Extension Term, the Second Non-Qualified Extension
Term or the Second Qualified Extension Term, as applicable, which prepayment
shall be applied in accordance with Section 2.4.3(a) hereof.

(b)                                 Without
limiting the generality of the foregoing Section 2.7.3(a), Borrowers
shall also have the right to satisfy any Debt Yield requirement set forth in Section
2.7.1 or 2.7.2 hereof by delivering to Lender a Letter of Credit in
an amount equal to the principal repayment of the Outstanding Principal Balance
that would be required in order to achieve the applicable required Debt Yield
(each, a “Debt Yield Letter of Credit”).  If Borrowers elect to deliver any Debt Yield
Letter of Credit, the following shall apply to each such Debt Yield Letter of
Credit:

(i)                                     Borrowers shall
pay to Lender all of Lender’s reasonable out-of-pocket costs and expenses in
connection therewith, including, without limitation, any costs or expenses
incurred in drawing down on such Debt Yield Letter of Credit.  Borrowers shall not be entitled to draw from
any such Debt Yield Letter of Credit. 
Upon five (5) days notice to Lender and provided that no Event of
Default shall have occurred and be continuing, Borrowers may replace such Debt
Yield Letter of Credit with a partial prepayment of the Loan in an amount equal
to such Debt Yield Letter of Credit, which prepayment shall be applied in
accordance with Section 2.4.3(a) hereof, following which prepayment,
Lender shall promptly return such Debt Yield Letter of Credit to Borrowers.

(ii)                                  Each Debt Yield
Letter of Credit delivered under this Agreement shall be additional security
for the payment of the Debt.  Upon the
occurrence and during the continuance of an Event of Default, Lender shall have
the right, at its option, to draw on any Debt Yield Letter of Credit and to
apply all or any part

 101
 

thereof to the payment of the Debt in such order, proportion or
priority as Lender may determine.

(iii)                               In addition to any other
right Lender may have to draw upon a Debt Yield Letter of Credit pursuant to
the terms and conditions of this Agreement, Lender shall have the additional
rights to draw in full on any Debt Yield Letter of Credit:  (A) with respect to any evergreen Debt Yield
Letter of Credit, if Lender has received a notice from the issuing bank that
such Debt Yield Letter of Credit will not be renewed and a substitute Debt
Yield Letter of Credit is not provided at least ten (10) Business Days prior to
the date on which the outstanding Debt Yield Letter of Credit is scheduled to
expire; (B) with respect to any Debt Yield Letter of Credit with a stated
expiration date, if Lender has not received a notice from the issuing bank that
it has renewed such Debt Yield Letter of Credit at least ten (10) Business Days
prior to the date on which such Debt Yield Letter of Credit is scheduled to
expire and a substitute Debt Yield Letter of Credit is not provided at least
ten (10) Business Days prior to the date on which the outstanding Debt Yield
Letter of Credit is scheduled to expire; (C) upon receipt of notice from the
issuing bank that such Debt Yield Letter of Credit will be terminated and a
substitute Debt Yield Letter of Credit is not provided at least ten (10)
Business Days prior to the date on which the outstanding Debt Yield Letter of
Credit is scheduled to be terminated; or (D) if Lender has received notice that
the bank issuing any Debt Yield Letter of Credit shall cease to be an Eligible
Institution and within ten (10) Business Days after Lender notifies Borrowers
in writing of such circumstance, Borrowers shall fail to deliver to Lender a
substitute Debt Yield Letter of Credit issued by an Eligible Institution.  Notwithstanding anything to the contrary
contained in the above, Lender is not obligated to draw upon any Debt Yield
Letter of Credit upon the happening of an event specified in clause (A),
(B), (C) or (D) above and shall not be liable for any losses
sustained by Borrowers due to the insolvency of the bank issuing any such Debt
Yield Letter of Credit if Lender has not drawn upon such Debt Yield Letter of
Credit.

Section 2.8                                   Exit
Fee.

(a)                                  In
all events and under all circumstances, except as set forth in subsection
(b) below, Borrowers shall be obligated to pay to Lender an exit fee (the “Exit Fee”) in an amount equal to the original
principal amount of the Loan multiplied by the Applicable Exit Fee Percentage,
which amount shall be payable as follows: 
(i) subject to the following clause (ii), upon any (and each)
partial prepayment of the Loan in accordance with the terms hereof, excluding,
however, any prepayment with the proceeds of any Minimum Mandatory Prepayment
(or any partial payment on account thereof), Non-Qualified Mandatory
Prepayment, Additional Non-Qualified Mandatory Prepayment, Release Parcel
Release Price, Adjacent Parcel Release Price and/or IP Release Price, if
applicable, in addition to all other amounts payable to Lender under Section
2.4 hereof, Borrowers shall pay to Lender, on account of the Exit Fee, an
amount equal to one percent (1%) of the amount so prepaid; (ii) upon any (and
each) application of any Net Proceeds to the Debt in accordance with the terms
of this Agreement, one percent (1%) of the amount thereof shall be retained by
Lender on account of the Exit Fee and the balance thereof shall be applied to
the Debt; and (iii) upon repayment in full of the Debt or the

 102
 

acceleration thereof in accordance with the
terms of any of the Loan Documents, Borrowers shall pay to Lender the entire
Exit Fee, calculated at the Applicable Exit Fee Percentage, less any amounts on
account thereof previously paid to Lender under the foregoing clauses (i)
and/or (ii) of this Section 2.8; provided, however,
that if, upon the repayment in full of the Debt, the Applicable Exit Fee
Percentage is one-half of one percent (0.50%) rather than one percent (1%),
then Borrowers will receive a credit against the portion of the Exit Fee then
due to make up for any overpayment on account of the Exit Fee under the
foregoing clauses (i) and/or (ii) by virtue of having applied a
one percent (1%) Applicable Exit Fee Percentage.  In furtherance of the foregoing, each
Borrower expressly acknowledges and agrees that (A) Lender shall have no
obligation to accept any prepayment of the Loan, other than any prepayment with
the proceeds of any Minimum Mandatory Prepayment (or any partial payment on
account thereof), Non-Qualified Mandatory Prepayment, Additional Non-Qualified
Mandatory Prepayment, Release Parcel Release Price, Adjacent Parcel Release
Price and/or IP Release Price, if applicable, unless and until Borrowers shall
have complied with this Section 2.8, and (B) Lender shall have no
obligation to release any Loan Document upon payment of the Debt unless and
until Lender shall have received the entire Exit Fee.

(b)                                 Notwithstanding
the foregoing subsection (a) of this Section 2.8, Lender
expressly acknowledges and agrees that no Exit Fee shall ever be due to Lender
with respect to any prepayment with the proceeds of any Minimum Mandatory
Prepayment (or any partial payment on account thereof), Non-Qualified Mandatory
Prepayment, Additional Non-Qualified Mandatory Prepayment, Release Parcel
Release Price, Adjacent Parcel Release Price and/or IP Release Price, if
applicable.

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

Section 2.9                                   Unused
Advance Fee.  Unless Borrowers shall
send a Relinquishment Notice in accordance with the terms hereof, on each
Payment Date Borrowers shall pay the following fee to Lender (whichever of the
following applies at any given time, the “Unused Advance Fee”):
(a) on each Payment Date commencing with the Closing Date and ending with the
Payment Date on which the Initial Construction Loan Advance is advanced or the
next Payment Date if the Initial Construction Loan Advance is advanced on a day
other than a Payment Date, Borrowers shall pay to Lender a fee equal to the
product of (i) one-fifth of one percent (0.20)% per annum multiplied by
(ii) the then applicable Construction Loan Amount; and (b) on each Payment Date
thereafter, Borrowers shall pay to Lender a fee equal to the product of (i)
one-quarter of one percent (0.25%) per annum multiplied by (ii) the
difference between (A) the then applicable Construction Loan Amount less
(B) the aggregate amount of all Construction Loan Advances actually advanced as
of such Payment Date.  In the event
Borrowers deliver the Relinquishment Notice in accordance with the terms hereof,
notwithstanding anything to the contrary set forth in this Agreement, such
Relinquishment Notice will not be effective until Borrowers pay to Lender the
Unused Advance Fee accrued through the Relinquishment Effective Date.  The Unused Advance Fee shall be payable on
the basis of the applicable annual rate set forth above and shall be calculated
by multiplying (1) the actual number of days elapsed in the period for which
the calculation is being made by (2) a

 103
 

daily rate based
on a three hundred sixty (360) day year by (3) the amount set forth in the
foregoing clause (a)(ii) or (b)(ii), as applicable.

ARTICLE
III.

CONSTRUCTION LOAN.

Section 3.1                                   Construction
Loan Advances.

(a)                                  Subject
to Section 3.1(c) hereof, provided no monetary Default or Event of
Default shall have occurred and be continuing and subject to the terms and
conditions of this Agreement, the Construction Loan shall be advanced to or for
the account of Borrowers in Construction Loan Advances made in accordance with Section
3.6 hereof.

(b)                                 Notwithstanding
the foregoing, in the event that Borrowers have not satisfied the Qualification
Conditions on or prior to the Construction Qualification Date, then, at Lender’s
option in its sole discretion, all of Borrowers’ rights to request and receive
any Construction Loan Advances hereunder shall terminate, Lender shall have no
further obligation whatsoever under this Agreement to fund any portion of the
Construction Loan to Borrowers and all provisions in the Loan Agreement and the
other Loan Documents relating to the Construction Loan shall be deemed deleted
herefrom and therefrom.

(c)                                  Notwithstanding
the foregoing, at any time prior to the Second Anniversary, Borrowers shall
have the right to send a written notice to Lender (a “Relinquishment Notice”) that they do not
desire to proceed with any Construction Loan Advances and will not use any
portion of the Construction Loan.  Upon
delivery of such a Relinquishment Notice and provided that (i) the provisions
of Section 2.9 hereof have been fully satisfied, and (ii) Borrowers have
previously paid or delivered, as applicable, or shall pay or deliver, as
applicable, prior to the Second Anniversary, the Non-Qualified Mandatory
Prepayment or a Non-Qualified Prepayment Letter of Credit (the first date on
which a Relinquishment Notice has been delivered to Lender, the provisions of Section
2.9 hereof have been fully satisfied and either the Non-Qualified Mandatory
Prepayment has been made to Lender or a Non-Qualified Prepayment Letter of
Credit has been delivered to Lender, being referred to herein as the “Relinquishment Effective Date”), (A) all of
the terms and conditions of this Agreement and the other Loan Documents
relating to the Construction Loan shall on the Relinquishment Effective Date be
deemed to have terminated and be of no further force or effect, (B) Lender
shall have no further obligation to fund any portion of the Construction Loan,
and (C) Borrowers shall have no further right to request or obtain any portion
of the Construction Loan, it being the clear intention of Lender and Borrowers
that, unless the Relinquishment Notice is delivered and either the
Non-Qualified Mandatory Prepayment is made or a Non-Qualified Prepayment Letter
of Credit is delivered, in each of the foregoing events, prior to the Second
Anniversary, the Construction Loan, subject to Section 3.1(b) above,
shall not be terminated and all of the provisions regarding the Construction
Loan in this Agreement and the other Loan Documents shall remain in full force
and effect, to the extent applicable, throughout the remaining term of the
Loan.

(d)                                 Notwithstanding
anything to the contrary set forth in this Agreement or the other Loan
Documents, in the event that the Relinquishment Effective Date

 104
 

shall not have occurred for any reason prior
to the Second Anniversary, then at any time on or after the Second Anniversary,
Lender shall have the right to advance the entire unfunded portion of the
Construction Loan (including the entire Construction Loan if no portion thereof
has yet been advanced) into the Construction Loan Reserve Account (the “Second Anniversary Unfunded Construction Loan Advance”),
following which (i) the unfunded portion of the Construction Loan shall be held
in accordance with the provisions of Sections 7.7 and 7.8 hereof
and shall constitute a Reserve Fund for all purposes under this Agreement and
the other Loan Documents, and (ii) all subsequent Construction Loan Advances
shall be advanced from the Construction Loan Reserve Account, subject to the
satisfaction of all conditions to funding with respect thereto set forth in
this Agreement (and shall continue to constitute Construction Loan Advances for
all purposes under this Agreement notwithstanding that they are being advanced
out of a Reserve Fund).

(e)                                  All
Construction Loan Advances (including the Second Anniversary Unfunded
Construction Loan Advance) shall for all purposes be deemed part of the
Outstanding Principal Balance upon the making of such Construction Loan Advance
by Lender.

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

(g)                                 The
Retainage, as applicable, shall be advanced on a contract by contract basis as
follows: (i) with respect to Major Contracts which have been previously
approved by Lender in accordance with the terms hereof, the Retainage shall be
released in accordance with the Retainage release provisions contained therein,
it being acknowledged and agreed by Borrowers, however, that Lender’s consent
of any such Major Contract may reasonably take into account such Retainage
release provisions and their relationship to the progress of the construction
work required under such Major Contract, and (ii) with respect to any other
contract or subcontract, after final completion of all construction work
provided for under such contract or subcontract and pursuant to a Construction
Loan Advance made in accordance with the provisions of Sections 3.2, 3.3
and/or 3.4 hereof, as applicable.

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

 105

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

Section 3.2                                   Conditions
Precedent to Initial Construction Loan Advance.  Lender’s obligation to make the Initial
Construction Loan Advance shall be subject to the satisfaction or Lender’s
waiver in writing of the following conditions precedent:

(a)                                  Construction
Qualification Date.  The Construction
Qualification Date shall not have occurred.

(b)                                 Construction
Documents.  Lender shall have
approved the Architect’s Contract, the Construction Management Agreement and
all other Major Contracts, together with any Change Orders entered into as of
the date of the Initial Construction Loan Advance to the extent Lender’s
approval is required with respect thereto pursuant to Section 3.15
hereof, which consent shall not be unreasonably withheld.

(c)                                  Disbursement
Schedule.  Lender and the
Construction Consultant shall have received and approved the Disbursement
Schedule.

(d)                                 Construction
Schedule.  Lender and the
Construction Consultant shall have received and approved the Construction
Schedule.

(e)                                  Loan
Budget.  Lender and the Construction
Consultant shall have received and approved the Loan Budget.

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

(i)                                     Three (3) complete
sets of the Plans and Specifications in the form approved by Lender and the
Construction Consultant and submitted to and approved by those Governmental
Authorities charged with issuing the permits delivered pursuant to Section
3.2(f)(x) below.

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

 106
 

(iii)                               Any Policies (or
certificates thereof) required by Section 6.1 hereof in connection with
the construction of the Project, to the extent not previously delivered.

(iv)                              Two (2) fully-executed
originals of the Construction Completion Guaranty.

(v)                                 The Payment and Performance
Bonds; provided, however, that Lender shall, at Borrowers’
request, review the financial statements of any proposed Major Contractor and
reasonably consider a request by Borrowers either (A) not to require a Payment
and Performance Bond with respect to such Major Contractor, or (B) to accept,
in lieu of a Payment and Performance Bond with respect to such Major
Contractor, a “Subguard Policy” issued by Zurich North America, together with a
financial interest endorsement, all in form and content reasonably acceptable
to Lender and subject to limits acceptable to Lender in its sole and absolute
discretion.

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

(vii)                           An Advance Request
accompanied by a completed and itemized Application and Certificate for Payment
(AIA Document No. G702) attached hereto as Exhibit H or similar form
approved by Lender, containing the certification of the Construction Manager or
Trade Contractor to whom such payment is made, as applicable, and the Architect
as to the material accuracy of same, together with invoices relating to all
items of Hard Costs covered thereby and accompanied by a cost breakdown showing
the cost of work on, and the cost

 107
 

of materials incorporated into, the Project to the date of the
requisition.  The cost breakdown shall
also show the percentage of completion of each Line Item on the Loan Budget,
and the accuracy of the cost breakdown shall be certified by Borrowers and by
the Architect.  All such applications for
payment shall also show all Trade Contractors, including Major Contractors, by
name and trade, the total amount of each contract or subcontract, the amount
theretofore paid to each Trade Contractor as of the date of such application,
and the amount to be paid from the proceeds of the Construction Loan Advance to
each Trade Contractor.

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

(ix)                                An Anticipated Cost
Report in respect of the Project prepared by the Construction Manager and/or
the General Contractor, which shall be reasonably satisfactory in form and
substance to Lender and the Construction Consultant.

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

(xi)                                A certificate from (A)
the Architect (the “Architect’s Certificate”)
substantially in the form attached hereto as Exhibit I, and (B) the
Construction Manager (the “Construction
Manager’s Certificate”) substantially in the form attached hereto as
Exhibit J, (C) the General Contractor (the “General Contractor’s Certificate”) substantially in the form
attached hereto as Exhibit N, and (D) at Lender’s request, from any
Major Contractor (the “Contractor’s
Certificate”) substantially in the form attached hereto as Exhibit
K.

(xii)                             Evidence reasonably
satisfactory to Lender that the notional amount of the Interest Rate Cap
Agreement shall be no less than the Outstanding Principal Balance, after giving
effect to the proposed Initial Construction Loan Advance.

(xiii)                          To the extent reasonably
requested by Lender, soil and geotechnical reports for the Hotel/Casino
Property and the Adjacent Property, which reports (A) shall be dated within one
(1) year preceding the Initial Construction Loan Advance, (B) shall be issued
by an engineer reasonably acceptable to Lender, (C) shall state that Lender may
rely thereon, and (D) shall be satisfactory to Lender in form and substance in
Lender’s reasonable discretion.

(g)                                 Payment
of Fees and Expenses.  Payment by
Borrowers of all fees and expenses required by this Agreement, to the extent
then due and payable, including, without limitation, (i) any fees and expenses
referred to in Section 10.13 hereof then due and payable, (ii) any
reasonable fees and expenses then due and payable to the Construction
Consultant, (iii) any

 108
 

Unused Advance Fee then due and payable, (iv)
any Administrative Agent Fee then due and payable, and/or (v) any title
premiums and/or other title charges then due and payable.

(h)                                 Required
Equity.  In the event that, as of the
date of the Initial Construction Loan Advance, the total Project Costs set
forth on the Loan Budget exceed the then applicable Construction Loan Amount
(such excess being referred to herein as the “Required
Equity Amount”), Borrowers shall be required to provide to Lender,
as an additional equity contribution, the Required Equity Amount, which may be
provided in one of, or by a combination of, the following manners:  (i) a voluntary prepayment of the Loan in
accordance with all of the terms of Section 2.4.1 hereof and to be
applied as set forth in Section 2.4.3(a) hereof, (ii) the delivery to
Lender of evidence satisfactory to Lender in its reasonable discretion that
Borrowers or one or more Affiliates thereof have previously expended cash to
satisfy Project Costs included on the Loan Budget, which shall result in a
credit against the amount of the Required Equity Amount by the amount of such
cash expended, and/or (iii) the delivery of a Letter of Credit (each, a “Required Equity Letter of Credit”).

If Borrowers elect to
deliver any Required Equity Letter of Credit, the following shall apply to each
such Required Equity Letter of Credit:

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

(B)                                Each Required Equity
Letter of Credit delivered under this Agreement shall be additional security
for the payment of the Debt.  Upon the
occurrence and during the continuance of an Event of Default, Lender shall have
the right, at its option, to draw on any Required Equity Letter of Credit and
to apply all or any part thereof to the payment of the Debt in such order,
proportion or priority as Lender may determine.

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

 109
 

outstanding Required Equity Letter of Credit is scheduled to expire;
(2) with respect to any Required Equity Letter of Credit with a stated
expiration date, if Lender has not received a notice from the issuing bank that
it has renewed such Required Equity Letter of Credit at least ten (10) Business
Days prior to the date on which such Required Equity Letter of Credit is
scheduled to expire and a substitute Required Equity Letter of Credit is not
provided at least ten (10) Business Days prior to the date on which the
outstanding Required Equity Letter of Credit is scheduled to expire; (3) upon
receipt of notice from the issuing bank that such Required Equity Letter of
Credit will be terminated and a substitute Required Equity Letter of Credit is
not provided at least ten (10) Business Days prior to the date on which the
outstanding Required Equity Letter of Credit is scheduled to be terminated; or
(4) if Lender has received notice that the bank issuing any Required Equity
Letter of Credit shall cease to be an Eligible Institution and within ten (10)
Business Days after Lender notifies Borrowers in writing of such circumstance,
Borrowers shall fail to deliver to Lender a substitute Required Equity Letter
of Credit issued by an Eligible Institution. 
Notwithstanding anything to the contrary contained in the above, Lender
is not obligated to draw upon any Required Equity Letter of Credit upon the
happening of an event specified in clause (1), (2), (3) or (4)
above and shall not be liable for any losses sustained by Borrowers due to the
insolvency of the bank issuing any such Required Equity Letter of Credit if
Lender has not drawn upon such Required Equity Letter of Credit.

(D)                               With respect to any
Required Equity Letter of Credit permitted to be delivered pursuant to this Section
3.2(h) and/or Section 3.3(d) and/or Section 3.12 hereof,
instead of delivering separate Required Equity Letters of Credit, Borrowers
shall have the right, at any time, to deliver a replacement Required Equity
Letter of Credit in an amount which reflects the aggregate amount of the
separate Required Equity Letters of Credit then in effect and/or then desired
by Borrowers to be in effect and, upon delivery of any such replacement
Required Equity Letter of Credit, Lender shall promptly return to Borrowers
that/those previously issued Required Equity Letter(s) of Credit the amount of
which has been included in such replacement Required Equity Letter of
Credit.  Without limiting the generality
of the foregoing, Borrowers shall also have the right, at any time, to deliver
a replacement Required Equity Letter of Credit, the amount of which may include
the amount of any Pre-Construction Letter(s) of Credit required hereunder and,
if applicable, any amendments thereto increasing the amount thereof, and upon
delivery of any such replacement Required Equity Letter of Credit, Lender shall
promptly return to Borrowers that/those previously issued Pre-Construction
Letters of Credit and any amendments thereto.

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

 110
 

(j)                                     Construction
Documents.

(i)                                     Architect’s
Contract.  Lender shall have received (i)
a certified copy of the Architect’s Contract which (A) shall be in the form
(including any Change Orders that require Lender’s approval pursuant to Section
3.15 hereof) previously approved by Lender, (B) shall have been duly
executed and delivered by the parties thereto, and (C) shall be in full force
and effect, and (ii) a duly executed and completed Architect’s Consent with
respect to the Architect’s Contract, in the form required hereunder and
otherwise reasonably acceptable to Lender and Construction Consultant.

(ii)                                  Construction
Management Agreement.  Lender shall have
received (i) a certified copy of the Construction Management Agreement which
(A) shall be in the form (including any Change Orders that require Lender’s
approval pursuant to Section 3.15 hereof) previously approved by Lender,
(B) shall have been duly executed and delivered by the parties thereto, and (C)
shall be in full force and effect, and (ii) a duly executed and completed
Construction Manager’s Consent with respect to the Construction Management
Agreement, in the form required hereunder and otherwise reasonably acceptable
to Lender and Construction Consultant.

(iii)                               General Contract.  Lender shall have received (i) a certified
copy of the General Contract which (A) shall be in the form (including any
Change Orders that require Lender’s approval pursuant to Section 3.15
hereof) previously approved by Lender, (B) shall have been duly executed and
delivered by the parties thereto, and (C) shall be in full force and effect,
(ii) a duly executed and completed General Contractor’s Consent, in the form
required hereunder and otherwise reasonably acceptable to Lender and
Construction Consultant, and (iii) copies of the General Contractor’s
license(s) necessary to operate, which shall be reasonably acceptable to Lender
and Construction Consultant.

(iv)                              Major Contracts.  Lender shall have received with respect to
each Major Contract then in effect (i) a certified copy of such Major Contract
which (A) shall be in the form (including any Change Orders that require Lender’s
approval pursuant to Section 3.15 hereof) previously approved by Lender,
(B) shall have been duly executed and delivered by the parties thereto, and (C)
shall be in full force and effect, (ii) a duly executed and completed Major
Contractor’s Consent with respect to such Major Contract, in the form required
hereunder and otherwise reasonably acceptable to Lender and Construction
Consultant, and (iii) copies of each Major Contractor’s license(s) necessary to
operate, which shall be reasonably acceptable to Lender and Construction
Consultant.

(v)                                 Other Contracts.  Borrowers shall have delivered to Lender
certified copies of all executed contracts and subcontracts for the Project
which do not constitute Major Contracts (and Lender shall have approved the
same in the case of Major Contractors), in each case certified by Borrower as
correct and complete.

 111
 

(vi)                              Other Work.  Borrowers shall have delivered to Lender firm
bids or estimates and other information reasonably satisfactory to Lender for
any material work not covered by any of the foregoing agreements to enable
Lender to ascertain the total estimated cost of all work done and to be done in
connection with the Project.

(k)                                  Trade
Costs Under General Contract.  Not
less than seventy percent (70)% of the budgeted trade costs under the General
Contract shall be subject to signed sub-contracts reasonably approved by Lender
to the extent they constitute Major Contracts.

(l)                                     Interest
Line Item.  The Loan Budget shall
include, without limitation, a Line Item for interest in an amount equal to the
Initial Maturity Extension Interest Shortfall.

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

(n)                                 Notices.  All notices required by any Governmental
Authority or by any Legal Requirement to be filed prior to commencement of
construction of the Project shall have been filed.

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

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

(q)                                 Lien
Waivers.  Borrowers shall have
delivered a lien waiver log and duly executed Lien waivers in the form set
forth in Exhibit L-2 (progress payment) or L-4 (final payment),
as applicable, attached hereto from all Major Contractors for all work
performed, and all labor or material supplied, for which payment thereof has
been made prior to the date of the Initial Construction Loan Advance.

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

(s)                                  Loan
Document Modifications. 
Modifications to any Loan Documents, in form and substance reasonably
satisfactory to Lender, as shall be required in

 112
 

accordance with the terms of this Agreement,
shall have been duly executed and delivered by the parties thereto and shall be
in full force and effect, and Lender shall have received the originals or fully
executed counterparts thereof.

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

(u)                                 Transfer
of Adjacent Property to Casino/Hotel Borrower.  At Borrowers’ sole cost and expense, Adjacent
Borrower shall have conveyed to Hotel/Casino Borrower any portion of the
Adjacent Property that, pursuant to the Plans and Specifications, is
anticipated to form a part of the Project (the “Deeded Adjacent Property”) and, in order to effectuate the
foregoing, the following conditions shall be satisfied:

(i)                                     (A) The Deeded
Adjacent Property, after being added to the Hotel/Casino Property, and (B) the
remaining portion of the Adjacent Property, after giving effect to such
conveyance of the Deeded Adjacent Property, shall each (1) comply with all
zoning ordinances, including, without limitation, those related to parking, lot
size and density, (2) constitute one or more separate tax parcels, and not be
subject to any lien for taxes due or not yet delinquent, and (3) comply in all
material respects with all Legal Requirements, including, without limitation,
those relating to land use and certificates of occupancy;

(ii)                                  Borrowers shall
deliver to Lender, at Borrowers’ sole cost and expense, ALTA/ASCM surveys of
each of (A) the Hotel/Casino Property including the Deeded Adjacent Property,
and (B) the remaining portion of the Adjacent Property, which surveys shall
include metes and bounds legal descriptions and shall conform to Lender’s
then-current requirements for surveys to be delivered in connection with its
loans; and

(iii)                               The Title Company shall
issue an endorsement to the Title Insurance Policy regarding the validity of
Lender’s lien on each of (A) the Hotel/Casino Property including the Deeded
Adjacent Property, and (B) the remaining portion of the Adjacent Property.

Upon any such conveyance of the Deeded Adjacent
Property to Hotel/Casino Borrower in accordance with the foregoing, thereafter
the term “Hotel/Casino Property” shall be deemed to include the Deeded Adjacent
Property for all purposes of this Loan Agreement and the other Loan Documents.

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

 113
 

(a)                                  Prior
Conditions Satisfied.  All conditions
precedent to the Initial Construction Loan Advance, as set forth in Section
3.2 hereof, and any other prior Construction Loan Advances, as set forth in
this Section 3.3, shall continue to be satisfied as of the date of such
subsequent Construction Loan Advance.

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

(i)                                     A Draw Request
complying with the requirements of, and constituting the same representations
and warranties as specified in, Section 3.2(f)(vi) hereof.

(ii)                                  An Advance Request
submitted in accordance with the requirements of Section 3.2(f)(vii)
hereof.

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

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

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

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

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

 114
 

executed unconditional Lien waivers in the form set forth in Exhibit
L-2 (progress payment) or L-4 (final payment) hereto, as applicable,
with respect to all payments which were requested to be paid with the
immediately preceding Construction Loan Advance and from whom a conditional
Lien waiver in the form set forth in Exhibit L-1 (progress payment) or L-3
(final payment) hereto, as applicable, was delivered in the immediately preceding
request for a Construction Loan Advance.

(viii)                        An updated (A) Architect’s
Certificate, (B) Construction Manager’s Certificate, (C) General Contractor’s
Certificate, and (D) at Lender’s request, an updated Contractor’s Certificate
from any Major Contractor.

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

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

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

(xii)                             Evidence reasonably
satisfactory to Lender that the notional amount of the Interest Rate Cap
Agreement shall be no less than the Outstanding Principal Balance, after giving
effect to the proposed Construction Loan Advance.

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

(d)                                 Required
Equity.  In the event that, as of the
date of the proposed Construction Loan Advance, the sum of the outstanding
principal amount of the Acquisition Loan Advance and the then applicable
Construction Loan Amount exceeds eighty percent (80%) of the Total Costs (the
amount in excess of such eighty percent (80%) threshold being referred to
herein as a “Subsequent Required Equity
Amount”), Borrowers shall be required to provide to Lender, as an
additional equity contribution, the Subsequent Required Equity Amount, which
may be provided in one of, or by a combination of, the following manners:  (i) a voluntary prepayment of the Loan in
accordance with all of the terms of Section 2.4.1 hereof and to be

 115
 

applied as set forth in Section 2.4.3(a)
hereof, (ii) the delivery to Lender of evidence satisfactory to Lender in its
reasonable discretion that Borrowers or one or more Affiliates thereof have
previously expended cash to satisfy Project Costs included on the Loan Budget,
which shall result in a credit against the amount of the Required Equity Amount
by the amount of such cash expended, and/or (iii) the delivery of a Required
Equity Letter of Credit.

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

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

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

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

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

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

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

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

(m)                               Loan
Document Modifications. 
Modifications to any Loan Documents, in form and substance reasonably
satisfactory to Lender, as shall be required in

 116
 

accordance with the terms of this Agreement,
shall have been duly executed and delivered by the parties thereto and shall be
in full force and effect, and Lender shall have received the originals or fully
executed counterparts thereof.

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

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

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

(c)                                  Certificates
of Occupancy.  A copy of the
Certificate(s) of Occupancy and all other material Governmental Approvals for
the Project.

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

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

(f)                                    Payment
of Costs.  Evidence satisfactory to
Lender that (i) all sums due in connection with the construction of the Project
have been paid in full (or will be paid out of the funds requested to be
advanced in the final Construction Loan Advance), as evidenced by (A) with
respect to any party with Lien rights, an executed Lien waiver substantially in
the form attached hereto as Exhibit L-3 or L-4, as applicable (as
required under the foregoing clause (d)), or (B) with respect to any
party without Lien rights, an invoice and proof of payment or such

 117
 

other evidence of payment as shall be
reasonably satisfactory to Lender, and (ii) except for any Lien then being
contested pursuant to, and in accordance with, Section 3.6(b) of the Mortgage,
no party claims or has a right to claim any statutory or common law Lien
arising out of the construction of the Project or the supplying of labor,
material and/or services in connection therewith.

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

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

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

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

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

Section 3.6                                   Procedures
for Loan Advances.

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

(b)                                 In
addition to the conditions set forth in Sections 3.2, 3.3 and 3.4 hereof,
as applicable, each Construction Loan Advance shall be conditioned on
satisfaction of the following conditions precedent:

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

 118
 

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

(c)                                  Each
Draw Request shall be accompanied by:

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

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

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

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

Section 3.7                                   Direct
Advances to Third Parties.  Lender
may make any or all Construction Loan Advances to (a) Construction Manager or
any Major Contractor, as applicable, for construction expenses which shall
theretofore have been approved by Lender and for which Borrowers shall have
failed to make payment after receipt by Borrowers of such applicable
Construction Loan Advance, (b) the Architect, to pay its fees to the extent
funds are

 119
 

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

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

Section 3.9                                   Cost
Overruns; Reallocation of Line Items.

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

 120
 

unless and until the proposed changes to the
Loan Budget so submitted by Borrowers are approved by Lender in its reasonable
discretion.

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

(A)                              If Lender reasonably
determines that any component of the construction of the Project which is the
subject of a Line Item (a “Line Item
Component”) has been completed without the expenditure by Borrowers
of the entire amount allocated in the Loan Budget to such Line Item Component,
and all Major Contractors have been paid in full for work performed and
materials provided with respect to such Line Item Component, the difference
between the amount of such Line Item Component in the Loan Budget and the
amount so expended for such Line Item Component shall be deemed to be a “Cost
Savings”; or

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

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

 121
 

or by reallocating any Contingency Line Item
in accordance with Section 3.10 hereof, new Line Items must be paid for by
Borrowers from sources other than the Loan.

Section 3.10                            Contingency
Reallocations.

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

(b)                                 Borrowers,
without the consent of Lender but after notice to Lender, may (i) reallocate up
to ten percent (10%) of the Contingency (Hard Costs) to any Hard Cost Line Item
and/or may reallocate up to ten percent (10%) of the Contingency (Soft Costs)
to any Soft Cost Line Item, provided that, in either event, no single
Line Item is increased by more than ten percent (10%), and (ii) reallocate a
portion of the Contingency (Hard Costs) to satisfy the amount of the contingency
required under the General Contract and increase the Line Item for such General
Contract by such amount, provided that (A) such reallocated portion of
the Contingency (Hard Costs), together with the remaining amount of the
Contingency (Hard Costs), shall be equal to or greater than ten percent (10%)
of the aggregate amount of the Loan Budget, and (B) such remaining amount of
the Contingency (Hard Costs) shall be equal to or greater than five percent
(5%) of the aggregate amount of the Loan Budget.  All other reallocations of any Contingency
shall require Lender’s prior consent, not to be unreasonably withheld.  Notwithstanding the foregoing, Lender
expressly acknowledges that the General Contractor shall have the right to
apply contingency under the General Contract as permitted thereunder.  Upon any such reallocation of all or any
portion of any Contingency to any Line Item, the amount of such Contingency
shall no longer be deemed “Contingency” hereunder, but shall be deemed to be
part of the Line Item to which such amount was reallocated.  In giving or withholding its approval to any
reallocation of any Contingency, Lender may take into account the then current
state of completion of the Project, any existing cost overruns and any
potential cost overruns as may then be reasonably foreseen or reasonably
anticipated by Lender.

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

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

(b)                                 The
Stored Materials are identified to the Hotel/Casino Property or the Adjacent
Property and Borrowers, are segregated so as to adequately give notice to all
third

 122
 

parties of Borrowers’ title in and to such
materials, and are components in substantially final form ready for
incorporation into the Project;

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

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

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

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

(g)                                 The
aggregate cost of Stored Materials to be stored at the Hotel/Casino Property
and/or the Adjacent Property at any one time shall not exceed $5,000,000.00;
and

(h)                                 The
aggregate cost of Stored Materials to be stored off-site from the Hotel/Casino
Property and the Adjacent Property at any one time shall not exceed
$1,000,000.00.

Section 3.12                            Loan
Balancing and Shortfalls.

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

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

 123
 

constitute a Reserve Fund in which Lender
shall have a Lien and security interest pursuant to the provisions of Section
7.8 hereof.

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

Section 3.13                            Quality
of Work.  No Construction Loan
Advance or any portion thereof shall be made with respect to materially
defective work or to any Trade Contractor that has performed work that is
materially defective and that has not been cured, as confirmed by the report of
the Construction Consultant, but Lender may disburse all or part of any
Construction Loan Advance before the sum shall become due if Lender reasonably
believes it advisable to do so, and all such Construction Loan Advances or
parts thereof shall be deemed to have been made pursuant to this Agreement.

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

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

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

(b)                                 Until
such time as the Project is forty percent (40%) complete as reasonably
determined and certified by the Construction Consultant, (i) the combination of
(A) Hard Costs paid for by Borrowers out of their own (or an Affiliate’s) funds
exclusive of the Loan and (B) Hard Costs paid for out of the Contingency (Hard
Costs) Line Item in accordance with the terms of this Agreement, does not
exceed 50% of the original amount of the Contingency (Hard Costs) Line Item set
forth in the Loan Budget, and/or (ii) the combination of (1) Soft Costs paid
for by Borrowers out of their own (or an Affiliate’s) funds exclusive of the
Loan and (B) Soft Costs paid for out of the Contingency (Soft Costs) Line Item
in accordance with the terms of this Agreement, does not exceed 50% of the
original amount of the Contingency (Soft Costs) Line Item set forth in the Loan
Budget, it being acknowledged and agreed that this condition shall be deemed
null and void once the Project is forty percent (40%) complete as reasonably
determined and certified by the Construction Consultant;

 124

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

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

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

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

(g)                                 With
respect to any Change Order which does not satisfy one or more of the foregoing
conditions in this Section 3.15, or which pursuant to such provisions
require Lender’s approval, Borrower shall have submitted to Lender and the
Construction Consultant, and the applicable Major Contractors and/or other
Trade Contractors, the requested change, together with changes in the Plans and
Specifications necessary to accomplish such change, a certificate of the
Architect in regard to same, and a Change Order to the applicable Trade Contractor
reflecting such change; and Lender shall have received the approval of such
change by the Construction Consultant, and the approved and signed Change Order
from the applicable Trade Contractor reflecting the increase in cost of
construction of the Project and/or the extension of time for completion of the
work to be performed under the applicable Major Contract or other contract or
subcontract with a Trade Contractor, and Borrowers shall have received Lender’s
written approval thereof, which approval shall not be unreasonably withheld.

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

Section
3.16                            Construction
Covenants.

(a)                                  Construction
Management Agreement.  The
construction of the Project shall be managed by the Construction Manager
pursuant to the Construction Management Agreement.  The Construction Manager and the Construction
Management Agreement shall be subject to approval by Lender in its reasonable
discretion.  Borrowers shall (i) enforce
the Construction Management Agreement, (ii) waive none of the material
obligations of any of the parties thereunder, (iii) do no act which would
relieve the Construction Manager from its material obligations thereunder to
construct the Project according to the Plans and

 125
 

Specifications, and (iv) make no material
amendment to or Change Order under the Construction Management Agreement,
except as permitted under Section 3.15 hereof, without the prior
approval of Lender in its reasonable discretion.

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

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

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

(e)                                  Application
of Construction Loan Proceeds. 
Borrowers shall use the proceeds of the Construction Loan solely and
exclusively in accordance with the Loan Budget that shall not be subject to
change, except as permitted hereby.

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

(g)                                 Completion
of Construction.  Once commenced, if
ever, subject to Lender’s obligation to continue to fund the Construction Loan
as and to the extent set forth in this Agreement, Borrowers shall diligently
pursue construction of the entire Project to completion and obtain one or more
Certificates of Occupancy (and to the extent the same are conditional or
require performance by Borrowers, Borrowers shall diligently satisfy all
conditions to the issuance of, and/or diligently perform all obligations
required for the continued validity of, the same) for the Project and
individual leasable space therein, if required by law, in accordance with the
Plans and Specifications (subject to Change Orders thereto permitted under Section
3.15 hereof) and in compliance with all restrictions, covenants and
easements affecting

 126
 

the Properties, all applicable Legal
Requirements and all Governmental Approvals, in each case, in all material respects,
and with all terms and conditions of the Loan Documents, free from any Liens
(other than Permitted Encumbrances), claims or assessments (actual or
contingent) asserted against any of the Properties for any material, labor or
other items furnished in connection therewith unless (i) bonded and removed as
a Lien on the affected Property or (ii) being contested in accordance with the
provisions of Section 3.6(b) of the Mortgage. 
Reasonable evidence of satisfactory compliance with the foregoing shall
be furnished by Borrowers to Lender upon Final Completion.  In addition, if any such Certificate of
Occupancy or other Governmental Approvals are temporary in nature, Borrowers
shall diligently pursue procuring final Certificates of Occupancy and/or
Governmental Approvals, as applicable.

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

(i)                                     Construction
Consultant.  Borrowers acknowledge
that (i) the Construction Consultant has been retained by Lender, at the sole
expense of Borrowers, to act as a consultant and only as a consultant to Lender
in connection with the construction of the Project and has no duty to
Borrowers, (ii) the Construction Consultant shall in no event have any power or
authority to give any approval or consent or to do any other act or thing which
is binding upon Lender, (iii) Lender reserves the right to make any and all
decisions required to be made by Lender under this Agreement and to give or
refrain from giving any and all consents or approvals required to be given by
Lender under this Agreement and to accept or not accept any matter or thing
required to be accepted by Lender under this Agreement, and without being bound
or limited in any manner or under any circumstance whatsoever by any opinion
expressed or not expressed, or advice given or not given, or information,
certificate or report provided or not provided, by the Construction Consultant
with respect thereto, (iv) Lender reserves the right in its sole and absolute
discretion to disregard or disagree, in whole or in part, with any opinion
expressed, advice given or information, certificate or report furnished or
provided by the Construction Consultant to Lender or any other Person or party,
and (v) Lender reserves the right to replace the Construction Consultant with
another inspecting engineer at any time and without prior notice to or approval
by Borrowers (but Lender agrees to provide Borrowers with reasonably prompt
notice of any decision to change the Construction Consultant).  Lender hereby advises Borrowers that it has
advised the Construction Consultant of the restrictions contained in this Section
3.16(i).  Construction Consultant
shall perform the following services on behalf of Lender:

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

 127
 

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

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

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

(j)                                     Correction
of Defects.  Borrowers shall promptly
correct all defects in the Project or any departure from the Plans and
Specifications not approved by Lender to the extent required hereunder unless
any such departure is required under applicable Legal Requirements.  Borrowers agree that the advance of any
proceeds of the Construction Loan, whether before or after such defects or
departures from the Plans and Specifications are discovered by, or brought to
the attention of, Lender, shall not constitute a waiver of Lender’s right to
require compliance with this covenant. 
Whether there exists a defect in the Project or a departure from the
Plans and Specifications shall be reasonably determined by the Architect and
the Construction Consultant or, if the Architect and the Construction
Consultant cannot reasonably agree, then shall be determined pursuant to the
most expedited form of arbitration available for such disagreement under the
rules of the American Arbitration Association, such arbitration to be held in
New York, New York.

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

 128
 

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

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

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

Section
3.17                            Pre-Construction
Advances.

3.17.1              Conditions to
Pre-Construction Advances. 
Notwithstanding anything to the contrary set forth in this Agreement,
upon the request of Borrowers from time to time, Lender shall make advances to
Borrowers of the Construction Loan to fund pre-construction costs and expenses
relating to the Project (each, a “Pre-Construction
Advance”), subject to the satisfaction of the following conditions
with respect to each such Pre-Construction Advance:

(a)                                  such
Pre-Construction Advance is for pre-construction costs or expenses (i)
contemplated by the Pre-Construction Budget until the Loan Budget is approved
by Lender in accordance with the terms hereof, (ii) contemplated by the Loan
Budget at any time after approval of the Loan Budget by Lender in accordance
with the terms hereof, or (iii) otherwise approved by Lender in its reasonable
discretion (any of the foregoing, “Approved
Pre-Construction Expenses”);

(b)                                 prior
to commencing any pre-construction work that consists of constructing or
demolishing any improvements (“Pre-Construction
Work”), (i) Lender shall have approved, which approval shall not be
unreasonably withheld, (A) the Architect and the Architect’s Contract, (B) the
Construction Manager and the Construction Management Agreement, to the extent
the Construction Management Agreement applies to such Pre-Construction Work,
(C) the General Contractor and the General Contract, to the extent the General
Contract applies to such Pre-Construction Work, (D) all Major Contractors and
Major Contracts relating to such Pre-Construction Work, (E) the plans and
specifications for such Pre-Construction Work (which may be a part of the Plans
and Specifications, if the same have theretofore been approved by Lender in
accordance with the terms of this Agreement), and (F) a

 129
 

construction progress schedule reflecting the
anticipated dates of completion of specified subcategories of the
Pre-Construction Budget with respect to such Pre-Construction Work (which may
be a part of the Construction Schedule, if the same has theretofore been
approved by Lender in accordance with the terms of this Agreement); and (ii)
Borrowers shall have obtained Payment and Performance Bonds covering each Major
Contractor performing such Pre-Construction Work; provided, however,
that Lender shall, at Borrowers’ request, review the financial statements of
any such Major Contractor and reasonably consider a request by Borrowers either
(A) not to require a Payment and Performance Bond with respect to such Major
Contractor, or (B) to accept, in lieu of a Payment and Performance Bond with
respect to such Major Contractor, a “Subguard Policy” issued by Zurich North
America, together with a financial interest endorsement, all in form and
content reasonably acceptable to Lender and subject to limits acceptable to
Lender in its sole and absolute discretion;

(c)                                  Borrowers
shall submit Lender’s or Servicer’s standard form of draw request to Lender at
least ten (10) days prior to the date on which Borrowers request such
Pre-Construction Advance be made, which request shall specify the Approved
Pre-Construction Expenses to be paid and shall be accompanied by copies of
invoices for the amounts requested;

(d)                                 on
the date such request is received by Lender and on the date such
Pre-Construction Advance is to be made, no Event of Default shall exist and
remain uncured;

(e)                                  all
representations and warranties made by Borrowers and/or Guarantors in the Loan
Documents or otherwise made by or on behalf of Borrowers and/or Guarantors in
connection therewith or after the date thereof shall have been true and correct
in all material respects on the date on which made and shall continue to be
true and correct in all material respects on the date of such Pre-Construction
Advance (except to the extent of changes in circumstances or conditions which
are not otherwise prohibited by this Agreement);

(f)                                    Lender
shall have received:

(i)                                     an Officer’s
Certificate (A) stating that the items to be funded by the requested
Pre-Construction Advance are Approved Pre-Construction Expenses, and a
description thereof, (B) stating that the Pre-Construction Work at the
applicable Property(ies) to be funded by the requested Pre-Construction Advance,
if any, has been completed in a good and workmanlike manner and in accordance
in all material respects with all applicable Legal Requirements, (C)
identifying each Person that supplied materials or labor in connection with any
Pre-Construction Work to be funded by the requested Pre-Construction Advance,
and each Person who supplied services entitled to a commission, fee or other
payment, as applicable, to be funded by the requested Pre-Construction Advance,
(D) stating that each such Person has been paid in full or will be paid in full
upon such Pre-Construction Advance, (E) stating that the Approved
Pre-Construction Expenses to be funded have not been the subject of a previous
Pre-Construction Advance, (F) stating that all previous Pre-Construction Advances
have been used to pay or reimburse Borrowers for the previously identified
Approved Pre-Construction Expenses, and (G) stating that, as of the date of
such Officer’s Certificate, no Event of Default has occurred and is continuing
and all

 130
 

representations and warranties made by Borrowers and/or Guarantors in
the Loan Documents or otherwise made by or on behalf of Borrowers and/or
Guarantors in connection therewith or after the date thereof were true and
correct in all material respects on the date on which made and continue to be
true and correct in all material respects on the date of such Officer’s
Certificate (except to the extent of changes in circumstances or conditions
which are not otherwise prohibited by this Agreement);

(ii)                                  a copy of any license,
permit or other approval by any Governmental Authority necessary to permit any
Pre-Construction Work to be funded or reimbursed by the requested
Pre-Construction Advance and not previously delivered to Lender;

(iii)                               if required by Lender
for requests in excess of one hundred seventy-five thousand dollars
($175,000.00) for a single item of Pre-Construction Work, lien waivers or other
evidence of payment satisfactory to Lender and releases from all parties
furnishing materials and/or services in connection with the requested
Pre-Construction Advance;

(iv)                              such other evidence as
Lender shall reasonably request to demonstrate that the Approved
Pre-Construction Expenses to be funded by the requested Pre-Construction
Advance have been completed and are paid for or will be paid upon such
Pre-Construction Advance to Borrowers;

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

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

(vii)                           at Borrowers’ expense, a
search of the public records that, subject to Section 3.11 hereof and
the Permitted Encumbrances, discloses no conditional

 131
 

sales contracts, chattel mortgages, leases of personalty, financing
statements or title retention agreements which affect any of the Properties;

(viii)                        evidence reasonably
satisfactory to Lender that the notional amount of the Interest Rate Cap
Agreement shall be no less than the Outstanding Principal Balance, after giving
effect to the proposed Pre-Construction Advance; and

(ix)                                evidence reasonably
satisfactory to Lender that Borrowers have obtained all Policies required by Section
6.1 hereof in connection with the construction of the Project, to the
extent not previously delivered to Lender;

(g)                                 Construction
Consultant shall have reasonably approved the request for the Pre-Construction
Advance, it being expressly agreed by Lender that Lender shall diligently
pursue obtaining Construction Consultant’s response within a commercially
reasonable time period following any such request which includes all the
required items as set forth herein;

(h)                                 Borrowers
shall retain Retainage with respect to each contract or subcontract relating to
the Pre-Construction Work as provided herein with respect to the Project;

(i)                                     each
Pre-Construction Advance shall be in a minimum amount of not less than one
million dollars ($1,000,000.00);

(j)                                     there
shall not be more than one Pre-Construction Advance in any thirty (30) day
period;

(k)                                  (i)
prior to making the first Pre-Construction Advance, Borrowers shall have
delivered to Lender a Letter of Credit (a “Pre-Construction
Letter of Credit”) in the aggregate amount of (A) such first
Pre-Construction Advance plus (B) the amount of interest estimated to accrue on
the amount of such first Pre-Construction Advance through the Initial Maturity
Date at the Applicable Interest Rate; and (ii) prior to making each subsequent
Pre-Construction Advance, Borrowers shall have delivered to Lender a
replacement Pre-Construction Letter of Credit in the aggregate amount of (A)
the aggregate amount of (1) such subsequent Pre-Construction Advance plus
(2) the amount of interest estimated to accrue on the amount of such subsequent
Pre-Construction Advance through the Initial Maturity Date at the Applicable
Interest Rate, plus (B) the amount of the previously delivered Pre-Construction
Letter of Credit (which, after the second Pre-Construction Advance, shall
represent a replacement Pre-Construction Letter of Credit itself being replaced
as aforesaid); provided, however, that in lieu of delivering any
such replacement Pre-Construction Letter of Credit, Borrowers shall have the
right, at their sole cost and expense, to provide an amendment to the then
existing Pre-Construction Letter of Credit which increases the amount thereof
in the aggregate amount set forth in the foregoing clauses (A) and (B),
but only if Lender is not required to relinquish physical possession of the
then existing Pre-Construction Letter of Credit and any amendments thereto
until such amendment has been delivered to Lender;

(l)                                     on
the date such request is received by Lender and on the date such
Pre-Construction Advance is to be made, (i) Borrowers shall not have delivered
the

 132
 

Relinquishment Notice to Lender, and (ii) the
Construction Qualification Date shall not have occurred; and

(m)                               in
no event shall the aggregate amount of all Pre-Construction Advances exceed
$45,500,000.00.

3.17.2              Pre-Construction
Letters of Credit.  If Borrowers
elect to deliver any Pre-Construction Letter of Credit, the following shall
apply to each such Pre-Construction Letter of Credit:

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

(b)                                 Each
Pre-Construction Letter of Credit delivered under this Agreement shall be
additional security for the payment of the Debt.  Upon the occurrence and during the
continuance of an Event of Default, Lender shall have the right, at its option,
to draw on any Pre-Construction Letter of Credit and to apply all or any part
thereof to the payment of the Debt in such order, proportion or priority as
Lender may determine.

(c)                                  In
addition to any other right Lender may have to draw upon a Pre-Construction
Letter of Credit pursuant to the terms and conditions of this Agreement, Lender
shall have the additional rights to draw in full on any Pre-Construction Letter
of Credit:  (A) with respect to any
evergreen Pre-Construction Letter of Credit, if Lender has received a notice
from the issuing bank that such Pre-Construction Letter of Credit will not be
renewed and a substitute Pre-Construction Letter of Credit is not provided at
least ten (10) Business Days prior to the date on which the outstanding
Pre-Construction Letter of Credit is scheduled to expire; (B) with respect to
any Pre-Construction Letter of Credit with a stated expiration date, if Lender
has not received a notice from the issuing bank that it has renewed such
Pre-Construction Letter of Credit at least ten (10) Business Days prior to the
date on which such Pre-Construction Letter of Credit is scheduled to expire and
a substitute Pre-Construction Letter of Credit is not provided at least ten
(10) Business Days prior to the date on which the outstanding Pre-Construction
Letter of Credit is scheduled to expire; (C) upon receipt of notice from the
issuing bank that such Pre-Construction Letter of Credit will be terminated and
a substitute Pre-Construction Letter of Credit is not provided at least ten
(10) Business Days prior to the date on which the outstanding Pre-Construction
Letter of Credit is scheduled to be terminated; or (D) if Lender has received
notice that the bank issuing any Pre-Construction Letter of Credit shall cease
to be an Eligible Institution and within ten (10) Business Days after Lender
notifies Borrowers in writing of such circumstance, Borrowers shall fail to
deliver to Lender a substitute Pre-Construction Letter of Credit issued by an
Eligible Institution.  Notwithstanding
anything to the contrary contained in the above, Lender is not obligated to
draw upon any Pre-Construction Letter of Credit upon the

 133
 

happening of an event specified in clause
(A), (B), (C) or (D) above and shall not be liable for any losses
sustained by Borrowers due to the insolvency of the bank issuing any such
Pre-Construction Letter of Credit if Lender has not drawn upon such
Pre-Construction Letter of Credit.

3.17.3              Pre-Construction
Advance is a Construction Loan Advance. 
Once advanced, each Pre-Construction Advance shall constitute a
Construction Loan Advance for all purposes under this Agreement.

3.17.4              Pre-Construction
Work.

(a)                                  Nothing
in this Section 3.17 shall (i) make Lender responsible for performing or
completing any Pre-Construction Work; (ii) require Lender to expend any of its
own funds to complete any Pre-Construction Work or pay any other Approved
Pre-Construction Expenses; (iii) obligate Lender to proceed with any
Pre-Construction Work; or (iv) obligate Lender to demand from any Borrower
additional sums to complete any Pre-Construction Work or pay any other Approved
Pre-Construction Expense.

(b)                                 Each
Borrower shall permit Lender and its agents and representatives (including its
engineers, architects or inspectors) or third parties to enter onto such
Borrower’s Property during normal business hours (subject to reasonable advance
notice (which may be given verbally) and the rights of tenants under their
Leases) to inspect the progress of any Pre-Construction Work and all materials
being used in connection therewith and to examine all plans and shop drawings
relating to such Pre-Construction Work. 
Each Borrower shall cause all contractors and subcontractors to
cooperate with Lender and such other Persons described above in connection with
inspections described in this Section 3.17.4(b).

Section
3.18                            Work
at Adjacent Property.

(a)                                  Until
the Initial Construction Loan Advance is made, if ever, and in all events
subject to Section 3.18(b) hereof, Borrowers shall not commence or
conduct any physical work at or on the Adjacent Property which exceeds, in the
aggregate, $2,400,000.00, whether funded out of any Borrower’s own funds, out
of a Pre-Construction Advance or otherwise, without Lender’s consent in its
reasonable judgment, other than (a) subject to Section 3.18(b) hereof,
the currently contemplated demolition of the apartment buildings on the
Adjacent Property and the construction of the contemplated temporary parking
lot thereon, and (b) the contemplated construction of the foundation for the
south tower to be constructed on the Adjacent Property.  Notwithstanding Borrowers’ commencement
and/or performance of any physical work at or on the Adjacent Property as
permitted in the foregoing sentence, in the event that either (i) the
Qualification Conditions have not been satisfied on or prior to the Construction
Qualification Date, or (ii) Borrowers have delivered the Relinquishment Notice
to Lender, or (iii) Borrowers have delivered a Stop Notice to Lender, Borrowers
shall, promptly thereafter, diligently and at their sole cost and expense,
restore the Adjacent Property to the condition in which it existed on the
Closing Date or another condition satisfactory to Lender in its sole
discretion, except if any of the apartment buildings on the Adjacent Property
were demolished as permitted above, Borrowers shall not be obligated to rebuild
such buildings.  In any event, Borrowers
shall notify and reasonably consult with Lender regarding any work to be
undertaken

 134
 

at or on the Adjacent Property and shall
conduct all work in accordance with all Legal Requirements and any applicable
O&M Agreement.

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

Section
3.19                            Administrative
Agent.

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

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

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

 135
 

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

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

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

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

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

 136
 

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

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

Section
3.20                            Monthly
Interest Payments During Construction.

3.20.1              Monthly Interest
Advance in Construction Loan Advances. 
From and after any Payment Date following the Initial Construction Loan
Advance (if the same shall ever occur) upon which the Interest Reserve Fund is
in an insufficient amount to pay the Monthly Interest Payment due on such
Payment Date and to also maintain the Minimum Balance, each Draw Request for a
Construction Loan Advance shall include, to the extent of the unfunded balance
of the interest Line Item in the Loan Budget, an amount necessary to pay the
Monthly Interest Payment due on the Payment Date on or next following the date
of the applicable Construction Loan Advance, as applicable (the “Monthly Interest Advance”).  Thereafter, provided that (a) such Draw
Request is approved in accordance with the terms of this Agreement, and (b) no
Event of Default shall have occurred and be continuing, if on the Payment Date
on or next following the date of the applicable Construction Loan Advance, as
applicable, the funds available in the Cash Management Account are insufficient
to pay the Monthly Interest Payment after satisfying all items with a higher
priority pursuant to Section 2.6.2(b) hereof, Lender shall
automatically, without the necessity of notifying, or obtaining the approval
of, any Borrower or any other Person, and without any Borrower’s specific
request, advance directly to the Servicer such portion of the requested Monthly
Interest Advance as is necessary to satisfy such insufficiency in the Cash Management
Account, it being acknowledged and agreed by Borrowers that in the event that,
with respect to any requested Monthly Interest Advance, less then the entire
amount thereof is needed to satisfy any such insufficiency in the Cash
Management Account, then the amount of the requested Monthly Interest Advance
included within the related requested Construction Loan Advance shall be deemed
automatically reduced by the amount not needed to satisfy such insufficiency,
which unneeded amount shall be treated as having never been included in the
requested Construction Loan Advance and shall remain available for subsequent
advance in accordance with all of the terms and conditions of this
Agreement.  Notwithstanding the foregoing,
Borrowers expressly acknowledge and agree that (i) in the event that on any day
on which the Monthly Interest Payment is due and payable (A) an Event of
Default has occurred and is continuing, (B) the applicable requested
Construction Loan Advance has not been approved as a result of the failure of
any applicable condition set forth in this Agreement, or (C) Borrowers have not
requested a Construction Loan Advance to cover such Monthly Interest Payment or
any portion thereof, in each of such instances, Borrowers shall remain liable
for the payment of all Monthly Interest Payments as and when due; and (ii) in
the event that on any day on which the Monthly Interest Payment is due and
payable, and assuming none of the events set forth in the foregoing clauses
(A), (B) or (C) has occurred and is

 137
 

continuing, the amount of such Monthly
Interest Payment exceeds the unfunded balance of the interest Line Item in the
Loan Budget, Borrowers shall remain liable for the difference between the
applicable Monthly Interest Payment and the unfunded balance of the interest
Line Item in the Loan Budget, such difference to be due and payable at the time
the Monthly Interest Payment is due and payable.  Lender acknowledges that if Lender is
obligated to advance to Servicer a portion of any Construction Loan Advance for
payment of all or any part of any Monthly Interest Payment pursuant to this Section
3.20.1, then the failure of Borrowers to pay such Monthly Interest Payment
or the applicable portion thereof shall not be deemed an Event of Default.

3.20.2              Lender’s Right to
Make Construction Loan Advance to Pay Monthly Interest.  Notwithstanding the foregoing, from and after
any Payment Date following the Initial Construction Loan Advance (if the same
shall ever occur) upon which the Interest Reserve Fund is in an insufficient
amount to pay the Monthly Interest Payment due on such Payment Date and to also
maintain the Minimum Balance, if (a) Borrowers fail to submit any Draw Request
for a Construction Loan Advance or fail to submit a Draw Request for a
Construction Loan Advance that includes a Monthly Interest Advance, (b) the
applicable requested Construction Loan Advance has not been approved as a
result of the failure of any applicable condition set forth in this Agreement,
and/or (c) an Event of Default has occurred and is continuing, in any of the
foregoing instances Lender shall have the right (but not the obligation), in
its sole and absolute discretion, without the necessity of notifying, or
obtaining the approval of, any Borrower or any other Person, and without any
Borrower’s specific request, to advance a portion of the Construction Loan
necessary to pay the Monthly Interest Payment then due directly to the Servicer
(a “Lender Monthly Interest Advance”).  With respect to the foregoing, Borrowers and
Lender expressly acknowledge and agree that (i) the fact that Lender makes a
Lender Monthly Interest Advance shall not relieve Borrowers from the obligation
to make all future Monthly Interest Payments, subject to Section 3.20.1
hereof, (ii) the fact that Lender makes a Lender Monthly Interest Advance in
any instance shall not obligate Lender to make any subsequent Lender Monthly
Interest Advance in the same or in any other instance, (iii) a Lender Monthly
Interest Advance, when made, shall constitute a Construction Loan Advance for
all purposes under this Agreement and shall constitute the only Construction
Loan Advance available to Borrowers for the subsequent thirty (30) days, (iv)
the amount of any Lender Monthly Interest Advance may exceed the unfunded
balance of the interest Line Item in the Loan Budget and Lender shall
determine, in its reasonable discretion, where to reallocate funds in the Loan
Budget to cover any such excess, and (v) if Lender makes a Lender Monthly
Interest Advance for payment of all or any part of any Monthly Interest Payment
pursuant to this Section 3.20.2, then the failure of Borrowers to pay
such Monthly Interest Payment or the applicable portion thereof shall not be
deemed an Event of Default (but it shall not be deemed to cure any other
existing Event of Default).

Section
3.21                            Construction
Loan Advances Once Construction Loan is Fully Advanced.  Lender and Borrowers acknowledge and agree
that because Lender is permitting Borrowers to delay Borrowers’ equity
contribution in the Project in return for Borrowers posting the Required Equity
Letter(s) of Credit, it is anticipated that at some point in time prior to
Substantial Completion, the Construction Loan Amount, other than the interest
Line Item, will be fully advanced (such time being referred to herein as the “Borrower Advance Date”). 
Accordingly, from and after the Borrower Advance Date and until Final
Completion, the following shall apply to each subsequent Construction Loan
Advance:

 138
 

(a)                                  Conditions
to Advances.

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

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

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

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

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

(d)                                 Failure
to Deliver Funds for the Construction Loan Reserve Account.  With respect to any Construction Loan
Advance, in the event that Borrowers fail to deliver the applicable funds for
deposit in the Construction Loan Reserve Account not later than seven (7) days
(or the next succeeding Business Day if such seventh (7th) day is not a
Business Day) prior to the Requested Disbursement Date, Lender shall have the
right at any time thereafter, in its sole discretion, to draw down on such
Required Equity Letter(s) of Credit in its/their entirety, without the consent
of, or notice to, Borrowers or any other Person other than the issuing bank(s)
of any such Required Equity Letter(s) of Credit, and to deposit the proceeds
thereof in the Construction Loan Reserve Account, following which, all further
Construction Loan Advances shall be funded in accordance with all of the terms
of this Agreement from the Construction Loan Reserve Account.

 139
 

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

Section
3.22                            Right
of Borrowers to Halt Construction and Restore. Notwithstanding anything to
the contrary set forth in this Agreement or in any other Loan Document, in the
event that the Qualification Conditions have been satisfied on or prior to the
Construction Qualification Date and Borrowers have commenced construction of
the Project, Borrowers shall have the right, at any time prior to the earlier
to occur of (1) the Non-Qualified Initial Maturity Date or (2) the Project Cost
Ceiling Date, to permanently stop construction of the Project, subject to the
conditions set forth in, and otherwise in accordance with the terms of, this Section
3.22.

(a)                                  Conditions
to Stopping Construction.

(i)                                     Notice to
Lender.  Borrowers shall give Lender
written notice of their intention to stop construction (a “Stop Notice”).

(ii)                                  Duty to Restore.  Upon Borrowers’ delivery of a Stop Notice,
Borrowers shall promptly commence and diligently proceed with the full
restoration of the Adjacent Property and the Hotel/Casino Property, as and to
the extent each has been impacted by Borrowers’ construction to date, to the
condition in which it or they, as applicable, existed on the Closing Date or
another condition satisfactory to Lender in its sole discretion, except if any
of the apartment buildings on the Adjacent Property were demolished as
permitted in Section 3.18 hereof, Borrowers shall not be obligated to
rebuild such buildings.

(iii)                               Payments to Lender.  Within ten (10) days following Borrowers’
delivery of a Stop Notice, Borrowers shall pay to Lender, to be applied by
Lender as a voluntary prepayment of the Loan in accordance with the provisions
of Section 2.4.1 hereof, an amount equal to the sum of: (A) the amount
of all Pre-Construction Advances and Construction Loan Advances advanced to
Borrowers prior to delivery of the Stop Notice, and (B) the Non-Qualified
Mandatory Prepayment, together with all other amounts due and payable under Section
2.4.1 hereof upon such prepayments, including, without limitation, (1) if
such prepayments occur on a date other than a Payment Date, all interest which
would have accrued on the amount so prepaid to be paid through, but not including,
the next succeeding ninth (9th) day of a calendar month, or, if such
prepayments occur on a Payment Date, through and including the last day of the
Interest Period immediately prior to the applicable Payment Date, (2) any
Breakage Costs, (3) if such prepayments are made prior to the Spread
Maintenance Release Date, the Spread Maintenance Premium due with respect to
the amount prepaid pursuant to clause (A) above, (4) the applicable Exit
Fee due with respect to the amount prepaid pursuant to clause (A) above,
and (5) all other sums due and payable under this Agreement, the Note and the
other Loan Documents, including, but not

 140
 

limited to, all of Lender’s costs and expenses (including reasonable
attorney’s fees and disbursements) incurred by Lender in connection with such
prepayments.

(iv)                              Deposit to Interest
Reserve.  Within ten (10) days
following Borrowers’ delivery of a Stop Notice, Borrowers shall deliver to
Lender, for deposit into the Interest Reserve Account and thereafter to
constitute a portion of the Interest Reserve Fund for all purposes under this
Agreement and the other Loan Documents, an amount reasonably determined by
Lender that, when added to the then existing Interest Reserve Fund, is
sufficient to pay Debt Service on the Loan through the Revised Maturity Date,
at an interest rate equal to the Strike Price plus the Spread, taking into
account the reasonably anticipated Net Cash Flow (and any interruption thereof
or adverse impact thereon as a result of stopping construction and restoring
the Properties as contemplated by this Section 3.22) for the period
following delivery of the Stop Notice and ending on the Revised Maturity
Date.  In furtherance of the foregoing,
Lender agrees that Borrowers shall have the right to use any existing portion
of the General Reserve Fund to cover the foregoing amount or any portion
thereof.

(b)                                 Reversion
of Maturity Date to Non-Qualified Initial Maturity Date.  Simultaneously with the delivery of a Stop
Notice, the Initial Maturity Date shall, without notice to or consent of any
Borrower or any other Person, automatically and for all purposes, revert from
the Qualified Initial Maturity Date to the Non-Qualified Initial Maturity Date
(the “Revised Maturity Date”).

(c)                                  Completion
of Restoration.  Upon completion of
the restoration of the Adjacent Property and the Hotel/Casino Property as
contemplated in Section 3.22(a)(ii) hereof, Borrowers shall furnish to
Lender the following:  (i) a notice from
Borrowers informing Lender that such restoration has been completed (a “Restoration Completion Notice”), (ii)
confirmation from the Construction Consultant that such restoration has been
fully completed substantially in accordance with all Legal Requirements, all
material Permitted Encumbrances and this Agreement, (iii) copies of any
material Governmental Approvals needed to confirm completion of such
restoration, (iv) evidence satisfactory to Lender that all sums due in
connection with the construction of the Project and/or such restoration have
been paid in full, as evidenced by (A) with respect to any party with Lien
rights, an executed Lien waiver in the form attached hereto as Exhibit L-4,
or (B) with respect to any party without Lien rights, an invoice and proof of
payment or such other evidence of payment as shall be reasonably satisfactory
to Lender, and (v) evidence satisfactory to Lender that, except for any Lien
then being contested pursuant to, and in accordance with, Section 3.6(b) of the
Mortgage, no party claims or has a right to claim any statutory or common law
Lien arising out of the construction of the Project or such restoration or the
supplying of labor, material and/or services in connection therewith.

(d)                                 Payment
of Fees and Expenses.  Without
limiting the generality of Section 10.13 hereof, which shall apply
throughout the term of the Loan, upon completion of such restoration, Borrowers
shall pay to Lender, within ten (10) days following receipt of the Restoration
Payment Statement, all actual out-of-pocket fees and expenses incurred by
Lender in connection with the stopping of construction and the restoration of
the Properties as contemplated by this Section 3.22 which have not
theretofore been reimbursed to Lender by

 141
 

Borrowers, including, without limitation,
Lender’s reasonable legal fees and expenses and the reasonable fees and
expenses of the Construction Consultant, the total of all such fees and
expenses to be evidenced by a written statement from Lender furnished to
Borrowers following Lender’s receipt of Borrower’s Restoration Completion Notice
(the “Restoration Payment Statement”).

(e)                                  Required
Equity Letter of Credit(s).

(i)                                     In the event that
Borrowers shall fail to make any of the payments required under this Section
3.22 by the date for payment set forth herein, Lender shall have the right
(but not the obligation) to draw down on all of the Required Equity Letters of
Credit then held by (or on behalf of) Lender and shall (A) pay itself the
payments owing to it out of the proceeds thereof, and (b) deposit the balance
of the proceeds in the Cash Management Account until required or permitted to
be released pursuant to the further provisions of this Section 3.22(e).

(ii)                                  In the event that
Borrowers shall fail to diligently complete restoration as contemplated herein
and/or shall fail to cause the satisfaction of any of the conditions set forth
in Section 3.22(c) hereof, in addition to all other rights and remedies
available to Lender, including, without limitation, proceeding against
Guarantors under the Construction Completion Guaranty, Lender shall have the
right (but not the obligation) to draw down on all of the Required Equity
Letters of Credit then held by (or on behalf of) Lender and use the proceeds
thereof, or if Lender has previously drawn down on the Required Equity Letters
of Credit, Lender shall have the right (but not the obligation) to use any
remaining proceeds thereof not previously applied as provided in Section
3.22(e)(i) hereof, to complete the restoration and/or to cause the
satisfaction of any such conditions.

(iii)                               In the event that
following delivery of a Stop Notice, an Event of Default shall occur and be
continuing, Lender shall be entitled to exercise all of its right and remedies
set forth in the Loan Agreement, including those relating to the Required
Equity Letters of Credit, including, without limitation, the right (but not the
obligation) to draw down on all of the Required Equity Letters of Credit then
held by (or on behalf of) Lender and apply the proceeds thereof to the
Obligations in such order and priority as Lender shall elect in its sole
discretion.

(iv)                              In the event that
Borrowers shall pay all of the amounts payable to Lender pursuant to this Section
3.22 and shall diligently perform all of its obligations under this Section
3.22, and provided that no Event of Default shall occur and be continuing,
Lender shall return to Borrowers all Required Equity Letters of Credit then
held by (or on behalf of) Lender or the remaining proceeds thereof if Lender
has previously drawn down on the Required Equity Letters of Credit and applied
less than all of the proceeds thereof, and Lender shall, at Borrower’s expense,
execute such documents and take such actions as Borrowers shall reasonably
request to evidence its release of the Required Equity Letters of Credit.

 142

(f)                                    Termination of
Guaranty Obligations.  In the event
that Borrowers shall pay all of the amounts payable to Lender pursuant to this Section
3.22 and shall diligently perform all of its obligations under this Section
3.22, at such time as Borrowers are entitled to a return of the Required
Equity Letters of Credit in accordance with Section 3.22(d)(iv) hereof,
the Non-Qualified Prepayment Guaranty shall be deemed terminated and the
guaranty obligations relating to the restoration of the Project pursuant to this
Section 3.22 in the Construction Completion Guaranty shall be deemed
terminated.  Lender shall, at Borrowers’
reasonable expense (including Lender’s reasonable attorneys’ fees), promptly
execute and deliver such documents as may be reasonably requested by Borrowers
or Guarantors to evidence such release of the Non-Qualified Prepayment Guaranty
and such provisions of the Construction Completion Guaranty.

(g)                                 Non-Qualified
Prepayment Letter of Credit.  In the
event that, pursuant to the provisions of Section 2.4.2(c) hereof,
Guarantors delivered the Non-Qualified Prepayment Letter of Credit to Lender,
thus terminating the Non-Qualified Prepayment Guaranty, all of the provisions
of this Section 3.22 relating to the Required Equity Letters of Credit
shall be deemed equally applicable to the Non-Qualified Prepayment Letter of
Credit and such Non-Qualified Prepayment Letter of Credit shall be deemed, for
purposes of this Section 3.22 only, an additional Required Equity Letter
of Credit.

(h)                                 Additional Non-Qualified
Mandatory Prepayment.  Within three
(3) calendar months following Borrowers’ delivery of a Stop Notice, Borrowers
shall pay to Lender, to be applied by Lender as a voluntary prepayment of the
Loan in accordance with the provisions of Section 2.4.1 hereof, the
Additional Non-Qualified Mandatory Prepayment, together with all other amounts
due and payable under Section 2.4.1 hereof upon such prepayment,
including, without limitation, (i) if such prepayment occurs on a date other
than a Payment Date, all interest which would have accrued on the amount so
prepaid to be paid through, but not including, the next succeeding ninth (9th)
day of a calendar month, or, if such prepayment occurs on a Payment Date,
through and including the last day of the Interest Period immediately prior to
the applicable Payment Date, (ii) any Breakage Costs, and (iii) all other sums
due and payable under this Agreement, the Note and the other Loan Documents,
including, but not limited to, all of Lender’s costs and expenses (including
reasonable attorney’s fees and disbursements) incurred by Lender in connection
with such prepayments.

ARTICLE
IV.

REPRESENTATIONS AND WARRANTIES.

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

4.1.1                     Organization.  Such Borrower has been duly organized and is
validly existing and in good standing with requisite power and authority to own
its properties and to transact the businesses in which it is now engaged.  Such Borrower is duly qualified to do
business and is in good standing in each jurisdiction where it is required to
be so qualified in connection with its properties, businesses and
operations.  Such Borrower possesses all
material rights, licenses, permits and authorizations, governmental or
otherwise, necessary to entitle it to own its properties and to transact the
businesses in which it is now engaged, and the sole 

 143
 

business of such Borrower is the ownership, management and operation of
its Property or the IP.  The ownership
interests of such Borrower are as set forth on the organizational chart
attached hereto as Schedule VI.

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

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

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

(a)                                  There is no action,
suit, claim, proceeding or investigation pending against such Borrower, HRHI or
any Guarantor or, to such Borrower’s actual knowledge, pending against any
Property or the IP or, to such Borrower’s actual knowledge, threatened in
writing against such Borrower, HRHI or any Guarantor or any Property or the IP
in any court or by or before any other Governmental Authority that would have a
material adverse effect on (i) the business operations, economic performance,
assets, financial condition, equity, contingent liabilities, material
agreements or results of operations of such Borrower, HRHI, any Guarantor, any
Property or the IP, (ii) the enforceability or validity of any Loan Document,
the perfection or priority of any Lien created under any Loan Document or the
remedies of Lender under any Loan Document, (iii) the ability of such Borrower,
HRHI or any Guarantor to perform, in all material respects, its obligations
under each of the Loan Documents, or (iv) the value of, or cash flow from any
Property or the IP.

(b)                                 There is no
proceeding, investigation or disciplinary action (including, without
limitation, before any Gaming authority, under any Gaming Law or under any
Gaming License or other Operating Permit) pending or, to Borrowers’ actual
knowledge, threatened in writing, either (i) in connection with, or that seeks
to restrain, enjoin, prevent the consummation of or otherwise challenge, any of
the Loan Documents or any of the transactions 

 144
 

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

4.1.5                     Agreements.  Such Borrower is not a party to any agreement
or instrument or subject to any restriction which would be reasonably likely to
materially and adversely affect such Borrower or its Property or the IP, or
such Borrower’s business, properties or assets, operations or condition,
financial or otherwise.  To the best of
such Borrower’s actual knowledge, such Borrower is not in default in any
material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement, license or
instrument to which it is a party or by which such Borrower or any of the
Properties or the IP are bound.  Such
Borrower has no material financial obligation under any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which such
Borrower is a party or by which such Borrower or its Property or the IP is
otherwise bound, other than (a) obligations incurred in the ordinary course of
the operation of the Properties as permitted pursuant to clause (t) of
the definition of “Special Purpose Entity” set forth in Section 1.1
hereof, (b) obligations under the Existing FF&E Leases, (c) obligations
under the Loan Documents, (d) obligations pursuant to its Management Agreement
and/or the Sub-Management Agreement, as applicable, and (e) as to Hotel/Casino
Borrower, obligations pursuant to the Liquor Management Agreement.

4.1.6                     Title.  Such Borrower has good, marketable and
insurable fee simple title to the real property comprising part of its Property
and good title to the balance of such Property, free and clear of all Liens
whatsoever except the Permitted Encumbrances, such other Liens as are permitted
pursuant to the Loan Documents and the Liens created by the Loan
Documents.  To the best of each Borrower’s
actual knowledge, the Permitted Encumbrances in the aggregate do not materially
and adversely affect the operation or use of such Borrower’s Property (as
currently used) or Borrowers’ ability to repay the Loan.  The Mortgage, when properly recorded in the
appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (a) a
valid, perfected first priority lien on the real property portion of the
Properties, subject only to Permitted Encumbrances and the Liens created by the
Loan Documents, and (b) together with the filing of the required Uniform
Commercial Code financing statements and the proper recording of the Assignment
of Leases, perfected security interests in and to, and perfected collateral
assignments of, all personalty (including the Leases), all in accordance with
the terms thereof, in each case subject only to any applicable Permitted Encumbrances,
such other Liens as are permitted pursuant to the Loan Documents and the Liens
created by the Loan Documents.  To such
Borrower’s actual knowledge after due inquiry, there are no claims for payment
for work, labor or materials 

 145
 

affecting any of the Properties that are or may become a Lien prior to,
or of equal priority with, the Liens created by the Loan Documents, except any
Lien then being contested pursuant to, and in accordance with, Section 3.6(b)
of the Mortgage.

4.1.7                     Solvency.  Borrowers have (a) not entered into the
transaction or executed the Note, this Agreement or any other Loan Documents
with the actual intent to hinder, delay or defraud any creditor and (b)
received reasonably equivalent value in exchange for its obligations under such
Loan Documents.  The aggregate fair
saleable value of Borrowers’ assets collectively exceeds and will, immediately
following the making of the Loan, exceed Borrowers’ total aggregate
liabilities, including, without limitation, subordinated, unliquidated, disputed
and contingent liabilities.  The
aggregate fair saleable value of Borrowers’ assets collectively is and will,
immediately following the making of the Loan, be greater than Borrowers’
probable aggregate liabilities, including the maximum amount of their
contingent liabilities on its debts as such debts become absolute and
matured.  Each Borrower’s assets do not
and, immediately following the making of the Loan will not, constitute
unreasonably small capital to carry out its business as conducted or as
proposed to be conducted.  Borrowers do
not intend to, and do not believe that they will, incur Indebtedness and
liabilities (including contingent liabilities and other commitments) beyond
their respective abilities to pay such Indebtedness and liabilities as they
mature (taking into account the timing and amounts of cash to be received by
each Borrower and the amounts to be payable on or in respect of obligations of
each Borrower).  No petition in
bankruptcy has been filed against any Borrower, HRHI or any Guarantor, and none
of any Borrower, HRHI nor any Guarantor has ever made an assignment for the
benefit of creditors or taken advantage of any insolvency act for the benefit
of debtors.  None of any Borrower, HRHI
nor any Guarantor are contemplating either the filing of a petition by it under
any state or federal bankruptcy or insolvency laws or the liquidation of all or
a major portion of its assets or properties, and no Borrower has any actual
knowledge of any Person contemplating the filing of any such petition against
it, HRHI or any Guarantor.

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

4.1.9                     No Plan
Assets.  As of the date hereof
and throughout the term of the Loan (a) no Borrower is nor will any Borrower be
an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to
Title I of ERISA, (b) none of the assets of any Borrower constitutes or will
constitute “plan assets” of one or more such plans within the meaning of 29
C.F.R. Section 2510.3-101, (c) no Borrower is nor will any Borrower be a “governmental
plan” within the meaning of Section 3(32) of ERISA, and (d) none of the assets
of any Borrower constitute “plan assets” of a governmental plan within the
meaning of 29 C.F.R. Section 2510.3-101 

 146
 

for purposes of any state law provisions regulating investments of, or
fiduciary obligations with respect to, governmental plans.

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

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

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

4.1.13              Federal Reserve
Regulations.  No part of the
proceeds of the Loan will be used for the purpose of purchasing or acquiring
any “margin stock” within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System or for any other purpose 

 147
 

which would be inconsistent with such Regulation U or any other
Regulations of such Board of Governors, or for any purposes prohibited by any
Legal Requirements or by the terms and conditions of this Agreement or the
other Loan Documents.

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

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

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

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

4.1.18              Enforceability.  The Loan Documents are not subject to any
right of rescission, set-off, counterclaim or defense by any Borrower, HRHI or
any Guarantor, including the defense of usury, nor would the operation of any
of the terms of the Loan Documents, or the exercise of any right thereunder,
render the Loan Documents unenforceable (subject to principles of equity and
bankruptcy, insolvency and other laws generally affecting creditors’ rights and
the enforcement of debtors’ obligations), and none of any Borrower, HRHI nor
any Guarantor has asserted any right of rescission, set-off, counterclaim or
defense with respect thereto.

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

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

4.1.21              Use of the
Properties.  (a) The Hotel/Casino
Property is used exclusively as a hotel and casino at a standard at least equal
to Comparable Hotel/Casinos, including, without 

 148
 

limitation, comparable food and beverage outlets and other amenities,
and otherwise as a top-end hotel and other appurtenant and related uses, and
(b) the Café Property and the Adjacent Property are used for Permitted
Adjacent/Café Uses and other appurtenant and related uses.

4.1.22              Certificate of
Occupancy; Operating Permits.  To
the best of each Borrower’s actual knowledge after due inquiry, all
certifications, permits, licenses and approvals, including, without limitation,
certificates of completion and occupancy permits, all environmental, health and
safety licenses, gaming licenses and permits and any applicable liquor license
necessary to permit the legal use, occupancy and operation of (a) the
Hotel/Casino Property as a hotel and casino at a standard at least equal to
Comparable Hotel/Casinos, including, without limitation, comparable food and
beverage outlets and other amenities, and (b) the Café Property and the
Adjacent Property as currently operated on the date hereof, or, subsequent to
the date hereof, for Permitted Adjacent/Café Uses (collectively, the “Operating Permits”), have been obtained and
are in full force and effect.  Each
Borrower shall keep and maintain, or cause to be kept and maintained, all
Operating Permits necessary for the operation of (i) the Hotel/Casino Property
as a hotel and casino at a standard at least equal to Comparable Hotel/Casinos,
and (ii) the Café Property and the Adjacent Property for one or more Permitted
Adjacent/Café Purposes.  To the best of
each Borrower’s actual knowledge after due inquiry, the use being made of each
Property is in conformity with the Certificate(s) of Occupancy issued for such
Property.  Attached hereto as Schedule
IX is, to the best of each Borrower’s actual knowledge after due inquiry, a
true and complete list of all current Operating Permits and those which are
subject to renewal.

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

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

4.1.25              Boundaries.  Except as disclosed on the Surveys, to each
Borrower’s actual knowledge, all of the Improvements which were included in
determining the appraised value of each Property lie wholly within the
boundaries and building restriction lines of such Property, and no improvements
on adjoining properties encroach upon such Property, and no easements or other
encumbrances upon any Property encroach upon any of the Improvements, so 

 149
 

as to materially and adversely affect the value or marketability of
such Property except those which are insured against by the applicable Title
Insurance Policy for such Property.

4.1.26              Leases.  To each Borrower’s actual knowledge after due
inquiry and except as set forth on Schedule X attached hereto or as
otherwise disclosed in the estoppel certificates delivered to Lender in
connection with the closing of the Loan, (a) the Properties are not subject to
any Leases other than the HRHI Lease and the other Leases described in said Schedule
X, (b) each Borrower is the owner and lessor of the landlord’s interest in
each such Lease affecting its Property, (c) no Person has any possessory
interest in any Property or any right to occupy the same except under and
pursuant to the provisions of such Leases, (d) all commercial Leases are in
full force and effect and there are no material defaults thereunder by either
party and there are no conditions that, with the passage of time or the giving
of notice, or both, would constitute material defaults thereunder, (e) the
copies of the commercial Leases delivered to Lender are true and complete, and
there are no oral agreements with respect thereto, (f) no Rent (including
security deposits) has been paid more than one (1) month in advance of its due
date, (g) all work to be performed by the landlord under each Lease has been
performed as required in such Lease and has been accepted by the applicable
tenant, and any payments, free rent, partial rent, rebate of rent or other
payments, credits, allowances or abatements required to be given by any
Borrower to any tenant has already been received by such tenant, (h) there has
been no prior sale, transfer or assignment, hypothecation or pledge of any
Lease or of the Rents received therein which is still in effect, (i) no
commercial tenant listed on Schedule X has assigned its Lease or sublet
all or any portion of the premises demised thereby, no such commercial tenant
holds its leased premises under assignment or sublease, nor does anyone except
such commercial tenant and its employees occupy such leased premises, (j) no
tenant under any Lease has a right or option pursuant to such Lease or
otherwise to purchase all or any part of the Property of which the leased
premises are a part, and (k) no tenant under any Lease has any right or option
for additional space in the Improvements.

4.1.27              Intentionally
Omitted.

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

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

 150
 

principles of equity and bankruptcy, insolvency and other laws
generally applicable to creditors’ rights and the enforcement of debtors’
obligations.

4.1.30              Special Purpose
Entity/Separateness. 
(a) Until the Debt has been paid in full, each Borrower hereby
represents, warrants and covenants that such Borrower is, shall be and shall
continue to be a Special Purpose Entity.

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

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

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

4.1.31              Management
Agreements; Liquor Management Agreement.

(a)                                  Each of the
Management Agreements is in full force and effect and there is no default
thereunder by any party thereto and no event has occurred that, with the
passage of time and/or the giving of notice would constitute a default
thereunder.  Following the date hereof,
there shall be no material default thereunder.

(b)                                 The Sub-Management
Agreement is in full force and effect and there is no material 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 material default
thereunder.

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

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

4.1.33              No Change in
Facts or Circumstances; Disclosure. 
To each Borrower’s actual knowledge, all material information submitted
by any Borrower to Lender and in all financial statements, rent rolls, reports,
certificates and other documents submitted in connection with the Loan or in
satisfaction of the terms thereof and all statements of fact made by any
Borrower in this Agreement or in any other Loan Document, are accurate,
complete and correct 

 151
 

in all material respects.  To
each Borrower’s actual knowledge, there has been no material adverse change in
any condition, fact, circumstance or event that would make any such information
inaccurate, incomplete or otherwise misleading in any material respect or that
otherwise materially and adversely impairs, or is reasonably likely to do so
after the date hereof, the use or operation of the Properties or the IP or the
business operations or the financial condition of any Borrower.  Each Borrower has disclosed to Lender all
material facts actually known to such Borrower and has not failed to disclose
any material fact actually known to such Borrower that could cause any Provided
Information or representation or warranty made herein to be materially
misleading.

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

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

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

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

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

 152
 

4.1.37              Intellectual
Property.

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

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

(ii)                                  all
copyrights, and the renewals thereof, owned or used by any Borrower or any
Affiliated IP Party in connection with the operation and/or use of one or more
of the Properties, including for each such copyright the registration number or
application number and country;

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

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

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

 153
 

correct and complete list of all Registered IP that is licensed from
Morton to IP Borrower pursuant to that certain License Agreement, dated as of
February 2, 2007 (the “Pink Taco License”)
from Morton in favor of IP Borrower (all such IP listed on Part IV of said Schedule
XI, the “Pink Taco IP”; and
the Pink Taco IP, together with the Rank IP, the “Licensed IP”).

(c)                                  Intentionally
Omitted.

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

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

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

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

(f)                                    Except as disclosed
in said Schedule XI:

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

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

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

(iv)                              to
Borrowers’ actual knowledge, the trademark registrations, service mark
registrations, domain name registrations and copyright registrations 

 154
 

included in
the Owned IP and Licensed IP have been duly issued and have not been canceled,
abandoned or otherwise terminated;

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

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

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

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

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

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

(k)                                  To Borrowers’ actual
knowledge, no basis exists for any adverse claim by any third party with
respect to any of the IP, and no act has been done or has been omitted to be
done by any Borrower or any Affiliate thereof to entitle any Person to make
such a claim or to cancel, forfeit or modify any of the IP.

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

(m)                               To Borrowers’ actual
knowledge, no disclosure has been made to any Person of the know-how or
financial or trade secrets of any Borrower, except properly and in 

 155
 

the ordinary course of business and on condition that such disclosure
is to be treated as being of a confidential nature and except where such
disclosure would not reasonably be expected to have an IP Material Adverse
Effect; and to Borrowers’ actual knowledge, none of the IP is being infringed
by any other Person, except where such infringement could not reasonably be
expected to have an IP Material Adverse Effect.

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

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

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

4.1.41              Gaming Licenses
and Other Operating Permits.

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

(b)                                 To Borrowers’ actual
knowledge, Gaming Operator possesses all Operating Permits (including, without
limitation, all Gaming Licenses) which are material to the execution, delivery
and performance of the Gaming Sublease and the use, occupation and operation of
the Casino Component; to Borrowers’ actual knowledge, each such Operating 

 156
 

Permit and Gaming License (or any replacement thereof) is and will be
in full force and effect; and, to Borrowers’ actual knowledge, Gaming Operator
is in compliance in all material respects with the Gaming Sublease, all Gaming
Licenses and all other Operating Permits applicable to the operation of the
Casino Component as contemplated herein. 
Further, Borrowers hereby represent and warrant as follows:

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

(d)                                 To Borrowers’ actual
knowledge, all Gaming Licenses are in full force and effect and have not been
amended or otherwise modified in any material adverse respect or suspended,
rescinded or revoked.

(e)                                  Neither Borrowers
nor, to Borrowers’ actual knowledge, Gaming Operator are in default in any
material respect under, or in violation in any material respect of, any Gaming
License or other Operating Permit, and no event has occurred, and no condition
exists, which, with the giving of notice or passage of time or both, would
constitute such a default thereunder or such a violation thereof, that has
caused or would reasonably be expected to cause the loss, suspension,
revocation, impairment, forfeiture, non-renewal or termination of any Gaming
License or the imposition of any restriction thereon.

(f)                                    Neither Borrowers
nor, to Borrowers’ actual knowledge, Gaming Operator have received any notice
of any violation of any Legal Requirement which has caused or would reasonably
be expected to cause any Gaming License or other Operating Permit to be
modified in any material adverse respect or suspended, rescinded or revoked.

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

(h)                                 The Gaming Sublease is
in full force and effect, neither Borrowers nor, to Borrowers’ actual
knowledge, Gaming Operator is in material default thereof and no event has
occurred, and no condition exists, which, with the giving of notice or passage
of time, or both, would constitute a material default thereunder or material
violation thereof.

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

(j)                                     There are no
restrictions on transfer or agreements not to encumber the ownership interests
of any Borrower in any of the Loan Documents that require the approval of the
Gaming Authorities in order to become effective.

 157
 

(k)                                  (i) Each of HRHI and
Hotel/Casino Borrower meet the suitability standards for a landlord
contemplated or set forth in the Gaming Laws; (ii) neither HRHI nor Hotel/Casino
Borrower have or will take dominion over the Casino Component while such Casino
Component continues to be used for gaming purposes without first obtaining the
approvals required by the Gaming Laws; and (iii) HRHI and/or Hotel/Casino
Borrower have obtained all necessary approvals to transfer the Gaming Assets to
Golden HRC.

4.1.42              Working Capital
Advance.  Borrowers acknowledge
and agree that on the Closing Date, Lender advanced to Borrowers $9,363,111.46
in working capital and Borrowers hereby represent and warrant to Lender that
such working capital advance was used for the purposes set forth on Schedule
XVI attached hereto and made a part hereof.

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

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

ARTICLE
V.

COVENANTS OF BORROWERS

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

 158
 

5.1.1                     Existence;
Compliance with Legal Requirements. 
Each Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence, rights,
licenses, permits and franchises necessary for the conduct of its business and
comply in all material respects with all Legal Requirements applicable to such
Borrower and its Property or the IP, including, without limitation, Prescribed
Laws.  There shall never be committed by
any Borrower, and no Borrower shall knowingly permit any other Person in
occupancy of or involved with the operation or use of any of the Properties to
commit, any act or omission affording the federal government or any state or
local government the right of forfeiture against any Property or any part
thereof or any monies paid in performance of Borrowers’ obligations under any
of the Loan Documents.  Each Borrower
hereby covenants and agrees not to commit, permit or suffer to exist any act or
omission affording such right of forfeiture. 
Each Borrower shall at all times maintain, preserve and protect in all
material respects all franchises and trade names and preserve all the remainder
of its property necessary for the conduct of its business as contemplated
hereunder and, subject to Borrowers’ right to demolish the Improvements on the
Adjacent Property subject to, and in accordance with, the provisions of Section
3.18 hereof, shall keep the Properties in good working order and repair in
all material respects, and from time to time make, or cause to be made, all
reasonably necessary repairs, renewals, replacements, betterments and improvements
thereto, all as more fully provided in the Mortgage.  Borrowers shall keep the Properties insured
at all times by financially sound and reputable insurers, to such extent and
against such risks, and maintain liability and such other insurance, as is more
fully provided in this Agreement. 
Borrowers shall operate the Properties in accordance with the terms and
provisions of the O&M Agreements in all material respects.  After prior notice to Lender, any Borrower,
at its own expense, may contest by appropriate legal proceeding promptly
initiated and conducted in good faith and with due diligence, the validity of
any Legal Requirement, the applicability of any Legal Requirement to such
Borrower or its Property or any alleged violation of any Legal Requirement,
provided that (a) no Event of Default has occurred and remains uncured; (b)
such proceeding shall be permitted under and be conducted in accordance with
the provisions of any instrument to which such Borrower is subject and shall
not constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (c) neither any
Property nor any part thereof or interest therein will be in imminent danger of
being sold, forfeited, terminated, cancelled or lost; (d) such Borrower shall
promptly upon final determination thereof comply with any such Legal
Requirement determined to be valid or applicable or cure any violation of any
Legal Requirement; (e) such proceeding shall suspend the enforcement of the
contested Legal Requirement against such Borrower and its Property; and (f)
such Borrower shall furnish such security as may be required in the proceeding,
or as may be reasonably requested by Lender, to insure compliance with such
Legal Requirement, together with all interest and penalties payable in
connection therewith.  Following any
non-compliance with such Legal Requirement as determined by a court of
competent jurisdiction, Lender may apply any such security, as necessary to
cause compliance with such Legal Requirement at any time when, in the
reasonable judgment of Lender, the validity, applicability or violation of such
Legal Requirement is finally established or any Property (or any part thereof
or interest therein) shall be in imminent danger of being sold, forfeited,
terminated, cancelled or lost.

5.1.2                     Taxes and
Other Charges.  Borrowers shall
pay all Taxes and Other Charges now or hereafter levied or assessed or imposed
against the Properties or any part thereof prior to the date upon which any
interest or late charges shall begin to accrue thereon; provided, 

 159
 

however, Borrowers’ obligation to directly pay
Taxes shall be suspended for so long as Borrowers comply with the terms and
provisions of Section 7.2 hereof. 
Borrowers will deliver to Lender receipts for payment or other evidence
satisfactory to Lender that the Taxes and Other Charges have been so paid or
are not then delinquent.  Borrowers shall
furnish to Lender receipts for the payment of the Taxes and the Other Charges
prior to the date upon which any interest or late charges shall begin to accrue
thereon; provided, however, Borrowers shall not be required to
furnish such receipts for payment of Taxes in the event that such Taxes have
been paid by Lender pursuant to Section 7.2 hereof.  Borrowers shall not suffer and shall promptly
cause to be paid and discharged (or provide reasonable security for) any Lien
or charge against any of the Properties, and shall promptly pay for all utility
services provided to any of  the
Properties.  After prior notice to
Lender, any Borrower, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any
Taxes or Other Charges, provided that (a) no Event of Default exists; (b) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which such Borrower is subject and shall
not constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (c) neither any
Property nor any part thereof or interest therein will be in imminent danger of
being sold, forfeited, terminated, cancelled or lost; (d) such Borrower shall
promptly upon final determination thereof pay the amount of any such Taxes or
Other Charges, together with all costs, interest and penalties which may be
payable in connection therewith; (e) such proceeding shall suspend the collection
of such contested Taxes or Other Charges from the applicable Property; and (f)
such Borrower shall furnish such security as may be required in the proceeding,
or as may be reasonably requested by Lender, to insure the payment of any such
Taxes or Other Charges, together with all interest and penalties thereon.  Lender may pay over any such cash deposit or
part thereof held by Lender to the claimant entitled thereto at any time when,
in the reasonable judgment of Lender, the entitlement of such claimant is
established or any Property (or part thereof or interest therein) shall be in
danger of being sold, forfeited, terminated, cancelled or lost or there shall
be any imminent danger of the Lien of the Mortgage being primed by any related
Lien.

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

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

5.1.5                     Intentionally
Omitted.

 160
 

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

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

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

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

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

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

5.1.10              Mortgage Taxes.  Borrowers represent that as of the Closing
Date Borrowers have paid all state, county and municipal recording and all
other taxes imposed upon the execution and recordation of the Mortgage.

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

 161
 

operation of each Property. 
Lender shall have the right from time to time at all times during normal
business hours upon reasonable notice (which may be verbal) to examine such
books, records and accounts at the office of any Borrower or any other Person
maintaining such books, records and accounts and to make such copies or
extracts thereof as Lender shall desire. 
After the occurrence and during the continuance of an Event of Default,
Borrowers shall pay any actual costs and expenses incurred by Lender to examine
Borrowers’ accounting records with respect to the Properties and the IP, as
Lender shall reasonably determine to be necessary or appropriate in the
protection of Lender’s interest.

(b)                                 Borrowers will furnish
to Lender annually, within one hundred twenty (120) days following the end of
each Fiscal Year of Borrowers, a complete copy of each Borrower’s, HRHI’s and
each Guarantor’s annual financial statements audited by a “Big Four” accounting
firm or other independent certified public accountant reasonably acceptable to
Lender (it being hereby understood and agreed that BDO Seidman, LLP is
acceptable to Lender) in accordance with the Uniform System of Accounts and
reconciled each year in accordance with GAAP (or such other accounting basis
acceptable to Lender) covering the Properties for such Fiscal Year and
containing statements of profit and loss for Borrowers, HRHI, each Guarantor
and each Property and a balance sheet for Borrowers, HRHI and each
Guarantor.  Notwithstanding anything to
the contrary set forth in this Agreement, the financial statements of Borrowers
may be consolidated with those of (1) HRHI for so long as (y) HRHI owns no other
assets other than the ownership interests in one or more of the Borrowers
and/or other assets related to one or more of the Borrowers, one or more of the
Properties and/or the IP, and (z) engages in no other business other than those
related to owning one or more of the Borrowers and/or other assets related to
one or more of the Borrowers, one or more of the Properties and/or the IP, and
(2) HR Holdings for so long as (x) the provisions of the foregoing clause
(1) remain true, (y) HR Holdings owns no other assets other than the
ownership interests in HRHI and/or one or more of the Borrowers and/or other
assets related to HRHI, one or more of the Borrowers, one or more of the
Properties and/or the IP, and (z) engages in no other business other than those
related to owning HRHI and/or one or more of the Borrowers and/or other assets
related to HRHI, one or more of the Borrowers, one or more of the Properties
and/or the IP.  Such statements of
Borrowers shall set forth the financial condition and the results of operations
for the Properties on a property-by-property basis and also on an aggregate
basis for all Properties for such Fiscal Year, and shall include, but not be
limited to, amounts representing annual Net Cash Flow, Pro-Forma Net Cash Flow,
Net Operating Income, Gross Income from Operations and Operating Expenses, in
each of the foregoing instances on a combined basis for all Properties as well
as for each individual Property. 
Borrowers’ annual financial statements shall be accompanied by (i) a
comparison of the budgeted income and expenses and the actual income and
expenses for the prior Fiscal Year, (ii) an unqualified opinion of a “Big Four”
accounting firm or other independent certified public accountant reasonably
acceptable to Lender, (iii) with respect to the Hotel/Casino Property,
occupancy statistics for such Property, (iv) a schedule reviewed by such
independent certified public accountant reconciling Net Operating Income to Net
Cash Flow (the “Net Cash Flow Schedule”),
which shall itemize all adjustments made to Net Operating Income to arrive at
Net Cash Flow deemed material by such independent certified public accountant,
and (v) an Officer’s Certificate from each Borrower certifying that each annual
financial statement presents fairly the financial condition and the results of
operations of such Borrower and the Properties being reported upon and that
such financial statements have been prepared in accordance with the Uniform
System of Accounts and reconciled in accordance 

 162
 

with GAAP and as of the date thereof whether there exists an event or
circumstance which constitutes a monetary Default or any Event of Default under
the Loan Documents executed and delivered by, or applicable to, any Borrower,
and if a monetary Default or any Event of Default exists, the nature thereof,
the period of time it has existed and the action then being taken to remedy the
same.  Each Guarantor’s annual financial
statements shall be accompanied by (A) an unqualified opinion of a “Big Four”
accounting firm or other independent certified public accountant reasonably
acceptable to Lender, and (B) an Officer’s Certificate certifying that each
annual financial statement presents fairly the financial condition and the
results of operations of such Guarantor being reported upon and that such
financial statements have been prepared in accordance with GAAP and as of the
date thereof whether there exists an event or circumstance which constitutes a
monetary Default or any Event of Default under the Loan Documents executed and
delivered by, or applicable to, such Guarantor, and if a monetary Default or
any Event of Default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy the same.  HRHI’s annual financial statements shall be
accompanied by (A) an unqualified opinion of a “Big Four” accounting firm or
other independent certified public accountant reasonably acceptable to Lender,
and (B) an Officer’s Certificate certifying that each annual financial
statement presents fairly the financial condition and the results of operations
of HRHI being reported upon and that such financial statements have been
prepared in accordance with GAAP and as of the date thereof whether there
exists an event or circumstance which constitutes a monetary Default or any
Event of Default under the Loan Documents executed and delivered by, or
applicable to, HRHI, and if a monetary Default or any Event of Default exists,
the nature thereof, the period of time it has existed and the action then being
taken to remedy the same.

(c)                                  Borrowers will
furnish, or cause to be furnished, to Lender on or before thirty (30) days
after the end of each calendar month during the term of the Loan and on or
before forty-five (45) days after the end of each calendar quarter during the
term of the Loan commencing with the first quarter of 2008 and thereafter, the
following items, accompanied by an Officer’s Certificate stating that such
items are true, correct, accurate, and complete and fairly present the
financial condition and results of the operations of each Borrower and the
Properties on a combined basis as well as each Property individually (subject
to normal year-end adjustments) as applicable: (i) with respect to the
Hotel/Casino Property, an occupancy report for the subject month; (ii) a rent
roll for each Property for the subject month (or quarter, as applicable); (iii)
monthly (or quarterly, as applicable) and year-to-date operating statements
(including Capital Expenditures) prepared for each calendar month (or quarter,
as applicable), noting Net Operating Income, Gross Income from Operations, and
Operating Expenses (not including any contributions to the Replacement Reserve
Fund), each in the form prepared by the applicable Manager under the applicable
Management Agreement so long at it includes the information otherwise required
herein, and, within thirty (30) days following Lender’s reasonable written
request, other information necessary and sufficient to fairly represent the
financial position and results of operation of each Property during such
period, and containing a comparison of budgeted income and expenses and the
actual income and expenses together with a detailed explanation of any
variances of five percent (5%) or more between budgeted and actual amounts for
such periods, all in form satisfactory to Lender, in each of the foregoing
instances on a combined basis for all Properties; (iv) a calculation reflecting
the annual Debt Service Coverage Ratio for the immediately preceding twelve
(12) month period as of the last day of such month (or quarter, as applicable);
and (v) a Net Cash Flow Schedule.  In
addition, 

 163
 

such Officer’s Certificate shall also state that the representations
and warranties of each Borrower set forth in Section 4.1.30 hereof are
true and correct as of the date of such certificate and that there are no trade
payables outstanding for more than sixty (60) days.  On or before forty-five (45) days after the
end of each calendar month, Borrowers also will furnish, or cause to be
furnished, to Lender, with respect to the Hotel/Casino Property, the most
current Smith Travel Research Reports or a locally available equivalent, if
any, identified by Lender, then available to Borrowers reflecting market
penetration and relevant hotel properties competing with the Hotel/Casino
Property.

(d)                                 For each Fiscal Year
during the term of the Loan, Borrowers shall submit to Lender an Annual Budget
not later than twenty (20) days prior to the commencement of such Fiscal Year
in form reasonably satisfactory to Lender. 
The Annual Budget shall be subject to Lender’s written reasonable
approval (each such Annual Budget, as and when approved or deemed approved
pursuant to this Section 5.1.11(d), the “Approved Annual Budget”). 
Lender’s approval of a proposed Annual Budget shall be deemed to have
been given if (i) such proposed Annual Budget is submitted to Lender with a
request for approval set forth in a written notice that states clearly (in
14-point type or larger): “THIS IS A REQUEST
FOR APPROVAL OF AN ANNUAL BUDGET AND IF LENDER DOES NOT RESPOND WITHIN TEN (10)
BUSINESS DAYS, BORROWERS MAY DELIVER A DEEMED APPROVAL NOTICE” and
Lender does not respond by approving such proposed Annual Budget or stating in
reasonable detail its objections to such proposed Annual Budget within ten (10)
Business Days of Lender’s receipt thereof, and (ii) after Lender’s failure to
respond to the initial request for approval of such proposed Annual Budget
within the time period set forth in the foregoing clause (i), Borrowers shall
re-submit such proposed Annual Budget to Lender with a request for approval set
forth in a written notice that states clearly (in 14-point type or larger): “THIS IS A REQUEST FOR APPROVAL OF AN ANNUAL
BUDGET.  APPROVAL WILL BE DEEMED GIVEN IF
LENDER DOES NOT RESPOND WITHIN THREE (3) BUSINESS DAYS” and Lender
does not respond to such second submission of such proposed Annual Budget by
approving such proposed Annual Budget or stating in reasonable detail its
objection thereto within three (3) Business Days of Lender’s receipt of such
second submission.  In the event that
Lender objects to a proposed Annual Budget submitted by any Borrower, Lender
shall advise Borrowers of such objections within ten (10) Business Days after
receipt thereof (and deliver to Borrowers a reasonably detailed description of
such objections) and Borrowers shall promptly revise such Annual Budget and
resubmit the same to Lender.  Lender
shall advise Borrowers of any objections to such revised Annual Budget within
ten (10) days after receipt thereof (and deliver to Borrowers a reasonably
detailed description of such objections) and Borrowers shall promptly revise
(or cause the applicable Manager to revise) the same in accordance with the
process described in this subsection until Lender approves each Annual
Budget.  Until such time that Lender
approves a proposed Annual Budget (or is deemed to have approved such Annual
Budget), the most recently Approved Annual Budget shall apply; provided, that
such Approved Annual Budget shall be automatically adjusted (i) to reflect
actual increases in Taxes and Insurance Premiums with respect to each Property,
(ii) by three percent (3%) on all other items to account for inflation, and
(iii) to reflect any expenses that must be incurred on an “emergency basis” in
order to prevent the occurrence of any harm to any individuals on any Property
or any Property itself or the operation thereof.  Notwithstanding the foregoing, if
seventy-five percent (75%) of the aggregate amount of costs set forth in a
proposed Annual Budget have been approved by Lender, then until such time as
Lender approves the 

 164
 

entirety of such proposed Annual Budget (or is deemed to have approved
the entirety of such proposed Annual Budget in accordance with this Section
5.1.11(d)), (A) such approved portions of such proposed Annual Budget shall
apply and shall constitute an “Approved Annual Budget” with respect only to
such portions, (B) the remainder of such proposed Annual Budget shall be
automatically adjusted as provided in the immediately preceding sentence, and
(C) Borrowers and Lender shall diligently continue the process of agreeing to
the remaining costs as set forth in this Section 5.1.11(d) for the
approval of the Annual Budget as a whole.

(e)                                  In the event that any
Borrower must incur any non-recurring extraordinary Operating Expense or
Capital Expenditure not set forth in the Approved Annual Budget then in effect
(each, an “Extraordinary Expense”),
then such Borrower shall promptly deliver to Lender a reasonably detailed
explanation of such proposed Extraordinary Expense for Lender’s approval.  Notwithstanding the foregoing, no prior
approval by Lender shall be required for any Extraordinary Expense needed to be
incurred immediately to prevent imminent injury to person or damage to property,
provided that within three (3) Business Days thereafter Borrowers shall provide
reasonably satisfactory evidence to Lender to demonstrate the imminent
necessity and reasonableness of the Extraordinary Expense incurred.

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

 165
 

Securitization, Lender expects there to be, with respect to such tenant
or group of Affiliated tenants, a concentration within all of the mortgage
loans included or expected to be included, as applicable, in the Securitization
such that such tenant or group of affiliated tenants would constitute a
Significant Obligor.

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

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

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

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

 166

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

5.1.13              Title to the Properties
and the IP.  Borrowers will
warrant and defend (a) the title to each Property, the Owned IP and any right
in and under all IP Agreements with respect to Licensed IP, and every part
thereof, subject only to Liens permitted hereunder (including Permitted
Encumbrances, Permitted IP Encumbrances and the asset sales and releases
permitted under this Agreement), and (b) the validity and priority of the Liens
of the Mortgage, the Assignment of Leases and the IP Assignments, subject only
to Liens permitted hereunder (including Permitted Encumbrances and Permitted IP
Encumbrances), in each case against the claims of all Persons whomsoever.  Borrowers shall reimburse Lender for any
actual losses, actual costs, actual damages (excluding lost profits, diminution
in value and other consequential damages) or reasonable expenses (including
reasonable attorneys’ fees and court costs) incurred by Lender if an interest
in any Property or the IP, other than as permitted hereunder, is claimed by
another Person.

5.1.14              Costs of
Enforcement.  In the event (a)
that the Mortgage is foreclosed in whole or in part or that the Mortgage is put
into the hands of an attorney for collection, suit, action or foreclosure, (b)
of the foreclosure of any mortgage prior to or subsequent to the Mortgage in
which proceeding Lender is made a party, or (c) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of any Borrower or any of
its Constituent Members or an assignment by any Borrower or any of its Constituent
Members for the benefit of its creditors and Lender incurs costs in connection
with any such proceeding as a direct or indirect result of the Loan, then, in
any of the foregoing instances, each Borrower, on behalf of itself and its
successors or assigns, shall be chargeable with and shall pay all actual
out-of-pocket costs of collection and defense, including attorneys’ fees and
costs, incurred by Lender or any Borrower in connection therewith and in
connection with any appellate proceeding or post-judgment action involved
therein.

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

(b)                                 After
request by Borrowers, but in no event more than two (2) times in any twelve
(12) month period, Lender shall within ten (10) Business Days furnish Borrowers
with a statement, duly acknowledged and certified, stating (i) the Outstanding
Principal Balance, (ii) the Applicable Interest Rate, (iii) the date an
installment of interest was 

 167
 

last paid, and (iv) whether or not Lender has
sent any notice of default under the Loan Documents which remains uncured in
the opinion of Lender.

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

5.1.16              Loan Proceeds.  Borrowers shall use the proceeds of the
Acquisition Loan received by them on the Closing Date only for the purposes set
forth in Section 2.1.2 hereof. 
Borrowers shall use the proceeds of the Construction Loan received by
them pursuant to any Construction Loan Advances only for the purposes set forth
in Section 2.1.3 hereof.

5.1.17              Performance by
Borrowers.  Borrowers shall, in a
timely manner and in all material respects, observe, perform and fulfill each
and every covenant, term and provision of each Loan Document executed and
delivered by, or applicable to, any Borrower, and shall not enter into or
otherwise suffer or permit any amendment, waiver, supplement, termination or
other modification of any Loan Document executed and delivered by, or
applicable to, any Borrower without the prior consent of Lender.

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

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

5.1.20              Leasing Matters.  Any Major Leases with respect to any Property
executed after the date hereof shall be subject to Lender’s approval, which
approval shall not be unreasonably withheld, conditioned or delayed, provided,
however, that renewals of any Major Lease by Borrowers initially
executed prior to the Closing Date shall not require the approval of Lender if
the terms of any such Lease provided for renewals at a reasonably determinable
rent.  Upon request, Borrowers shall
furnish Lender with executed copies of all Leases.  All proposed Major Leases shall be on
commercially reasonable terms and no Lease shall not contain any terms which
would materially adversely affect Lender’s rights under the Loan
Documents.  All Leases executed after the
date hereof shall provide that they are subordinate to the Mortgage and 

 168
 

that the lessee agrees to attorn to Lender or
any purchaser at a sale by foreclosure or power of sale, provided that,
with respect to Major Leases and except with respect to the HRHI Lease, Lender
provides commercially reasonable non-disturbance language.  Borrowers (i) shall observe and perform the
obligations imposed upon the lessor under the Leases in a commercially
reasonable manner; (ii) shall enforce the terms, covenants and conditions
contained in the Leases upon the part of the lessee thereunder to be observed
or performed in a commercially reasonable manner and in a manner not to impair
the value of any Property involved, except that no termination by any Borrower
or acceptance of surrender by a tenant of any Major Lease (including, without
limitation, the HRHI Lease) will be permitted without the consent of Lender;
(iii) shall not collect any of the rents more than one (1) month in advance
(other than security deposits); (iv) shall not execute any other assignment of
lessor’s interest in the Leases or the Rents (except as contemplated by the
Loan Documents); and (v) shall not alter, modify or change the terms of (A) the
HRHI Lease other than any ministerial, non-monetary amendment or modification,
or (B) any other Major Lease in any material manner, in each of the foregoing
instances, without the prior written approval of Lender, not to be unreasonably
withheld.  To the extent Lender’s
approval is required pursuant to this Section 5.1.21, Lender shall
endeavor to respond to a request for Lender’s approval within ten (10) Business
Days after Borrowers’ written request therefor, delivered together with any
documents or information required to be provided by Borrowers hereunder in
connection with Lender’s review of the proposed Major Lease, Major Lease
amendment or Major Lease termination.  If
the correspondence from Borrowers requesting such approval contains the
following statement at the top of the first page thereof in capitalized,
boldfaced, 14 point type lettering: “IF YOU
FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING
WITHIN TEN (10) BUSINESS DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN”,
and if Lender shall fail to respond to or to expressly deny such request for
approval in writing (stating in reasonable detail the reason for such
disapproval) within ten (10) Business Days after receipt of Borrowers’ written
request therefor together with the documents and information required above and
any other information reasonably requested by Lender in writing prior to the
expiration of such ten (10) Business Day period in order to adequately review
the same, then Borrowers shall re-submit such proposed Major Lease, Major Lease
amendment or Major Lease termination and accompanying information to Lender
with a request for approval containing the following statement at the top of
the first page thereof in capitalized, boldfaced, 14 point type lettering: “IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS
REQUEST FOR APPROVAL IN WRITING WITHIN FIVE (5) BUSINESS DAYS, YOUR APPROVAL
SHALL BE DEEMED GIVEN”, and if Lender does not respond to such
second request by approving such proposed Major Lease, Major Lease amendment or
Major Lease termination or stating its objection thereto within five (5)
Business Days of Lender’s receipt of such second submission, Lender’s approval
shall be deemed given.  Notwithstanding
anything to the contrary contained herein, Borrowers shall not enter into a
lease of all or substantially all of any Property without Lender’s prior
consent.

5.1.21              Alterations.  Other than the construction of the Project,
which shall be governed by the provisions of Article III hereof,
Borrowers shall obtain Lender’s prior consent to any material alterations to
any Improvements, which consent shall not be unreasonably withheld, conditioned
or delayed.  Notwithstanding the
foregoing, Lender’s consent shall not be required in connection with any
alterations that will not have a material adverse effect on any Borrower’s
financial condition, the value of the applicable Property or the Net Operating
Income, provided  

 169
 

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

5.1.22              Operation of the
Properties.

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

(b)                                 Each
Borrower shall: (i) promptly perform and/or observe, in all material respects,
all of the covenants and agreements required to be performed and observed by it
under the Management Agreement and/or the Sub-Management Agreement to which it
is a party and do all things necessary to preserve and to keep unimpaired its
material rights thereunder; (ii) promptly notify Lender of any material default
under its Management Agreement and/or the Sub-Management Agreement of which it
is aware; (iii) promptly deliver to Lender a 

 170
 

copy of each financial statement, business
plan, capital expenditures plan, notice, report and estimate received by it
under its Management Agreement and/or the Sub-Management Agreement; and (iv)
enforce the performance and observance of all of the material covenants and
agreements required to be performed and/or observed by the Manager under its
Management Agreement and by Sub-Manager under the Sub-Management Agreement, in
each of the foregoing instances, in a commercially reasonable manner.

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

5.1.23              Liquor Management
at Hotel/Casino Property.

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

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

(c)                                  Upon
the occurrence and during the continuance of an Event of Default, Borrowers
shall, at the request of Lender, cause the Liquor Manager, if one of the 

 171
 

Borrowers or an Affiliate of any Borrower, to
continue to perform all obligations under the Liquor Management Agreement.  Additionally, Borrowers shall, upon and after
the foreclosure, deed in lieu of foreclosure or other similar transfer of the
Hotel/Casino Property to Lender, its designee or nominee (a “Lender Successor Owner”), at the request of
Lender, cause the Liquor Manager, if one of the Borrowers or an Affiliate of
any Borrower, to perform all obligations under the Liquor Management Agreement
for the benefit of the Lender Successor Owner and to maintain all applicable
Operating Permits necessary for the performance thereof for a period not to
exceed fifteen (15) months after the effective date of such transfer to the
Lender Successor Owner (which period shall in all events terminate upon Lender
Successor Owner’s appointment of a new liquor manager possessing all
Governmental Approvals necessary to provide all alcoholic beverage services at
the Hotel/Casino Property, subject to Liquor Manager’s obligation to transfer
its responsibilities under the Liquor Management Agreement to such new liquor
manager and to reasonably cooperate with the transition of the liquor
management responsibilities from Liquor Manager to such new liquor manager),
either in accordance with the terms of the Liquor Management Agreement,
including, but not limited to, the obligation to deposit all revenue derived
from liquor sales into an account designated by the Lender Successor Owner, or
pursuant to a replacement liquor services management agreement in form and
substance reasonably acceptable to Lender and such Liquor Manager; provided
that (i) the Lender Successor Owner shall be obligated to pay a then market
rate liquor management fee which is reasonable and customary for similar hotel
and casinos in Las Vegas, Nevada, and (ii) all other terms and arrangements
shall be usual and customary for similar hotel and casinos in Las Vegas,
Nevada.  Notwithstanding the foregoing,
at any time after the foreclosure, deed in lieu of foreclosure or other similar
transfer of the Hotel/Casino Property to a Lender Successor Owner, at the
option of such Lender Successor Owner exercised by written notice to the Liquor
Manager, such Lender Successor Owner shall have the right to terminate the
Liquor Management Agreement with any Liquor Manager without penalty or
termination fee and, in connection with the foregoing, Liquor Manager shall
transfer its responsibilities thereunder to a Person selected by such Lender
Successor Owner in its sole discretion.

5.1.24              Gaming Operations
at the Hotel/Casino Property.

(a)                                  All
gaming operations conducted at the Hotel/Casino Property shall at all times be
operated by a Qualified Gaming Operator and Borrowers shall use commercially
reasonable best efforts to conduct and/or to cause to be conducted the gaming
operations in such a manner so as to maximize Gross Income from Operations at
the Properties in the aggregate.  Lender
acknowledges and agrees that, as of the Closing Date, Golden HRC LLC is a
Qualified Gaming Operator.

(b)                                 Hotel/Casino
Borrower acknowledges that under the Gaming Recognition Agreement, Lender has
the right (but not the obligation) to cure any default by HRHI under the Gaming
Sublease.  In furtherance of that right,
Hotel/Casino Borrower shall promptly execute, acknowledge and deliver to Lender
such instruments as may reasonably be required to permit Lender to so cure any
default under the Gaming Sublease. 
Additionally, subject to the Gaming Laws, Hotel/Casino Borrower
irrevocably appoints Lender as its true and lawful attorney-in-fact to do, in
its name or otherwise, any and all acts and to execute any and all documents
that are necessary to preserve any rights of Hotel/Casino Borrower under or
with respect to the HRHI Lease, the Gaming Sublease and/or the Gaming
Recognition Agreement 

 172
 

(and the above powers granted to Lender are
coupled with an interest and shall be irrevocable) to the extent that
Hotel/Casino Borrower fails to do any of the same within five (5) Business Days
following written request by Lender.

5.1.25              Intellectual
Property.

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

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

5.1.26              Licensing and
Sublicensing of the IP.

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

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

(i)                                     IP Borrower shall
have notified Lender of such Adjacent Property IP License at least ten (10)
Business Days prior to the anticipated date of the execution and delivery
thereof, which notice shall include (A) a copy of the Adjacent Property IP
License, and (B) an Officer’s Certificate providing a certification that such
Adjacent Property IP License (1) does not and will not adversely affect any
Borrower’s ownership and/or operation of, or any activities conducted on, its
Property, (2) does not and will not materially diminish any Borrower’s rights
to use any of the Owned IP or Licensed IP that is reasonably necessary or
desirable to operate its Property as then being operated and as then 

 173
 

contemplated to be operated in the future, and (3) does not, and is not
reasonably anticipated in the future to, materially diminish the value of any
Owned IP or Licensed IP;

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

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

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

(v)                                 Such Adjacent Property
IP License shall not adversely effect Lender’s Liens and security interests in
the Owned IP and Licensed IP, all of which shall remain in full force and
effect and, at Lender’s request in its sole discretion, IP Borrower shall collaterally
assign to Lender such Adjacent Property IP License pursuant to a security
agreement reasonably satisfactory to Lender and IP Borrower in form and
substance.

(c)                                  Notwithstanding
the foregoing or anything else to the contrary set forth in this Agreement or
the other Loan Documents, IP Borrower shall have the right, without the consent
of Lender and without violating the Loan Documents, to license or sublicense,
as applicable, the IP (or any portion thereof) to any bonafide third party who
is not an Affiliate of any Borrower or any other Restricted Party (a “Third Party IP License”); provided
that all of the following conditions shall be satisfied with respect to any
such Third Party IP License:

(i)                                     IP Borrower shall
have notified Lender of such proposed Third Party IP License at least ten (10)
Business Days prior to the anticipated date of the execution and delivery
thereof, which notice shall include (A) a copy of the proposed Third Party IP
License, and (B) an Officer’s Certificate providing a certification that (1) as
of the date of such notice, no monetary Default nor any Event of Default shall
have occurred and be continuing, (2) the proposed licensee or sublicensee, as
applicable, is a bonafide third party who is not an Affiliate of any Borrower
or any other Restricted Party, (3) the total consideration paid and to be paid
under such proposed Third Party IP License, (4) other than the proposed Third
Party IP License, there are no other written or oral agreements between any
Borrower or any other Restricted Party or any Affiliate of any thereof, on the
one hand, and the proposed licensee or sublicensee, as applicable, on the other
hand, 

 174
 

relating to such proposed Third Party IP License or the IP covered
thereunder, (5) the proposed Third Party IP License does not and will not
adversely affect any Borrower’s ownership and/or operation of, or any
activities conducted on, its Property, (6) the proposed Third Party IP License
does not and will not materially diminish any Borrower’s rights to use any of
the Owned IP or Licensed IP that is reasonably necessary or desirable to
operate its Property as then being operated and as then contemplated to be
operated in the future, and (7) the proposed Third Party IP License does not,
and is not reasonably anticipated in the future to, materially diminish the
value of any Owned IP or Licensed IP;

(ii)                                  Such proposed Third
Party IP License shall, without limitation, (A) be on arm’s-length, market
terms, (B) require cash consideration only, (C) prohibit any material amendment
thereof without Lender’s prior reasonable approval, other than any amendment
that does not violate any of the requirements of this Section 5.1.26(c)(ii),
(D) prohibit the assignment or sub-licensing thereof without Lender’s prior
reasonable approval, other than an assignment to a bonafide third party who is
not an Affiliate of any Borrower or any other Restricted Party, and (E) require
the proposed licensee or sublicensee, as applicable, to deposit all
consideration payable thereunder or otherwise in connection therewith from time
to time directly into the Lockbox Account;

(iii)                               All consideration and/or
royalties that is/are paid under or otherwise in connection with such Third
Party IP License shall constitute Gross Income from Operations for all purposes
under this Agreement and the other Loan Documents and, if notwithstanding the
provisions of the foregoing Section 5.1.26(c)(ii)(E) hereof, any
Borrower shall receive any such consideration and/or royalties, the same shall
be deposited directly in the Lockbox Account within one (1) Business Day
following receipt by any Borrower from time to time;

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

(v)                                 Without limiting the
generality of the foregoing, such Third Party IP License shall in no event
prohibit or limit in any manner the use of the “Hard Rock” name in connection
with the operation of the Hotel/Casino Property or any other Property;

(vi)                              Such Third Party IP
License shall not adversely effect Lender’s Liens and security interests in the
Owned IP and Licensed IP, all of which shall remain in full force and effect
and, at Lender’s request in its sole discretion, IP Borrower shall collaterally
assign to Lender such Third Party IP License pursuant to a security agreement
reasonably satisfactory to Lender and IP Borrower in form and substance; and

(vii)                           On the date of the full
execution and delivery of such Third Party IP License, no monetary Default nor
any Event of Default shall have occurred and be continuing.

 175
 

(d)                                 Notwithstanding
the foregoing or anything else to the contrary set forth in this Agreement or
the other Loan Documents, IP Borrower shall have the right to license or
sublicense, as applicable, the IP (or any portion thereof) to an Affiliate of
any Borrower or any other Restricted Party (an “Affiliate IP License”); provided that (i) all of the
conditions set forth in Section 5.1.26(c) hereof shall be satisfied with
respect to any such Affiliate IP License, other than the condition set forth in
Section 5.1.26(c)(i)(2) hereof, and (ii) such Affiliate IP License shall
have been approved in writing by Lender, which approval shall not be
unreasonably withheld.

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

Section
5.2                                   Negative
Covenants.  From the date hereof
until payment and performance in full of all obligations of Borrowers under the
Loan Documents or the earlier release of the Lien of the Mortgage in accordance
with the terms of this Agreement and the other Loan Documents, each Borrower
covenants and agrees with Lender that it will not do, directly or indirectly,
any of the following:

5.2.1                     Operation
of the Properties; Liquor Management.

(a)                                  Borrowers
shall not, without Lender’s prior consent (which consent shall not be
unreasonably withheld, conditioned or delayed): (i) subject to Section 9.5.1
hereof, surrender, terminate or cancel any Management Agreement; provided,
that Borrowers may, without Lender’s consent, replace any Manager so long as
the replacement manager is a Qualified Manager pursuant to a Replacement
Management Agreement; (ii) reduce or consent to the reduction of the term of
any Management Agreement; (iii) increase or consent to the increase of the
amount of any charges or fees under any Management Agreement; or (iv) otherwise
modify, change, supplement, alter or amend, or waive or release any of its
rights and remedies under, any Management Agreement in any material
respect.  Notwithstanding the foregoing,
Borrowers may terminate the Sub-Management Agreement without the consent of
Lender so long as either (A) the Improvements on the Adjacent Property are and
are intended to remain completely vacant or are demolished, or (B) a Manager
under a Management Agreement is obligated to perform the duties that were
delegated to Sub-Manager under the Sub-Management Agreement.

(b)                                 Following
the occurrence and during the continuance of an Event of Default, Borrowers
shall not exercise any rights, make any decisions, grant any approvals or 

 176
 

otherwise take any action under any
Management Agreement or the Sub-Management Agreement without the prior consent
of Lender, which consent may be withheld in Lender’s sole discretion.

(c)                                  Hotel/Casino
Borrower shall not, without Lender’s prior consent (which consent shall not be
unreasonably withheld, conditioned or delayed): (i) subject to Section 9.5.2
hereof, surrender, terminate or cancel any Liquor Management Agreement; provided,
that Hotel/Casino Borrower may, without Lender’s consent, replace the Liquor
Manager so long as the replacement liquor manager is a Qualified Liquor Manager
pursuant to a Replacement Liquor Management Agreement; (ii) reduce or consent
to the reduction of the term of the Liquor Management Agreement; (iii) increase
or consent to the increase of the amount of any charges or fees under the
Liquor Management Agreement; or (iv) otherwise modify, change, supplement,
alter or amend, or waive or release any of its rights and remedies under, any
Liquor Management Agreement in any material respect.

(d)                                 Following
the occurrence and during the continuance of an Event of Default, Hotel/Casino
Borrower shall not exercise any rights, make any decisions, grant any approvals
or otherwise take any action under the Liquor Management Agreement without the
prior consent of Lender, which consent may be withheld in Lender’s sole
discretion.

5.2.2                     Liens.  No Borrower shall create, incur, assume or
suffer to exist any Lien on any portion of any Property or the IP or knowingly
permit any such action to be taken, except: (i) Permitted Encumbrances and
Permitted IP Encumbrances; (ii) Liens created by or permitted pursuant to the
Loan Documents; and (iii) Liens for Taxes or Other Charges not yet delinquent.

5.2.3                     Dissolution.  No Borrower shall (a) engage in any dissolution,
liquidation or consolidation or merger with or into any other business entity,
(b) engage in any business activity not related to the ownership and operation
of its Property or the IP, (c) transfer, lease or sell, in one transaction or
any combination of transactions, the assets or all or substantially all of the
properties or assets of such Borrower except to the extent permitted by the
Loan Documents, or (d) modify, amend, waive or terminate (i) its organizational
documents in any material respect or in any respect with regard to the
provisions concerning any Borrower’s status as a Special Purpose Entity, or
(ii) its qualification and good standing in any jurisdiction, in each case,
without obtaining the prior consent of Lender.

5.2.4                     Change in
Business.  No Borrower shall
enter into any line of business other than the ownership and operation of its
Property or the IP, or make any material change in the scope or nature of its
business objectives, purposes or operations, or undertake or participate in a
material manner in activities other than the continuance of its present
business.

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

5.2.6                     Zoning.  No Borrower shall initiate or consent to any
zoning reclassification of any portion of any Property or seek any variance
under any existing zoning 

 177
 

ordinance or use or permit the use of any
portion of any Property in any manner that could result in such use becoming a
non-conforming use under any zoning ordinance or any other applicable land use
law, rule or regulation, in each case, without the prior consent of Lender not
to be unreasonably withheld.

5.2.7                     Removal of
FF&E.  Except in the ordinary
course of business, no Borrower shall remove or transfer any material article
of FF&E or other personal property owned by any Borrower used in the
operation of any Property unless the same is replaced with substantially
similar FF&E or is obsolete, without the prior written consent of Lender in
each instance, which consent shall not be unreasonably withheld, conditioned or
delayed.  To the extent Lender’s prior
written approval is required pursuant to this Section 5.2.7, Lender
shall endeavor to respond to a request for Lender’s approval within five (5)
Business Days after Borrowers’ written request therefor, delivered together with
any documents or information required to be provided by Borrowers hereunder in
connection with Lender’s review of the proposed action or matter.  Lender’s approval of any action or matter
requiring Lender’s consent under this Section 5.2.7 shall be deemed to have
been given if (i) a request for approval, together with any documents or
information required to be provided by Borrowers hereunder in connection with
Lender’s review of the proposed action or matter, is submitted to Lender with a
request for approval set forth in a written notice that states clearly (in
14-point type or larger): “THIS IS A REQUEST
FOR APPROVAL AND IF LENDER DOES NOT RESPOND TO OR EXPRESSLY DENY THIS REQUEST
FOR APPROVAL IN WRITING WITHIN FIVE (5) BUSINESS DAYS, BORROWERS MAY DELIVER A
DEEMED APPROVAL NOTICE”, and Lender does not respond by approving
such proposed action or matter or stating in reasonable detail its objections
to such proposed action or matter within five (5) Business Days of Lender’s
receipt thereof, and (ii) after Lender’s failure to respond to the initial
request for approval of such proposed action or matter within the time period
set forth in the foregoing clause (i), Borrowers shall re-submit such request
to Lender in a written notice that states clearly (in 14-point type or larger):
“THIS IS A REQUEST FOR APPROVAL.  APPROVAL WILL BE DEEMED GIVEN IF LENDER DOES
NOT RESPOND WITHIN FIVE (5) BUSINESS DAYS”, and Lender does not
respond to such second submission by approving such proposed action or matter
or stating in reasonable detail its objection thereto within five (5) Business
Days of Lender’s receipt of such second submission.

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

5.2.9                     ERISA.  (a) Assuming that Lender is not, and is
not lending the assets of, an “employee benefit plan” as defined in Section
3(3) of ERISA, no Borrower shall engage in any transaction which would cause
any obligation, or action taken or to be taken, hereunder (or the exercise by
Lender of any of its rights under the Note, this Agreement or the other Loan 

 178
 

Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited transaction under
ERISA.

(b)                                 Each
Borrower shall deliver to Lender such certifications or other evidence from
time to time throughout the term of the Loan, as requested by Lender in its
reasonable discretion, that (i) such Borrower is not an “employee benefit plan”
as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a
“governmental plan” within the meaning of Section 3(32) of ERISA; (ii) none of
the assets of such Borrower constitute “plan assets” within the meaning of
Section 3(3) of ERISA for purposes of any state law provisions regulating
investments of, or fiduciary obligations with respect to, governmental plans;
and (iii) one or more of the following circumstances is true:

(A)                              Equity interests in such
Borrower are publicly offered securities, within the meaning of 29 C.F.R.
§2510.3 101(b)(2);

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

(C)                                Such Borrower qualifies
as an “operating company”, a “venture capital operating company” or a “real
estate operating company” within the meaning of 29 C.F.R. §2510.3 101(c), (d)
or (e).

5.2.10              Transfers.  (a) Borrowers acknowledge that Lender
has examined and relied on the experience of Borrowers and their general
partners, members, principals and (if any Borrower is a trust) beneficial
owners, as applicable, in owning and operating properties such as the Properties
and in owning intellectual property such as the IP, in agreeing to make the
Loan, and will continue to rely on Borrowers’ ownership of the Properties and
the IP as a means of maintaining the value of the Properties and the IP as
security for repayment of the Debt and the performance of the obligations
contained in the Loan Documents. 
Borrowers acknowledge that Lender has a valid interest in maintaining
the value of the Properties and the IP so as to ensure that, should Borrowers
default in the repayment of the Debt or the performance of the obligations
contained in the Loan Documents, Lender can recover the Debt by a sale of the
Properties and the IP.

Without the prior consent of Lender and except to the
extent otherwise set forth in this Section 5.2.10, Borrowers shall not,
and shall not permit any Transfer Restricted Party to, (i) sell, convey,
mortgage, grant, bargain, encumber, pledge, assign, license, grant options with
respect to, or otherwise transfer or dispose of (directly or indirectly, voluntarily
or involuntarily, by operation of law or otherwise, and whether or not for
consideration or of record) any Property or any part thereof or any legal or
beneficial interest therein or any IP or any part thereof or any legal or
beneficial interest therein, or (ii) permit a Sale or Pledge of any interest in
any Transfer Restricted Party (any of the actions in the foregoing clauses
(i) or (ii), a “Transfer”),
other than, notwithstanding anything to the contrary contained in this Section
5.2.10, (A) pursuant to Leases of space in the Improvements to tenants in
accordance with the provisions of Section 5.1.20 hereof, including,
without limitation, the HRHI Lease, (B) any Release Parcel Sale, any Adjacent
Parcel Sale or an IP Sale, in each instance in accordance with the applicable
provisions of 

 179
 

Section 2.5
hereof, (C) a conveyance of the Deeded Adjacent Property as contemplated by Section
3.2(u) hereof, (D) any IP License or Adjacent Property IP License granted
in accordance with the provisions of Section 5.1.26 hereof, (E)
Permitted Encumbrances and Permitted IP Encumbrances, and (F) the issuance of
new stock in, the merger or consolidation of, and/or the Sale or Pledge of the
stock in, any Publicly Traded Entity who owns a direct or indirect ownership interest
in any Transfer Restricted Party; provided, however, that in the
case of each of the foregoing clauses (A) – (F), such Transfer shall
only be permitted hereunder if it does not violate any Legal Requirements,
including specifically, but without limitation, any Gaming Laws.

(b)                                 A
Transfer shall include, but not be limited to, (i) an installment sales
agreement wherein any Borrower agrees to sell a Property or any part thereof or
the IP or any part thereof for a price to be paid in installments; (ii) an
agreement by any Borrower leasing all or a substantial part of a Property for
other than actual occupancy by a space tenant thereunder or a sale, assignment
or other transfer of, or the grant of a security interest in, any Borrower’s
right, title and interest in and to any Leases or any Rents; (iii) if a
Transfer Restricted Party is a corporation, any merger, consolidation or Sale
or Pledge of such corporation’s stock or the creation or issuance of new stock;
(iv) if a Transfer Restricted Party is a limited or general partnership or
joint venture, any merger or consolidation or the change, removal, resignation
or addition of a general partner or the Sale or Pledge of the general
partnership interest of any general partner or any profits or proceeds relating
to such partnership interest, or the Sale or Pledge of limited partnership
interests or any profits or proceeds relating to such limited partnership
interest or the creation or issuance of new limited partnership interests; (v)
if a Transfer Restricted Party is a limited liability company, any merger or
consolidation or the change, removal, resignation 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 Transfer
Restricted Party is a trust or nominee trust, any merger, consolidation or the
Sale or Pledge of the legal or beneficial interest in a Transfer Restricted
Party or the creation or issuance of new legal or beneficial interests; or
(vii) the removal or the resignation of any Manager (including, without
limitation, an Affiliated Manager) other than in accordance with Section
5.1.22 hereof.

(c)                                  Notwithstanding
the provisions of this Section 5.2.10, so long as the following
Transfers do not violate any Legal Requirements in any instance, including
specifically, but without limitation, any Gaming Laws, or cause or otherwise
result in the suspension, termination and/or revocation of any Gaming License,
the HRHI Lease, the Gaming Sublease or the Casino Component Lease, as
applicable, the following Transfers may occur without the consent of Lender or
the payment of any transfer or other fee:

(A)                              the Transfer of any
direct or indirect interest in any Transfer Restricted Party, provided
that (1) no Event of Default has occurred and is continuing, (2) (y) one or
both Guarantors continue to Control, directly or indirectly, each Borrower and
HRHI, and (z) one or both Guarantors own, directly or indirectly, at least a
fifty-one percent (51%) economic interest in each Borrower and in HRHI, (3)
Lender 

 180
 

receives (y) at least ten (10) days prior written notice of any such
voluntary Transfer and copies of the documents transferring such interest, or
(z) written notice of any such involuntary Transfer and copies of the documents
transferring such interest within thirty (30) days following such involuntary
Transfer, (4) if after such Transfer any Person and its Affiliates collectively
would own more than forty-nine (49%) in the aggregate of the direct and/or
indirect interests of any Borrower and as of the Closing Date such Person and
its Affiliates collectively owned forty-nine percent (49%) or less in the
aggregate of the direct and/or indirect interests of any Borrower, Lender shall
have received, prior to such Transfer, an Additional Insolvency Opinion
reasonably satisfactory to Lender and the Rating Agencies and, if a
Securitization has occurred, a confirmation in writing from the Rating Agencies
to the effect that such Transfer will not result in a re-qualification, reduction
or withdrawal of the then current rating assigned to the Securities or any
class thereof in any applicable Securitization, and (5) Borrowers deliver to
Lender a copy of any consents or approvals required by any Governmental
Authority, including specifically, but without limitation, any Gaming
Authority, in connection with such Transfer;

(B)                                the Transfer of any
direct or indirect interest in any Transfer Restricted Party to any other
Person who is, as of the Closing Date, a holder of any direct or indirect
interest in any Transfer Restricted Party, provided that (1) no Event of
Default has occurred and is continuing, (2) (y) one or both Guarantors continue
to Control, directly or indirectly, each Borrower and HRHI, and (z) one or both
Guarantors own, directly or indirectly, at least a fifty-one percent (51%)
economic interest in each Borrower and in HRHI, (3) Lender receives (y) at
least ten (10) days prior written notice of any such voluntary Transfer and
copies of the documents transferring such interest, or (z) written notice of
any such involuntary Transfer and copies of the documents transferring such
interest within thirty (30) days following such involuntary Transfer, and (4)
Borrowers deliver to Lender a copy of any consents or approvals required by any
Governmental Authority, including specifically, but without limitation, any
Gaming Authority, in connection with such Transfer;

(C)                                the Transfer of any
direct or indirect interest in any Transfer Restricted Party by inheritance,
devise, bequest or operation of law upon the death of a natural person who
owned such interest, provided that (1) such Transfer is to a non-minor
member of the immediate family of the deceased holder of such interest or a
trust established for the benefit of one or more members of the immediate
family of the deceased holder of such interest, (2) (y) one or both Guarantors
continue to Control, directly or indirectly, each Borrower and HRHI, and (z)
one or both Guarantors own, directly or indirectly, at least a fifty-one percent
(51%) economic interest in each Borrower and in HRHI, (3) such Transfer shall 

 181
 

not result in a change of Control of the day-to-day operations of any
of the Properties, (4) Lender receives written notice of such Transfer and
copies of the documents transferring such interest not later than thirty (30)
days following such Transfer, (5) the legal and financial structure of each
Borrower and the other Transfer Restricted Parties, and the single purpose
nature and bankruptcy remoteness of each Borrower and the other Transfer
Restricted Parties, after such Transfer shall satisfy the applicable provisions
of the Loan Documents, including, without limitation, Section 4.1.30
hereof, (6) if after such Transfer any Person and its Affiliates would
collectively own more than forty-nine (49%) in the aggregate of the direct
and/or indirect interests of any Borrower and as of the Closing Date such
Person and its Affiliates collectively owned forty-nine percent (49%) or less
in the aggregate of the direct and/or indirect interests of any Borrower,
Lender shall have received an Additional Insolvency Opinion reasonably
satisfactory to Lender and the Rating Agencies and, if a Securitization has
occurred, a confirmation in writing from the Rating Agencies to the effect that
such Transfer will not result in a re-qualification, reduction or withdrawal of
the then current rating assigned to the Securities or any class thereof in any
applicable Securitization, and (7) Borrowers deliver to Lender a copy of any
consents or approvals required by any Governmental Authority, including
specifically, but without limitation, any Gaming Authority, in connection with
such Transfer; and

(D)                               (1) the merger or
consolidation of any Guarantor or any Constituent Member of any Guarantor with
or into any other Person, (2) the sale of any Guarantor or substantially all of
any Guarantor’s assets to any other Person, or (3) the issuance of new stock or
limited partnership or membership interests in, and/or the Sale or Pledge of
stock, limited partnership or membership interests in, any Guarantor or any
Constituent Member thereof (any of the occurrences in the foregoing clauses
(1), (2) or (3), a “Guarantor
Transfer”); provided, that, in each of the foregoing
instances, whether or not the applicable Guarantor or the applicable
Constituent Member of a Guarantor is or is not a Publicly Traded Company, (I)
after giving effect to such Guarantor Transfer, when viewed both individually
and together with any prior Guarantor Transfers, (y) the Guarantors, collectively,
shall continue to satisfy the Net Worth Requirements, and (z) at least one of
the Guarantors shall be a Qualified Real Estate Guarantor, (II) except if the
applicable Guarantor or the applicable Constituent Member of a Guarantor is a
Publicly Traded Company, Lender receives at least ten (10) days prior written
notice of any such Guarantor Transfer, (III) if after such Guarantor Transfer
any Person and its Affiliates collectively would own more than forty-nine (49%)
in the aggregate of the direct and/or indirect interests of any Borrower and as
of the Closing Date such Person and its Affiliates collectively owned
forty-nine percent (49%) or less in the aggregate of the direct and/or indirect
interests of any Borrower, Lender shall have 

 182
 

received, prior to such Guarantor Transfer, an Additional Insolvency
Opinion reasonably satisfactory to Lender and the Rating Agencies and, if a
Securitization has occurred, a confirmation in writing from the Rating Agencies
to the effect that such Guarantor Transfer will not result in a
re-qualification, reduction or withdrawal of the then current rating assigned
to the Securities or any class thereof in any applicable Securitization, and
(IV) Borrowers deliver to Lender a copy of any consents or approvals required
by any Governmental Authority, including specifically, but without limitation,
any Gaming Authority, in connection with such Guarantor Transfer.

(d)                                 With
respect to any Transfer permitted under this Section 5.2.10 or otherwise
consented to by Lender, Borrower shall pay all fees and expenses incurred by
Lender in connection with such Transfer, including, without limitation, the
cost of any third party reports, reasonable legal fees and expenses, Rating
Agency fees and expenses and required legal opinions.

(e)                                  Notwithstanding
anything to the contrary set forth in this Agreement or in any of the other
Loan Documents, Borrowers expressly acknowledge and agree, on behalf of
themselves and the other Transfer Restricted Parties, that any Transfer or
Guarantor Transfer stated to be permitted hereunder or thereunder shall only be
permitted if it does not violate any Legal Requirements, including
specifically, but without limitation, any Gaming Laws.

5.2.11              Morton
Indemnification and PWR/RWB Escrow Agreement.  Borrowers shall not do, and Borrowers shall
not permit any Affiliate to do, any of the following, in each instance without
the prior approval of Lender, which approval shall not be unreasonably
withheld:  (a) modify, amend, waive any
right under, or terminate the Morton Indemnification or the PWR/RWB Escrow
Agreement, other than any ministerial, non-monetary amendment or modification;
(b) make any claim or otherwise exercise any rights or remedies under the
Morton Indemnification or the PWR/RWB Escrow Agreement; or (c) other than the
funds contemplated to be released on the Closing Date pursuant to the express
terms of the PWR/RWB Escrow Agreement, cause any funds escrowed under the
PWR/RWB Escrow Agreement to be used for any purpose other than the satisfaction
of indemnification claims pursuant to the Morton Indemnification until such
time as the Morton Indemnification shall expire by its terms.  Subject to Lender’s reasonable approval,
Borrowers shall diligently pursue their rights and remedies under the Morton
Indemnification and the PWR/RWB Escrow Agreement, and following the occurrence
and during the continuance of an Event of Default, Lender shall have the right
to pursue the same on behalf of, and in the name of, any Borrower, and each
Borrower hereby appoints Lender its attorney-in-fact, coupled with an interest,
to pursue the same.

5.2.12              Distributions to
Affiliates.  Other than the fees
and expense reimbursements payable to any Affiliated Manager pursuant to any
Management Agreement reasonably approved by Lender, no Borrower shall make any
distributions to, or otherwise pay any dividends or make any payments to, any
Restricted Party unless and until the Excess Cash Termination Conditions shall
have occurred, and thereafter, only when no Event of Default shall have occurred
and be continuing.

 183
 

ARTICLE
VI.

INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

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

(i)                                     comprehensive all
risk insurance on the Improvements and the Personal Property (including any
Stored Materials) (A) in an amount equal to one hundred percent (100%) of the “Full
Replacement Cost,” which for purposes of this Agreement shall mean actual
replacement value (exclusive of costs of excavations, foundations, underground
utilities and footings) with a waiver of depreciation; (B) containing an Agreed
Amount endorsement with respect to the Improvements and Personal Property
waiving all co-insurance provisions; (C) providing for no deductible in excess
of Two Hundred Fifty Thousand Dollars ($250,000) for all such insurance
coverage except that the deductible for earthquake or windstorm insurance shall
not exceed five percent (5%) of the total value of the Properties and the
deductible for flood insurance shall not exceed Two Hundred Fifty Thousand
Dollars ($250,000); and (D) containing an “Ordinance or Law Coverage” or “Enforcement”
endorsement if any of the Improvements or the use of any of the Properties
shall at any time constitute legal non-conforming structures or uses.  In addition, Borrowers shall obtain: (x) if
any portion of the Improvements is currently or at any time in the future
located in a federally designated “special flood hazard area”, flood hazard
insurance in an amount equal to the lesser of (1) the Outstanding Principal
Balance or (2) the maximum amount of such insurance available under the
National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973
or the National Flood Insurance Reform Act of 1994, as each may be amended, or
such greater amount as Lender shall reasonably require; (y) earthquake
insurance in a reasonable amount based on the maximum probable loss and in form
and substance reasonably satisfactory to Lender in the event any Property is
located in an area with a high degree of seismic activity; and (z) windstorm
insurance in amounts and in form and substance reasonably satisfactory to
Lender in the event windstorm coverage is excluded from the all risk insurance
coverage required under this subsection (i), provided that the insurance
pursuant to clauses (x), (y) and (z) hereof shall be on terms
consistent with the comprehensive all risk insurance policy required under this
subsection (i);

(ii)                                  commercial general
liability insurance against claims for personal injury, bodily injury, death or
property damage occurring upon, in or about any Property, such insurance (A) to
be on the so-called “occurrence” form with a combined limit of not less than
Two Million Dollars ($2,000,000) in the aggregate and One Million Dollars
($1,000,000) per occurrence, with a deductible not to exceed One Hundred
Thousand Dollars ($100,000) (and, if on a blanket policy, containing an “Aggregate
Per Location” endorsement); (B) to continue at not less than the aforesaid
limit until required to be changed by Lender in writing by reason of changed
economic conditions making such protection inadequate; and 

 184
 

(C) to cover at least the following hazards: (1) premises and operations;
(2) products and completed operations on an “if any” basis; (3) independent
contractors; (4) blanket contractual liability for all legal contracts; (5)
contractual liability covering the indemnities contained in Article 8 of the
Mortgage to the extent the same is available; (6) owner’s and contractor’s
protective liability prior to the commencement and during the performance of
any portion of the Initial Renovations and/or the Project; (7) owner’s
contingent general liability prior to the commencement and during the
performance of any portion of the Initial Renovations and/or the Project; and
(8) dram shop coverage;

(iii)                               rental loss and/or
business income interruption insurance (A) with Lender named as loss payee; (B)
covering all risks required to be covered by the insurance provided for in Section
6.1(a)(i) above; (C) containing an extended period of indemnity endorsement
which provides that after the physical loss to the Improvements and Personal
Property with respect to the applicable Property has been repaired, the
continued loss of income will be insured until such income either returns to
the same level it was at prior to the loss, or the expiration of six (6) months
from the date that such Property is repaired or replaced and operations are resumed,
whichever first occurs, and notwithstanding that the policy may expire prior to
the end of such period; and (D) in an amount equal to one hundred percent
(100%) of the projected Gross Income from Operations from each Property for a
period of eighteen (18) months from the date of such Casualty (assuming such
Casualty had not occurred) and notwithstanding that the policy may expire prior
to the end of such period.  The amount of
such business income insurance shall be determined prior to the date hereof and
at least once each year thereafter based on Borrowers’ reasonable estimate of
the Gross Income from Operations from each Property for the succeeding eighteen
(18) month period.  Provided that (y) no
Event of Default shall have occurred and be continuing, and (z) Lender has not
elected (to the extent Lender has the right to so elect under Section 6.4
hereof) to apply the Net Proceeds arising from the Casualty giving rise to
insurance proceeds under this Section 6.1(a)(iii) to the Obligations in
accordance with Section 6.4 hereof, all proceeds payable to Lender under
this Section 6.1(a)(iii) shall be deposited in the Cash Management
Account and applied in the manner set forth in Section 2.6.2(b) or 2.6.2(c)
hereof, as applicable, it being expressly acknowledged and agreed by Borrowers
that in the event that the circumstances in the foregoing clause (y)
and/or (z) have occurred (and, in the case of the foregoing clause
(y), are continuing), Lender shall apply all proceeds payable to Lender
under this Section 6.1(a)(iii) to the Obligations in such order, amounts
and priority as Lender shall elect in its sole discretion.  Notwithstanding the foregoing, nothing herein
contained shall be deemed to relieve Borrowers of their obligations to pay the
Obligations secured by the Loan Documents on the respective dates of payment
provided for in this Agreement and the other Loan Documents except to the
extent such amounts are actually paid out of the proceeds of such business
income insurance;

(iv)                              at all times during which
structural construction, repairs or alterations are being made with respect to
the Improvements on the applicable 

 185
 

Property, including, without limitation, construction of the Initial
Renovations and/or the Project, and only if the property coverage form does not
otherwise apply, (A) contractor’s liability insurance covering claims not
covered by or under the terms or provisions of the above mentioned commercial
general liability insurance policy; and (B) the insurance provided for in subsection
(i) above written in a so-called builder’s risk completed value form (1) on
a non-reporting basis, (2) against all risks insured against pursuant to subsection
(i) above, (3) including permission to occupy such Property, and (4) with
an Agreed Amount endorsement waiving co-insurance provisions;

(v)                                 worker’s compensation
insurance with respect to any employees at any of the Properties, as required
by any Governmental Authority or Legal Requirement, and employers practice
liability insurance in an amount not less than One Million Dollars ($1,000,000)
per occurrence with a deductible not to exceed $350,000;

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

(vii)                           umbrella liability insurance
in an amount not less than Two Hundred Sixty Million Dollars ($260,000,000) per
occurrence on terms consistent with the commercial general liability insurance
policy required under subsection (ii) above;

(viii)                        motor vehicle liability
coverage for all owned and non-owned vehicles, including rented and leased
vehicles containing minimum limits per occurrence of One Million and No/100
Dollars ($1,000,000);

(ix)                                if a Property is or
becomes a legal “non conforming” use, ordinance or law coverage and insurance
coverage to compensate for the cost of demolition or rebuilding of the
undamaged portion of such Property and the increased cost of construction in
amounts as reasonably requested by Lender;

(x)                                   the commercial
property, liability and business income insurance required under Sections
6.1(a)(i), (ii) and (iii) above shall cover perils of terrorism and
acts of terrorism and Borrowers shall maintain commercial property, liability
and business income insurance for loss resulting from perils and acts of
terrorism on terms (including amounts) consistent with those required under Sections
6.1(a)(i), (ii) and (iii) above at all times during the term of the
Loan (collectively, the “Terrorism Insurance”);
provided, however, that Borrowers shall only be required to
maintain Terrorism Insurance in the amount (the “Terrorism Cap”) that may be purchased by Borrowers at a cost
not to exceed (A) $1,300,000.00 per year until such time, if ever, as Borrowers
are required to carry so-called builder’s risk coverage with 

 186
 

respect to construction of the Project pursuant to the terms of this
Agreement, and (B) $3,900,000.00 per year at all times following such time, if
ever, as Borrowers are required to carry so-called builder’s risk coverage with
respect to construction of the Project pursuant to the terms of this Agreement;
provided, however, that if Borrowers shall have exercised their
right to permanently stop construction of the Project in accordance with Section
3.22 hereof, upon satisfaction of all of the conditions set forth in said Section
3.22 hereof, the Terrorism Cap shall be reduced to, and shall remain,
$1,300,000.00 per year for the remaining term of the Loan (including any extensions);

(xi)                                crime coverage in an
amount not less than (A) Two Million and No/100 Dollars ($2,000,000) until
Substantial Completion of the Project (if the same shall ever occur), and (B)
Twenty-Five Million and No/100 Dollars ($25,000,000) from and after Substantial
Completion of the Project (if the same shall ever occur), to protect against
employee dishonesty, on- and off- premises money, securities, computer and
credit card fraud, robbery and safe burglary; and

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

(b)                                 All
insurance provided for in Section 6.1(a) hereof shall be obtained under
valid and enforceable policies (collectively, the “Policies” or in the singular, the “Policy”), and shall be subject to the reasonable approval of
Lender.  Lender’s approval of any
insurance shall be deemed to have been given if (i) a request for approval,
together with a copy of the applicable proposed insurance and any other
documents and information reasonably requested by Lender in writing in order to
adequately review the same, is submitted to Lender with a request for approval
set forth in a written notice that states clearly (in 14-point type or larger):
“THIS IS A REQUEST FOR APPROVAL AND IF LENDER
DOES NOT RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING
WITHIN EIGHT (8) DAYS, BORROWERS MAY DELIVER A DEEMED APPROVAL NOTICE”,
and Lender does not respond by approving such proposed insurance or stating in
reasonable detail its objections to such proposed insurance within eight (8)
days of Lender’s receipt thereof, and (ii) after Lender’s failure to respond to
the initial request for approval of such proposed insurance within the time
period set forth in the foregoing clause (i), Borrowers shall re-submit such
request to Lender in a written notice that states clearly (in 14-point type or
larger): “THIS IS A REQUEST FOR
APPROVAL.  APPROVAL WILL BE DEEMED GIVEN
IF LENDER DOES NOT RESPOND WITHIN SEVEN (7) DAYS”, and Lender does
not respond to such second submission by approving such proposed insurance or
stating in reasonable detail its objection thereto within seven (7) days of
Lender’s receipt of such second submission. 
The Policies shall be issued by financially sound and responsible
insurance companies authorized to do business in the State and having a claims
paying ability rating of (i) “A-” or better (and the equivalent thereof) by
S&P and by (A) at least two (2) of the Rating Agencies rating the
Securities (provided that if S&P is rating the Securities, than only by one
additional Rating Agency rating the Securities, which shall be Moody’s if they
are rating the Securities), or (B) if only one Rating Agency is rating the
Securities, then only by such Rating Agency; (ii) if there are more than one,
but less than five, insurance companies collectively issuing the Policies, (y)
seventy-five percent (75%) or more of the insured amount shall have a 

 187
 

claims paying ability rating of “A” or better
(and the equivalent thereof) by S&P and by (A) at least two (2) of the
Rating Agencies rating the Securities (provided that if S&P is rating the
Securities, than only by one additional Rating Agency rating the Securities,
which shall be Moody’s if Moody’s is rating the Securities), or (B) if only one
Rating Agency is rating the Securities, then only by such Rating Agency, and
(z) the remaining twenty-five percent (25%) (or lesser remaining amount) of
which shall have a claims paying ability rating of “BBB” or better (and the
equivalent thereof) by S&P and by (A) at least two (2) of the Rating
Agencies rating the Securities (provided that if S&P is rating the
Securities, than only by one additional Rating Agency rating the Securities,
which shall be Moody’s if Moody’s is rating the Securities), or (B) if only one
Rating Agency is rating the Securities, then only by such Rating Agency, or
(iii) if there are five or more insurance companies collectively issuing the
Policies, (y) sixty percent (60%) or more of the insured amount shall have a
claims paying ability rating of “A” or better (and the equivalent thereof) by
S&P and by (A) at least two (2) of the Rating Agencies rating the
Securities (provided that if S&P is rating the Securities, than only by one
additional Rating Agency rating the Securities, which shall be Moody’s if Moody’s
is rating the Securities), or (B) if only one Rating Agency is rating the
Securities, then only by such Rating Agency, and (z) the remaining forty
percent (40%) (or lesser remaining amount) of which shall have a claims paying
ability rating of “BBB” or better (and the equivalent thereof) by S&P and
by (A) at least two (2) of the Rating Agencies rating the Securities (provided
that if S&P is rating the Securities, than only by one additional Rating
Agency rating the Securities, which shall be Moody’s if Moody’s is rating the
Securities), or (B) if only one Rating Agency is rating the Securities, then
only by such Rating Agency, and shall also have a rating of “A X” or better by
AM Best’s.  The Policies described in Section
6.1(a) hereof (other than those strictly limited to liability protection)
shall designate Lender as loss payee. 
Not less than five (5) Business Days prior to the expiration dates of
the Policies theretofore furnished to Lender, certificates of insurance
evidencing the Policies reasonably satisfactory to Lender and accompanied by
evidence reasonably satisfactory to Lender of payment of the premiums due
thereunder (the “Insurance Premiums”),
shall be delivered by Borrowers to Lender.

(c)                                  Any
blanket insurance Policy shall substantially fulfill the requirements contained
herein and shall otherwise provide the same protection as would a separate
Policy insuring only each Property in compliance with the provisions of Section
6.1(a) hereof, and shall only be permitted so long as no Event of Default
has occurred and is continuing.

(d)                                 All
Policies provided for or contemplated by Section 6.1(a) hereof, except
for the Policy referenced in Section 6.1(a)(v) hereof, shall name the
applicable Borrower(s) as the insured and Lender as an additional insured, as
its interests may appear, and in the case of property damage, boiler and
machinery, flood and earthquake insurance, shall contain a standard
non-contributing mortgagee clause in favor of Lender providing that the loss
thereunder shall be payable to Lender.

(e)                                  All
property Policies provided for in Section 6.1 hereof shall contain
clauses or endorsements to the effect that:

(i)                                     no act or
negligence of any Borrower, or anyone acting for any Borrower, or of any tenant
or other occupant (including, without limitation, HRHI 

 188
 

with respect to the Hotel/Casino Property), or failure to comply with
the provisions of any Policy, which might otherwise result in a forfeiture of
the insurance or any part thereof, shall in any way affect the validity or enforceability
of the insurance insofar as Lender is concerned;

(ii)                                  the Policies shall
not be materially changed (other than to increase the coverage provided
thereby) or canceled without at least thirty (30) days’ notice to Lender;

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

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

(f)                                    If
at any time Lender is not in receipt of written evidence that all Policies are
in full force and effect, Lender shall have the right, upon two (2) Business
Days’ written notice to Borrowers, to take such reasonable action as Lender
deems necessary to protect its interest in any of the Properties, including,
without limitation, the obtaining of such insurance coverage as Lender in its
sole discretion deems appropriate.  All
premiums incurred by Lender in connection with such action or in obtaining such
insurance and keeping it in effect shall be paid by Borrowers to Lender within
ten (10) days after demand and, until paid, shall be secured by the Mortgage
and shall bear interest at the Default Rate from the date of demand.

(g)                                 Notwithstanding
anything to the contrary set forth herein, proof of all property coverages
required under Section 6.1(a) hereof shall be on an Acord 28 Evidence of
Property Form (2003/10 version) or on such other binding form as is then
generally used or is otherwise reasonably acceptable to Lender.

(h)                                 Notwithstanding
anything to the contrary set forth in this Agreement or the other Loan
Documents, Lender agrees that by funding the Acquisition Loan on the Closing
Date, the existing Policies and coverages covering the Properties as of the
Closing Date are satisfactory to Lender in all respects and are deemed to fully
comply with the requirements of this Agreement and the other Loan Documents as
of the Closing Date; provided, however, that the foregoing shall
not prevent Lender from insisting upon strict compliance with the requirements
of this Section 6.1 with respect to any future Policies or coverage.

Section
6.2                                   Casualty.  If any Property shall be damaged or
destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrowers shall give prompt notice of such
damage to Lender and shall promptly commence and diligently prosecute the
completion of the Restoration so that such Property resembles, as nearly as
possible, the condition such Property was in immediately prior to such
Casualty, with such alterations as may be reasonably approved by Lender (to the
extent such alterations are of a type that would require Lender’s approval
under Section 5.1.21 hereof) and otherwise in accordance with Section
6.4 hereof, provided, that if (A) Lender is obligated to make Net
Proceeds available to Borrowers for purposes of Restoration in accordance with Section
6.4 hereof, (B) Lender has received such Net Proceeds, and (C) Lender has
not made such Net Proceeds available to Borrowers, then Borrowers shall not be
required to 

 189
 

repair and restore such Property unless and until such
Net Proceeds are made available to Borrowers. 
It is expressly understood, however, that Borrowers shall not be
obligated to restore such Property to the precise condition of such Property prior
to such Casualty provided such Property is restored, to the extent practicable,
to be of at least equal value and of substantially the same character as prior
to the Casualty.  Borrowers shall pay all
costs of such Restoration whether or not such costs are covered by
insurance.  Lender may, but shall not be
obligated to make proof of loss if not made promptly by any Borrower.  In addition, Lender may participate in any
settlement discussions with any insurance companies (and shall approve any
final settlement) with respect to any Casualty in which the Net Proceeds or the
costs of completing the Restoration are equal to or greater than the
Restoration Threshold and the applicable Borrower shall deliver to Lender all
instruments reasonably required by Lender to permit such participation.  In the event of a Casualty in which the Net
Proceeds and the costs of completing the Restoration are each less than the
Restoration Threshold, Borrowers may settle and adjust such claim without
Lender’s consent or participation.

Section
6.3                                   Condemnation.  Borrowers shall promptly give Lender notice
of the actual or threatened commencement of any proceeding for the Condemnation
of any Property or any part thereof and shall deliver to Lender copies of any
and all papers served in connection with such proceedings.  Lender may participate in any such
proceedings with respect to any Condemnation in which Borrowers’ reasonable
estimate (based on any statement of value submitted to the condemning authority
or any other reasonable evidence in Lender’s reasonable judgment) of the Net
Proceeds or the costs of completing the Restoration are equal to or greater
than the Restoration Threshold, and the applicable Borrower shall from time to
time deliver to Lender all instruments reasonably requested by it to permit
such participation.  Borrowers shall, at
their expense, diligently prosecute any such proceedings, and shall, to the
extent required hereunder, consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings.  Notwithstanding any taking by any public or
quasi-public authority through Condemnation or otherwise (including, but not
limited to, any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrowers shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the Debt
shall not be reduced until any Award shall have been actually received and
applied by Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt. 
Lender shall not be limited to the interest paid on the Award by the
condemning authority but shall be entitled to receive out of the Award interest
at the rate or rates provided herein or in the Note.  If any Property or any portion thereof is
taken by a condemning authority, Borrowers shall promptly commence and
diligently prosecute the Restoration of the applicable Property and otherwise
comply with the provisions of Section 6.4 hereof, provided, that
if (A) Lender is obligated to make Net Proceeds available to Borrowers for
purposes of Restoration in accordance with Section 6.4 hereof, (B)
Lender has received such Net Proceeds, and (C) Lender has not made such Net
Proceeds available to Borrowers, then Borrowers shall not be obligated to
repair and restore such Property unless and until such Net Proceeds are made
available to Borrowers.  If such Property
is sold, through foreclosure or otherwise, prior to the receipt by Lender of
the Award, Lender shall have the right, whether or not a deficiency judgment on
the Note shall have been sought, recovered or denied, to receive the Award, or
a portion thereof sufficient to pay the Debt.

 190

Section
6.4                                   Restoration.  The following provisions shall apply in
connection with the Restoration of any Property:

(a)                                  If
the Net Proceeds shall be less than the Restoration Threshold and the costs of
completing the Restoration shall be less than the Restoration Threshold,
provided that no Event of Default shall have occurred and be continuing, the
Net Proceeds will be disbursed by Lender to the Borrower owning such Property
upon receipt and Borrowers shall diligently proceed to Restore the applicable
Property.

(b)                                 If
(i) the Net Proceeds shall be equal to or greater than the Restoration
Threshold and/or the costs of completing the Restoration shall be equal to or
greater than the Restoration Threshold, but (ii) the Net Proceeds shall be less
than the Restoration Value Threshold, provided that no Event of Default shall
have occurred and be continuing, the Net Proceeds will be held by Lender and
Lender shall make the Net Proceeds available for the Restoration of the
applicable Property in accordance with the provisions of this Section 6.4,
provided that the conditions set forth in Section 6.4(c)(i)(A), (B),
(D), (F), (G) and (H) hereof are met.

(c)                                  If
(i) the Net Proceeds shall be equal to or greater than the Restoration
Threshold and/or the costs of completing the Restoration shall be equal to or
greater than the Restoration Threshold, and (ii) the Net Proceeds shall equal
or exceed the Restoration Value Threshold, the Net Proceeds shall be held by
Lender and Lender shall have the right, in its sole discretion, to (A) apply
the Net Proceeds to the Debt in accordance with the provisions of Section
6.4(d) hereof, or (B) make the Net Proceeds available for the Restoration
of such Property in accordance with the provisions of this Section 6.4.  The term “Net
Proceeds” for purposes of this Section 6.4 shall mean: (i)
the net amount of all insurance proceeds received by Lender pursuant to Sections
6.1(a)(i), (iv), (vi), (ix) and (x) hereof as a result of such
damage or destruction, after deduction of Lender’s reasonable costs and
expenses (including, but not limited to, reasonable counsel fees), if any, in
collecting same (“Insurance Proceeds”),
or (ii) the net amount of the Award, after deduction of Lender’s reasonable
costs and expenses (including, but not limited to, reasonable counsel fees), if
any, in collecting same (“Condemnation
Proceeds”), whichever the case may be.

(i)                                     Subject to the
provisions of Section 6.4(a) above, the Net Proceeds shall be made
available to the applicable Borrower for Restoration of its Property upon the
approval of Lender in its reasonable discretion that the following conditions
are met:

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

(B)                                (1) in the event the
Net Proceeds are Insurance Proceeds, less than thirty percent (30%) of the
total floor area of the Improvements on such Property has been damaged,
destroyed or rendered unusable as a result of such Casualty, or (2) in the
event the Net Proceeds are Condemnation Proceeds, less than fifteen percent
(15%) of the land constituting such Property is taken, and such land is located
along the 

 191
 

perimeter or periphery of such Property, and no portion of the
Improvements is located on such land;

(C)                                Intentionally Omitted;

(D)                               the applicable Borrower
shall commence the Restoration as soon as reasonably practicable (but in no
event later than sixty (60) days after such Casualty or Condemnation, whichever
the case may be, occurs, (subject to Excusable Delay and delays in the claims
adjustments process outside the control of Borrowers)) and shall diligently
pursue the same to satisfactory completion;

(E)                                 Lender shall be
satisfied that any operating deficits, including all scheduled payments of
principal and interest under the Note, which will be incurred with respect to
such Property as a result of the occurrence of any such Casualty or
Condemnation, whichever the case may be, will be covered out of the aggregate
amount of (1) the Net Proceeds, (2) the insurance coverage referred to in Section
6.1(a)(iii) hereof, if applicable, and (3) other funds of Borrowers;

(F)                                 Lender shall be
satisfied that the Restoration will be completed on or before the earliest to
occur of (1) three (3) months prior to the Maturity Date (as may be extended),
(2) with respect to the Hotel/Casino Property, the earliest date required for
such completion under the terms of the Gaming Sublease, (3) such time as may be
required under applicable Legal Requirements, or (4) the expiration of the
insured period provided by the insurance coverage referred to in Section
6.1(a)(iii) hereof;

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

(H)                               the Restoration shall be
done and completed by the applicable Borrower in an expeditious and diligent
fashion and in compliance with all applicable Legal Requirements;

(I)                                    such Casualty or
Condemnation, as applicable, does not result in the loss of access to any
portion of such Property or the related Improvements;

(J)                                   Lender shall be
satisfied that the Debt Yield, after giving effect to the Restoration, shall be
equal to or greater than the Debt Yield immediately prior to such Casualty or
Condemnation, as applicable, calculated based on the most recent financial
statements delivered to Lender pursuant to Section 5.1.11 hereof prior
to such Casualty or Condemnation;

 192
 

(K)                               Lender shall be
satisfied that the Loan-to-Value Ratio, after giving effect to the Restoration,
shall be equal to or less than the Loan-to-Value-Ratio immediately prior to
such Casualty or Condemnation;

(L)                                 the applicable
Borrower shall deliver, or cause to be delivered, to Lender a signed detailed
budget approved in writing by such Borrower’s architect or engineer stating the
entire cost of completing the Restoration of such Property, which budget shall
be reasonably acceptable to Lender; and

(M)                            the Net Proceeds together
with any cash or cash equivalent deposited by Borrowers with Lender are
sufficient in Lender’s reasonable discretion to cover the cost of the
Restoration of such Property.

(ii)                                  In the event the Net
Proceeds are equal to or exceed the Restoration Threshold, the Net Proceeds
shall be paid directly to Lender and shall be held by Lender in an
interest-bearing account and, until disbursed in accordance with the provisions
of this Section 6.4(c), shall constitute additional security for the
Debt and the Other Obligations.  The Net
Proceeds shall be disbursed by Lender to, or as directed by, the applicable
Borrower from time to time during the course of the Restoration, upon receipt
of evidence reasonably satisfactory to Lender that (A) all materials installed
and work and labor performed (except to the extent that they are to be paid for
out of the requested disbursement) in connection with the Restoration have been
paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic’s or materialman’s liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the affected Property
arising out of the Restoration which have not either been fully bonded to the
satisfaction of Lender and discharged of record or in the alternative fully
insured to the satisfaction of Lender by the Title Company, except for any Lien
then being contested pursuant to, and in accordance with, Section 3.6(b) of the
Mortgage.

(iii)                               In the event the Net
Proceeds are equal to or exceed the Restoration Threshold, all plans and
specifications required in connection with the Restoration shall be subject to
prior reasonable approval by Lender and by an independent consulting engineer
selected by Lender (the “Casualty Consultant”).  Lender shall have the use of the plans and
specifications and all permits, licenses and approvals required or obtained in
connection with the Restoration.  The
identity of the contractors, subcontractors and materialmen engaged in the
Restoration the cost of which is greater than $750,000, as well as the
contracts under which they have been engaged, shall be subject to prior review
and reasonable acceptance by Lender and the Casualty Consultant.  All out-of-pocket costs and expenses incurred
by Lender in connection with making the Net Proceeds available for the
Restoration, including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant’s fees, shall be paid by Borrowers.

 193
 

(iv)                              In the event the Net
Proceeds are equal to or exceed the Restoration Threshold, in no event shall
Lender be obligated to make disbursements of the Net Proceeds in excess of an
amount equal to the costs actually incurred from time to time for work in place
as part of the Restoration, as certified by the Casualty Consultant, minus the
Casualty Retainage.  The term “Casualty Retainage” shall mean, as to each
contractor, subcontractor or materialman engaged in the Restoration,  an amount equal to ten percent (10%) of the
costs actually incurred for work in place as part of the Restoration, as
certified by the Casualty Consultant, until the Restoration has been
completed.  The Casualty Retainage shall
be reduced to five percent (5%) of the costs incurred for work upon receipt by
Lender of reasonably satisfactory evidence that fifty percent (50%) of the
Restoration has been completed.  The
Casualty Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Section 6.4(c), be less than the amount
actually held back by the applicable Borrower from contractors, subcontractors
and materialmen engaged in the Restoration. 
The Casualty Retainage shall not be released until the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Section 6.4(c) and that all
approvals necessary to permit the re-occupancy and use of the affected Property
have been obtained from all appropriate Governmental Authorities and
quasi-governmental authorities, and Lender receives evidence reasonably
satisfactory to Lender that the costs of the Restoration have been paid in full
or will be paid in full out of the Casualty Retainage; provided, however,
that Lender will release the portion of the Casualty Retainage being held with
respect to any contractor, subcontractor or materialman engaged in the
Restoration as of the date upon which the Casualty Consultant certifies to
Lender that such contractor, subcontractor or materialman has satisfactorily
completed all work and has supplied all materials in accordance with the
provisions of such contractor’s, subcontractor’s or materialman’s contract,
such contractor, subcontractor or materialman delivers the lien waivers (if the
value of the applicable contract exceeds $175,000.00) and evidence of payment
in full of all sums due to such contractor, subcontractor or materialman as may
be reasonably requested by Lender or by the Title Company, and Lender receives
an endorsement to the applicable Title Insurance Policy insuring the continued
priority of the Lien of the Mortgage and evidence of payment of any premium
payable for such endorsement.  If required
by Lender, the release of any such portion of the Casualty Retainage shall be
approved by the surety company, if any, which has issued a payment or
performance bond with respect to such contractor, subcontractor or materialman.

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

(vi)                              In the event the Net
Proceeds are equal to or exceed the Restoration Threshold, if at any time the
Net Proceeds or the undisbursed balance thereof shall not, in the good faith
opinion of Lender in consultation with the Casualty Consultant, be sufficient
to pay in full the balance of the costs which are estimated by the Casualty
Consultant to be incurred in connection with the 

 194
 

completion of the Restoration, Borrowers shall deposit the deficiency
(the “Net Proceeds Deficiency”)
with Lender before any further disbursement of the Net Proceeds shall be
made.  The Net Proceeds Deficiency
deposited with Lender shall be held by Lender and shall be disbursed for costs
actually incurred in connection with the Restoration on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Section 6.4(c) shall constitute additional security for
the Debt and the Other Obligations.

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

(d)                                 All
Net Proceeds not required (i) to be made available for the Restoration or (ii)
to be returned to a Borrower as excess Net Proceeds pursuant to Section
6.4(c)(vii) hereof, may be retained and applied by Lender in accordance
with Section 2.4.2 hereof toward the payment of the Debt whether or not
then due and payable, in such order, priority and proportions as Lender in its
sole discretion shall deem proper, or, at the discretion of Lender, the same
may be paid, either in whole or in part, to Borrowers for such purposes as
Lender shall approve, in its reasonable discretion.  Notwithstanding anything to the contrary
contained herein, if Lender is obligated under this Agreement to disburse the
Net Proceeds to Borrowers for Restoration, and if Lender fails to do so, then
any obligation of Borrowers to restore or repair such Property under the Loan
Documents shall not apply until such Net Proceeds have been disbursed to
Borrowers.

(e)                                  In
the event of foreclosure of the Mortgage with respect to any Property, or other
transfer of title to any Property in extinguishment in whole or in part of the
Debt, all right, title and interest of Borrowers in and to the Policies that
are not blanket Policies then in force concerning such Property and all
proceeds payable thereunder shall thereupon vest in the purchaser at such
foreclosure or Lender or other transferee in the event of such other transfer
of title.

ARTICLE
VII.

RESERVE FUNDS

Section
7.1                                   Required
Repair Fund.

7.1.1                     Deposits.  Borrowers shall perform, or cause to be
performed, the maintenance, repairs and environmental remediation at the
Properties as more particularly set forth on Schedule XII hereto (such
maintenance, repairs and environmental remediation hereinafter collectively
referred to as the “Required Repairs”). 
Borrowers shall complete the Required Repairs on or before the required
deadline for each repair as set forth on Schedule XII subject to
Excusable Delay.  It shall be an Event of
Default under this Agreement if, after notice 

 195
 

from Lender and a thirty (30) day cure period
has elapsed or such longer period as is reasonably necessary to effectuate such
cure provided that Borrowers are diligently proceeding to cure, (a) any
Borrower does not complete the Required Repairs at its Property by the required
deadline for each repair as set forth on Schedule XII subject to
Excusable Delay, or (b) the applicable Borrower does not satisfy each condition
contained in Section 7.1.2 hereof. 
Upon the occurrence and during the continuance of such an Event of
Default, Lender, at its option, may withdraw all amounts in the Required Repair
Fund from the Required Repair Account and Lender may apply such funds either to
completion of the Required Repairs at one or more of the Properties or toward
payment of the Debt in such order, proportion and priority as Lender may
determine in its sole discretion.  Lender’s
right to withdraw and apply the Required Repair Fund shall be in addition to
all other rights and remedies provided to Lender under this Agreement and the
other Loan Documents.  On the Closing
Date, Borrowers shall deposit with Lender the amount for each Property set
forth on such Schedule XII hereto to perform the Required Repairs for
such Property multiplied by one hundred fifteen percent (115%), the aggregate
amount of which for all of the Properties is Seventy-Eight Thousand and 00/100
($78,000.00), which amounts so deposited with Lender shall be held by Lender in
accordance with Section 7.8 hereof. 
Such amounts so deposited shall hereinafter be referred to as Borrowers’
“Required Repair Fund” and the
account in which such amounts are held shall hereinafter be referred to as
Borrowers’ “Required Repair Account”.

7.1.2                     Release of
Required Repair Fund.

(a)                                  Lender
shall disburse to Borrowers portions of the Required Repair Fund from the
Required Repair Account from time to time, but not more frequently than once in
any thirty (30) day period, not later than ten (10) Business Days after
Borrowers have submitted evidence of satisfaction by Borrowers of each of the
following conditions with respect to each disbursement: (i) Borrowers shall
submit a written request for payment to Lender at least ten (10) Business Days
prior to the date on which Borrowers request such payment be made, which request
shall specify the Required Repairs to be paid on a Property-by-Property basis;
(ii) on the date such request is received by Lender and on the date such
payment is to be made, no Event of Default shall exist and remain uncured;
(iii) Lender shall have received an Officer’s Certificate and/or a contractor’s
or architect’s certificate (together with an Officer’s Certificate, the “Certificate”) which collectively shall (A)
state that all Required Repairs to be funded by the requested disbursement have
been completed in a good and workmanlike manner in all material respects and in
accordance with all Legal Requirements in all material respects, such
Certificate to be accompanied by a copy of any license, permit or other
approval by any Governmental Authority necessary to permit the commencement
and/or completion of the Required Repairs, if applicable, (B) identify each
Person that supplied materials or labor in connection with the Required Repairs
to be funded by the requested disbursement, (C) state that each such Person has
been paid in full or will be paid in full upon such disbursement for work
completed and/or materials furnished to date, such Certificate to be
accompanied by lien waivers with respect to contracts the value of which
exceeds $175,000.00 or other evidence of payment reasonably satisfactory to
Lender, (D) state that the Required Repairs to be funded have not been the
subject of a previous disbursement, and (E) state that all previous
disbursements from the Required Repairs Fund have been used to pay the
previously identified Required Repairs; and (iv) to the extent requested by
Lender, a title search indicating that the applicable Property is free from all
liens, claims and other encumbrances not previously approved by Lender.  Lender shall not be 

 196
 

required to make disbursements from the
Required Repair Account unless such requested disbursement is in an amount
greater than Five Thousand Dollars ($5,000) (or a lesser amount if the total
amount in the Required Repair Account is less than Five Thousand Dollars
($5,000), in which case only one disbursement of the amount remaining in the
account shall be made) and such disbursement shall be made only upon
satisfaction of each condition contained in this Section 7.1.2.

(b)                                 Nothing
in this Section 7.1.2 shall (i) make Lender responsible for performing
or completing any Required Repairs; (ii) require Lender to expend funds in
addition to the Required Repairs Fund to complete any Required Repairs; (iii)
obligate Lender to proceed with any Required Repairs; or (iv) obligate Lender
to demand from any Borrower additional sums to complete any Required Repairs.

(c)                                  Each
Borrower shall permit Lender and Lender’s agents and representatives (including
Lender’s engineer, architect or inspector) or third parties to enter onto such
Borrower’s Property during normal business hours (subject to the rights of
tenants under their Leases) to inspect the progress of any Required Repairs and
all materials being used in connection therewith and to examine all plans and
shop drawings relating to such Required Repairs.  Each Borrower shall cause all contractors and
subcontractors to cooperate with Lender or Lender’s representatives or such
other Persons described above in connection with inspections described in this Section
7.1.2(c).

(d)                                 If
a disbursement will exceed $200,000.00, Lender may require an inspection of the
applicable Property at Borrowers’ expense prior to making a disbursement from
the Required Repairs Fund in order to verify completion of the Required Repairs
for which reimbursement is sought. 
Lender may require that such inspection be conducted by an appropriate
independent qualified professional selected by Lender and may require a
certificate of completion by an independent qualified professional architect
acceptable to Lender prior to any disbursement from the Required Repairs
Fund.  Borrowers shall pay the expense of
the inspection as required hereunder, whether such inspection is conducted by
Lender or by an independent qualified professional architect.

(e)                                  In
addition to any insurance required under the Loan Documents, Borrowers shall
provide or cause to be provided worker’s compensation insurance, builder’s
risk, and public liability insurance and other insurance to the extent required
under applicable law in connection with the Required Repairs.  All such policies shall be in form and amount
reasonably satisfactory to Lender.

7.1.3                     Balance in
Required Repair Account.  The
insufficiency of any balance in the Required Repair Account shall not relieve
any Borrower from its obligation to perform the Required Repairs in a good and
workmanlike manner and in accordance with all Legal Requirements.

7.1.4                     Remainder
of Required Repair Fund. 
Provided that no Event of Default shall have occurred and be continuing,
upon the completion of all Required Repairs any remaining portion of the
Required Repair Fund shall be released to Borrower.

 197
 

Section
7.2                                   Tax
and Insurance Escrow Fund.  On the
date hereof, Borrowers shall deposit with Lender $845,178.00 on account of the
Taxes next coming due and $790,438.00 on account of the Insurance Premiums next
coming due.  Additionally, Borrowers
shall pay to Lender on each Payment Date (a) one twelfth of the Taxes that
Lender estimates will be payable during the next ensuing twelve (12) months in
order to accumulate with Lender sufficient funds to pay all such Taxes at least
fifteen (15) days prior to their respective due dates, and (b) one twelfth of
the Insurance Premiums that Lender estimates will be payable for the renewal of
the coverage afforded by the Policies upon the expiration thereof in order to
accumulate with Lender sufficient funds to pay all such Insurance Premiums at
least fifteen (15) days prior to the expiration of the Policies (the foregoing
amount deposited with Lender on the date hereof and said amounts to be
deposited pursuant to clauses (a) and (b) above, being
hereinafter called the “Tax and Insurance Escrow
Fund”).  Lender will apply the
Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums
required to be made by Borrowers pursuant to Section 5.1.2 hereof and
under the Mortgage.  In making any
payment relating to the Tax and Insurance Escrow Fund, Lender may do so
according to any bill, statement or estimate procured from the appropriate
public office (with respect to Taxes) or insurer or agent (with respect to
Insurance Premiums), without inquiry into the accuracy of such bill, statement
or estimate or into the validity of any tax, assessment, sale, forfeiture, tax
lien or title or claim thereof.  If the
amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to Section 5.1.2 hereof, Lender
shall, in its sole discretion, return any excess to Borrowers or credit such
excess against future payments to be made to the Tax and Insurance Escrow
Fund.  To the extent sufficient amounts
have been deposited into the Tax and Insurance Fund with Lender in compliance
with this Section 7.2, it shall not be an Event of Default if the
Insurance Premiums and/or the Taxes are not paid due to Lender’s failure to
apply such amounts to the payment of the Insurance Premiums and the Taxes on
the respective dates on which each are due provided that Borrowers have not
impeded Lender’s attempt to pay such Insurance Premiums or Taxes.  Any amount remaining in the Tax and Insurance
Escrow Fund after the Debt has been paid in full shall be returned to
Borrowers.  In allocating such excess,
Lender may deal with the Person shown on the records of Lender to be the owner
of each of the Properties.  If at any
time Lender reasonably determines that the Tax and Insurance Escrow Fund is not
or will not be sufficient to pay Taxes and Insurance Premiums by the dates set
forth in clauses (a) and (b) above, Lender shall notify Borrowers
of such determination and Borrowers shall increase their monthly payments to
Lender by the amount that Lender reasonably estimates is sufficient to make up
the deficiency at least fifteen (15) days prior to the due date of the Taxes
and/or fifteen (15) days prior to expiration of the Policies, as the case may
be.

Section
7.3                                   Replacements
and Replacement Reserve.

7.3.1                     Replacement
Reserve Fund.  Borrowers shall
pay to Lender on each Payment Date an amount equal to three percent (3%) of the
Gross Income from Operations of the Hotel/Casino Property for the immediately
preceding calendar month, to be applied in accordance with this Agreement to
the costs of FF&E Expenditures and FF&E Expenditures Work required to
be made to the Hotel/Casino Property during the calendar year (collectively,
the “Replacements”).  Amounts so deposited shall hereinafter be
referred to as Borrowers’ “Replacement
Reserve Fund” and the account in which such amounts are held shall
hereinafter be referred to as Borrowers’ “Replacement
Reserve Account”.

 198
 

7.3.2                     Disbursements
from Replacement Reserve Account. 
So long as no Event of Default shall have occurred and be continuing,
Lender shall make disbursements from the Replacement Reserve Fund as requested
by Borrowers and reasonably approved by Lender, which approval shall not be
unreasonably conditioned, withheld or delayed, no more frequently than once in
any thirty (30) day period and of no less than Five Thousand Dollars ($5,000)
per disbursement (or a lesser amount if the total amount in the Replacement
Reserve Account at such time is less than Five Thousand Dollars ($5,000)), upon
delivery by Borrowers of Lender’s or Servicer’s standard form of draw request
specifying the Replacements to be paid for on a Property-by-Property basis and
accompanied by copies of paid invoices for or invoices to be paid with the
amounts requested and, if required by Lender for requests in excess of One
Hundred Seventy-Five Thousand Dollars ($175,000) for a single item, lien
waivers and releases from all parties furnishing materials and/or services in
connection with the requested payment. 
Lender may require an inspection of the applicable Property at Borrowers’
expense prior to making a monthly disbursement in order to verify completion of
replacements and repairs of items in excess of Two Hundred Thousand Dollars
($200,000) for which reimbursement is sought. 
Lender shall cause any disbursement from the Replacement Reserve Fund to
be made within five (5) Business Days after receipt of Borrowers’ request and all
required documentation provided that such request is reasonably approved by
Lender.  Notwithstanding the foregoing,
Lender’s approval of any disbursement from the Replacement Reserve Fund shall
not be required if the Replacements and the cost thereof for which such
disbursement is sought is set forth in the Approved Annual Budget then in
effect.

7.3.3                     Balance in
the Replacement Reserve Account. 
The insufficiency of any balance in the Replacement Reserve Account
shall not relieve Borrowers from their obligation to fulfill all preservation
and maintenance covenants in the Loan Documents.

Section
7.4                                   Interest
Reserve Fund.

7.4.1                     Deposits
to Interest Reserve Account.  On
the Closing Date, Borrowers shall deposit with Lender the amount of
$45,000,000.00 to be held by Lender as additional collateral for the Loan.  Additionally, additional amounts may be
deposited with Lender from time to time (a) pursuant to Section(s)
2.6.2(b)(ix), 2.6.2(b)(xi)(A), 2.6.2(c)(ix), 2.6.2(c)(xi)(A), 2.7.1(a)(v),
2.7.1(b)(v), 2.7.2(a)(v), 2.7.2(b)(v) and/or 3.22(a)(iv)
hereof, and/or (b) otherwise at Borrowers’ election in their sole discretion
from additional equity or excess cash flow of any Borrower.  All amounts so deposited with Lender shall
hereinafter be referred to as Borrowers’ “Interest
Reserve Fund” and the account in which such amounts are held shall
hereinafter be referred to as Borrowers’ “Interest
Reserve Account.”

7.4.2                     Withdrawals
from Interest Reserve Account. 
Provided that no Event of Default shall have occurred and be continuing,
if on any Payment Date the funds available in the Cash Management Account are
insufficient to pay the Monthly Interest Payment due on such Payment Date after
satisfying all items with a higher priority pursuant to Section 2.6.2(b)
hereof, Lender shall automatically, without the necessity of notifying, or
obtaining the approval of, any Borrower or any other Person, and without any
Borrower’s request, apply a portion of the Interest Reserve Fund then on
deposit to the payment of the Monthly Interest Payment or the portion thereof
for which funds in the Cash Management Account are insufficient as aforesaid,
as applicable, so long as following such disbursement the Interest Reserve
Account shall have a 

 199
 

balance at least equal to the Minimum Balance,
and the Interest Reserve Fund shall be reduced by an equal amount.  Borrowers expressly acknowledge and agree
that no disbursements from the Interest Reserve Fund shall be made at any time
during which an Event of Default has occurred and is continuing and/or at any
time to the extent that such disbursement would cause the balance of the
Interest Reserve Fund to be less than the Minimum Balance.  Notwithstanding the foregoing, Borrowers
expressly acknowledge and agree that in the event that on any day on which a
Monthly Interest Payment is due and payable (a) an Event of Default has
occurred and is continuing, Borrowers shall remain liable for the payment of
all Monthly Interest Payments as and when due, or (b) the amount of such
Monthly Interest Payment exceeds the Interest Reserve Fund then on deposit (not
including the Minimum Balance), Borrowers shall remain liable for the
difference between such Monthly Interest Payment and the Interest Reserve Fund
then on deposit (not including the Minimum Balance), such difference to be due
and payable at the time the Monthly Interest Payment is due and payable.  Lender acknowledges that if Lender is
obligated to apply Interest Reserve Funds to the payment of the Monthly Interest
Payment pursuant to this Section 7.4.2, then the failure of Borrowers to
pay such Monthly Interest Payment to the extent of such Interest Reserve Fund
(not including the Minimum Balance) shall not be deemed an Event of Default.

7.4.3                     Minimum
Balance in Interest Reserve Account. 
Without limiting any other provisions of this Agreement, at all times
during the term of the Loan, Borrowers shall maintain a minimum balance in the
Interest Reserve Account equal to the Minimum Balance, calculated as of each
Payment Date.

Section
7.5                                   Initial
Renovation Reserve Fund.

7.5.1                     Deposit to
Initial Renovation Reserve Fund. 
On the Closing Date, Borrowers shall deposit with Lender the amount of
$35,000,000.00 to be held by Lender as additional collateral for the Loan for
the payment of those initial renovations to the Properties identified on Schedule
XIII attached hereto and made a part hereof, as the same may be modified
from time to time with Lender’s reasonable approval (the “Initial Renovations”).  All such amounts so deposited shall
hereinafter be referred to as the “Initial
Renovation Reserve Fund” and the account in which such amounts are
held shall hereinafter be referred to as the “Initial
Renovation Reserve Account.”

7.5.2                     Withdrawals
from Initial Renovation Reserve Fund.

(a)                                  Lender
shall make disbursements from the Initial Renovation Reserve Fund for Initial
Renovation Costs incurred by any Borrower upon satisfaction by Borrowers of
each of the following conditions with respect to each such disbursement:

(i)                                     such
disbursement is for Initial Renovation Costs (A) contemplated by the Initial
Renovations Budget, (B) set forth in the Approved Annual Budget then in effect,
or (C) reasonably approved by Lender;

(ii)                                  prior
to commencing any Initial Renovations that consist of constructing or
demolishing any improvements, (A) Lender shall have approved, which approval
shall not be unreasonably withheld, (1) the architect and the architect’s
contract, 

 200
 

if any, relating thereto, (2) the construction manager and the
construction management agreement, if any, relating thereto, (3) the general
contractor and the general contract, if any, relating thereto, (4) all Major
Contracts and Major Contractors (except relating to such Initial Renovations
rather than the Project), if any, relating thereto, (5) the plans and
specifications for such Initial Renovations, if any, and (6) a construction
progress schedule reflecting the anticipated dates of completion of specified
subcategories of the Initial Renovations as set forth in the Initial
Renovations Budget; and (B) Borrowers shall have obtained Payment and
Performance Bonds covering each Major Contractor performing such Initial
Renovations; provided, however, that Lender shall, at Borrowers’
request, review the financial statements of any such Major Contractor and reasonably
consider a request by Borrowers either (A) not to require a Payment and
Performance Bond with respect to such Major Contractor, or (B) to accept, in
lieu of a Payment and Performance Bond with respect to such Major Contractor, a
“Subguard Policy” issued by Zurich North America, together with a financial
interest endorsement, all in form and content reasonably acceptable to Lender
and subject to limits acceptable to Lender in its sole and absolute discretion;

(iii)                               Borrowers shall submit
Lender’s or Servicer’s standard form of draw request for payment to Lender at
least ten (10) Business Days prior to the date on which Borrowers request such
payment be made, which request shall specify the Initial Renovation Costs to be
paid on a Property-by-Property basis and shall be accompanied by copies of
invoices for the amounts requested;

(iv)                              on
the date such request is received by Lender and on the date such payment is to
be made, no Event of Default shall exist and remain uncured;

(v)                                 all
representations and warranties made by Borrowers and/or Guarantors in the Loan
Documents or otherwise made by or on behalf of Borrowers and/or Guarantors in
connection therewith or after the date thereof shall have been true and correct
in all material respects on the date on which made and shall continue to be
true and correct in all material respects on the date of such disbursement
(except to the extent of changes in circumstances or conditions which are not
otherwise prohibited by this Agreement);

(vi)                              Lender
shall have received:

(1)                                  an
Officer’s Certificate (A) containing a description of the Initial Renovation
Costs to be funded by such disbursement, (B) stating that all Initial
Renovation Costs to be funded by the requested disbursement have been completed
in a good and workmanlike manner and in accordance in all material respects
with all applicable Legal Requirements, (C) identifying each Person that
supplied materials or labor in connection with the Initial Renovation Costs to
be funded by the requested disbursement, (D) stating that each such Person has
been paid in full or will be paid in full upon such disbursement, (E) stating
that the Initial Renovation Costs to be funded have not been the subject of a
previous disbursement, (F) stating that all previous disbursements of Initial
Renovation Reserve Funds have been used to pay or reimburse Borrowers for the
previously identified Initial Renovation Costs, and (G) 

 201
 

stating that, as of the
date of such Officer’s Certificate, no Event of Default has occurred and is
continuing and all representations and warranties made by Borrowers and/or
Guarantors in the Loan Documents or otherwise made by or on behalf of Borrowers
and/or Guarantors in connection therewith or after the date thereof were true
and correct in all material respects on the date on which made and continue to
be true and correct in all material respects on the date of such Officer’s
Certificate (except to the extent of changes in circumstances or conditions
which are not otherwise prohibited by this Agreement);

(2)                                  a
copy of any license, permit or other approval by any Governmental Authority
necessary to permit the commencement and/or completion of the Initial
Renovations to be funded or reimbursed by the requested disbursement and not
previously delivered to Lender;

(3)                                  if
required by Lender for requests in excess of One Hundred Seventy-Five Thousand
Dollars ($175,000.00) for a single item, lien waivers or other evidence of
payment satisfactory to Lender and releases from all parties furnishing
materials and/or services in connection with the requested payment;

(4)                                  such
other evidence as Lender shall reasonably request to demonstrate that the
Initial Renovations to be funded by the requested disbursement have been
completed;

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

(6)                                  at
Borrowers’ expense, a search of the public records that, subject to Section
3.11 hereof and the Permitted Encumbrances, discloses no conditional sales
contracts, chattel mortgages, leases of personalty, financing statements or
title retention agreements which affect any of the Properties; and

(7)                                  Lender
shall have received evidence reasonably satisfactory to Lender that Borrowers
have obtained all Policies required by Section 6.1 hereof in connection
with the construction of the Initial Renovations, to the extent not previously
delivered to Lender;

(vii)                           Construction Consultant
shall have reasonably determined that, following the making of the requested
disbursement, there shall be sufficient 

 202
 

sums remaining in the Initial Renovation Reserve Fund to complete all
of the Initial Renovations, it being understood and agreed by Borrowers that,
in the event that Construction Consultant shall reasonably determine that there
are not sufficient sums remaining in the Initial Renovation Reserve Fund to
complete all of the Initial Renovations in accordance with the Initial
Renovations Budget (any such insufficiency, an “Initial
Renovations Shortfall”), Lender shall not make any further
disbursements from the Initial Renovations Reserve Fund until Borrowers have
done either one or a combination of the following in an aggregate amount equal
to such Initial Renovations Shortfall: (A) delivered to Lender evidence
satisfactory to Lender in its reasonable discretion that Borrowers or one or
more Affiliates thereof have previously expended cash to satisfy Initial Renovation
Costs included on the Initial Renovations Budget in an amount at least equal to
such Initial Renovations Shortfall, and/or (B) delivered to Lender for deposit
in the Initial Renovations Reserve Account an amount equal to such Initial
Renovations Shortfall, which amount shall thereafter constitute a portion of
the Initial Renovations Reserve Fund for all purposes under this Agreement;

(viii)                        Construction Consultant shall
have reasonably approved the requested disbursement, it being expressly agreed
by Lender that Lender shall diligently pursue obtaining Construction Consultant’s
response within a commercially reasonable time period following any such
request which includes all the required items as set forth herein; and

(ix)                                Borrowers
shall retain Retainage with respect to each contract or subcontract relating to
the Initial Renovations as provided herein with respect to the Project.

Lender shall make disbursements as requested by
Borrowers not more frequently than once in any thirty (30) day period and in a
minimum amount of no less than five thousand dollars ($5,000.00) per
disbursement (or a lesser amount if the total amount in the Initial Renovation
Reserve Account is less than Five Thousand Dollars ($5,000), in which case only
one disbursement of the amount remaining in the account shall be made);

(b)                                 Nothing
in this Section 7.5.2 shall (i) make Lender responsible for performing
or completing any Initial Renovations; (ii) require Lender to expend funds in
addition to the Initial Renovation Reserve Fund to complete any Initial
Renovations; (iii) obligate Lender to proceed with any Initial Renovations; or
(iv) obligate Lender to demand from any Borrower additional sums to complete
any Initial Renovations.

(c)                                  Each
Borrower shall permit Lender and Lender’s agents and representatives (including
Lender’s engineer, architect or inspector) or third parties to enter onto such
Borrower’s Property during normal business hours (subject to the rights of
tenants under their Leases) to inspect the progress of any Initial Renovations
and all materials being used in connection therewith and to examine all plans
and shop drawings relating to such Initial Renovations.  Each Borrower shall cause all contractors and
subcontractors to cooperate with Lender or Lender’s representatives or such
other Persons described above in connection with inspections described in this Section
7.5.2(c).

 203
 

(d)                                 If
a requested disbursement will exceed $200,000.00, Lender may require an
inspection of the applicable Property at Borrowers’ expense prior to making a
disbursement from the Initial Renovation Reserve Fund in order to verify
completion of the Initial Renovations for which reimbursement is sought.  Lender may require that such inspection be
conducted by an appropriate independent qualified professional selected by
Lender and may require a certificate of completion by an independent qualified
professional architect acceptable to Lender prior to the disbursement from the
Initial Renovation Reserve Fund. 
Borrowers shall pay the expense of the inspection as required hereunder,
whether such inspection is conducted by Lender or by an independent qualified
professional architect.

(e)                                  In
addition to any insurance required under the Loan Documents, Borrowers shall
provide or cause to be provided worker’s compensation insurance, builder’s
risk, and public liability insurance and other insurance to the extent required
under applicable law in connection with any Initial Renovations.  All such policies shall be in form and amount
reasonably satisfactory to Lender.

7.5.3                     Balance in
the Initial Renovation Reserve Account. 
The insufficiency of any balance in the Initial Renovation Reserve
Account shall not relieve Borrowers from their obligation to fulfill all
preservation and maintenance covenants in the Loan Documents.

Section
7.6                                   General
Reserve Fund.

7.6.1                     Deposits
to General Reserve Account.  From
time to time during the term of the Loan, pursuant to Sections
2.6.2(b)(xi)(B), 2.6.2(c)(xi)(B) and/or 2.4.3(g) hereof,
certain amounts may be deposited with Lender for the purpose of establishing a
general reserve fund for the purposes described in this Section 7.6.  All amounts so deposited with Lender shall
hereinafter be referred to as the “General
Reserve Fund” and the account in which such amount is held shall
hereinafter be referred to as the “General
Reserve Account.”

7.6.2                     Withdrawals
from General Reserve Account. 
Provided that no Event of Default shall have occurred and be continuing,
Borrower shall have the right from time to time to request a disbursement of
funds from the General Reserve Account for the following purposes: (a) for the
payment of Operating Expenses either reflected in the Approved Annual Budget
then in effect or otherwise reasonably approved by Lender, (b) for the payment
to Borrowers, HRHI and/or HR Holdings for the purposes of permitting such
parties to pay federal and state income tax obligations with respect to income
allocated to them from the Properties and/or the IP (but only for so long as
any particular Property or portion thereof or any particular portion of the IP
remains as security for the Loan); provided, however, that in no
event shall the aggregate amount of the General Reserve Fund used for the
purposes of this clause (b) during the entire term of the Loan exceed
three million dollars ($3,000,000.00), (c) for the payment of cost over-runs in
connection with the construction of the Project, as reasonably approved by
Lender to the extent required under Section 3.15 hereof, and/or (d) as
provided in Section 3.22(a)(iv) hereof; provided, however,
that Lender shall make disbursements as requested by Borrowers not more
frequently than once in any thirty (30) day period and in a minimum amount of
no less than five thousand dollars ($5,000.00) per disbursement (or a lesser
amount if the total amount in the General Reserve Account is less than Five
Thousand Dollars ($5,000), in which case only one disbursement of the amount
remaining in the account shall be made).

 204
 

7.6.3                     Release of
General Reserve Fund.  In the
event that, as of any Financial Determination Date, the Excess Cash Termination
Conditions shall have been satisfied, the balance of the General Reserve Fund
shall be released to Borrowers and Borrowers shall have no further obligation
to deposit with Lender any general reserve amount for the remaining term of the
Loan, as the same may be extended in accordance with Section 2.7 hereof.

Section
7.7                                   Construction
Loan Reserve Fund.

7.7.1                     Deposit to
Construction Loan Reserve Fund. 
Pursuant to Section 3.1(d) hereof, the unfunded portion of the
Construction Loan as of the Second Anniversary may be advanced and deposited
with Lender in an account which shall be referred to herein as the “Construction Loan Reserve Account.”

7.7.2                     Withdrawals
from Construction Loan Reserve Account.  The funds in the Construction Loan Reserve
Account shall be advanced as Construction Loan Advances subject to, and in
accordance with, the provisions of Article III hereof.

Section
7.8                                   Reserve
Funds, Generally.

(a)                                  Borrowers
hereby grant to Lender a first-priority perfected security interest in each of
the Reserve Funds held by Lender and any and all monies now or hereafter
deposited in each Reserve Fund as additional security for payment of the
Debt.  Until expended or applied in
accordance herewith, the Reserve Funds shall constitute additional security for
the Debt.  Upon the occurrence and during
the continuance of an Event of Default, Lender may, in addition to any and all
other rights and remedies available to Lender, apply any sums then present in
any or all of the Reserve Funds to the reduction of the Debt (in such order,
proportion and priority as Lender may determine in its sole discretion), until
the Debt is paid in full, with any amounts remaining being disbursed to
Borrowers.  The Reserve Funds shall not
constitute trust funds and may be commingled with other monies held by Lender.

(b)                                 Borrowers
shall not, without obtaining the prior consent of Lender, further pledge,
assign or grant any security interest in any Reserve Fund or the monies deposited
therein or permit any lien or encumbrance to attach thereto, or any levy to be
made thereon, or any UCC-1 Financing Statements, except those naming Lender as
the secured party, to be filed with respect thereto.

(c)                                  The
Reserve Funds shall be held in an Eligible Account in Permitted Investments
pursuant to the Cash Management Agreement. 
All interest or other earnings on a Reserve Fund (with the exception of
the Tax and Insurance Escrow Fund) shall be added to and become a part of such
Reserve Fund and shall be disbursed in the same manner as other monies
deposited in such Reserve Fund, except that all interest or other earnings on
the Tax and Insurance Escrow Fund shall be retained by Lender.  Borrowers shall have the right to direct
Lender to invest sums on deposit in the Eligible Account in Permitted
Investments provided (i) such investments are then regularly offered by Lender
for accounts of this size, category and type, (ii) such investments are
permitted by applicable Legal Requirements, (iii) the maturity date of the
Permitted Investment is not later than the date on which the applicable Reserve
Fund is required for payment of an obligation for which such Reserve Fund was
created, 

 205
 

and (iv) no Event of Default shall have
occurred and be continuing.  Borrowers
shall be responsible for payment of any federal, state or local income or other
tax applicable to the interest or income earned on the Reserve Funds (with the
exception of the Tax and Insurance Escrow Fund).  No other investments of the sums on deposit
in the Reserve Funds shall be permitted except as set forth in this Section
7.8.  Borrowers shall bear all
reasonable costs associated with the investment of the sums in the account in
Permitted Investments.  Such costs shall
be deducted from the income or earnings on such investment, if any, and to the
extent such income or earnings shall not be sufficient to pay such costs, such
costs shall be paid by Borrowers promptly on demand by Lender.  Lender shall have no liability for the rate
of return earned or losses incurred on the investment of the sums in Permitted
Investments.

(d)                                 Borrowers,
jointly and severally, shall indemnify Lender and hold Lender harmless from and
against any and all actions, suits, third party claims, demands, liabilities,
actual losses, actual damages (excluding lost profits, diminution in value and
other consequential damages), obligations and reasonable costs and expenses
(including litigation costs and reasonable attorneys’ fees and expenses)
arising from or in any way connected with the Reserve Funds held by Lender or
the performance of the obligations for which the Reserve Funds were
established, excluding matters arising from Lender’s or its agents’ fraud,
willful misconduct, illegal acts or gross negligence.  Borrowers shall assign to Lender all rights
and claims any Borrower may have against all Persons supplying labor, materials
or other services which are to be paid from or secured by the Reserve Funds; provided,
however, that Lender may not pursue any such right or claim unless an
Event of Default has occurred and remains uncured.

ARTICLE
VIII.

DEFAULTS

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

(i)                                     if (A) the Debt is
not paid in full on the Maturity Date, (B) any Monthly Interest Payment or any
required monthly deposit to any Reserve Fund is not paid in full on or before
the related Payment Date, or (C) any other portion of the Debt is not paid
within three (3) Business Days following notice to Borrowers that the same is
due and payable;

(ii)                                  if any of the Taxes
or Other Charges are not paid prior to the date upon which any interest or late
charges shall begin to accrue thereon, subject to Section 7.2 hereof;

(iii)                               if the Policies are not
kept in full force and effect;

(iv)                              if any Borrower Transfers
or otherwise encumbers any portion of any Property or any interest therein or
the IP or any portion thereof, or any direct or indirect interest in any
Transfer Restricted Party is Transferred, in each instance, in violation of the
provisions of this Agreement and not otherwise consented to by Lender;

 206
 

(v)                                 if any representation
or warranty made by any Borrower herein or in any other Loan Document, or in
any report, certificate, financial statement or other instrument, agreement or
document furnished to Lender by or on behalf of any Borrower or any Restricted
Party shall have been false or misleading in any material respect as of the
date the representation or warranty was made, provided, however,
if such representation or warranty is susceptible of being cured, and Lender
has not theretofore materially adversely relied thereon, Borrowers shall have
the right to cure such representation or warranty within ten (10) Business Days
of notice thereof;

(vi)                              if any Borrower, HRHI or
any Guarantor shall make an assignment for the benefit of any creditor (other
than Lender);

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

(viii)                        if any Borrower attempts to
assign its rights under this Agreement or any of the other Loan Documents or
any interest herein or therein in contravention of the Loan Documents;

(ix)                                if any Borrower
breaches any of its respective negative covenants contained in Section 5.2
hereof or any covenant contained in Section 4.1.30 or Section 5.1.11
hereof, provided, however, that, unless otherwise addressed in
any other clause of this Section 8.1(a), a breach of any covenant
contained in Section 4.1.30, Section 5.1.11 or Section 5.2
hereof shall not constitute an Event of Default if (A) such breach is
inadvertent and non-recurring, (B) if such breach is curable, Borrowers shall
promptly cure such breach within thirty (30) days after notice thereof from
Lender, and (C) with respect to a material breach of any material covenant
contained in Section 4.1.30 hereof, within fifteen (15) Business Days of
the request of Lender, Borrowers deliver to Lender an Additional Insolvency
Opinion, or a modification of the Insolvency Opinion, to the effect that such
breach shall not in any way impair, negate or amend the opinions rendered in
the Insolvency Opinion, which opinion or modification and the counsel
delivering such opinion or modification shall be acceptable to Lender in its
reasonable discretion;

(x)                                   with respect to any
term, covenant or provision set forth herein which specifically contains a
notice requirement or grace period, if any Borrower 

 207
 

shall be in default under such term, covenant or condition after the
giving of such notice or the expiration of such grace period;

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

(xii)                             if a material default by
any Borrower has occurred and continues beyond any applicable cure period under
any Management Agreement (or any Replacement Management Agreement) and as a
result of such default the Manager thereunder terminates or cancels such
Management Agreement (or any Replacement Management Agreement);

(xiii)                          if a material default by
Hotel/Casino Borrower has occurred and continues beyond any applicable cure
period under the Liquor Management Agreement (or any Replacement Liquor
Management Agreement) and as a result of such default the Liquor Manager
thereunder terminates or cancels such Liquor Management Agreement (or any
Replacement Liquor Management Agreement);

(xiv)                         if any Borrower fails to
comply in any material respect with the covenants as to Prescribed Laws set
forth in Section 5.1.1 hereof and such failure to comply continues after
ten (10) Business Days notice thereof;

(xv)                            except as otherwise
contemplated by the Loan Documents, if Hotel/Casino Borrower ceases to do business
as a hotel and casino at a standard at least equal to Comparable Hotel/Casinos,
including, without limitation, comparable food and beverage outlets and other
amenities, (other than temporary cessation in connection with any diligent
Restoration of the Hotel/Casino Property following a Casualty or Condemnation)
and such failure continues after thirty (30) days notice from Lender thereof; provided,
however, that if any such failure is susceptible of cure but cannot
reasonably be cured within such thirty (30) day period, and provided, further,
that Borrowers shall have commenced to cure such failure within such thirty
(30) day period and shall thereafter diligently and expeditiously proceed to
cure the same, such thirty (30) day period shall be extended for such time as
is reasonably necessary for Borrowers in the exercise of due diligence to cure
such Default, such additional period not to exceed sixty (60) days, subject to
Excusable Delay;

(xvi)                         if (A) there shall occur any
default by HRHI or Hotel/Casino Borrower under the HRHI Lease in the observance
or performance of any term, covenant or condition on its part to be observed or
performed and such failure shall continue beyond the expiration of all
applicable notice and cure periods under the HRHI Lease, (B) if, without Lender’s
prior written consent, the HRHI Lease shall be terminated, changed, modified or
amended, other than ministerial non-monetary amendments or modifications, or
(C) if, without Lender’s prior 

 208
 

written consent, HRHI shall hold over at the expiration or earlier
termination of the HRHI Lease;

(xvii)                      if (A) there shall occur any
default by HRHI under the Gaming Sublease in the observance or performance of
any term, covenant or condition on the part of HRHI to be observed or performed
and such failure shall continue beyond the expiration of all applicable notice
and cure periods under the Gaming Sublease, (B) any event shall occur which
would cause the Gaming Sublease to terminate without notice or action by the
Gaming Operator or which would entitle the Gaming Operator to terminate the
Gaming Sublease by giving notice to HRHI, (C) if HRHI shall waive, excuse,
condone or in any way release or discharge the Gaming Operator of or from any
of the Gaming Operator’s material obligations, covenants and/or conditions
under the Gaming Sublease without the prior written consent of Lender, (D) if,
without Lender’s prior written consent, HRHI shall terminate (or consent to or
approve any such termination), change, modify or amend the Gaming Sublease, other
than ministerial non-monetary amendments or modifications, (E) if HRHI shall
fail to provide Gaming Employees as and to the extent required pursuant to
Paragraph 7 of the HRHI Gaming Agreement, (F) if HRHI shall, without the
consent of Lender as provided in the HRHI Gaming Agreement, consent to or
approve any matter requiring Lender’s consent thereunder (other than a
termination), in the event that either (1) Lender has been materially damaged
by such consent or approval or is reasonably likely to be materially damaged by
such consent or approval with the further passage of time, or (2) HRHI is
unable to rescind or void such consent or approval within thirty (30) days
after notice from Lender of its objection thereto, and/or (G) HRHI shall
otherwise default under the Gaming Recognition Agreement or the HRHI Gaming
Agreement and such default, if a monetary default, shall continue beyond the
notice and cure period set forth in Section 8.1(a)(i)(C) hereof, or if a
non-monetary default, shall continue beyond the notice and cure period set
forth in Section 8.1(a)(xxiii) hereof;

(xviii)                   if at any time during the term of
the Loan, for any reason (including, without limitation, the revocation,
suspension or surrender of any required Governmental Approval), the gaming
operations at the Hotel/Casino Property (A) are not being operated by a
Qualified Gaming Operator pursuant to either (1) the Gaming Sublease and Gaming
Recognition Agreement or (2) one or more other written agreements previously
approved by Lender in its reasonable discretion, or (B) any Gaming License or
finding of suitability held by the Gaming Operator shall be materially
adversely modified, denied, suspended, revoked or canceled or allowed to lapse
or if a notice of a material violation is issued under any Gaming License by
the issuing agency or other Governmental Authority having jurisdiction, or any
proceeding is commenced by any Governmental Authority for the purpose of
modifying in any materially adverse respect, suspending, revoking or canceling
any Gaming License in any materially adverse respect, in each case, which is
not stayed within sixty (60) days after commencement thereof and the result of
which is reasonably likely to be Borrowers’ inability to continue to conduct
gaming operations at the Hotel/Casino 

 209
 

Property; provided, however, that during the course of any of the
foregoing, substantially the same gaming operations are permitted to continue
to operate at the Hotel/Casino Property, or any Governmental Authority shall
have appointed a conservator, supervisor or trustee with respect to the Casino
Component or the Hotel/Casino Property;

(xix)                           if at any time during the
term of the Loan, for any reason (including, without limitation, the
revocation, suspension or surrender of any required Governmental Approval), the
alcoholic beverage services at the Hotel/Casino Property (A) are not being
managed by a Qualified Liquor Manager pursuant to the Liquor Management
Agreement or a Replacement Liquor Management Agreement;

(xx)                              if HRHI shall fail to
provide liquor management services following an Event of Default or a
foreclosure of the Mortgage as and to the extent required pursuant to Sections
5(a) or 5(b) of the Assignment of Liquor Management Agreement;

(xxi)                           in the event that Gaming
Borrower shall ever become the Gaming Operator pursuant to Article XII
hereof, if Gaming Borrower thereafter shall fail to provide gaming operation
services for the Hotel/Casino Property following an Event of Default or a
foreclosure of the Mortgage as and to the extent required pursuant to Section
12.1(e) hereof;

(xxii)                        in the event that Gaming
Borrower, any other Borrower or any Affiliate thereof shall ever become the
Liquor Manager, if Gaming Borrower, such other Borrower or such Affiliate
thereof thereafter shall fail to provide liquor management services following
an Event of Default or following the transfer of the Hotel/Casino Property to a
Lender Successor Owner as and to the extent required pursuant to Section
5.1.23(c) hereof;

(xxiii)                     if any Borrower shall continue to
be in Default under any of the other terms, covenants or conditions of this
Agreement or any other Loan Document, in each instance, not specified in subsections
(i) to (xxii) above, for ten (10) Business Days after notice to
Borrowers from Lender, in the case of any Default which can be cured by the
payment of a sum of money, or for thirty (30) days after notice from Lender in
the case of any other Default; provided, however, that if any
such non-monetary Default is susceptible of cure but cannot reasonably be cured
within such thirty (30) day period, and provided further that Borrowers shall
have commenced to cure such Default within such thirty (30) day period and
thereafter diligently and expeditiously proceed to cure the same, such thirty
(30) day period shall be extended for such time as is reasonably necessary for
Borrowers in the exercise of due diligence to cure such Default, such
additional period not to exceed ninety (90) days, subject to Excusable Delay;

(xxiv)                    the occurrence of any event that is
expressly specified to be an Event of Default in this Agreement or any other
Loan Document; or

 210

(xxv)                       if any other event shall occur
or condition shall exist, if the effect of such event or condition is to
accelerate the maturity of any portion of the Debt or to permit Lender to
accelerate the maturity of all or any portion of the Debt.

(b)                                 Upon
the occurrence and during the continuance of an Event of Default (other than an
Event of Default described in clauses (vi) or (vii) above) and at
any time thereafter, in addition to any other rights or remedies available to
it pursuant to this Agreement and the other Loan Documents or at law or in
equity, to the extent permitted by applicable law, Lender may take such action,
without notice or demand, that Lender deems advisable to protect and enforce
its rights against Borrowers and in and to any Property and/or the IP,
including, without limitation, declaring the Debt to be immediately due and
payable, and Lender may enforce or avail itself of any or all rights or
remedies provided in the Loan Documents against Borrowers, any Property and/or
the IP, including, without limitation, all rights or remedies available at law
or in equity; and upon any Event of Default described in clauses (vi) or
(vii) above, the Debt and all Other Obligations of Borrowers hereunder
and under the other Loan Documents shall, to the extent permitted by applicable
law, immediately and automatically become due and payable, without notice or
demand, and each Borrower hereby expressly waives any such notice or demand,
anything contained herein or in any other Loan Document to the contrary notwithstanding.

Section
8.2                                   Remedies.

(a)                                  Upon
the occurrence and during the continuance of an Event of Default, subject to
applicable Gaming Laws, all or any one or more of the rights, powers,
privileges and other remedies available to Lender against Borrowers under this
Agreement or any of the other Loan Documents executed and delivered by, or
applicable to, Borrowers or at law or in equity may be exercised by Lender at
any time and from time to time, whether or not all or any of the Debt shall be
declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and
remedies under any of the Loan Documents, in each case to the extent permitted
by applicable law.  Any such actions
taken by Lender shall be cumulative and concurrent and may be pursued
independently, singularly, successively, together or otherwise, at such time
and in such order as Lender may determine in its sole discretion, to the
fullest extent permitted by law, without impairing or otherwise affecting the
other rights and remedies of Lender permitted by law, equity or contract or as
set forth herein or in the other Loan Documents.  Without limiting the generality of the
foregoing, each Borrower agrees, to the extent permitted by applicable law,
that if an Event of Default is continuing (i) Lender shall not be subject to
any “one action” or “election of remedies” law or rule, and (ii) all liens and
other rights, remedies or privileges provided to Lender shall remain in full
force and effect until Lender has exhausted all of its remedies against the
Properties, the IP and any other collateral and the Mortgage has been
foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or
the Debt has been paid in full.

(b)                                 During
the continuance of an Event of Default, with respect to each Borrower and the
Properties and the IP, nothing contained herein or in any other Loan Document
shall be construed as requiring Lender to resort to any particular Property or
to the IP for the satisfaction of any of the obligations in preference or
priority to any other Property or the IP, and Lender may seek satisfaction out
of all of the Properties, any Property, the IP or any part 

 211
 

of any thereof, in its absolute discretion in
respect of the Obligations.  In addition,
to the extent permitted by applicable law, Lender shall have the right from
time to time to partially foreclose the Mortgage in any manner and for any
amounts secured by the Mortgage then due and payable as determined by Lender in
its sole discretion, including, without limitation, the following
circumstances: (i) in the event Borrowers default beyond any applicable grace
period in the payment of one or more scheduled payments of interest, Lender may
foreclose the Mortgage to recover such delinquent payments, and/or (ii) in the
event Lender elects to accelerate less than the entire Outstanding Principal
Balance, Lender may foreclose the Mortgage to recover so much of the
Outstanding Principal Balance as Lender may accelerate and such other sums
secured by the Mortgage as Lender may elect in its sole discretion.  Notwithstanding one or more partial
foreclosures, the Properties, the IP and any other collateral shall remain
subject to the Mortgage to secure payment of sums secured by the Mortgage and
not previously recovered.

(c)                                  Subject
to applicable Gaming Laws, Lender shall have the right, at Lender’s sole cost
and expense except during the continuance of an Event of Default, in which
event the same shall be at Borrowers’ sole cost and expense, from time to time
to sever the Note and the other Loan Documents into one or more separate notes,
mortgages and other security documents (the “Severed
Loan Documents”) in such denominations as Lender shall determine in
its sole discretion for purposes of evidencing and enforcing its rights and
remedies provided hereunder, provided that Borrowers’ liability or obligation
shall not be increased by such severance. 
Borrowers shall execute and deliver to Lender from time to time,
promptly after the request of Lender, a severance agreement and such other
documents as Lender shall reasonably request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably
satisfactory to Lender.  Subject to
applicable Gaming Laws, each Borrower hereby absolutely and irrevocably
appoints Lender as its true and lawful attorney, coupled with an interest, in
its name and stead to make and execute all documents necessary or desirable to
effect the aforesaid severance, each Borrower ratifying all that its said
attorney shall do by virtue thereof; provided, however, Lender
shall not make or execute any such documents under such power until five (5)
Business Days after notice has been given to Borrowers by Lender of Lender’s
intent to exercise its rights under such power. 
Except as may be required in connection with a Securitization and
expressly provided pursuant to Section 9.1 hereof, (i) Borrowers shall
not be obligated to pay any costs or expenses incurred in connection with the
preparation, execution, recording or filing of the Severed Loan Documents, and
(ii) the Severed Loan Documents shall not contain any representations,
warranties or covenants not contained in the Loan Documents (modified to reflect
the current status of such representations and warranties) and any such
representations and warranties contained in the Severed Loan Documents will be
given by Borrowers only as of the Closing Date.

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

 212
 

Borrower shall not be construed to be a
waiver of any subsequent Default or Event of Default by any Borrower or to
impair any remedy, right or power consequent thereon.

(e)                                  To
the extent permitted by applicable law, any amounts recovered from any
Property, the IP or any other collateral for the Loan after an Event of Default
may be applied by Lender toward the payment of any interest and/or principal of
the Loan and/or any other amounts due under the Loan Documents in such order,
priority and proportions as Lender in its sole discretion shall determine.

(f)                                    Upon
the occurrence and during the continuance of an Event of Default, Lender may
declare Lender’s obligations to make Construction Loan Advances hereunder to be
terminated, whereupon the same shall terminate, and/or declare all unpaid
principal of and accrued interest on the Note, together with all other sums
payable under the Loan Documents, to be immediately due and payable, whereupon
the same shall become and be immediately due and payable, anything in the Loan
Documents to the contrary notwithstanding, and without presentation, protest or
further demand or notice of any kind, all of which are expressly hereby waived
by Borrowers to the extent permitted by applicable law; provided, however,
that Lender may make Construction Loan Advances or parts of Construction Loan
Advances thereafter without thereby waiving the right to demand payment of the
Note, without becoming liable to make any other or further Construction Loan
Advances, and without affecting the validity of or enforceability of the Loan
Documents.  Notwithstanding and without
limiting the generality of the foregoing or anything else to the contrary
contained in this Agreement, upon the occurrence and during the continuance of
an Event of Default, Lender’s obligations to make Construction Loan Advances
hereunder shall automatically terminate.

(g)                                 Upon
the occurrence and during the continuance of an Event of Default, Lender may
cause the construction of the Project to be completed and may enter upon the
Property and construct, equip and complete the Project in accordance with the
Plans and Specifications, with such changes therein as Lender may, from time to
time, and in its sole and absolute discretion, deem appropriate.  In connection with any construction of the
Project undertaken by Lender pursuant to the provisions of this subsection,
Lender may:

(i)                                     use any funds of
Borrowers, including any balance which may be held by Lender as security or in
escrow, including, without limitation, any Shortfall Funds and/or any funds on
deposit in the Construction Loan Reserve Account;

(ii)                                  draw down on any
Letter of Credit then held by Lender and use the proceeds thereof;

(iii)                               employ existing
contractors, subcontractors, agents, architects, engineers and the like, or
terminate the same and employ others;

(iv)                              employ security watchmen
to protect the Properties;

(v)                                 make such additions,
changes and corrections in the Plans and Specifications as shall, in the
judgment of Lender, be necessary or desirable;

 213
 

(vi)                              take over and use any and
all Personal Property contracted for or purchased by Borrowers, if appropriate,
or dispose of the same as Lender sees fit in accordance with applicable law;

(vii)                           to the extent permitted by
applicable law, execute all applications and certificates on behalf of
Borrowers which may be required by any Governmental Authority or Legal
Requirement or contract documents or agreements;

(viii)                        pay, settle or compromise all
existing or future bills and claims which are or may be Liens against any of
the Properties, or may be necessary for the completion of construction of the
Project or the clearance of title to any of the Properties, including, without
limitation, all taxes and assessments;

(ix)                                complete the marketing
and leasing of leasable space in the Project, enter into new leases and
occupancy agreements at any of the Properties, and modify or amend existing
leases and occupancy agreements, all as Lender shall deem to be necessary or
desirable;

(x)                                   to the extent
permitted by applicable law, prosecute and defend all actions and proceedings
in connection with the completion of the construction of the Project or in any
other way affecting any of the Properties and take such action and require such
performance as Lender deems necessary under any Payment and Performance Bonds;
and

(xi)                                to the extent permitted
by applicable law, take such other action hereunder, or refrain from acting
hereunder, as Lender may, in its sole and absolute discretion, from time to
time determine, and without any limitation whatsoever, to carry out the intent
of this Section 8.2.

Subject to Section 9.4
hereof, Borrowers shall be liable to Lender for all costs paid or incurred for
the construction, completion and equipping of the Project, whether the same
shall be paid or incurred pursuant to the provisions of this Section 8.2
or otherwise, and all payments made or liabilities incurred by Lender hereunder
of any kind whatsoever shall be deemed advances made to Borrowers under this
Agreement and shall be secured by the Mortgage and the other applicable Loan
Documents.  In the event Lender takes
possession of any Property and assumes control of such construction as
aforesaid, Lender shall not be obligated to continue such construction longer
than Lender shall see fit and may thereafter, at any time, change any course of
action undertaken by it or abandon such construction and decline to make
further payments for the account of Borrowers, whether or not the construction
of the Project shall have been completed. 
For the purpose of this Section 8.2 the construction, equipping
and completion of the Project shall be deemed to include any action necessary
to cure any existing Event of Default by Borrowers under any of the terms and
provisions of any of the Loan Documents.

 214
 

ARTICLE IX.

SPECIAL PROVISIONS

Section
9.1                                   Sale
of Note and Securitization. 
Borrowers acknowledge and agree that Lender may sell all or any portion
of the Loan and the Loan Documents, or require Borrowers to restructure the
Loan into multiple notes (which may include component notes and/or senior and
junior notes) and/or issue one or more participations therein and/or syndicate
the Loan, which restructuring may include the restructuring of a portion of the
Loan into one or more mezzanine loans to the direct and/or indirect owners of
the equity interests in Borrowers as reasonably, mutually determined by Lender
and Borrowers and that are direct or indirect subsidiaries of HR Holdings,
secured by a pledge of such interests, or consummate one or more private or
public securitizations of rated single- or multi-class securities (the “Securities”) secured by or evidencing ownership interests in
all or any portion of the Loan and the Loan Documents or a pool of assets that
include the Loan and the Loan Documents (such sales, participations and/or
securitizations, collectively, a “Securitization”).  At the request of Lender, and to the extent
not already required to be provided by Borrowers under this Agreement,
Borrowers shall use commercially reasonable good faith efforts to provide
information not in the possession of Lender or which may be reasonably required
by Lender in order to satisfy the market standards to which Lender customarily
adheres or which may be reasonably required by prospective investors and/or the
Rating Agencies in connection with any such Securitization including, without
limitation, to:

(a)                                  provide
additional and/or updated Provided Information or other information with
respect to the Properties and/or the IP reasonably requested or reasonably
required by Lender, prospective investors or the Rating Agencies, together
with, if customary or if otherwise requested by any Rating Agency, appropriate
verification and/or consents related to the Provided Information through
letters of auditors or opinions of counsel of independent attorneys reasonably
acceptable to Lender and the Rating Agencies;

(b)                                 review
descriptive materials for presentations to any or all of the Rating Agencies,
and work with third-party service providers engaged to obtain, collect, and
deliver information reasonably requested or reasonably required by Lender,
prospective investors or the Rating Agencies;

(c)                                  if
required by any Rating Agency, (i) deliver updated opinions of counsel as to
non-consolidation, due execution and enforceability with respect to the
Properties, the IP, any Borrower, HRHI, any Guarantor, any of their respective
Affiliates and the Loan Documents, and (ii) amend the Special Purpose Entity
provisions of the organizational documents for each Borrower, which counsel
opinions and amendments to the organizational documents shall be reasonably
satisfactory to Lender and the Rating Agencies;

(d)                                 if
required by any Rating Agency, use commercially reasonable efforts to deliver
such additional tenant estoppel letters, subordination agreements and/or other
agreements from parties to agreements that affect any of the Properties or the
IP, which estoppel letters, subordination agreements and other agreements shall
be reasonably satisfactory to Lender and the Rating Agencies;

 215
 

(e)                                  provide,
as of the closing date of the Securitization, updated representations and
warranties made in the Loan Documents as may be reasonably requested by Lender
or the Rating Agencies and consistent with the facts covered by such
representations and warranties made in the Loan Documents to the extent they
are true as of the closing of the Securitization;

(f)                                    execute
such amendments to the Loan Documents as may be reasonably requested by Lender
or the Rating Agencies to effect the Securitization and/or deliver one or more
new component notes to replace the original note or modify the original note to
reflect multiple components of the Loan (and such new notes or modified note
shall have the same initial weighted average coupon of the original note, but
such new notes or modified note may change the interest rate of the Loan), and
modify the Cash Management Agreement with respect to the newly created
components such that the pricing and marketability of the Securities and the
size of each class of Securities and the rating assigned to each such class by
the Rating Agencies shall provide the most favorable rating levels and achieve
the optimum rating levels for the Loan, provided, however, that
(i) such new notes or modified note will not change the interest rate, the
stated maturity or the amortization of principal set forth in the Note unless
the varying interest rates shall have the same initial weighted average coupon
of the original Note, (ii) such amendments to the Loan Documents or the new
notes or modified note will not modify or amend any other economic or material
term of the Loan in a manner materially adverse to Borrowers, HRHI or
Guarantors or any of their respective Constituent Members, or (iii) such
amendments to the Loan Documents will not materially increase Borrowers’ or
Guarantors’ obligations and liabilities under the Loan Documents or materially
decrease the rights of Borrowers under the Loan Documents;

(g)                                 if
requested by Lender, review any information regarding any Property, the IP, any
Borrower, HRHI, the Gaming Operator, any Manager, the Liquor Manager and/or the
Loan which is contained in any preliminary or final private placement
memorandum, prospectus, prospectus supplement (including any amendment or
supplement to either thereof), or other disclosure document to be used by
Lender or any affiliate thereof; and

(h)                                 supply
to Lender such documentation, financial statements and reports concerning any
Borrower, HRHI, any Guarantor, the Loan, any Property and/or the IP in form and
substance required in order to comply with any applicable securities laws.

Lender shall pay all reasonable third party costs and
expenses (excluding fees and expenses of Borrowers’ legal counsel) in excess of
Twenty Thousand Dollars ($20,000) incurred by Borrowers in connection with
Borrowers’ complying with requests made under this Section 9.1 and/or
under Section 9.1.2 hereof, provided, however, the fees
and expenses of Borrowers’ legal counsel and Borrowers’ administrative costs
shall not be included in such amount and Borrowers shall remain at all times
responsible for the fees and expenses of its legal counsel and its own
administrative costs.  In addition to the
foregoing, Lender expressly acknowledges and agrees that Borrowers shall not be
required to pay any Rating Agency surveillance charges.

9.1.2                     Re-Dating.  In connection with a Securitization or other
sale of all or a portion of the Loan, Lender shall have the right to modify all
operative dates (including, but not limited to, payment dates, interest period
start dates and end dates, etc) under the Loan 

 216
 

Documents, by up to ten (10) days (such
action and all related action is a “Re-Dating”)
so long as such modification shall not have a materially adverse effect on
Borrowers.  Borrowers shall cooperate
with Lender to implement any Re-Dating. 
If any Borrower fails to cooperate with Lender within ten (10) Business
Days of written request by Lender, Lender is hereby appointed as each Borrower’s
attorney-in-fact to execute any and all documents necessary to accomplish the
Re-Dating, the foregoing power of attorney being coupled with an interest.

Section
9.2                                   Securitization
Indemnification.  (a) Each
Borrower understands that information provided to Lender by Borrowers and their
agents, counsel and representatives may be included in Disclosure Documents in
connection with the Securitization and may also be included in filings with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the “Securities Act”), or the
Securities and Exchange Act of 1934, as amended (the “Exchange Act”),
and may be made available to investors or prospective investors in the
Securities, the Rating Agencies, and service providers relating to the
Securitization.  In the event that the
Disclosure Document is required to be revised prior to the sale of all
Securities, Borrower will cooperate with the holder of the Note in updating the
Disclosure Document by providing all current information necessary to keep the
Disclosure Document accurate and complete in all material respects.

(b)                                 Upon
Lender’s reasonable request, Borrowers shall provide in connection with each of
(i) a preliminary and a final private placement memorandum or (ii) a
preliminary and final prospectus or prospectus supplement, as applicable, an
agreement (A) certifying that Borrowers have examined such Disclosure Documents
specified by Lender and that to each Borrower’s actual knowledge, each such
Disclosure Document, as it relates to Borrowers, Borrowers’ Affiliates,
Guarantors, HRHI, the Properties, the IP, the Managers, the Liquor Manager, the
Gaming Operator and/or the Loan, does not contain any untrue statement of a
material fact or omit to state a material fact in each Borrower’s actual
knowledge necessary in order to make the statements made, in the light of the
circumstances under which they were made, not materially misleading, (B)
jointly and severally indemnifying Lender, Credit Suisse (whether or not it is
Lender), any Affiliate of Credit Suisse that has filed any registration
statement relating to the Securitization or has acted as the sponsor or
depositor in connection with the Securitization, any Affiliate of Credit Suisse
that acts as an underwriter, placement agent or initial purchaser of Securities
issued in the Securitization, any other co-underwriters, co-placement agents or
co-initial purchasers of Securities issued in the Securitization, and each of
their respective officers, directors, partners, employees, representatives,
agents and Affiliates and each Person or entity who controls any such Person
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (collectively, the “Indemnified
Persons”), for any out-of-pocket losses, third party claims, actual
damages (but not lost revenues, diminution in value and other consequential
damages) or liabilities (collectively, the “Liabilities”)
to which any such Indemnified Person may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such Disclosure Document
specified by Lender for Borrowers’ review, as it relates to Borrowers,
Borrowers’ Affiliates, Guarantors, HRHI, the Properties, the IP, the Managers,
the Liquor Manager, the Gaming Operator and/or the Loan, known by any Borrower
to be untrue or arise out of or are based upon the omission or alleged omission
to state therein a material fact in any Borrower’s actual knowledge, required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, 

 217
 

and (C) agreeing to reimburse each
Indemnified Person for any reasonable legal or other reasonable expenses
reasonably incurred by such Indemnified Person in connection with investigating
or defending the Liabilities; provided, however, that Borrowers
will be liable in any such case under clauses (B) or (C) above
only to the extent that any such Liabilities arise out of or are based upon any
such untrue statement or omission made therein in reliance upon and in
conformity with information furnished to Lender by Borrowers in connection with
the preparation of any Disclosure Document(s) or in connection with the
underwriting or closing of the Loan or in the ordinary course of the Loan,
including, without limitation, financial statements of any Borrower, operating
statements and rent rolls with respect to any of the Properties.  This indemnity agreement will be in addition
to any liability which any Borrower may otherwise have.  Moreover, the indemnification provided for in
clauses (B) and (C) above shall be effective whether or not a
separate indemnification agreement is provided.

(c)                                  In
connection with Exchange Act Filings, Borrowers, jointly and severally, shall
(i) indemnify the Indemnified Persons for Liabilities to which any such
Indemnified Persons may become subject insofar as the Liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact in any Disclosure Documents specified by Lender for Borrowers’
review, as it relates to Borrowers, Borrowers’ Affiliates, Guarantors, HRHI,
the Properties, the IP, the Managers, the Liquor Manager, the Gaming Operator
and/or the Loan, or the omission or alleged omission to state in any such Disclosure
Document a material fact in any Borrower’s actual knowledge, required to be
stated in such Disclosure Document in order to make the statements in such
Disclosure Document, in light of the circumstances under which they were made,
not misleading, and (ii) reimburse each Indemnified Person for any reasonable
legal or other expenses reasonably incurred by such Indemnified Person in
connection with defending or investigating the Liabilities; provided, however,
that Borrowers will be liable in any such case under clauses (i) or (ii)
above only to the extent that any such Liabilities arise out of or are based
upon any such untrue statement or omission made therein in reliance upon and in
conformity with information furnished to Lender by Borrowers in connection with
the preparation of any Disclosure Document(s) or in connection with the
underwriting or closing of the Loan or in the ordinary course of the Loan,
including, without limitation, financial statements of any Borrower, operating
statements and rent rolls with respect to any of the Properties.

(d)                                 Promptly
after receipt by an Indemnified Person under this Section 9.2 of notice
of the commencement of any action, such Indemnified Person will, if a claim in
respect thereof is to be made against Borrowers under this Section 9.2,
notify Borrowers in writing of the commencement thereof, but the omission to so
notify Borrowers will not relieve any Borrower from any liability which any
Borrower may have to any Indemnified Person hereunder except to the extent that
such failure to notify causes material prejudice to any Borrower.  In the event that any action is brought
against any Indemnified Person, and it notifies Borrowers of the commencement
thereof, Borrowers will be entitled to participate therein and, to the extent
that they may elect by written notice delivered to such Indemnified Person
promptly after receiving the aforesaid notice from such Indemnified Person, to
assume the defense thereof with counsel reasonably satisfactory to such
Indemnified Person.  After notice from
Borrowers to such Indemnified Person under this Section 9.2, such
Indemnified Person shall pay for any legal or other expenses subsequently
incurred by such Indemnified Person in connection with the defense thereof
other than reasonable costs of investigation; provided, however,
if the defendants 

 218
 

in any such action include both the
Indemnified Person and any Borrower and the Indemnified Person shall have
reasonably concluded that there are any legal defenses available to it and/or
other Indemnified Persons that are different from or additional to those
available to Borrowers, the Indemnified Person(s) shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified
Person(s) at the cost of Borrowers. 
Borrowers shall not be liable for the expenses of more than one separate
counsel unless any Indemnified Person shall have reasonably concluded that
there may be legal defenses available to it that are different from or
additional to those available to another Indemnified Person.

(e)                                  Without
the prior consent of Credit Suisse (which consent shall not be unreasonably
withheld), no Borrower shall settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not any
Indemnified Person is an actual or potential party to such claim, action, suit
or proceeding) unless Borrowers shall have given Credit Suisse reasonable prior
notice thereof and shall have obtained an unconditional release of each
Indemnified Person hereunder from all liability arising out of such claim,
action, suit or proceeding.  As long as
Borrowers have complied with their obligations to defend and indemnify
hereunder, Borrowers shall not be liable for any settlement made by any
Indemnified Person without the consent of Borrowers (which consent shall not be
unreasonably withheld).

(f)                                    Borrowers
agree that if any indemnification or reimbursement sought pursuant to this Section
9.2 is finally judicially determined to be unavailable for any reason or is
insufficient to hold any Indemnified Person harmless (with respect only to the
Liabilities that are the subject of this Section 9.2), then Borrowers,
on the one hand, and such Indemnified Person, on the other hand, shall
contribute to the Liabilities for which such indemnification or reimbursement
is held unavailable or is insufficient: (i) in such proportion as is
appropriate to reflect the relative benefits to Borrowers, on the one hand, and
such Indemnified Person, on the other hand, from the transactions to which such
indemnification or reimbursement relates; or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in clause
(i) but also the relative faults of Borrowers, on the one hand, and all
Indemnified Persons, on the other hand, as well as any other equitable
considerations.  In determining the
amount of contribution to which the respective parties are entitled, the
following factors shall be considered: (A) Lender’s and Borrowers’ relative
knowledge and access to information concerning the matter with respect to which
the claim was asserted; and (B) the opportunity to correct and prevent any
statement or omission.  Notwithstanding
the provisions of this Section 9.2, no Person found liable for a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any other Person who is
not also found liable for such fraudulent misrepresentation.

(g)                                 Borrowers
agree that the indemnification, contribution and reimbursement obligations set
forth in this Section 9.2 shall apply whether or not any Indemnified
Person is a formal party to any lawsuits, claims or other proceedings.  Borrowers further agree that the Indemnified
Persons are intended third party beneficiaries under this Section 9.2.

 219
 

(h)                                 Subject
to the provisions of Section 9.4 hereof, the liabilities and obligations
of Borrowers and Lender under this Section 9.2 shall survive the
termination of this Agreement and the satisfaction and discharge of the Debt.

Section
9.3                                   Intentionally
Omitted.

Section
9.4                                   Exculpation.  Subject to the qualifications below, Lender
shall not enforce the liability and obligation of Borrowers to perform and
observe the obligations contained in the Note, this Agreement, the Mortgage or
the other Loan Documents by any action or proceeding wherein a money judgment
shall be sought against any Borrower, except that Lender may bring a
foreclosure action, an action for specific performance or any other appropriate
action or proceeding to enable Lender to enforce and realize upon its interest
under the Note, this Agreement, the Mortgage and the other Loan Documents, or
in any Property, the Rents, the IP or any other collateral given to Lender
pursuant to the Loan Documents; provided, however, that, except
as specifically provided herein, any judgment in any such action or proceeding
shall be enforceable against any Borrower only to the extent of such Borrower’s
interest in its Property, in its Rents, in the IP and in any other collateral
given by it to Lender, and Lender, by accepting the Note, this Agreement, the
Mortgage and the other Loan Documents, agrees that it shall not sue for, seek
or demand any deficiency judgment against any Borrower in any such action or
proceeding under, or by reason of, or in connection with, the Note, this
Agreement, the Mortgage or the other Loan 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 Loan Documents; (b) impair the right of
Lender to name any Borrower as a party defendant in any action or suit for
foreclosure and sale under the Mortgage; (c) affect the validity or
enforceability of or any guaranty made in connection with the Loan, including,
without limitation, the Non-Recourse Guaranty, the Non-Qualified Prepayment
Guaranty, the Closing Completion Guaranty, the Construction Completion Guaranty
and the HRHI Guaranty, or any of the rights and remedies of Lender thereunder;
(d) impair the right of Lender to obtain the appointment of a receiver; (e)
impair the enforcement of the Assignment of Leases; (f) constitute a
prohibition against Lender seeking a deficiency judgment against any Borrower
in order to fully realize the security granted by the Mortgage or commencing
any other appropriate action or proceeding in order for Lender to exercise its
remedies against any Property or the IP; or (g) constitute a waiver of the
right of Lender to enforce the liability and obligation of any Borrower, by
money judgment or otherwise, to the extent of any actual loss, damage
(excluding any lost revenue, diminution of value and other consequential
damages), reasonable cost, reasonable expense, liability, claim or other
obligation incurred by Lender (including attorneys’ fees and costs reasonably
incurred) arising out of or in connection with the following:

(i)                                     fraud or
intentional misrepresentation by any Borrower, HRHI, any Guarantor or any of
their respective principals, officers, agents or employees in connection with
the Loan;

(ii)                                  physical waste to any
Property arising from the intentional misconduct or gross negligence of any
Borrower, HRHI, any Guarantor or any of their respective principals, officers,
agents or employees and/or any removal of any asset forming a part of any
Property in violation of this Agreement or the other Loan Documents;

 220
 

(iii)                               Intentionally Omitted;

(iv)                              the misappropriation or
conversion by any Borrower, by any Person Controlled by any Borrower,
including, without limitation, any Affiliated Manager, a Liquor Manager who is
an Affiliate of any Borrower or a Gaming Operator who is an Affiliate of any
Borrower, by any agent of any Borrower, or by any other Person with whom any
Borrower shall collude or cooperate, of (A) any Insurance Proceeds paid by
reason of any Casualty, to the extent so misappropriated or converted; (B) any
Awards received in connection with a Condemnation, to the extent so
misappropriated or converted; (C) any Rents or other Gross Income from
Operations not delivered to Lender following and during the continuance of an
Event of Default and not otherwise used to pay actual, customary Operating
Expenses reflected on the Approved Annual Budget then in effect, including,
without limitation, (I) any income, proceeds or other amounts received by any
Borrower under the Gaming Sublease, and/or (II) without duplication of the
foregoing clause (I), any income, proceeds or revenue generated from
gaming activities at any Property, in each of the foregoing instances, to the
extent so misappropriated or converted; (D) any Rents paid more than one (1)
month in advance in violation of this Agreement or the other Loan Documents, to
the extent so misappropriated or converted; and/or (E) any security deposits,
to the extent so misappropriated or converted;

(v)                                 the failure to pay (or
to deposit into the Reserve Funds amounts sufficient to pay) all Taxes and all
other costs giving rise to any Lien on any portion of any Property or the IP
with priority over or equal to the Lien of the Loan Documents in violation of
this Agreement or the other Loan Documents, to the extent that there is
sufficient Gross Income from Operations to make such payments (or deposits, as
applicable);

(vi)                              if any Borrower fails to
maintain its status as a Special Purpose Entity as required pursuant to the
terms hereof;

(vii)                           if Borrowers fail to obtain
Lender’s consent to any subordinate financing, mortgage or other voluntary Lien
encumbering any Property or the IP other than Permitted Encumbrances and
Permitted IP Encumbrances;

(viii)                        the failure to maintain
insurance coverage under blanket insurance policies to the extent permitted
under this Agreement;

(ix)                                if any of the events
set forth in clauses (a), (b) or (c) of Section 5.2.11
hereof shall occur without the prior approval of Lender;

(x)                                   if any of the
restrictions to Transfer set forth in Section 5.2.10 hereof or in any of
the other Loan Documents are violated;

(xi)                                if Lender or any
Affiliate thereof shall succeed to the interest of HRHI under the Gaming
Sublease following a foreclosure, deed in lieu of foreclosure or similar
transfer, any actual loss, cost, damage or expense 

 221
 

(including, without limitation, reasonable attorneys’ fees and
expenses) suffered by Lender or such Affiliate as a result of: (A) any act,
omission, neglect or default of HRHI under the Gaming Sublease, (B) any claim,
defense, counterclaim or offset which the Gaming Operator may have under the
Gaming Sublease against HRHI, (C) any obligation to make any payment to the
Gaming Operator under the Gaming Sublease which was required to be made by or
on behalf of HRHI prior to the time Lender or such Affiliate succeeded to HRHI’s
interest under the Gaming Sublease, (D) any monies deposited with HRHI under
the Gaming Sublease, except to the extent such monies are actually received by
Lender or such Affiliate, (E) any obligation to complete or permit the
construction of any improvements under the Gaming Sublease arising while HRHI
was the sublandlord under the Gaming Sublease, and/or (F) any default by HRHI under
the Gaming Lease beyond applicable notice and cure periods;

(xii)                             if HRHI or any Affiliate
thereof shall send a notice to Gaming Operator under Section 6(a), (c) or (d)
of the Gaming Recognition Agreement which conflicts with any notice theretofore
sent by Lender to Gaming Operator under said Section 6(a), (c) or (d), as
applicable, of the Gaming Recognition Agreement; provided, however,
that the liability under this clause (xii) shall be limited to all fees
and costs incurred by Gaming Operator in bringing and pursuing any interpleader
action contemplated by said Section 6(a), (c) or (d), as applicable, and only
to the extent that Gaming Operator seeks to recover and/or does recover such
fees and expenses from Lender;

(xiii)                          if HRHI shall fail to provide
Gaming Employees for the operation of gaming activities at the Hotel/Casino
Property as and to the extent required pursuant to Paragraph 7 of the HRHI
Gaming Agreement;

(xiv)                         in the event that Gaming
Borrower shall ever become the Gaming Operator pursuant to Article XII
hereof, if Gaming Borrower thereafter shall fail to provide gaming operation
services for the Hotel/Casino Property following an Event of Default or a
foreclosure of the Mortgage as and to the extent required pursuant to Section
12.1(e) hereof;

(xv)                            in the event that HRHI,
Gaming Borrower, any other Borrower or any Affiliate thereof shall be the
Liquor Manager, if HRHI, Gaming Borrower, such other Borrower or such Affiliate
thereof shall fail to provide liquor management services for the Hotel/Casino
Property following an Event of Default or a foreclosure of the Mortgage as and
to the extent required (A) as to HRHI, pursuant to Sections 5(a) or 5(b) of the
Assignment of Liquor Management Agreement, as applicable, and (B) as to Gaming
Borrower, any other Borrower or any Affiliate thereof, pursuant to Section
5.1.23(c) hereof;

(xvi)                         in connection with the
$250,000.00 lease termination fee pursuant to Section 3.2(B) of that certain
Lease by and between PM Realty, LLC and HRHI, as landlord, and Mr. Chow of Las
Vegas, LLC, as tenant, dated December 24, 2004; and/or

 222

(xvii)                      as a result of the imposition of
any tax provided in NRS §§375.020 and 375.023 with respect to the merger
transaction contemplated under the Merger Agreement and/or the subsequent
conveyance of the Hotel/Casino Property (i) to HRHH Gaming Junior Mezz, LLC,
and then (ii) to HRHH Gaming Senior Mezz, LLC, and then (iii) to Hotel/Casino
Borrower, provided, however, that any liability under this clause
(xvii) shall terminate upon the payment in full of the Debt.

Notwithstanding anything to the contrary in this
Agreement, the Note or any of the other Loan Documents, (A) Lender shall not be
deemed to have waived any right which Lender may have under Section 506(a),
506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim
for the full amount of the Debt secured by the Mortgage or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Loan Documents, and (B) the Debt shall be fully recourse to
Borrowers in the event of: (i) any Borrower, HRHI or both Guarantors filing a
voluntary petition under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; or (ii) the filing of an involuntary petition
against any Borrower, HRHI or both Guarantors under the Bankruptcy Code or any
other Federal or state bankruptcy or insolvency law by or on behalf of any
Person other than Lender and/or the Administrative Agent, and such petition is
not dismissed within ninety (90) days after filing, or any Borrower, or any
Affiliate of any of them who Controls any Borrower, or HRHI or both Guarantors,
solicit or cause to be solicited petitioning creditors for any involuntary
petition against any Borrower, HRHI or both Guarantors from any Person (other
than if requested to do so by or on behalf of Lender and/or the Administrative
Agent); (iii) any Borrower, HRHI or both Guarantors filing an answer consenting
to, or any Borrower, HRHI or both Guarantors, or any Affiliate of any of them
who Controls any Borrower, otherwise consenting to or acquiescing or joining
in, any involuntary petition filed against any Borrower, HRHI or both
Guarantors, by any other Person (other than if filed by or on behalf of Lender
and/or the Administrative Agent) under the Bankruptcy Code or any other Federal
or state bankruptcy or insolvency law; (iv) any Borrower, HRHI or both
Guarantors, or any Affiliate of any of them who Controls any Borrower,
consenting to or acquiescing or joining in an application for the appointment
of a custodian, receiver, trustee or examiner for any Borrower or any portion
of any Property or any portion of the IP (other than any such appointment at
the request or petition of Lender and/or the Administrative Agent); or (v) any
Borrower, HRHI or both Guarantors voluntarily making an assignment for the
benefit of creditors (other than Lender and/or the Administrative Agent), or
admitting, in writing or in any legal proceeding, its insolvency or inability
to pay its debts as they become due; unless, in the case of any of the
foregoing clauses (i), (ii), (iii), (iv) or (v) as it relates to
or affects both Guarantors, one or more guarantors acceptable to Lender in its
sole discretion remains or becomes a guarantor of the Loan.

Notwithstanding anything to the contrary in this
Agreement or any other Loan Document, and except for (1) Guarantors’
obligations under the Non-Recourse Guaranty, the Non-Qualified Prepayment
Guaranty, the Closing Completion Guaranty and the Construction Completion
Guaranty, (2) HRHI’s obligations under the HRHI Guaranty, and (3) with respect
to the DLJ Guarantor, DLJ Merchant Banking Partners IV, L.P., MBP IV Plan
Investors, L.P., DLJMB HRH Co-Investments, L.P., DLJ Offshore Partners IV,
L.P., and DLJ Merchant Banking Partners IV (Pacific), L.P. (such limited partnerships, collectively,
the “DLJMB Parties”) as 

 223
 

provided in that certain
commitment letter of the DLJMB Parties of even date herewith addressed to the
DLJ Guarantor, no present or future Constituent Member in any Borrower, nor any
present or future shareholder, officer, director, employee, trustee,
beneficiary, advisor, member, partner, principal, participant or agent of or in
any Borrower or of or in any Person that is or becomes a Constituent Member in
any Borrower, shall have any personal liability, directly or indirectly, under
or in connection with this Agreement or any of the Loan Documents, or any
amendment or amendments to any of the foregoing made at any time or times,
heretofore or hereafter, and Lender on behalf of itself and its successors and
assigns, hereby waives any and all such personal liability.  In addition, Lender, for itself and its
successors and assigns, acknowledges and agrees that neither Borrowers, nor any
Constituent Member, nor any other party, is assuming any personal liability,
directly or indirectly, under or in connection with any agreement, lease,
instrument, claim or right constituting a part of any Property or the IP or to
which any Property or the IP is now or hereafter subject, except as may be
expressly set forth therein.

For purposes of this Agreement and each of the other
Loan Documents, neither the negative capital account of any Constituent Member
in any Borrower nor any obligation of any Constituent Member in any Borrower to
restore a negative capital account or to contribute or loan capital to any
Borrower or to any other Constituent Member in any Borrower shall at any time
be deemed to be the property or an asset of such Borrower (or any such other
Constituent Member) and neither Lender nor any of its successors or assigns shall
have any right to collect, enforce or proceed against any Constituent Member
with respect to any such negative capital account or obligation to restore,
contribute or loan.

Section
9.5                                   Matters
Concerning Managers and Liquor Manager.

9.5.1                     If (a) an
Event of Default occurs and is continuing, (b) without the consent of Lender,
Morgans Parent ceases to Control any Manager, unless following such change of
Control, each affected Manager still constitutes a Qualified Manager, (c) any
Manager shall become bankrupt or insolvent, or (d) any Manager commits fraud,
gross negligence, willful misconduct or misappropriation of funds with respect
to any Borrower and/or any Property and/or the IP or any material default
otherwise occurs under any Management Agreement beyond any applicable grace and
cure periods, the applicable Borrower shall, at the request of Lender,
terminate the applicable Management Agreement and replace the Manager
thereunder with a Qualified Manager pursuant to a Replacement Management
Agreement, it being understood and agreed that the management fee for such
Qualified Manager shall not exceed then prevailing market rates.  If (i) an Event of Default occurs and is
continuing, (ii) Sub-Manager shall become bankrupt or insolvent, or (iii)
Sub-Manager commits fraud, gross negligence, willful misconduct or
misappropriation of funds with respect to any Borrower and/or any Property or
any material default otherwise occurs under the Sub-Management Agreement beyond
any applicable grace and cure periods, the applicable Borrowers shall, at the
request of Lender, terminate the Sub-Management Agreement and amend an existing
Management Agreement to include the duties previously delegated under the
Sub-Management Agreement (if not already included therein).

9.5.2                     If (a) an
Event of Default occurs and is continuing, (b) without the consent of Lender,
HR Holdings ceases to Control the Liquor Manager, unless following such change
of 

 224
 

Control, the Liquor Manager still constitutes
a Qualified Liquor Manager, (c) the Liquor Manager shall become bankrupt or
insolvent, or (d) the Liquor Manager commits fraud, gross negligence, willful
misconduct or misappropriation of funds with respect to Hotel/Casino Borrower
and/or the Hotel/Casino Property or any material default otherwise occurs under
the Liquor Management Agreement beyond any applicable grace and cure periods,
Hotel/Casino Borrower shall, at the request of Lender, terminate the Liquor
Management Agreement and replace the Liquor Manager thereunder with a Qualified
Liquor Manager pursuant to a Replacement Liquor Management Agreement, it being
understood and agreed that the management fee for such Qualified Liquor Manager
shall not exceed then prevailing market rates; provided, however,
that in no event shall Hotel/Casino Borrower be required to terminate such
Liquor Manager if such immediate termination would require cessation of
liquor-related activities at any of the Properties and, in such event, (i) such
termination shall occur immediately upon the ability of Hotel/Casino Borrower
to transfer such liquor operations to a Qualified Liquor Manager as required
herein, and (ii) Hotel/Casino Borrower shall, at its sole cost and expense,
diligently pursue the engagement and licensing of a replacement Qualified
Liquor Manager.

Section
9.6                                   Matters
Concerning Gaming Operator.  If (a)
the Gaming Operator commits fraud, gross negligence or willful misconduct with
respect to the Hotel/Casino Property or any material default otherwise occurs
under the Gaming Sublease beyond any applicable grace and cure periods, or (b)
the Gaming Operator (i) has its gaming license suspended or revoked, (ii)
allows its gaming license to lapse, or (iii) may not lawfully operate gaming at
the Hotel/Casino Property pursuant to any Legal Requirements or the order of
any Governmental Authority, Hotel/Casino Borrower shall, at the request of
Lender and to the extent permitted by applicable Legal Requirements and the
requirements of any Gaming Authorities, cause HRHI to terminate the Gaming
Sublease and replace the Gaming Operator with a Qualified Gaming Operator
pursuant to a new gaming sublease or similar agreement and a new recognition
agreement, in each instance reasonably acceptable to Lender; provided, however,
that in no event shall Hotel/Casino Borrower be required to terminate such
Gaming Operator if such immediate termination would require cessation of
gaming-related activities at the Hotel/Casino Property and, in such event, (A)
such termination shall occur immediately upon the ability of Hotel/Casino Borrower
to transfer such gaming operations to a Qualified Gaming Operator as required
herein, and (B) Hotel/Casino Borrower shall, at its sole cost and expense,
diligently pursue the engagement and licensing of a replacement Qualified
Gaming Operator.

Section
9.7                                   Servicer.  (a) At the option of Lender, the Loan
may be serviced by a servicer/trustee (the “Servicer”)
selected by Lender and Lender may delegate all or any portion of its
responsibilities under this Agreement and the other Loan Documents to the Servicer
pursuant to a servicing agreement (the “Servicing Agreement”)
between Lender and Servicer.  Borrowers
shall not be responsible for any set up fees or any other initial costs
relating to or arising under the Servicing Agreement nor shall Borrowers be
responsible for payment of the monthly servicing fee due to the Servicer under
the Servicing Agreement.

(b)                                 Lender
shall endeavor in good faith (without liability for failure to do so) to
provide Borrowers with notification of any change in the Person servicing the
Loan; provided that it is expressly acknowledged and agreed by Lender
that it shall not constitute a Default or Event of Default hereunder if due to
such failure to provide notification Borrowers 

 225
 

send any payments required to be made
hereunder to Lender or any predecessor Person servicing the Loan.

Section 9.8                                   Restructuring
of Loan.  Lender, without in any way
limiting Lender’s other rights hereunder, in its sole and absolute discretion,
shall have the right at any time, at Lender’s sole cost and expense, to require
Borrowers to restructure the Loan into multiple notes (which may include
component notes and/or senior and junior notes) and/or to create participation
interests in the Loan, which restructuring may include the restructuring of a portion
of the Loan to one or more mezzanine loans (each, a “New
Mezzanine Loan”) to the direct and/or indirect owners of the equity
interests in Borrowers as reasonably, mutually determined by Lender and
Borrowers and that are direct or indirect subsidiaries of HR Holdings, secured
by a pledge of such interests, the establishment of different interest rates
for the Loan and any New Mezzanine Loan(s) and the payment of the Loan and any
New Mezzanine Loan(s) in such order of priority as may be designated by Lender;
provided, that (i) the total amounts of the Loan and any New Mezzanine
Loan(s) shall equal the amount of the Loan and any previously existing New
Mezzanine Loan(s), if any, immediately prior to the restructuring, (ii) the
weighted average spread above LIBOR of the Loan and any New Mezzanine Loan(s),
if any, immediately following such restructuring, shall, in the aggregate,
equal the weighted average spread for all of the Loan and any previously
existing New Mezzanine Loan(s), if any, immediately prior to the restructuring,
and (iii) the debt service payments on the Loan and any New Mezzanine Loan(s),
if any, as calculated immediately following such restructuring, shall equal the
aggregate debt service payments which would have been payable under the Loan
and any previously existing New Mezzanine Loan(s), if any, had the
restructuring not occurred.  Borrowers
shall cooperate with all reasonable requests of Lender in order to restructure
the Loan and/or to create and/or restructure one or more New Mezzanine Loan(s),
if applicable, and shall, upon fifteen (15) Business Days written notice from
Lender, which notice shall include the forms of documents for which Lender is
requesting execution and delivery, (A) execute and deliver such documents,
including, without limitation, in the case of any New Mezzanine Loan, a
mezzanine note, a mezzanine loan agreement, a pledge and security agreement and
a mezzanine cash management agreement, (B) cause Borrowers’ counsel to deliver
such legal opinions, and (C) create such a bankruptcy remote borrower under
each New Mezzanine Loan as, in each of the case of clauses (A), (B) and (C)
above, shall be reasonably required by Lender and required by any Rating Agency
in connection therewith, all in form and substance reasonably satisfactory to
Lender, including, without limitation, the severance of this Agreement, the
Mortgage and the other Loan Documents if requested by Lender.  Except as may be required in connection with
a Securitization pursuant to Section 9.1 hereof, Borrowers shall not be
obligated to pay any costs or expenses incurred in connection with any such
restructuring as set forth in this Section 9.8.  In the event any Borrower fails to execute
and deliver such documents to Lender within five (5) Business Days following
such written notice by Lender, and Lender sends a second notice to Borrowers
with respect to the delivery of such documents containing a legend clearly
marked in not less than fourteen (14) point bold face type, underlined, in all
capital letters “POWER OF ATTORNEY IN FAVOR OF LENDER DEEMED EFFECTIVE FOR
EXECUTION AND DELIVERY OF DOCUMENTS IF NO RESPONSE WITHIN 5 BUSINESS DAYS”,
each Borrower hereby absolutely and irrevocably appoints Lender as its true and
lawful attorney, coupled with an interest, in its name and stead to make and
execute all documents necessary or desirable to effect such transactions, each
Borrower ratifying all that such attorney shall do by virtue thereof, if any
Borrower fails to execute and deliver such documents within five (5) 

 226
 

Business Days of receipt of such second notice.  It shall be an Event of Default if any
Borrower fails to comply with any of the terms, covenants or conditions of this
Section 9.8 after the expiration of five (5) Business Days after the
second notice thereof.

ARTICLE
X.

MISCELLANEOUS

Section
10.1                            Survival.  This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan Documents.  Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the legal
representatives, successors and assigns of such party.  All covenants, promises and agreements in
this Agreement, by or on behalf of any Borrower, shall inure to the benefit of
the legal representatives, successors and assigns of Lender.

Section
10.2                            Lender’s
Discretion.  Whenever pursuant to
this Agreement, Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Lender, the
decision of Lender to approve or disapprove or to decide whether arrangements
or terms are satisfactory or not satisfactory shall (except as is otherwise
specifically herein provided) be in the sole discretion of Lender and shall be
final and conclusive.  Whenever this
Agreement expressly provides that Lender may not unreasonably withhold its
consent or its approval of an arrangement or term, such provisions shall also
be deemed to prohibit Lender from unreasonably delaying or conditioning such
consent or approval.  Prior to a
Securitization, whenever pursuant to this Agreement the Rating Agencies are
given any right to approve or disapprove, or any arrangement or term is to be
satisfactory to the Rating Agencies, the decision of Lender to approve or
disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory, based upon Lender’s determination of Rating Agency criteria,
shall be substituted therefor.

Section
10.3                            Governing
Law.

(a)                                  THIS
AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER
AND ACCEPTED BY BORROWERS IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE
LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH
STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO
THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS
AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA,
EXCEPT THAT AT ALL 

 227
 

TIMES THE PROVISIONS FOR THE CREATION,
PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS IN ANY
REAL PROPERTY INTEREST CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE
IN WHICH THE APPLICABLE REAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO
THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF
NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN
DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER.  TO THE FULLEST EXTENT PERMITTED BY LAW, EACH
BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE
OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

(b)                                 NOTWITHSTANDING
THE FOREGOING, THIS AGREEMENT IS SUBJECT TO THE GAMING LAWS.  LENDER EXPRESSLY ACKNOWLEDGES AND AGREES THAT
ALL RIGHTS, REMEDIES, POWERS AND OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT
MAY BE EXERCISED ONLY TO THE EXTENT THAT THE EXERCISE THEREOF DOES NOT VIOLATE
ANY APPLICABLE PROVISIONS OF THE GAMING LAWS AND ONLY TO THE EXTENT THAT ANY
APPLICABLE REQUIRED APPROVAL OF ANY GAMING AUTHORITY (INCLUDING PRIOR
APPROVALS) IS OBTAINED.  NOTWITHSTANDING
THE FOREGOING, BORROWERS EXPRESSLY ACKNOWLEDGE AND AGREE THAT THE FACT THAT ANY
GAMING LAW OR THE LACK OF APPROVAL FROM ANY GAMING AUTHORITY MAY PREVENT ANY
BORROWER OR ANY OTHER PERSON FROM TAKING ANY ACTION OR FULFILLING ANY
OBLIGATION HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT WHICH RESULTS IN THE
OCCURRENCE OF AN EVENT OF DEFAULT AND/OR A CIRCUMSTANCE GIVING RISE TO RECOURSE
LIABILITY UNDER SECTION 9.4 HEREOF, SHALL NOT, IN ANY MANNER, LIMIT OR
VITIATE OR BE DEEMED TO LIMIT OR VITIATE SUCH EVENT OF DEFAULT OR SUCH
CIRCUMSTANCE GIVING RISE TO RECOURSE LIABILITY IN ANY MANNER WHATSOEVER.

(c)                                  ANY
LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR ANY BORROWER ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL, AT LENDER’S
OPTION, BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK,
COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW AND, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH
BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON
VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND
EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT
IN ANY 

 228
 

SUIT, ACTION OR PROCEEDING.  EACH BORROWER DOES HEREBY DESIGNATE AND
APPOINT:

CT CORPORATION SYSTEM

111 EIGHTH AVENUE

NEW YORK, NEW YORK 10011

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON
ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND
AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF
SAID SERVICE MAILED OR DELIVERED TO SUCH BORROWER IN THE MANNER PROVIDED HEREIN
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON SUCH
BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.  EACH BORROWER (I) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT
ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

Section
10.4                            Modification,
Waiver in Writing.  No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, or of the Note, or of any other Loan Document, nor consent to any
departure by any Borrower therefrom, shall in any event be effective unless the
same shall be in a writing signed by the party against whom enforcement is sought,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. 
Except as otherwise expressly provided herein, no notice to, or demand
on any Borrower, shall entitle such Borrower or any other Borrower to any other
or future notice or demand in the same, similar or other circumstances.

Section
10.5                            Delay
Not a Waiver.  Neither any failure
nor any delay on the part of Lender in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under the Note or under any other Loan Document, or
under any other instrument given as security therefor, shall operate as or
constitute a waiver thereof, nor shall a single or partial exercise thereof
preclude any other future exercise, or the exercise of any other right, power,
remedy or privilege.  In particular, and
not by way of limitation, by accepting payment after the due date of any amount
payable under this Agreement, the Note or any other Loan Document, Lender shall
not be deemed to have waived any right either to require prompt payment when
due of all other amounts due under this Agreement, the Note or the other Loan
Documents, or to declare a default for failure to effect prompt payment of any
such other amount.

Section
10.6                            Notices.  Except as otherwise required by applicable
law, all notices, consents, approvals and requests required or permitted
hereunder or under any other Loan 

 229
 

Document (each, a “Notice”) shall
be given in writing and shall be effective for all purposes if (a) hand
delivered, (b) sent by reputable overnight courier, (c) sent by (i) certified
or registered United States mail, postage prepaid, return receipt requested or
(ii) expedited prepaid delivery service, either commercial or United States
Postal Service, with proof of attempted delivery, or (d) sent by telecopier
(with answer back acknowledged and followed by a hard copy via one of the other
methods described above), addressed as follows (or to such other address and
Person as shall be designated from time to time by any party hereto, as the
case may be, in a Notice to the other parties hereto in the manner provided for
in this Section 10.6):

If to Lender:                                                                               Column
Financial, Inc.

11 Madison Avenue

New York, New York 10010

Attention: Edmund Taylor

Facsimile No.:  (212) 352-8106

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.:  (917) 326-8433

with a copy to:                                                                 Thelen
Reid Brown Raysman & Steiner LLP

875 Third Avenue

New York, New York 10022

Attention:  Jeffrey B. Steiner, Esq.

Facsimile No.:  (212) 603-2001

Hard Rock/Rand Peppas

with a copy to:                                                                 Administrative
Agent at such time as Column Financial, Inc. has notified Borrowers of a
replacement Administrative Agent and such replacement Administrative Agent’s
address(es) for Notice

If to Borrowers:                                                             Morgans
Hotel Group Co.

475 Tenth Avenue

New York, New York 10018

Re:  Hard Rock

Attention:  Marc Gordon, Chief Investment
Officer

Facsimile No.:  (212) 277-4201

With a copy to:                                                             Wachtell,
Lipton, Rosen & Katz

51 West 52nd Street

29th Floor

New York, New York 10019

Attention:  Stephen Gellman, Esq.

Facsimile No.:  (212) 403-2000

 230
 

With a copy to:                                                             DLJ
Merchant Banking Partners

11 Madison Avenue

New York, New York 10010

Attention:  Ryan Sprott

Facsimile No.:  (212) 743-1667

With a copy to:                                                             Latham
& Watkins LLP

885 Third Avenue

Suite 1000

New York, New York 10022

Attention:  Michelle Kelban, Esq.

Facsimile No.:  (212) 751-4864

With a copy to:                                                             Latham
& Watkins LLP

633 West Fifth Street

Suite 4000

Los Angeles, California 90071

Attention:  Paul Fuhrman, Esq.

Facsimile No.:  (213) 891-8763

A Notice shall be deemed to have been given: in the
case of hand delivery or delivery by a reputable overnight courier, at the time
of delivery; in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; in the case of expedited prepaid
delivery and telecopy, upon the first attempted delivery on a Business Day; or
in the case of telecopy, upon sender’s receipt of a machine-generated
confirmation of successful transmission on a Business Day after advice by
telephone to recipient that a telecopy Notice is forthcoming; provided,
that within three (3) Business Days thereafter, a hard copy of such Notice
shall have been delivered pursuant to the provisions of clause (a), (b)or
(c) of this Section 10.6. 
Any failure to deliver a Notice by reason of a change of address not
given in accordance with this Section 10.6, or any refusal to accept a
Notice, shall be deemed to have been given when delivery was attempted.  Any Notice required or permitted to be given
by any party hereunder or under any other Loan Document may be given by its respective
counsel.  Additionally, any Notice
required or permitted to be given by Lender hereunder or under any other Loan
Document may also be given by the Servicer. 
Any Notice sent to one Borrower shall constitute and shall be deemed to
constitute such Notice to all Borrowers.

Section
10.7                            Trial
by Jury.  TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH BORROWER AND LENDER EACH HEREBY AGREES NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM
OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY EACH BORROWER AND LENDER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. 
EACH 

 231
 

PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.

Section
10.8                            Headings.  The Article and/or Section headings and the
Table of Contents in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.

Section
10.9                            Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.

Section
10.10                     Preferences.  Lender shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by
Borrowers to any portion of the Obligations of Borrowers hereunder.  To the extent Borrowers make a payment or
payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Lender.

Section
10.11                     Waiver
of Notice.  Each Borrower hereby
expressly waives, and shall not be entitled to, any notices of any nature
whatsoever from Lender except with respect to matters for which this Agreement
or the other Loan Documents specifically and expressly provide for the giving
of notice by Lender to Borrowers and except with respect to matters for which
Borrowers are not, pursuant to applicable Legal Requirements, permitted to
waive the giving of notice.

Section
10.12                     Remedies
of Borrowers.  In the event that a
claim or adjudication is made that Lender or its agents have acted unreasonably
or unreasonably delayed acting in any case where by law or under this Agreement
or the other Loan Documents, Lender or such agent, as the case may be, has an
obligation to act reasonably or promptly, each Borrower agrees that neither
Lender nor its agents shall be liable for any monetary damages, and Borrowers’
sole remedies shall be limited to commencing an action seeking injunctive
relief or declaratory judgment.  The
parties hereto agree that any action or proceeding to determine whether Lender
has acted reasonably shall be determined by an action seeking declaratory
judgment.

Section
10.13                     Expenses;
Indemnity.  (a) Borrowers
jointly and severally covenant and agree to pay or, if Borrowers fail to pay,
to reimburse, Lender, within ten (10) days of receipt of notice from Lender,
for all reasonable costs and expenses (including reasonable attorneys’ fees and
disbursements) incurred by Lender in connection with (i) Borrowers’ ongoing
performance of and compliance with Borrowers’ respective agreements and
covenants contained in this Agreement and the other Loan Documents on their
part to be performed or complied with after the Closing Date, including,
without limitation, confirming compliance with environmental, gaming and
insurance requirements; (ii) the negotiation, preparation, execution, delivery
and administration of any consents, amendments, waivers or other modifications
to this Agreement 

 232
 

and the other Loan Documents and any other documents
or matters requested by or benefiting any Borrower; (iii) securing Borrowers’
compliance with their obligations pursuant to the provisions of this Agreement
and the other Loan Documents; (iv) the filing and recording fees and expenses,
title insurance and reasonable fees and expenses of counsel for providing to
Lender all required legal opinions, and other similar expenses incurred in
creating and perfecting the Liens in favor of Lender pursuant to this Agreement
and the other Loan Documents; (v) all fees payable hereunder, including,
without limitation, the Administrative Agent Fee, the Unused Advance Fee and
the fees of the Construction Consultant; (vi) reviewing and processing any
requested Construction Loan Advance or Change Order; (vii) dealing with any
Letter of Credit delivered to Lender hereunder; (viii) subject to the terms
hereof, 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 any Borrower, this
Agreement, the other Loan Documents, any Property, the IP or any other security
given for the Loan; and (ix) enforcing any obligations of or collecting any
payments due from any Borrower under this Agreement or the other Loan Documents
or with respect to any Property or the IP or in connection with any refinancing
or restructuring of the credit arrangements provided under this Agreement in
the nature of a “work-out” or of any insolvency or bankruptcy proceedings; provided,
however, that Borrowers shall not be liable for the payment of any such
costs and expenses to the extent the same arise by reason of the gross
negligence, illegal acts, fraud or willful misconduct of Lender.  Notwithstanding the provisions set forth in
this Section 10.13(a) or in any other provision of this Agreement or the
other Loan Documents, in the event that (A) Lender employs counsel to collect
the Debt, protect or foreclose the Mortgage or as otherwise permitted in this
Agreement and the other Loan Documents and (B) Lender has sold or transferred
any interests in the Note, then Borrowers shall only be responsible for the
attorneys’ fees and expenses of the counsel of one Lender.

(b)                                 Borrowers
shall, jointly and severally, indemnify, defend and hold harmless Lender from
and against any and all other liabilities, obligations, out-of-pocket losses,
actual damages (but not lost revenues, diminution in value and other
consequential damages), penalties, actions, judgments, third party suits, third
party claims, reasonable costs, reasonable expenses and disbursements of any
kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of counsel for Lender in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
Lender shall be designated a party thereto), that may be imposed on, incurred
by, or asserted against Lender in any manner relating to or arising out of (i)
any breach by any Borrower of its obligations under, or any material
misrepresentation by any Borrower contained in, this Agreement or the other
Loan Documents, or (ii) the use or intended use of the proceeds of the Loan
(collectively, the “Indemnified Liabilities”);
provided, however, that Borrowers shall not have any obligation
to Lender hereunder to the extent that such Indemnified Liabilities arise from
the gross negligence, illegal acts, fraud or willful misconduct of Lender.  To the extent that the undertaking to
indemnify, defend and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, Borrowers shall pay
the maximum portion that they are permitted to pay and satisfy under applicable
law to the payment and satisfaction of all Indemnified Liabilities incurred by
Lender.

(c)                                  Borrowers,
jointly and severally, covenant and agree to pay for or, if Borrowers fail to
pay, to reimburse Lender for, any fees and expenses incurred by any Rating 

 233
 

Agency in connection with any consent,
approval, waiver or confirmation obtained from such Rating Agency and required
pursuant to the terms and conditions of this Agreement or any other Loan
Document in connection with any request or approval sought by Borrowers, and
Lender shall be entitled to require payment of such fees and expenses as a
condition precedent to the obtaining of any such consent, approval, waiver or
confirmation; provided, however, that Lender expressly
acknowledges and agrees that Borrowers shall not be required to pay any Rating
Agency surveillance charges.

Section
10.14                     Schedules
and Exhibits Incorporated.  The
Schedules and Exhibits annexed hereto are hereby incorporated herein as a part
of this Agreement with the same effect as if set forth in the body hereof.

Section
10.15                     Offsets,
Counterclaims and Defenses.  Any
assignee of Lender’s interest in and to this Agreement, the Note and the other
Loan Documents shall take the same free and clear of all offsets, counterclaims
or defenses which are unrelated to such documents which Borrowers may otherwise
have against any assignor of such documents, and no such unrelated counterclaim
or defense shall be interposed or asserted by any Borrower in any action or
proceeding brought by any such assignee upon such documents and any such right
to interpose or assert any such unrelated offset, counterclaim or defense in
any such action or proceeding is hereby expressly waived by each Borrower to
the extent permitted by applicable law.

Section
10.16                     No
Joint Venture or Partnership; No Third Party Beneficiaries.

(a)                                  Borrowers
and Lender intend that the relationships created hereunder and under the other
Loan Documents be solely that of borrower and lender.  Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between any Borrower and Lender nor to grant Lender any interest
in any Property or the IP other than that of mortgagee, beneficiary or lender.

(b)                                 This
Agreement and the other Loan Documents are solely for the benefit of Lender and
Borrowers and nothing contained in this Agreement or the other Loan Documents
shall be deemed to confer upon anyone other than Lender and Borrowers any right
to insist upon or to enforce the performance or observance of any of the
obligations contained herein or therein. 
All conditions to the obligations of Lender to make the Loan hereunder
and/or to disbursements from the Reserve Funds are imposed solely and
exclusively for the benefit of Lender and no other Person shall have standing
to require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make the Loan and/or will refuse
to make any disbursement from any Reserve Fund in the absence of strict
compliance with any or all thereof and no other Person shall under any
circumstances be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by Lender if, in Lender’s sole
discretion, Lender deems it advisable or desirable to do so.

(c)                                  Without
limiting the generality of Section 10.16(a) hereof, Borrowers expressly
acknowledge and agree that: (i) DLJ Merchant Banking, Inc. is an affiliate of
Lender and various of its indirect subsidiaries and/or affiliates own indirect
ownership interests in each Borrower (the “DLJ
Entities”), and (ii) neither the Lender named herein nor any
successor or assign thereof shall have any liability to any Borrower as a
result of such 

 234
 

relationship between Lender and the DLJ
Entities, including, without limitation, under any theory of lender liability.

(d)                                 The
benefits of this Agreement shall not inure to any third party, nor shall
this Agreement be construed to make or render Lender liable to any Trade
Contractors including any Major Contractors or others for goods and materials
supplied or work and labor furnished in connection with the construction or
rehabilitation of the Project or for debts or claims accruing to any such
Persons against Borrowers.  Lender shall
not be liable for the manner in which any Construction Loan Advances under this
Agreement may be applied by Borrowers, any Major Contractor or any of Borrower’s
other Trade Contractors.  Notwithstanding
anything contained in the Loan Documents, or any conduct or course of conduct
by the parties hereto, before or after signing the Loan Documents, this
Agreement shall not be construed as creating any rights, claims or causes of
action against Lender, or any of its officers, directors, agents or employees,
in favor of any Major Contractor or other Trade Contractor, or any of their
respective creditors, or any other Person. 
Without limiting the generality of the foregoing, Construction Loan
Advances made directly to any Major Contractor or other Trade Contractor pursuant
to any requests for Construction Loan Advances, whether or not such request is
required to be approved by Borrowers, shall not be deemed a recognition by
Lender of a third-party beneficiary status of any such Person.

(e)                                  Observation,
inspection and approvals by Lender of the Plans and Specifications, the
construction of the Project and/or the workmanship and materials used therein
shall impose no responsibility or liability of any nature whatsoever on Lender
or Lender’s Construction Consultant and no Borrower, Trade Contractor or other
interested Person, under any circumstances, shall be entitled to rely upon such
inspections and approvals by Lender or Lender’s Construction Consultant for any
reason.  Approvals granted by Lender for
any matters covered under this Agreement shall be narrowly construed to cover
only the parties and facts identified in any such approval.

(f)                                    All
terms, provisions, covenants and other conditions of the obligations of Lender
to make Construction Loan Advances hereunder are imposed, and all funds held by
Lender pursuant to this Agreement are held, solely and exclusively for the
benefit of Lender.  No Person, other than
Borrowers, shall have standing to require satisfaction of such terms,
provisions, covenants and other conditions in accordance with their terms;
neither Borrowers nor any other Person shall be entitled to assume that Lender
will refuse to make Construction Loan Advances in the absence of strict
compliance with any or all of such terms, covenants and other conditions; and
no Person, other than Borrowers, shall be entitled to require any particular
application of such funds (but Borrowers shall be entitled to require the
application of such funds as provided in this Agreement).  No one, other than Lender, under any circumstances,
shall be deemed to be beneficiary of such terms, provisions, covenants and
other conditions, any or all of which may be freely waived, in whole or in
part, by Lender at any time if, in Lender’s discretion, Lender deems it
advisable or desirable to do so.

Section
10.17                     Publicity.  All news releases, publicity or advertising
by any Borrower or their Affiliates through any media intended to reach the
general public which refers to the Loan Documents or the financing evidenced by
the Loan Documents or to Lender, Credit Suisse or any of their Affiliates shall
be subject to the prior approval of Lender not to be unreasonably 

 235
 

withheld, conditioned or delayed.  Notwithstanding the foregoing, disclosure
required by applicable state or federal securities laws, rules or regulations
or other applicable Legal Requirements, or as customarily and reasonably
requested by any Gaming Authorities, shall not be subject to Lender’s prior
written approval.

Section
10.18                     Waiver
of Marshalling of Assets.  To the
fullest extent permitted by law, each Borrower, for itself and its successors
and assigns, waives all rights to a marshalling of the assets of any Borrower,
any Borrower’s partners and others with interests in any Borrower, and of any
Property or the IP, or to a sale in inverse order of alienation in the event of
foreclosure of the Mortgage, and agrees not to assert any right under any laws
pertaining to the marshalling of assets, the sale in inverse order of
alienation, homestead exemption, the administration of estates of decedents, or
any other matters whatsoever to defeat, reduce or affect the right of Lender
under the Loan Documents to a sale of any Property and/or the IP for the
collection of the Debt without any prior or different resort for collection or
of the right of Lender to the payment of the Debt out of the net proceeds of
the Properties and/or the IP in preference to every other claimant
whatsoever.  In addition, to the fullest
extent permitted by law, each Borrower, for itself and its successors and
assigns, waives in the event of foreclosure of the Mortgage, any equitable
right otherwise available to such Borrower which would require the separate
sale of any Property and/or the IP or require Lender to exhaust its remedies
against any Property and/or the IP before proceeding against any other Property
and/or the IP; and further in the event of such foreclosure, each Borrower does
hereby expressly consent to and authorize, at the option of Lender, the
foreclosure and sale either separately or together of any combination of the
Properties and the IP.

Section
10.19                     Waiver
of Counterclaim.  To the fullest
extent permitted by law, each Borrower hereby waives the right to assert a
counterclaim, other than a compulsory counterclaim, in any action or proceeding
brought against it by Lender or its agents or otherwise to offset any
Obligations under the Loan Documents.  No
failure by Lender to perform any of its obligations hereunder shall be a valid
defense to, or result in any offset against, any payments which any Borrower is
obligated to make under any of the Loan Documents.

Section
10.20                     Conflict;
Construction of Documents; Reliance. 
In the event of any conflict between the provisions of this Agreement
and any of the other Loan Documents, the provisions of this Agreement shall
control.  The parties hereto acknowledge
that they were represented by competent counsel in connection with the
negotiation, drafting and execution of the Loan Documents and that such Loan
Documents shall not be subject to the principle of construing their meaning
against the party which drafted same. 
Each Borrower acknowledges that, with respect to the Loan, such Borrower
shall rely solely on its own judgment and advisors in entering into the Loan
without relying in any manner on any statements, representations or recommendations
of Lender or any parent, subsidiary or Affiliate of Lender.  Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under any
of the Loan Documents or any other agreements or instruments which govern the
Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of
Lender of any equity interest any of them may acquire in any Borrower, and each
Borrower hereby irrevocably waives the right to raise any defense or take any action
on the basis of the foregoing with respect to Lender’s exercise of any such
rights or remedies.  Each Borrower
acknowledges that Lender engages in the business of real estate financings and
other real estate transactions and 

 236
 

investments which may be viewed as adverse to or
competitive with the businesses of Borrowers or their Affiliates.

Section
10.21                     Brokers
and Financial Advisors.

(a)                                  Each
Borrower hereby represents that neither it nor any of its Affiliates has dealt
with any financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this
Agreement.  Each Borrower hereby agrees
to indemnify, defend and hold Lender harmless from and against any and all
third-party claims, liabilities, out-of-pocket costs and reasonable expenses of
any kind (including Lender’s reasonable attorneys’ fees and expenses (but only
for one (1) set of attorneys)) in any way relating to or arising from a claim
by any Person that such Person acted on behalf of any Borrower or an Affiliate
of any Borrower in connection with the transactions contemplated herein.  The provisions of this Section 10.21(a)
shall survive the expiration and termination of this Agreement and the payment
of the Debt.

(b)                                 Lender
hereby represents that neither it nor any of its Affiliates has dealt with any
financial advisors, brokers, underwriters, placement agents, agents or finders
in connection with the transactions contemplated by this Agreement.  Lender hereby agrees to indemnify, defend and
hold Borrowers harmless from and against any and all third-party claims,
liabilities, out-of-pocket costs and reasonable expenses of any kind (including
Borrowers’ reasonable attorneys’ fees and expenses (but only for one (1) set of
attorneys)) in any way relating to or arising from a claim by any Person that
such Person acted on behalf of Lender or an Affiliate of Lender in connection
with the transactions contemplated herein. 
The provisions of this Section 10.21(b) shall survive the
expiration and termination of this Agreement and the payment of the Debt.

Section
10.22                     Prior
Agreements.  This Agreement and the
other Loan Documents contain the entire agreement of the parties hereto and
thereto in respect of the transactions contemplated hereby and thereby, and all
prior agreements among or between such parties, whether oral or written,
including, without limitation, (i) the Commitment Letter dated May 11, 2006
between Morgans Hotel Group Co., MHG HR Acquisition Corp and Lender, and (ii)
the Commitment Letter dated December 22, 2006 between Morgans Hotel Group Co.,
MHG HR Acquisition Corp, DLJ Merchant Banking, Inc. and Lender, are superseded
by the terms of this Agreement and the other Loan Documents.

Section
10.23                     Joint
and Several Liability.  The
representations, covenants, warranties and obligations of Borrowers hereunder
are joint and several.

Section
10.24                     Certain
Additional Rights of Lender (VCOC). 
Notwithstanding anything to the contrary contained in this Agreement,
Lender shall have:

(a)                                  subject
to applicable Gaming Laws, the right to routinely consult with and advise each
Borrower’s management regarding the significant business activities and
business and financial developments of each Borrower; provided, however,
that such consultations shall not include discussions of environmental
compliance programs or disposal of hazardous substances.  Consultation meetings should occur on a
regular basis (no less frequently 

 237
 

than quarterly) with Lender having the right
to call special meetings at any reasonable times and upon reasonable advance
notice;

(b)                                 the
right, in accordance with the terms of this Agreement, to examine the books and
records of each Borrower at any reasonable times upon reasonable notice;

(c)                                  the
right, in accordance with the terms of this Agreement, including, without
limitation, Section 5.1.11 hereof, to receive monthly, quarterly and
year-end financial reports, including balance sheets, statements of income,
shareholder’s equity and cash flow, a management report and schedules of
outstanding indebtedness; and

(d)                                 the
right, without restricting any other rights of Lender under this Agreement
(including any similar right), to approve any acquisition by any Borrower of
any other significant property (other than (i) personal property required for
the day to day operation of any Property and (ii) to the extent any such
acquisition is contemplated in the Approved Annual Budget then in effect).

The rights described above in this Section 10.24
may be exercised by any entity which owns and Controls, directly or indirectly,
substantially all of the interests in Lender.

Section
10.25                     Future
Funding, Participations and Assignment.

(a)                                  Borrowers
hereby acknowledge that Lender intends, at Lender’s sole cost and expense, to
transfer the Note and the other Loan Documents to one or more special purpose
entities in one or more transactions (collectively, with their respective
successors, assigns and beneficiaries, the “Trust”)
in connection with the issuance of Securities. 
Whether or not any such transfer occurs, it is intended that a
participation agreement (the “Participation
Agreement”) will be executed and delivered pursuant to which (i) one
or more senior participation interests will be created representing a portion
of the principal amount of the Note previously advanced, and (ii) one or more
junior participation interests (each, a “Junior
Participation”) will be created which may or may not represent
funded portions of the Note and shall represent all future funding obligations
under the Note.  Each Junior
Participation will be transferred to one or more third parties (in such
capacity, each, a “Junior Holder”).  The documentation associated with the Note
obligates Lender to make future advances of funds to Borrowers with respect to
the Properties (such obligation, the “Future
Funding Obligations”).  Lender
will not transfer the Future Funding Obligations to the Trust, but instead to
one or more Junior Holders.  By its
execution and delivery of this Agreement and its acceptance of the Loan on the
date hereof in accordance with the terms hereof, Borrowers hereby acknowledge,
confirm and agree that: (i) the Note may be transferred to the Trust; (ii)
whether or not the Note has been or ever is transferred to the Trust, any and
all Junior Participations will be transferred to one or more Junior Holders;
(iii) from and after the date of transfer to the Junior Holders, the Future
Funding Obligations will be solely the obligation of the applicable Junior
Holder(s), on the same terms and conditions specified in the Note and the
related Loan Documents; and (iv) Borrowers will not have any right of offset or
other claim against any Trust (or its assigns or beneficiaries) as holder of
the Note or any interest therein in connection with the Future Funding Obligations
or against any Junior Holder, other than with respect to the Future Funding
Obligations associated with its Junior Participation.

 238
 

(b)                                 Lender
and/or any Junior Holder may assign, transfer or sell all or any portion of its
Future Funding Obligation and shall thereafter be relieved of such Future
Funding Obligation, provided that such assignee at the time of
assignment assumes such Future Funding Obligation in writing in a manner
directly enforceable by, and reasonably acceptable to, Borrowers and such
assumption is delivered to Borrowers.  At
such time as Lender has so transferred all of the Future Funding Obligations
pursuant to this Section 10.25, the named Lender hereunder shall have no
Future Funding Obligations hereunder or under the other Loan Documents.  Notwithstanding the foregoing, Lender
expressly agrees that no matter how many participations Lender may create,
assign, transfer or sell with respect to the Future Funding Obligations,
Borrowers shall only have to deal with the Administrative Agent in connection
with obtaining any Advance under the Future Funding Obligations.

ARTICLE
XI.

INTENTIONALLY OMITTED

ARTICLE
XII.

GAMING PROVISIONS

Section
12.1                            Operation
of Casino Component.

(a)                                  Borrowers
shall (i) cause HRHI to observe and perform the obligations imposed upon the
lessor under the Gaming Sublease in a commercially reasonable manner; (ii)
cause HRHI to enforce the terms, covenants and conditions contained in the
Gaming Sublease and the Gaming Recognition Agreement upon the part of the Gaming
Operator thereunder to be observed or performed in a commercially reasonable
manner and in a manner not to impair the value of the Casino Component or the
Hotel/Casino Property; (iii) not allow any amendment to or termination or
modification of the Gaming Sublease without the consent of Lender, which
consent shall not be unreasonably withheld, other than modifications of a
ministerial and non-monetary nature; (iv) not permit HRHI to collect any of the
rents or other payments due under the Gaming Sublease more than one (1) month
in advance; and (v) not permit HRHI to execute any assignment of its interest
in the Gaming Sublease.

(b)                                 As
soon as practicable after the date hereof, Borrowers shall submit or cause to
be submitted any and all applications, filings and other submissions required
by the Gaming Authorities or pursuant to any Gaming Laws to obtain the Gaming
Licenses necessary to permit the operation of the Casino Component by Gaming
Borrower as contemplated herein. 
Borrowers shall timely pay all application fees, investigative fees and
other costs or fees required by the Gaming Authorities with respect to said
approvals and licenses or arising in connection with the diligent prosecution
of such applications.  Borrowers shall
diligently and comprehensively respond to any inquiries and requests from the
Gaming Authorities and promptly file or cause to be filed any additional
information required in connection with such applications or filings as soon as
practicable after receipt of requests therefor.

(c)                                  Provided
that (i) no Event of Default has occurred and is continuing, (ii) Gaming
Borrower is, pursuant to Gaming Laws, the holder of all Gaming Licenses and all
other Operating Permits and Governmental Approvals necessary for the 

 239
 

operation of the Casino Component as a casino
and the performance of the Casino Component Lease, (iii) the Casino Component
Lease is in full force and effect and no material default beyond applicable
notice and/or cure periods has occurred thereunder, (iv) the Gaming Sublease
has either expired by its own terms or has been properly terminated pursuant to
the terms thereof, and (v) Borrowers have given Lender thirty (30) days prior
written notice, Gaming Borrower shall operate the Casino Component pursuant to
the Casino Component Lease and in accordance with all Gaming Laws and all other
applicable Legal Requirements.  Borrowers
shall thereafter maintain all Gaming Licenses, Operating Permits and
Governmental Approvals necessary for the lawful operation of the Casino
Component as a casino consistent with Comparable Hotel/Casinos and use its
commercially reasonable efforts to operate the Casino Component in a manner
designed to maximize revenues from the Properties in the aggregate.  No Borrowers shall take, permit or omit any
action that would adversely affect the status or good standing of Gaming
Borrower under such Operating Permits, Gaming Licenses or Governmental
Approvals.

(d)                                 Borrowers
hereby acknowledge and agree that the Casino Component Lease and any and all
rights and interests (whether choate or inchoate and including, without
limitation, all mechanic’s and materialmen’s liens under applicable law) owed,
claimed or held, by Gaming Borrower thereunder or otherwise in and to the
Casino Component, shall be in all respects subordinate and inferior to the
liens and security interests created, or to be created, for the benefit of
Lender under the Loan Documents, and securing the repayment of the Note and the
performance of the Obligations, and all renewals, extensions, increases,
supplements, amendments, modifications or replacements thereof.

(e)                                  Borrowers
hereby agree that, at any time after the date the Casino Component Lease
becomes effective, if ever, (i) upon the occurrence and during the continuance
of an Event of Default and at the request of Lender, Gaming Borrower shall
continue to perform all of its obligations under the terms of the Casino
Component Lease with respect to the Casino Component, (ii) upon and after
foreclosure, deed in lieu of foreclosure or other similar transfer of the
Casino Component to a Lender Successor Owner, Gaming Borrower shall (A)
recognize such Lender Successor Owner as the lessor under the Casino Component
Lease, (B) not exercise any right to terminate the Casino Component Lease, and
(C) at the request of such Lender Successor Owner, continue to operate and
manage the Casino Component and maintain all applicable Gaming Licenses with
respect to the Casino Component for a period not to exceed fifteen (15) months
after the effective date of such transfer to such Lender Successor Owner (which
period shall in all events terminate upon Lender Successor Owner’s appointment
of a new gaming operator possessing all Gaming Licenses and other Governmental
Approvals necessary to conduct all gaming operations at the Hotel/Casino
Property, subject to Gaming Borrower’s obligation to transfer its
responsibilities under the Casino Component Lease to such new gaming operator
and to reasonably cooperate with the transition of the gaming operations from
Gaming Borrower to such new gaming operator), in accordance with the terms of
the Casino Component Lease; provided that such Lender Successor Owner
shall be obligated to pay a then market rate casino management fee which is
reasonable and customary for similar casinos in Las Vegas, Nevada, and (iii) at
any time after foreclosure, deed in lieu of foreclosure or other similar
transfer of the Casino Component to a Lender Successor Owner, at the option of
such Lender Successor Owner exercised by written notice to Gaming Borrower,
such Lender Successor Owner shall have the right to terminate the Casino
Component Lease without penalty or termination fee.

 240
 

(f)                                    Upon
the occurrence and during the continuance of an Event of Default, Lender may
elect, upon written notice, to require Gaming Borrower or any other Borrower to
surrender or relinquish one or more or all of the Gaming Licenses held by such
Person(s).  If Gaming Borrower or such
other Borrower fails or refuses to so relinquish such Gaming License(s) within
five (5) Business Days after receipt of such written notice, then Lender is
hereby appointed (which appointment is coupled with an interest) as each
Borrower’s attorney in fact with full authority to surrender or relinquish each
such Gaming License on each such Borrower’s behalf, the foregoing power being
irrevocable and coupled with an interest.

(g)                                 Gaming
Borrower agrees to (i) execute such affidavits and certificates as Lender shall
reasonably require to further evidence the agreements herein contained, (ii) on
request from Lender, furnish Lender with copies of such information as
Hotel/Casino Borrower is entitled to receive under the Casino Component Lease,
and (iii) cooperate with Lender’s representative in any inspection of all or
any portion of the Casino Component from time to time at reasonable times
during business hours.

(h)                                 Lender
agrees to cooperate with all Gaming Authorities in connection with the
administration of its regulatory jurisdiction over the Gaming Operator, Gaming
Borrower and any other Person licensed by or registered with the Gaming
Authorities, including the provision of such documents or other information as
may be requested by the Gaming Authorities relating to the Gaming Sublease, the
Casino Component Lease or the Loan Documents. 
Additionally, Lender acknowledges and understands that (a) it is subject
to being called forward by the Gaming Authorities, in their discretion, for
licensing or a finding of suitability, (b) all rights, remedies and powers
provided in this Agreement may be exercised only to the extent the exercise
thereof does not violate any applicable Gaming Laws, and (c) to the extent
prior approval of the Gaming Authorities is required pursuant to applicable
Gaming Laws for the exercise, operation and effectiveness of any remedy hereunder
or under any other Loan Document, or the taking of any action that may be taken
by Lender hereunder or under any other Loan Document, such remedy or action
shall be subject to such prior approval of the Gaming Authorities, but the
foregoing acknowledgements shall not be read or construed, in any manner or at
any time, to qualify or limit any representation, warranty, covenant, agreement
or obligation of any Borrower herein, including, without limitation, any of the
same relating to the due authorization, execution, delivery, performance and/or
enforceability of any Loan Document, or any assignment, issuance, granting or
remedy evidenced, created or effected thereby. 
Notwithstanding the foregoing, Borrowers expressly acknowledge and agree
that Lender shall not be liable to any Borrower or any other Person for any
loss, cost, damage, fine or other expense suffered by any Borrower or any other
Person resulting from Lender’s cooperation with, appearance before, or
provision of information or documents to, any Gaming Authority as contemplated
in this Sections 12.1(h), except for Lender’s gross negligence, willful
misconduct or fraud.

Section
12.2                            Gaming
Liquidity Requirements.  From and
after the date, if ever, upon which Gaming Borrower becomes the Gaming Operator
in accordance with the terms of this Agreement, Borrowers shall furnish to
Lender, within five (5) Business Days following the end of each calendar month,
an Officer’s Certificate certifying as to the amount of the Gaming Liquidity
Requirement (including a calculation of the determination thereof) and the
Gaming Operating Reserve with respect to such month, including any changes to
the foregoing during 

 241
 

such month, the foregoing to be in form and substance
reasonably acceptable to Lender (the “Monthly Gaming Requirement
Certificate”).

ARTICLE
XIII.

RIGHT OF FIRST OFFER

Section
13.1                            Right
of First Offer.  Prior to seeking any
Refinancing Loan and/or any commitment for a Refinancing Loan, Borrowers shall
first notify Credit Suisse in writing (the “Right of
First Offer Notice”) of its intention to obtain any such Refinancing
Loan, which Right of First Offer Notice shall (a) contain the Material Economic
Terms which Borrowers would, in good faith, expect to receive in the market for
loans similar in type to the Refinancing Loan being sought, and (b) offer (in
each case, a “Right of First Offer”) to Credit
Suisse the opportunity to consider whether or not Credit Suisse (or an
Affiliate thereof) will provide the Refinancing Loan on Material Economic Terms
substantially similar to the Material Economic Terms contained in the Right of
First Offer Notice.  For the purposes of
this Article XIII, “Material Economic Terms”
shall mean, collectively, the term of the facility, the approximate amount of
the facility, the type of facility (i.e., fixed rate v. floating rate;
interest only v. amortization), interest rate, points and other fees,
guarantors and types of guaranty agreements, use of deposits/reserves, required
equity, and net worth and liquidity requirements.  For purposes only of (i) this Article XIII,
and (ii) the definition of Applicable Exit Rate Percentage set forth in Section
1.1 hereof, the term “Credit Suisse” shall also include any Affiliate of
Credit Suisse.

Section
13.2                            Right
of First Offer Procedure.  The Right
of First Offer shall be subject to the procedure set forth below.

(a)                                  As
and when Borrowers determine that they will seek to obtain a Refinancing Loan,
Borrowers shall promptly send to Credit Suisse the Right of First Offer Notice.

(b)                                 Upon
receipt of the Right of First Offer Notice, Credit Suisse shall have the right
to request all information and materials relating to Borrowers, their direct
and indirect principals and the Properties that Credit Suisse shall reasonably
require in order to evaluate whether or not it will seek to obtain the
requisite internal approvals (the “Internal
Approvals”) to extend a Refinancing Loan (collectively, the “Right of First Offer Information and Materials”)
and Borrowers hereby agree to cooperate with Credit Suisse in all reasonable
respects in connection with providing the Right of First Offer Information and
Materials.  Such request for the Right of
First Offer Information and Materials shall be made within five (5) Business
Days of Credit Suisse’s receipt of the Right of First Offer Notice.

(c)                                  If
Credit Suisse is not willing to consider the Refinancing Loan, Credit Suisse
shall, prior to the expiration of the period ending thirty (30) days after
Credit Suisse’s receipt of the Right of First Offer Information and Materials,
deliver to Borrowers a written notice to such effect (“Lender’s Rejection Notice”).  Upon receipt of Lender’s Rejection Notice,
Borrowers shall then have the right to solicit Third Party Lenders to provide a
Refinancing Loan.

 242
 

(d)                                 (d)                                 If
Credit Suisse is willing to consider the Refinancing Loan, Credit Suisse shall,
prior to the expiration of the period ending thirty (30) days after Credit
Suisse’s receipt of the Right of First Offer Information and Materials, deliver
to Borrowers a term sheet containing Material Economic Terms substantially
similar to the Material Economic Terms contained in the Right of First Offer
Notice upon which Credit Suisse is prepared to seek the Internal Approvals to
extend the Refinancing Loan (the “ROFO Term
Sheet”), it being understood that such ROFO Term Sheet shall not be
binding upon Credit Suisse and shall in no event be deemed a commitment by
Credit Suisse to lend.  If Credit Suisse
does not deliver a ROFO Term Sheet within such thirty (30) day period, Credit
Suisse shall be deemed to be unwilling to provide the Refinancing Loan on the
Material Economic Terms contained in the Right of First Offer Notice and the
terms and conditions of clause (c) above shall be applicable.

(e)                                  Credit
Suisse shall not be liable in any manner whatsoever for (i) failure to deliver
any notice or documents specified herein or (ii) its failure to continue to
consider whether or not it will commit to extend the Refinancing Loan.

Section
13.3                            Application
to Credit Suisse.  Borrowers expressly
acknowledge and agree that Borrowers shall afford the rights under this Article
XIII to Credit Suisse whether or not Credit Suisse or any Affiliate thereof
is then “Lender” under this Agreement and the other Loan Documents.

[NO FURTHER TEXT ON THIS PAGE]

 243

IN WITNESS WHEREOF, the parties
hereto have caused this Loan Agreement to be duly executed by their duly
authorized representatives, all as of the day and year first above written.

	
  

  	
  HRHH HOTEL/CASINO, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Richard Szymanski

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Szymanski

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HRHH CAFE, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Marc Gordon

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Marc Gordon

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HRHH DEVELOPMENT, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Marc Gordon

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Marc Gordon

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HRHH IP, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Richard Szymanski

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Szymanski

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
							

 

 

	
  

  	
  HRHH GAMING, LLC,

  
	
   

  	
  a Nevada limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Richard Szymanski

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Szymanski

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

 

	
  

  	
  COLUMN FINANCIAL, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Roman Marin

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Roman Marin

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

EXHIBIT D

CONSTRUCTION GUARANTY OF
COMPLETION

This CONSTRUCTION GUARANTY OF COMPLETION (this “Guaranty”) is executed as of February 2, 2007, by MORGANS GROUP LLC, a Delaware limited liability company,
having an address at 475 Tenth Avenue, New York, New York 10018, Attention:
Marc Gordon, Chief Investment Officer (“Morgans Guarantor”),
and by DLJ MB IV HRH, LLC, a Delaware limited
liability company, having an address c/o DLJ Merchant Banking Partners, 11
Madison Avenue, New York, New York 10010, Attention: Ryan Sprott (“DLJ Guarantor”; and collectively with Morgans Guarantor,
each individually, a “Guarantor”,  and collectively, “Guarantors”), jointly and severally, for
the benefit of COLUMN FINANCIAL, INC.,
a Delaware corporation, having an address at 11 Madison Avenue, New York,
New York 10010 (together with its successors and assigns, “Lender”).

RECITALS:

A.            Pursuant
to that certain Promissory Note, dated of even date herewith, executed by HRHH HOTEL/CASINO, LLC, a Delaware
limited liability company (“Hotel/Casino
Borrower”), HRHH CAFE, LLC,
a Delaware limited liability company (“Café
Borrower”), HRHH
DEVELOPMENT, LLC, a Delaware limited liability company (“Adjacent Borrower”), HRHH IP, LLC, a Delaware limited
liability company (“IP Borrower”),
and HRHH GAMING, LLC, a Nevada limited liability company (“Gaming
Borrower”; and each of Hotel/Casino Borrower, Café Borrower,
Adjacent Borrower, IP Borrower and Gaming Borrower, individually, a “Borrower”, and collectively, “Borrowers”), and payable to the order of
Lender in the original principal amount of up to One Billion Three Hundred Sixty Million and
00/100 Dollars ($1,360,000,000.00) (as the same may be amended,
restated, replaced, supplemented, or otherwise modified from time to time, the “Note”), Borrowers have become indebted, and may from time
to time be further indebted, to Lender with respect to a loan (the “Loan”) made pursuant to that certain Loan Agreement, dated
as of the date hereof, among Borrowers and Lender (as the same may be amended,
restated, replaced, supplemented, or otherwise modified from time to time, the “Loan Agreement”), which Loan is secured by, among other
things, that certain Construction Deed
of Trust, Assignment of Leases and Rents, Security Agreement and
Financing Statement (Fixture Filing), dated as of the date hereof (as the same
may be amended, restated, replaced, supplemented, or otherwise modified from
time to time, the “Security Instrument”),
given by Borrowers, as grantees, for the benefit of Lender, encumbering, among
other properties, certain real property and the improvements thereon located in
Las Vegas, Nevada and more particularly described on Exhibits A-1 (the “Hotel/Casino Property”) and A-2
(the “Adjacent Property”; and the
Hotel/Casino Property and the Adjacent Property, individually, a “Property”, and collectively, the “Properties” ) attached hereto and made a
part hereof, and further evidenced, secured or governed by other instruments
and documents executed in connection with the Loan (together with the Note, the
Loan Agreement and the Security Instrument, collectively, the “Loan Documents”).

B.            Lender
is not willing to make the Loan, or otherwise extend credit, to Borrowers
unless each Guarantor unconditionally guarantees payment and performance to
Lender of the Guaranteed Obligations (as herein defined).

C.            Each
Guarantor is the owner of a direct or indirect interest in each Borrower, and
each Guarantor will directly benefit from Lender’s making the Loan to
Borrowers.

D.            All
capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to such term in the Loan Agreement.

NOW, THEREFORE, as an inducement to Lender to make the
Loan to Borrowers, and to extend such additional credit as Lender may from time
to time extend under the Loan Documents, and for $10.00 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          Guaranteed
Obligations.

(a)                   Subject to Section 1.1(b) hereof, each
Guarantor hereby jointly and severally, irrevocably, absolutely and
unconditionally guarantees to Lender the full, complete and punctual payment,
performance and satisfaction of all of the obligations, duties, covenants and
agreements of Borrowers under the Loan Agreement relating to the Project,
substantially in compliance with the Plans and Specifications, the Loan Budget,
the Construction Schedule and all applicable Legal Requirements, within the
time frame required by the Loan Agreement, including, without limitation:

(i)            to diligently
commence, perform and complete (or cause to be commenced, performed and
completed) the construction of the Project in accordance with the terms of the
Loan Agreement;

(ii)           to pay all Project
Costs associated with the Project, including, without limitation, all Hard
Costs, Soft Costs and other obligations, liabilities, costs and expenses
incurred in connection with the completion of the Project, as the same may
become due and payable (excluding Operating Expenses and interest on the Loan);

(iii)          to keep the
Properties free and clear of all Liens or claims of Liens arising or incurred
in connection with the completion of the Project, other than Permitted
Encumbrances and any such Liens being contested pursuant to, and in accordance
with, Section 3.6(b) of the Security Instrument, and if any Liens should be
filed, or should attach, with respect to any Property by reason of the carrying
out of the Project, within fifteen (15) Business Days after obtaining notice
thereof (but in any event prior to the date on which such Property or any part
thereof or interest therein may be in imminent danger of being sold, forfeited,
foreclosed, terminated, cancelled or lost), other than any such Liens being
contested pursuant to, and in accordance with, Section 3.6(b) of the Security
Instrument, to either (A) cause the removal of such Liens or (B) post security
against the consequences of their possible foreclosure and procure an
endorsement to the 

 2
 

Title
Insurance Policy insuring Lender against the consequences of the foreclosure or
enforcement of such Liens;

(iv)          to pay the premiums
for all policies of insurance required to be furnished by Borrowers pursuant to
the Loan Agreement during the performance of the Project if such premiums are
not paid by Borrowers;

(v)           if Lender exercises
its rights to complete any of the Project pursuant to the Loan Agreement, this
Guaranty or any of the other Loan Documents, to pay or reimburse Lender for any
and all costs and expenses incurred by Lender in completing the Project;

(vi)          to pay all claims
relating to the foregoing before they become delinquent;

(vii)         to correct or cause
to be corrected any material defect in the Project, as reasonably determined by
the Architect and the Construction Consultant or, if the Architect and the
Construction Consultant cannot reasonably agree, then as determined pursuant to
the most expedited form of arbitration available for such disagreement under
the rules of the American Arbitration Association, such arbitration to be held
in New York, New York; and

(viii)        to pay any and all
costs, expenses, liabilities, claims and amounts required to be paid by
Guarantors pursuant to Section 1.7 or any other provision hereof (the “Enforcement Costs”).

(b)                   Notwithstanding anything contained herein to the
contrary, the maximum aggregate liability of Guarantors under the foregoing Section
1.1(a) (excluding Enforcement Costs with respect to which there shall be no
limit hereunder), shall not exceed an amount equal to 22.5% of the total Loan
Budget less the amount of the interest Line Item (the “Guaranteed Obligations Cap”).

(c)                   Each Guarantor hereby jointly and severally,
irrevocably, absolutely and unconditionally guarantees to Lender the full,
complete and punctual payment, performance and satisfaction of all of the
obligations, duties, covenants and agreements of Borrowers under Section
3.22 of the Loan Agreement relating to restoration of the Properties
following Borrowers election to terminate construction of the Project,
substantially in compliance with all applicable Legal Requirements and to the
reasonable satisfaction of the Construction Consultant, including, without
limitation:

(i)            to diligently
commence, perform and complete (or cause to be commenced, performed and
completed) the restoration of the Properties to the extent required under, and
in accordance with the terms of, the Loan Agreement;

(ii)           to pay all costs
associated with such restoration, including, without limitation, all hard
costs, soft costs and other obligations, liabilities, costs and expenses
incurred in connection with the completion of such restoration, as the same may
become due and payable;

 3
 

(iii)          to keep the
Properties free and clear of all Liens or claims of Liens arising or incurred
in connection with such restoration, other than Permitted Encumbrances and any
such Liens being contested pursuant to, and in accordance with, Section 3.6(b)
of the Security Instrument, and if any Liens should be filed, or should attach,
with respect to any Property by reason of the carrying out of such restoration,
within fifteen (15) Business Days after obtaining notice thereof (but in any
event prior to the date on which such Property or any part thereof or interest
therein may be in imminent danger of being sold, forfeited, foreclosed,
terminated, cancelled or lost), other than any such Liens being contested
pursuant to, and in accordance with, Section 3.6(b) of the Security Instrument,
to either (A) cause the removal of such Liens or (B) post security against the
consequences of their possible foreclosure and procure an endorsement to the
Title Insurance Policy insuring Lender against the consequences of the
foreclosure or enforcement of such Liens;

(iv)          to pay the premiums
for all policies of insurance required to be furnished by Borrowers pursuant to
the Loan Agreement during the performance of the restorations if such premiums
are not paid by Borrowers;

(v)           if Lender exercises
its rights to complete any of the restoration pursuant to the Loan Agreement,
this Guaranty or any of the other Loan Documents, to pay or reimburse Lender
for any and all costs and expenses incurred by Lender in completing the
restoration; and

(vi)          to pay all claims
relating to the foregoing before they become delinquent;

provided, however, that the foregoing
shall not include the prepayment obligations set forth in Section 3.22(a)(iii)
of the Loan Agreement or the interest reserve obligations set forth in Section
3.22(a)(iv) of the Loan Agreement.

The obligations and liabilities set forth in the foregoing Section
1.1(a), as limited pursuant to the foregoing Section 1.1(b), and the
foregoing Section 1.1(c), are collectively referred to herein as the “Guaranteed
Obligations”; and the
completion obligations with respect to completion of the Project or restoration
from any construction of the Project shall be referred herein as the “Guaranteed Work”.  Each Guarantor hereby acknowledges having
received, reviewed and approved a true and complete copy of the Loan
Agreement.  Each Guarantor hereby
irrevocably and unconditionally covenants and agrees that it is liable for the
Guaranteed Obligations as a primary obligor and not merely as a surety.

1.2          Payment
and Performance by Guarantors.

(a)                   If Borrowers shall fail to diligently proceed with
any of the Guaranteed Work and the completion thereof in accordance with the
provisions of the Loan Agreement, subject to Excusable Delay, or if Borrowers
shall otherwise fail to perform their obligations under the Loan Agreement
relating to the construction or restoration, as applicable, of the Guaranteed
Work, or if any of the other Guaranteed Obligations shall not be paid and
performed when due, then Guarantors, within ten (10) days after a written
demand for payment

 4
 

or performance has been given to Guarantors
by Lender in accordance with the notice provisions hereof, shall pay or perform
the same and if Guarantors shall so pay and perform, Lender shall continue to
disburse the Construction Loan with respect to the construction of the Project
(but not with respect to restoration of the Properties), but only in accordance
with the terms and conditions of the Loan Agreement.  Only with respect to the construction of the
Project (but not with respect to the restoration of the Properties), so long as
Lender continues to disburse the Construction Loan, in accordance with the
terms and conditions of the Loan Agreement, and with respect to the restoration
of the Properties without the condition of funding any portion of the
Construction Loan, Guarantors’ obligations hereunder shall continue in full
force and effect, notwithstanding any default by any Borrower under any other
covenants, terms or conditions set forth in the Loan Documents, commencement
and/or completion of foreclosure proceedings or acquisition by Lender of all or
any portion of any Property through foreclosure or deed in lieu of foreclosure
and, in that regard, all of the covenants, terms or conditions set forth in the
Loan Documents relating in any way to the Guaranteed Obligations shall survive any
such foreclosure or deed in lieu of foreclosure and remain binding obligations
of Borrowers guaranteed by each Guarantor hereunder until the complete payment
and performance of all of the Guaranteed Obligations.

(b)                   Intentionally Omitted.

(c)                   If any Guarantor shall, within fifteen (15) days
after written demand from Lender, fail to diligently undertake the performance
of the Guaranteed Obligations, then Lender shall have the right, at its option,
either before, during or after commencing foreclosure or sale proceedings
against all or any portion of the Property, as the case may be, and before,
during or after pursuing any other right or remedy against Borrower or
Guarantor, to perform any and all of the Guaranteed Obligations by or through
any agent, contractor or subcontractor of its selection, with such changes or
modifications in the applicable Plans and Specifications and in any contracts
or subcontracts relating thereto, all as Lender in its sole discretion deems
proper.  Furthermore, Lender shall have
no obligation to protect or insure any collateral for the Loan, nor shall
Lender have any obligation to perfect its security interest in any collateral
for the Loan.  During the course of any
work related to any Guaranteed Work undertaken by Lender or any other party on
behalf of Lender, Guarantors shall pay on demand any amounts due to
contractors, subcontractors and material suppliers and for permits and licenses
necessary or desirable in connection therewith to the extent such amounts
constitute Guaranteed Obligations hereunder. 
Guarantors’ obligations in connection with any Guaranteed Work related
to the Project undertaken by Lender or any other party on behalf of Lender
shall not be affected by any errors or omissions of Borrowers’ general
contractor or architect, Lender’s consulting architect, or any subcontractor or
agent or employee of any of the foregoing in the design, supervision and/or
performance of the work, it being understood that such risk is assumed by
Guarantors.

(d)                   Satisfaction by Guarantors of any liability
hereunder at any one time with respect to any default by any Borrower shall not
discharge Guarantors with respect to any other default by any Borrower at any
other time (subject to the Guaranteed Obligations Cap with respect to the
Guaranteed Obligations relating to construction of the Project but not
restoration), it being the intent hereof that this Guaranty and the obligations
of Guarantors hereunder shall be continuing and may be enforced by Lender to
the end that Guaranteed Work shall be timely completed, lien free, without
loss, cost, expense, injury or liability of any kind to Lender, subject 

 5
 

to the express terms hereof.  To the extent permitted by applicable law,
all of the remedies set forth herein and/or provided for in any of the Loan
Documents or at law or equity shall be equally available to Lender, and the
choice by Lender of one such alternative over another shall not be subject to
question or challenge by Guarantor or any other Person, nor shall any such
choice be asserted as a defense, setoff, or failure to mitigate damages in any
action, proceeding, or counteraction by Lender to recover or seeking any other
remedy under this Guaranty, nor shall such choice preclude Lender from
subsequently electing to exercise a different remedy.  The parties have agreed to the alternative
remedies provided herein in part because they recognize that the choice of
remedies in the event of a default hereunder will necessarily be and should
properly be a matter of good faith business judgment, which the passage of time
and events may or may not prove to have been the best choice to maximize
recovery by Lender at the lowest cost to Borrowers and/or Guarantors.  It is the intention of the parties that such
good faith choice by Lender be given conclusive effect regardless of such
subsequent developments.  No Guarantor
shall have any right of recourse against Lender by reason of any action Lender
may take or omit to take under the provisions of this Guaranty or under the
provisions of any of the other Loan Documents, except to the extent of Lender’s
gross negligence, willful misconduct or fraud.

1.3          Nature of Guaranty.  This Guaranty is an irrevocable,
unconditional, absolute, continuing guaranty of payment and performance and not
a guaranty of collection.  This Guaranty
may not be revoked by Guarantors and shall continue to be effective with
respect to any Guaranteed Obligations arising or created after any attempted
revocation by any Guarantor and after (if any Guarantor is a natural person) any
Guarantor’s death (in which event this Guaranty shall be binding upon such
Guarantor’s estate and such Guarantor’s legal representatives and heirs).  The fact that at any time or from time to
time the Guaranteed Obligations may be increased (subject to the Guaranteed
Obligations Cap with respect to the Guaranteed Obligations relating to
construction of the Project but not restoration) or reduced shall not release
or discharge the obligation of Guarantors to Lender with respect to the
Guaranteed Obligations.  This Guaranty
may be enforced by Lender and any subsequent holder of the Note and shall not
be discharged by the assignment or negotiation of all or part of the Note.  This Guaranty shall terminate upon the
earlier to occur of (i) payment in full of the Debt, (ii) complete payment and
performance of all of the Guaranteed Obligations, (iii) Final Completion of the
Project, or (iv) with respect to the Guaranteed Obligations relating to
construction of the Project but not restoration, the date upon which Guarantors
have made payments with respect to the Guaranteed Obligations that are equal to
or greater than the Guaranteed Obligations Cap and have paid all Enforcement
Costs incurred by Lender; provided, however, that if, at the time
any of the events set forth in the foregoing clauses (i), (ii) or
(iv), as applicable, shall occur, Guarantors are then in the process of
completing any Guaranteed Work, Guarantors shall, at Lender’s reasonable
expense, reasonably cooperate to transition such completion to Lender or its
designee, including, without limitation, assigning to Lender or its designee
any construction-related contracts not previously assigned to Lender, making
Guarantors’ employees available to Lender or its designee for construction
status briefings and to answer questions regarding construction of the Project
or the restoration, as applicable, and turning over to Lender copies of
Guarantors’ books, records and files relating to the construction and
completion of the Project or the restoration, as applicable.

1.4          Guaranteed
Obligations Not Reduced by Offset.  The Guaranteed Obligations and the
liabilities and obligations of Guarantors to Lender hereunder shall not be 

 6
 

reduced, discharged or released because or by
reason of any existing or future offset, claim or defense of any Borrower
(except the defense of the payment of the Guaranteed Obligations) or any other
party against Lender 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          No
Duty To Pursue Others. 
To the extent permitted by applicable law, it shall not be necessary for
Lender (and each Guarantor hereby waives any rights which such Guarantor may
have to require Lender), in order to enforce the obligations of Guarantors
hereunder, first to (a) institute suit or exhaust its remedies against any
Borrower or others liable on the Loan or the Guaranteed Obligations or any
other Person, (b) enforce Lender’s rights against any collateral which
shall ever have been given to secure the Loan, (c) enforce Lender’s rights
against any other guarantor(s) of the Guaranteed Obligations, (d) join any
Borrower or any others liable on the Guaranteed Obligations in any action
seeking to enforce this Guaranty, or (e) resort to any other means of obtaining
payment of the Guaranteed Obligations. 
Lender shall not be required to mitigate damages or take any other action
to reduce, collect or enforce the Guaranteed Obligations.

1.6          Waivers.  Each Guarantor agrees to the provisions of
the Loan Documents and, to the extent permitted by applicable law, hereby
waives notice of (a) any loans or advances made by Lender to Borrowers,
(b) acceptance of this Guaranty, (c) any amendment or extension of the
Note, the Loan Agreement, the Security Instrument or any other Loan Documents,
(d) the execution and delivery by any Borrower and Lender of any other loan or
credit agreement or of any Borrower’s execution and delivery of any promissory
notes or other documents arising under the Loan Documents or in connection with
any Property, (e) the occurrence of any breach by any Borrower or an Event
of Default, (f) Lender’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 any Borrower,
and (i) any other action at any time taken or omitted by Lender and, generally,
all demands and notices of every kind in connection with this Guaranty, the
Loan Documents, any documents or agreements evidencing, securing or relating to
any of the Guaranteed Obligations and the obligations hereby guaranteed.

1.7          Payment
of Expenses.  In
the event that any Guarantor should breach or fail to timely perform any
provisions of this Guaranty, Guarantors shall, immediately upon written demand
by Lender, pay Lender all reasonable costs and expenses (including, without
limitation, reasonable attorneys’ fees, court costs, filing fees, recording
costs, title insurance premiums, survey costs and expenses of foreclosure)
incurred by Lender in the enforcement hereof or the preservation of Lender’s
rights hereunder.  Notwithstanding the
foregoing, in the event that (i) Lender employs counsel to enforce the
provisions of this Guaranty and (ii) Lender has sold or transferred any
interests in the Note, then Guarantors shall only be responsible for the
attorneys’ fees and expenses of the counsel of only one Lender.

1.8          Payment
by Guarantors.  If
any amount due on the Guaranteed Obligations is not paid to Lender within ten
(10) Business Days after written demand by Lender, the same shall bear interest
at the Default Rate from the date of demand until the date such amount has 

 7
 

been paid in full (which interest shall be
included within the meaning of Guaranteed Obligations).

1.9          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,
Lender must rescind or restore any payment or any part thereof received by
Lender in satisfaction of the Guaranteed Obligations, as set forth herein, any
prior release or discharge from the terms of this Guaranty given to any
Guarantor by Lender shall be without effect and this Guaranty and the
Guaranteed Obligations shall remain in full force and effect.  It is the intention of Borrowers and
Guarantors that Guarantors’ obligations hereunder shall not be discharged
except by Guarantors’ performance of such obligations and then only to the
extent of such performance.

1.10        Waiver
of Subrogation, Reimbursement and Contribution.  Notwithstanding anything to the contrary
contained in this Guaranty, as long as the Debt remains outstanding and to the
extent permitted by applicable law, each Guarantor hereby unconditionally and
irrevocably waives, releases and abrogates any and all rights it may now or
hereafter have under any agreement, at law or in equity (including, without
limitation, any law subrogating any Guarantor to the rights of Lender), to
assert any claim against or seek contribution, indemnification or any other
form of reimbursement from any Borrower or any other party liable for payment
of any or all of the Guaranteed Obligations for any payment made by any
Guarantor under or in connection with this Guaranty or otherwise until such
time as the Guaranteed Obligations have been paid and performed in full.

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

ARTICLE II

EVENTS
AND CIRCUMSTANCES NOT REDUCING

OR DISCHARGING GUARANTORS’ OBLIGATIONS

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

2.1          Modifications;
Sales.

(a)           Any renewal,
extension, increase (subject to the Guaranteed Obligations Cap with respect to
the Guaranteed Obligations relating to construction of the Project but not
restoration), modification, alteration or rearrangement of all or any part of 

 8
 

the Guaranteed
Obligations, the Note, the Loan Agreement, the Security Instrument, the other
Loan Documents or any other document, instrument, contract or understanding
between Borrowers (or any of them) and Lender or any other parties pertaining
to the Guaranteed Obligations, or any sale, assignment or foreclosure of the Note, the Loan Agreement, the
Security Instrument or any of the other Loan Documents or any sale or transfer
of all or any portion of any Property, or any failure of Lender to
notify any Guarantor of any such action.

(b)           Any amendment,
modification or Change Order to the Plans and Specifications and/or the Loan
Budget made in accordance with the terms of the Loan Agreement, Guarantors
expressly acknowledging and agreeing that any of the foregoing which results in
an increase to the Loan Budget shall have the effect of increasing the maximum
dollar amount constituting the Guaranteed Obligations Cap.

2.2          Adjustment.  Any adjustment, indulgence, forbearance or
compromise that might be granted or given by Lender to any Borrower or any
Guarantor or any other party liable for payment of any or all of the Guaranteed
Obligations.

2.3          Condition
of Borrowers or Guarantors.  The insolvency, bankruptcy, arrangement,
adjustment, composition, liquidation, disability, dissolution or lack of power
of any Borrower, any Guarantor or any other party at any time liable for the
payment or performance of all or part of the Guaranteed Obligations; or any
dissolution of any Borrower or any Guarantor or any sale, lease or transfer of
any or all of the assets of any Borrower or any Guarantor or any changes in the
direct or indirect shareholders, partners or members of any Borrower or any
Guarantor; or any reorganization of any Borrower or any 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 exceed 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 Note, the Loan Agreement, the Security Instrument or the other Loan Documents
or otherwise creating the Guaranteed Obligations acted in excess of their
authority, (d) the Guaranteed Obligations violate applicable usury laws,
(e) any Borrower has valid defenses (other than the payment of the
Guaranteed Obligations), claims or offsets (whether at law, in equity or by
agreement) which render the Guaranteed Obligations wholly or partially
uncollectible from such Borrower, (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 Note, the Loan Agreement, the Security
Instrument or any of the other Loan Documents have been forged or otherwise are
irregular or not genuine or authentic, it being agreed that each Guarantor
shall remain liable hereon regardless of whether any Borrower or any other
Person, including any other Guarantor, be found not liable on the Guaranteed
Obligations or any part thereof for any reason.

 9

2.5                  Release
of Obligors. 
Any full or partial release of the liability of any Borrower 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 each Guarantor that such Guarantor may
be required to pay the Guaranteed Obligations in full without assistance or
support of any other party, and such Guarantor has not been induced to enter
into this Guaranty on the basis of a contemplation, belief, understanding or
agreement that other parties will be liable to pay or perform the Guaranteed
Obligations, or that Lender will look to other parties 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                  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.

2.8                  Care
and Diligence. 
The failure of Lender or any other party to exercise diligence or
reasonable care in the preservation, protection, enforcement, sale or other
handling or treatment of all or any part of any collateral, property or
security, including, but not limited to, any neglect, delay, omission, failure
or refusal of Lender (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.

2.9                  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 each Guarantor that such 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.

2.10                Representations.  The accuracy or inaccuracy of the representations and warranties made by
any Guarantor herein or by any Borrower in any of the Loan Documents.

2.11                Offset.  The Note, the Loan
Agreement, the Guaranteed Obligations and the liabilities and obligations of
Guarantors to Lender hereunder shall not be reduced, discharged or released
because of or by reason of any existing or future right of offset, claim or
defense  (except as may be expressly
provided in the Loan Agreement and except that of payment of the Guaranteed
Obligations) of any Borrower against Lender or any other Person, or against
payment of the Guaranteed Obligations, whether such right of offset, claim or
defense arises in 

 10
 

connection with the Guaranteed Obligations (or the transactions
creating the Guaranteed Obligations) or otherwise.

2.12                Merger.  The reorganization, merger or consolidation
of any Borrower into or with any other Person.

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

2.14                Other Actions Taken or
Omitted. 
Any other action taken or omitted to be taken with respect to the Loan
Documents, the Guaranteed Obligations, or the security and collateral therefor,
whether or not such action or omission prejudices any Guarantor or increases
the likelihood that any Guarantor will be required to pay the Guaranteed
Obligations pursuant to the terms hereof, it being the unambiguous and
unequivocal intention of each Guarantor that such 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 Lender to enter
into the Loan Documents and extend credit to Borrowers, each Guarantor
represents and warrants to Lender as follows:

3.1                  Benefit.  Such Guarantor is an affiliate of Borrowers,
is the owner of a direct or indirect interest in each Borrower, 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.  Such Guarantor is familiar with, and has
independently reviewed books and records regarding, the financial condition of
each Borrower and is familiar with the value of any and all collateral intended
to be created as security for the payment of the Note or the Guaranteed
Obligations; however, such Guarantor is not relying on such financial condition
or collateral as an inducement to enter into this Guaranty.

3.3                  No Representation By Lender.  Neither Lender nor any other party has made
any representation, warranty or statement to such Guarantor in order to induce
said Guarantor to execute this Guaranty.

3.4                  Legality.  The execution, delivery and performance by
such Guarantor of this Guaranty and the consummation of the transactions
contemplated hereunder do not and will not contravene or conflict with any law,
statute or regulation whatsoever to which such Guarantor is subject or
constitute a material default (or an event which with notice or lapse of time
or both would constitute a default) under, or result in the material breach of,
any indenture, mortgage,

 11
 

deed of trust, charge, lien, or any contract,
agreement or other instrument to which such Guarantor is a party or which may
be applicable to such Guarantor.  This
Guaranty is a legal and binding obligation of such Guarantor and is enforceable
in accordance with its terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to the enforcement of creditors’
rights.

3.5                  Litigation.  There is no action, suit, proceeding or
investigation pending or, to such Guarantor’s knowledge, threatened in writing
against such Guarantor in any court or by or before any other Governmental
Authority, or labor controversy affecting such Guarantor or any of such
Guarantor’s properties, businesses, assets or revenues, which would reasonably
be expected to materially and adversely affect the performance of such
Guarantor’s obligations and duties under this Guaranty or impair such Guarantor’s
ability to fully fulfill and perform such Guarantor’s obligations under this
Guaranty and the other Loan Documents to which such Guarantor is a party.

3.6                  Offset.
The Loan Documents are not subject to any right of rescission, set-off,
counterclaim or defense by such Guarantor, including the defense of usury, and
such Guarantor has not asserted any right of rescission, set-off, counterclaim
or defense with respect thereto.

3.7                  Embargoed Person.  At all times throughout the term of the Loan,
including after giving effect to any Transfer permitted pursuant to the Loan
Documents, (a) none of the funds or other assets of such Guarantor shall
constitute property of, or shall be beneficially owned, directly or indirectly,
by any person, entity or government subject to trade restrictions under U.S.
law, including, but not limited to, the International Emergency Economic Powers
Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C.
App. 1 et seq., and any Executive Orders or regulations promulgated thereunder
(each an “Embargoed Person”) with
the result that the Loan made by Lender is or would be in violation of law;
(b) no Embargoed Person shall have any interest of any nature whatsoever
in such Guarantor, with the result that the Loan is or would be in violation of
law; and (c) none of the funds of such Guarantor shall be derived from any
unlawful activity with the result that the Loan is or would be in violation of
law.

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

ARTICLE IV

COVENANTS

4.1                  Corporate Existence.
Each Guarantor shall maintain and preserve such Guarantor’s corporate existence
and qualification as a corporation or limited liability company (as applicable)
pursuant to the laws of such Guarantor’s State of formation.

4.2                  Dissolution.  Subject to Transfers permitted pursuant to
the Loan Agreement, no Guarantor shall liquidate, wind-up or dissolve (or
suffer any liquidation or dissolution).

 12
 

4.3                  Litigation.  Each Guarantor shall give prompt notice to
Lender of any litigation or governmental proceedings pending or threatened in
writing against such Guarantor of which such Guarantor has notice and which
would reasonably be expected to materially adversely affect such Guarantor’s
ability to perform its obligations hereunder.

4.4                  Notice of Default.  Each Guarantor shall promptly advise Lender
of any material adverse change in such Guarantor’s condition, financial or
otherwise, of which such Guarantor has knowledge and which would reasonably be
expected to materially adversely affect such Guarantor’s ability to perform its
obligations hereunder.

4.5                  Certification.
Each Guarantor at any time and from time to time, within ten (10) Business Days
following the request by Lender, shall execute and deliver to Lender a
statement certifying that this Guaranty is unmodified and in full force and
effect (or if modified, that the same is in full force and effect as modified
and stating such modifications) or, if applicable, that this Guaranty is no
longer in full force and effect.

ARTICLE V

SUBORDINATION OF CERTAIN INDEBTEDNESS

5.1                  Subordination of All
Guarantor Claims. 
As used herein, the term “Guarantor
Claims” shall mean all debts and liabilities of any Borrower to any
Guarantor, whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligations of any Borrower 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 or Persons
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 any Guarantor. 
The Guarantor Claims shall include, without limitation, all rights and
claims of any Guarantor against any Borrower (arising as a result of
subrogation or otherwise) as a result of such Guarantor’s payment of all or a
portion of the Guaranteed Obligations. 
After the occurrence and during the continuance of a monetary Default or
any Event of Default, no Guarantor shall receive or collect, directly or
indirectly, from any Borrower any amount upon the Guarantor Claims.

5.2                  Claims in Bankruptcy.  In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief, or other insolvency proceedings
involving any Guarantor as debtor, Lender 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 Guarantor Claims.  Each Guarantor hereby assigns such dividends
and payments to Lender.  Should Lender
receive, for application against the Guaranteed Obligations, any dividend or
payment which is otherwise payable to any Guarantor and which, as between any
Borrower and any Guarantor, shall constitute a credit against the Guarantor
Claims, then, upon payment to Lender in full and performance of the Guaranteed
Obligations, such Guarantor shall become subrogated to the rights of Lender to
the extent that such payments to Lender on the Guarantor Claims have
contributed toward the liquidation of the Guaranteed Obligations, and such
subrogation shall be 

 13
 

with respect to that proportion of the
Guaranteed Obligations which would have been unpaid if Lender had not received
dividends or payments upon the Guarantor Claims.

5.3                  Payments Held in Trust.  In the event that, notwithstanding anything
to the contrary contained in this Guaranty, any Guarantor shall receive any funds,
payments, claims or distributions which are prohibited by this Guaranty, such
Guarantor agrees to hold in trust for Lender 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 Lender, and
such Guarantor covenants promptly to pay the same to Lender.

5.4                  Liens Subordinate.  Each Guarantor agrees that any liens,
security interests, judgment liens, charges or other encumbrances upon any
Borrower’s 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 such Borrower’s assets securing payment of
the Guaranteed Obligations, regardless of whether such encumbrances in favor of
any Guarantor or Lender presently exist or are hereafter created or
attach.  Without the prior written consent
of Lender as long as the Debt is outstanding, no Guarantor shall (a) exercise
or enforce any creditor’s right it may have against any Borrower, 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 any Borrower held by any Guarantor.

ARTICLE VI

MISCELLANEOUS

6.1                  Waiver.  No failure to exercise, and no delay in
exercising, on the part of Lender, 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 Lender hereunder shall be in
addition to all other rights provided by law. 
No modification or waiver of any provision of this Guaranty, nor 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.  Pursuant to Nevada Revised Statutes (“NRS”) Section 40.495(2), Each Guarantor
hereby waives the provisions of NRS Section 40.430.

6.2                  Notices.  All notices,
consents, approvals and requests required or permitted hereunder (each, a “Notice”) 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, (b) a reputable overnight courier for next Business Day
delivery, or (c) 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 

 14
 

party hereto, as the case may be, in a Notice
to the other parties hereto in the manner provided for in this Section 6.2):

	
  Guarantor:

  	
   

  	
  DLJ MB IV HRH, LLC

  
	
   

  	
   

  	
  c/o DLJ Merchant Banking Partners

  
	
   

  	
   

  	
  11 Madison Avenue

  
	
   

  	
   

  	
  New York, New York 10010

  
	
   

  	
   

  	
  Attention: Ryan Sprott

  
	
   

  	
   

  	
  Facsimile No.: (212) 743-1667

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Latham & Watkins LLP

  
	
   

  	
   

  	
  885 Third Avenue

  
	
   

  	
   

  	
  Suite 1000

  
	
   

  	
   

  	
  New York, New
  York 10022

  
	
   

  	
   

  	
  Attention:
  Michelle Kelban, Esq.

  
	
   

  	
   

  	
  Facsimile No.:
  (212) 751-4864

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Latham & Watkins LLP

  
	
   

  	
   

  	
  633 West Fifth
  Street

  
	
   

  	
   

  	
  Suite 4000

  
	
   

  	
   

  	
  Los Angeles,
  California 90071

  
	
   

  	
   

  	
  Attention: Paul
  Fuhrman, Esq.

  
	
   

  	
   

  	
  Facsimile No.:
  (213) 891-8763

  
	
   

  	
   

  	
   

  
	
  Guarantor:

  	
   

  	
  Morgans Hotel Group Co.

  
	
   

  	
   

  	
  475 Tenth Avenue

  
	
   

  	
   

  	
  New York, New York 10018

  
	
   

  	
   

  	
  Attention:  Marc Gordon, Chief Investment
  Officer

  
	
   

  	
   

  	
  Facsimile No.: (212) 277-4270

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Wachtell, Lipton, Rosen & Katz

  
	
   

  	
   

  	
  51 West 52nd
  Street

  
	
   

  	
   

  	
  29th Floor

  
	
   

  	
   

  	
  New York, New
  York 10019

  
	
   

  	
   

  	
  Attention:
  Stephen Gellman, Esq.

  
	
   

  	
   

  	
  Facsimile No.:
  (212) 403-2000

  
	
   

  	
   

  	
   

  
	
  Lender:

  	
   

  	
  Column Financial, Inc.

  
	
   

  	
   

  	
  11 Madison
  Avenue

  
	
   

  	
   

  	
  New York, New
  York 10010

  
	
   

  	
   

  	
  Attention:
  Edmund Taylor

  
	
   

  	
   

  	
  Facsimile No.:
  (212) 352-8106

  

 

 15
 

 

	
  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.:
  (917) 326-8433

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Thelen Reid Brown Raysman & Steiner, LLP

  
	
   

  	
   

  	
  875 Third Avenue

  
	
   

  	
   

  	
  New York, New
  York 10022

  
	
   

  	
   

  	
  Attention:
  Jeffrey B. Steiner, Esq.

  
	
   

  	
   

  	
  Facsimile No.:
  (212) 603-2001

  
	
   

  	
   

  	
  Hard Rock/Rand Peppas

  

 

A Notice shall be deemed
to have been given in the case of hand delivery or delivery by a reputable
overnight courier, at the time of delivery; in the case of registered or
certified mail, when delivered or the first attempted delivery on a Business
Day; in the case of expedited prepaid delivery and telecopy, upon the first
attempted delivery on a Business Day; or in the case of telecopy, upon sender’s
receipt of a machine-generated confirmation of successful transmission after
advice by telephone to recipient that a telecopy Notice is forthcoming.  provided, that within three (3) Business Days
thereafter, a hard copy of such Notice shall have been delivered pursuant to
the provisions of clause (a), (b) or (c) of this Section 6.2.

6.3                  Governing Law; Submission
to Jurisdiction. 
This Guaranty shall be governed, enforced and construed in accordance
with the laws of the State of New York (without giving effect to New York’s
principles of conflicts of law).

6.4                  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.

6.5                  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.

6.6                  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, heirs and legal
representatives; provided, however, that no Guarantor may,
without the prior written consent of Lender, assign any of its rights, powers,
duties or obligations hereunder 

 16
 

except as may otherwise be permitted under
the Loan Agreement.  The obligations,
liabilities, representations, covenants and agreements of Guarantors hereunder
are joint and several.

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

6.8                  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.

6.9                  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.

6.10                Rights
and Remedies. 
If any Guarantor becomes liable for any indebtedness owing by any
Borrower to Lender, 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 Lender hereunder shall be cumulative of any and all other
rights that Lender may ever have against such Guarantor.  To the extent permitted by applicable law,
the exercise by Lender 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.

6.11                Entirety.  THIS GUARANTY EMBODIES THE FINAL, ENTIRE
AGREEMENT OF GUARANTORS AND LENDER WITH RESPECT TO GUARANTORS’ 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 GUARANTORS AND LENDER AS A FINAL AND
COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING
BETWEEN ANY GUARANTOR AND/OR ANY BORROWER AND LENDER, 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 ANY GUARANTOR AND LENDER.

6.12                Waiver
of Right To Trial By Jury.  EACH GUARANTOR
AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND TO THE EXTENT PERMITTED BY 

 17
 

APPLICABLE LAW, WAIVE 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 NOTE, THE LOAN AGREEMENT, THE SECURITY INSTRUMENT
OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING
IN CONNECTION THEREWITH.  THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH GUARANTOR AND
LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY EACH
GUARANTOR AND LENDER.

6.13                Cooperation.  Each Guarantor acknowledges that Lender and
its successors and assigns may (a) sell this Guaranty, the Note and the other
Loan Documents to one or more investors as a whole loan, (b) participate
the Loan secured by this Guaranty to one or more investors, (c) deposit
this Guaranty, the Note and the other Loan Documents with a trust, which trust
may sell certificates to investors evidencing an ownership interest in the trust
assets, or (d) otherwise sell the Loan or one or more interests therein to
investors (the transactions referred to in clauses (a) through (d)
are hereinafter each referred to as “Secondary
Market Transactions”).  Each
Guarantor shall, at no cost to such Guarantor other than for such Guarantor’s
legal and accounting fees, reasonably cooperate with Lender in effecting any
such Secondary Market Transaction and shall reasonably cooperate to implement
all requirements imposed by any Rating Agency involved in any Secondary Market
Transaction.  Each Guarantor shall, at no
cost to such Guarantor other than for such Guarantor’s legal and accounting
fees, provide such information and documents relating to such Guarantor, any
Borrower, any Property and any tenants thereof or the Improvements, to the
extent in such Guarantor’s possession or able to be obtained by such Guarantor
from any Borrower or otherwise using reasonable efforts, as Lender may
reasonably request in connection with such Secondary Market Transaction.  In addition, each Guarantor shall make
available to Lender all information concerning its business and operations that
Lender may reasonably request in connection with such Secondary Market
Transaction.  Lender shall be permitted
to share all such information or information previously provided by any
Guarantor with the investment banking firms, Rating Agencies, accounting firms,
law firms and other third-party advisory firms involved with the Loan and the
Loan Documents or the applicable Secondary Market Transaction provided such
parties are held to customary confidentiality standards.  It is understood that the information
provided by any Guarantor to Lender 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.  Lender and all of the aforesaid third-party
advisors and professional firms shall be entitled to rely on the information
supplied by, or on behalf of, any Guarantor in the form as provided by such
Guarantor.  Lender may publicize the
existence of the Loan in connection with its marketing for a Secondary Market
Transaction or otherwise as part of its business development.  Notwithstanding anything to the contrary
contained in this Guaranty, in the event of a Secondary Market Transaction,
Guarantors shall be entitled to deal with and rely upon only one Servicer for
all owners of interest in the Loan in connection with all matters relating to
the Loan and shall not incur any costs greater than those that would be
incurred if the lead lender were the only Lender (including enforcement
costs).  Any such transaction shall be at
Lender’s 

 18
 

sole cost and expense, including, without limitation, the cost of any
reports, certifications or opinions required of Guarantors in connection with
any such transaction.  No such
transaction shall result in a material increase in the obligations or potential
liability of Guarantors under this Guaranty and the Loan Documents by reason of
any requested additional covenant, representation, warranty, indemnity or
certification or otherwise.

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

6.15                USA Patriot Act Notice. 
Lender hereby notifies Guarantors that pursuant to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)) (the “Patriot Act”),
it is required to obtain, verify and record information that identifies each
Guarantor, which information includes the name and address of each Guarantor
and other information that will allow Lender to identify each Guarantor in
accordance with the Patriot Act.

6.16                Fully Recourse.  The Guaranteed Obligations are joint and
several recourse obligations of Guarantors and not restricted by any limitation
on personal liability.  Notwithstanding
anything to the contrary in this Guaranty, in the Loan Agreement or in any
other Loan Document, no present or future Constituent Member other than (i) a
Guarantor, and (ii) with respect to the DLJ Guarantor, DLJ Merchant Banking Partners IV, L.P., MBP IV Plan Investors, L.P.,
DLJMB HRH Co-Investments, L.P., DLJ Offshore Partners IV, L.P., and DLJ
Merchant Banking Partners IV (Pacific), L.P. (such limited partnerships,
collectively, the “DLJMB Parties”)
as provided in that certain commitment letter of the DLJMB Parties of even date
herewith addressed to the DLJ Guarantor, nor any present or future shareholder,
officer, director, employee, trustee, beneficiary, advisor, member, partner,
principal, participant or agent of or in any Guarantor or of or in any Person
that is or becomes a Constituent Member, other than Guarantors and such DLJMB
Parties, shall have any personal liability, directly or indirectly, under or in
connection with this Guaranty, or any amendment or amendments hereto made at
any time or times, heretofore or hereafter, and Lender on behalf of itself and
its successors and assigns, hereby waives any and all such personal liability.

ARTICLE VII

FINANCIAL REPRESENTATION, WARRANTIES AND
COVENANTS

7.1                  Agreement
of Guarantors. 
Each Guarantor hereby makes the representations, warranties and
covenants set forth on Exhibit B attached hereto and made a part hereof,
which representations, warranties and covenants are intended to and shall form
a part of this Guaranty for all purposes.

 19
 

 

[No Further Text on This Page]

 20

IN WITNESS WHEREOF, each Guarantor has executed and
delivered this Construction Guaranty of Completion as of the date first set
forth above.

	
  

  	
  MORGAN GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  MORGANS GROUP LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Morgans Hotel Group Co.,

  
	
   

  	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  	
  as Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DLJ GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  DLJ MB
  IV HRH, LLC,

  
	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
						

 

	
  STATE OF 

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss:

  
	
  COUNTY OF 

  	
  )

  	
   

  

 

On the        day of
                     ,
in the year 2007, before me, the undersigned, a notary public in and for said
state, personally appeared
                       ,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.

	
  

  	
   

  
	
   

  	
  Notary Public

  

 

	
  

  	
   

  	
   

  
	
  STATE OF 

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss:

  
	
  COUNTY OF 

  	
  )

  	
   

  

 

On the         day
of
                      ,
in the year 2007, before me, the undersigned, a notary public in and for said
state, personally appeared
                        ,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.

	
  

  	
   

  
	
   

  	
  Notary Public

  

 

EXHIBIT
B

FINANCIAL
REPRESENTATIONS, WARRANTIES AND COVENANTS

1.             Guarantor’s
Financial Condition.      (a)           As of the date hereof after giving
effect to this Guaranty and, in the case of the DLJ Guarantor, the equity and
other commitments of the DLJMB Parties insofar as relate to the DLJ Guarantor, and throughout the term of
the Loan, such Guarantor is and will be solvent and has and will have
(i) assets which, fairly valued, exceed its obligations, liabilities
(including contingent liabilities as determined in accordance with GAAP) and
debts, and (ii) property and assets sufficient to satisfy and repay its
obligations and liabilities.

(b)           At all times throughout the term of
this Guaranty, the Guarantors shall maintain (i) Guarantors Net Worth in excess
of $400,000,000.00 in the aggregate, and (ii) a minimum amount of Guarantors
Effective Liquidity in excess of $200,000,000.00 in the aggregate. Within
one-hundred twenty (120) days following the end of each calendar year, and,
upon Lender’s written request, within forty-five (45) days following the end of
any calendar quarter, each Guarantor shall deliver or cause to be delivered to
Lender a complete copy of such Guarantor’s and, in the case of the DLJ
Guarantor, the DLJMB Parties’ annual, and, if requested, quarterly financial
statements audited by a “Big Four” accounting firm, BDO Seidman LLP, or other
independent certified public accountant reasonably acceptable to Lender
prepared in accordance with GAAP, including in each case statements of profit
and loss and a balance sheet for such Guarantor and the DLJMB Parties, as the
case may be, together with a certificate of each Guarantor (which certificate
in the case of the Morgans Guarantor shall pertain only to the Morgans
Guarantor, and in the case of the DLJ Guarantor shall pertain only to the DLJ
Guarantor and the DLJMB Parties) (i) setting forth in reasonable detail such
Guarantor’s and each DLJMB Parties’ Net Worth as of the end of the prior
calendar year or quarter, as the case may be, based thereon, and then Effective
Liquidity, and (ii) certifying that such financial statements are true,
correct, accurate and complete in all material respects and fairly present the
financial condition and results of the operations of such Guarantor, and, in
the case of DLJ Guarantor, the DLJMB Parties, provided, however, that in the
event the DLJ Guarantor, any DLJMB Party or the Morgans Guarantor is not
otherwise required to, and does not, cause to be prepared such audited
financial statements in the ordinary course of its business, it may deliver the
unaudited statements which are delivered to its investors or otherwise prepared
in the ordinary course of its business, accompanied by such certification.

(c)           Such Guarantors shall not, and DLJ
Guarantor shall not cause or permit and further represents and covenants that
the DLJMB Parties shall not, at any time while a default in the payment of the
Guaranteed Obligations has occurred and is continuing beyond any applicable
grace period or following any notice thereof, (i) enter into or effectuate any
transaction with any Affiliate of such Guarantors or any of DLJMB Parties, as
the case may be, which would reduce such Guarantors’ or DLJMB Party’s then Net
Worth or Effective Liquidity, or (ii) sell, pledge, mortgage or otherwise
Transfer to any other Person (including any of its Affiliates) any assets or 

any interest
therein, other than (in the case of either clauses (i) or (ii) of this Section
(c)) (x) if in the ordinary course of 
business, consistent with past practice and for reasonably equivalent
value, or (y) for reasonably equivalent value.

(d)           As used in this Section 1 and Section
4 below, the following terms shall have the following meanings:

“Distributable
Cash” means, with respect to any Person, and subject to the
following proviso, the amount of all capital surplus, retained earnings or net
profits of such Person held in the form of cash or cash equivalents (including
cash reserves established from undistributed net profits from any prior fiscal
period), then freely and lawfully distributable to the holders of all equity
interests of such Person as dividends or distributions or in redemption of such
equity interests in accordance with all laws and operative agreements,
documents or instruments governing the formation and capitalization of such
Person, the receipt of which by the holders of such equity interests, if so
paid, will not give rise to any liability of the recipient to return or to
repay such amounts to such Person, and the payment or distribution of which by
such Person to such equity holders (i) will not violate any term or condition
of any agreement or instrument to which such Person is subject or by which its
properties or assets is bound, and (ii) has been consented to or approved by
all other Persons not controlled by Morgans Guarantor whose consent to or
approval of such payment or distribution is required under any of such
operative, governing or other agreements, documents or instruments; provided
that Lender is given, from time to time, such information as it may reasonably
request (including income statements and balance sheets of any such Person that
satisfy the requirements for  financial
statements set forth in Section 1(c) above, together with a certificate of the
chief financial officer of Morgans confirming that, to the best of his or her
knowledge, the foregoing calculations and financial statements are accurate in
all material respects) confirming the foregoing.

“Effective
Liquidity” means, with respect to any Person, as of a given date,
the sum of (i) all unrestricted cash and cash equivalents held by such Person
and, in the case of Morgans Guarantor, the Distributable Cash of its direct or
indirect wholly owned subsidiaries membership or other equity interests in
which are not pledged to or otherwise encumbered by any lien, charge or other
encumbrance in favor any Person other than Morgans Guarantor or Lender; (ii)
the aggregate amount of available borrowing of such Person under credit
facilities and other lines of credit; and (iii) except as provided in the
following sentence, the aggregate maximum amount, if any, of all committed and
undrawn or uncalled capital available to such Person (as to any Person its “Available Capital”) under the terms of any partnership,
limited liability, statutory business trust, or similar agreement of such
Person from any Constituent Member (other than (x) any Constituent Member of
another Constituent Member that is publicly traded, and (y) in the case of the
DLJ Guarantor, any limited partner of DLJMB HRH Co-Investments, L.P., a DLJMB
Party (“Co-Investments LP”)), less, (iv)
the aggregate amount of any accrued but unpaid liabilities or obligations of
such Person under the facilities or agreements described in the preceding
clauses (ii) and (iii), other than (for purposes of this clause (iv)) the
principal amount of Indebtedness under any such 

facilities.  In addition, and notwithstanding anything
herein to the contrary, the Available Capital of Co-Investments LP for purposes
of determining its Effective Liquidity shall equal, as of a given date, either
(i) Co-Investments LP’s Available Capital, or (ii), if greater, and subject to
the following proviso, an aggregate amount not exceeding one hundred fifty
(150%) percent of the aggregate Available Capital of the other DLJMB Parties, provided
that Lender is given, from time to time, such information as it may reasonably
request (including an opinion of counsel to Co-Investments LP in respect of the
following clause (y)) to confirm that the limited partners of Co-Investments LP
(x) are financially capable of funding such amount, and (y) are and remain
obligated to make capital contributions to Co-Investments LP in such aggregate
amounts in order to cause the DLJ Guarantor or DLJMB Parties to pay and perform
the Guaranteed Obligations.

“Guarantors
Effective Liquidity” means, with respect to the Guarantors, as of a
given date, the sum of the Effective Liquidity of (i) the DLJ Guarantor and,
without duplication,  each of the DLJMB
Parties, and (ii) the Morgans Guarantor.

“Guarantors
Net Worth” means, with respect to the Guarantors, as of a given
date, the sum of (i) the Net Assets of the Morgans Guarantor, and (ii) the Net
Worth of (x) the DLJ Guarantor and (y), without duplication, each of the DLJMB
Parties, including for purposes of this computation, and subject to the
following proviso, the Net Worth of any limited partner of Co-Investments LP
that shall have entered into an equity commitment letter satisfactory to
Lender, for the express benefit of Lender, pursuant to which such limited
partner of Co-Investments LP agrees to, and recognizes the rights of Lender in
place and instead of the general partner or manager of Co-Investments LP to require
such limited partner of Co-Investments LP to, make contributions to
Co-Investments LP directly to Lender, in an aggregate amount not  exceeding one hundred fifty (150%) percent of
the aggregate Net Worth of the DLJMB Parties other than Co-Investments LP, provided
that Lender is given, from time to time, such information as it may reasonably
request (including an opinion of counsel to Co-Investments LP in respect of the
following clause (B)) to confirm (A) the Net Worth of the limited partners of
Co-Investments LP, and (B) that they are and remain obligated to make capital
contributions to Co-Investments LP in such aggregate amounts in order to cause
the DLJ Guarantor or DLJMB Parties to pay and perform the Guaranteed
Obligations.

“Net Assets” means, with respect to the Morgans Guarantor
only, as of a given date, an amount equal to the aggregate fair market value of
Morgans Guarantor’s  assets and
properties (i) as reasonably determined by Lender in good faith applying such
customary and reasonable market factors as Lender shall then apply to similar
assets and properties, or (ii) at the election of Morgans Guarantor, as
determined by appraisals prepared by an independent MAI real estate “state
certified general appraiser” (as defined under regulations or guidelines issued
pursuant the Financial Institutions Reform Recovery Enforcement Act of 1989, 12
U.S.C. 1811 et. Seq., as amended) selected by the Morgans Guarantor and
approved by Lender (which approval shall not be unreasonably withheld, delayed,
or conditioned) at Morgans Guarantor’s sole cost and expense and not more than
ninety (90) days prior to such date, minus the amount of all
Indebtedness of 

Morgans Guarantor
and its consolidated subsidiaries as of such date, but in no event shall such
amount be less than zero.

“Net
Worth” shall mean, with respect to any Person as of a given
date, (i) such Person’s total assets as of such date, less (ii) such
Person’s total liabilities as of such date, in each case, as they would be
reflected in a balance sheet prepared in accordance with GAAP.

2.             Financial
and other Information; Dividends and Distributions.  Each Guarantor with respect to (i) itself,
severally and not jointly, and (ii) in the case of DLJ Guarantor, the DLJMB
Parties, represents, warrants and covenants to Lender during the term of the
Loan that:

(a)           all
financial data and other financial information that, as of any applicable date,
has been delivered to Lender with respect to such Guarantor, and in the case of
DLJ Guarantor, the DLJMB Parties (i) is true, complete and correct in all
material respects as of the dates of such reports, (ii) accurately
represent, in all material respects, the financial condition of such Guarantor
and the DLJMB Parties as of the date of such reports, and (iii) has been
prepared in accordance with GAAP throughout the periods covered, except as
disclosed therein; and

(b)           except for the payment of
employee salaries and benefits and other administrative expenses and dividends
or other distributions in the ordinary course of business consistent with past
practice, or with Lender’s prior written consent exercised in its sole
discretion, it shall not sell, pledge, mortgage or otherwise transfer any of
its material assets, or any interest therein, on terms materially less favorable
than would be obtained in an arms-length transaction for fair consideration,
or, with respect to any such transactions between or among the DLJMB Parties
and any of their respective affiliates, on terms materially less favorable to
such DLJMB Parties than would be obtained in comparable transactions with
Persons who are not affiliates.

3.             Confidentiality;
Cooperation.  Lender agrees to treat
all financial statements and other financial information of any Guarantor and
the DLJMB Parties that are not publicly available, confidentially, provided
that, each Guarantor recognizes that Lender shall, and hereby authorizes Lender
to, include such financial information or extracts therefrom in any Disclosure
Documents or similar disclosure with respect to any syndication of the Loan, so
long as in each case the affected Guarantor shall have the right, prior to
their dissemination,  to review and
approve any such Disclosure Documents or similar documents (such approval not
to be unreasonably withheld, delayed or conditioned) and the recipients of any
such Disclosure Documents are subject to customary obligations to preserve the
confidentiality of such information, to the extent applicable to such
syndication.  In connection therewith and
with respect to all such financial information, each Guarantor shall cooperate
with and indemnify and hold harmless Lender to the same extent provided in
Section 9.2 of the Loan Agreement as if it were a party thereto and each
reference to “Borrowers” therein were instead a reference to such Guarantor.

4.             Substitute
Guarantors.  If at any time, subject
to all of the terms and conditions of the Loan Agreement or any other Loan
Document,  a Guarantor shall seek to be released from its obligations
under this Guaranty and substitute any replacement guarantor for the Guaranteed
Obligations following any Transfer of an interest (direct or indirect) in HR
Holdings, any 

Guarantor
Transfer or otherwise (any such replacement guarantor permitted under the Loan
Documents or otherwise consented to by Lender, being referred to herein as a
“Substitute Guarantor”), then (a) the requirements of the first sentence of
Section 1(b) above shall be modified such that, as to each Person
providing any Guaranty pursuant to the Loan Agreement, including any Substitute
Guarantor, at all times that such Guaranty shall be required to be outstanding
in accordance with the Loan Agreement, (x) such Person’s Net Worth (or in the
event that the Morgans Guarantor shall remain a guarantor hereunder at such
time, as to the Morgans Guarantor only, its Net Assets, and in the event that
the DLJ Guarantor shall remain a guarantor hereunder at such time, the Net
Worth of the DLJ Guarantor and the DLJMB Parties calculated in accordance with
clause (ii) of the definition of “Guarantors
Net Worth” above) shall equal not less than an amount equal to the
lesser of (1) $200,000,000.00 or (2) the product of $400,000,000.00 and such
Person’s then percentage interest (directly or indirectly) in all profits and
losses of HR Holdings, and (y) such Person’s Effective Liquidity shall be in
excess of an amount equal to the lesser of (1) $100,000,000.00 or (2) the
product of $200,000,000.00 and such Person’s then percentage interest (directly
or indirectly) in all profits and losses of HR Holdings, and (b) the provisions
of this Exhibit B with respect to financial reporting, financial condition,
transactions, dividends and distributions, confidentiality and cooperation
shall apply to all such Persons, provided that, in all cases at least
one of the Persons providing any Guaranty is a Qualified Real Estate Guarantor.

5.             Conflicts.  Nothing in this Exhibit B shall be
read in any manner or construed or deemed to alter, modify, amend or waive any
term or condition of any Loan Document, except to the extent this Exhibit B
is expressly incorporated by reference therein, including by Section 7.1
of the Guaranty.  In the event of any
conflicts between the terms and conditions hereof and the terms and conditions
of any Loan Document, the terms and conditions of the other Loan Documents
shall control and be binding in all respects.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]