TABLE OF CONTENTS

 

1.	DEFINITIONS			2
2.	CLOSING			6
3.	EVENTS OCCURRING ON OR PRIOR TO THE CLOSING DATE			6
	3.1.	Organization of Holdings and Assignment of Rights		6
	3.2.	Initial Capital Contributions		7
	3.3.	Deliveries by DLJMB		7
	3.4.	Deliveries by Morgans		7
	3.5.	Deliveries by Holdings		8
4.	CLOSING CONDITIONS			8
	4.1.	Conditions Precedent to Obligations of DLJMB		8
	4.2.	Conditions Precedent to Obligations of Morgans		9
5.	REPRESENTATIONS AND WARRANTIES OF DLJMB			10
	5.1.	Organization, Good Standing		10
	5.2.	Authorization; No Breach		10
	5.3.	Brokerage		10
	5.4.	Investment Representation		10
	5.5.	Sufficient Funds		11
	5.6.	Hart-Scott-Rodino		11
	5.7.	Equity Commitment Letter		11
	5.8.	Litigation		11
	5.9.	No Other Representations and Warranties		11
6.	REPRESENTATIONS AND WARRANTIES OF THE MORGANS PARTIES			12
	6.1.	Organization, Good Standing, Qualification		12
	6.2.	Authorization; No Breach		12
	6.3.	No Knowledge of Misrepresentations or Omissions		12
	6.4.	Litigation		13
	6.5.	Escrow Deposits		13
	6.6.	Casino Lease		13
	6.7.	Brokerage		14
	6.8.	Investment Representation		14
	6.9.	Credit Facility Commitment Letter		14
	6.10.	No Prior Activities		14
	6.11.	No Other Representations and Warranties		15
7.	ADDITIONAL COVENANTS			15
	7.1.	Access to Information		15
	7.2.	Payment of Expenses by Holdings		15
	7.3.	Actions Relating to the Acquisition Agreements		16
	7.4.	Actions with Respect to Debt Financing		17
	7.5.	Gaming Approvals		18

 

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	7.6.	Exclusivity	18
	7.7.	Cooperation by DLJMB	19
	7.8.	Actions with Respect to Equity Financing	19
	7.9.	Actions with Respect to Casino Lease	19
8.	TERMINATION		19
	8.1.	Termination	19
	8.2.	Effect of Termination	20
	8.3.	Escrow Deposits	21
9.	INDEMNIFICATION		22
	9.1.	Survival of Representations and Warranties	22
	9.2.	General Indemnification	23
	9.3.	Survival	25
10.	MISCELLANEOUS		25
	10.1.	Public Statements	25
	10.2.	Injunctive Relief	25
	10.3.	Governing Law/Choice of Law and Forum	25
	10.4.	Entire Agreement; Amendment; Waiver	25
	10.5.	Binding Effect/Nonassignment	25
	10.6.	Invalidity of Provision	26
	10.7.	Notices	26
	10.8.	Headings; Execution in Counterparts	27
	10.9.	No Strict Construction	27
	10.10.	Survival	27

 

 

LIST OF EXHIBITS

Exhibits Referenced

A	FORM OF LLC AGREEMENT
B	ACQUISITION AGREEMENTS
C	FORM OF MANAGEMENT AGREEMENT
D	MERGER AGREEMENT
E	FORM OF TECHNICAL SERVICES AGREEMENT
F	CASINO LEASE
G	PROPOSED TRANSACTION STRUCTURE CHART
H	EQUITY COMMITMENT LETTER

 

 

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CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (the “Agreement”) is made and entered into as of November 7, 2006 (the “Effective Date”) by and between DLJ MB IV HRH, LLC, a Delaware limited liability company (“DLJMB”), and Morgans Hotel Group, Co., a Delaware corporation (“Morgans”). Capitalized terms not otherwise defined in this Agreement shall have the respective meanings specified in the form of Limited Liability Company Agreement attached hereto as Exhibit A (the “LLC Agreement”).

RECITALS

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

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

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

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

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

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AGREEMENT

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

1.             DEFINITIONS

For purposes of this Agreement:

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

“Acquisition” has the meaning specified in the Recitals.

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

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

“Agreement” has the meaning specified in the Preamble.

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

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

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

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

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

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“Closing” has the meaning specified in Section 2.

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

“Credit Facility Commitment Letter” means the commitment letter from Column Financial, Inc., dated as of May 11, 2006, pursuant to which Column Financial committed to provide a credit facility with an aggregate principal amount equal to the lesser of Seven Hundred Million Dollars ($700,000,000) and eighty-two and one half percent (82.5%) of the capitalized cost of the Acquisition, as amended, modified or supplemented from time to time in accordance with this Agreement, or any substitute commitment letter or definitive agreement, entered into by the Morgans Parties or Holdings in accordance with Section 7.4.

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

“DLJMB” has the meaning specified in the Preamble.

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

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

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

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

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

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

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

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

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

“Equity Commitment Letter” means the commitment letter attached hereto as Exhibit H from DLJ Merchant Banking Partners IV, L.P. and certain of its affiliated entities dated as of November 7, 2006, pursuant to which such entities committed to provide One

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Hundred Million Dollars ($100,000,000) of equity capital to DLJMB in connection with the transactions contemplated by this Agreement.

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

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

“Financing Waiver Date” has the meaning specified in Section 4.1(f).

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

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

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

“Holdings” has the meaning specified in the Recitals.

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