AMENDED AND RESTATED THIRD MEZZANINE LOAN AGREEMENT

Exhibit 10.7

 

AMENDED AND RESTATED THIRD MEZZANINE LOAN AGREEMENT

Dated as of May 22, 2008

Between

HARRAH’S LAS VEGAS MEZZ 3, LLC, HARRAH’S ATLANTIC CITY MEZZ 3, LLC,

RIO MEZZ 3, LLC, FLAMINGO LAS VEGAS MEZZ 3, LLC, HARRAH’S LAUGHLIN

MEZZ 3, LLC, AND PARIS LAS VEGAS MEZZ 3, LLC,

collectively, as Borrower

and

JPMORGAN CHASE BANK N.A.,

as Lender

 

TABLE OF CONTENTS

 

 

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SCHEDULES

 

 

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AMENDED AND RESTATED THIRD MEZZANINE LOAN AGREEMENT

THIS AMENDED AND RESTATED THIRD MEZZANINE LOAN AGREEMENT , dated as of May 22, 2008 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “ Agreement ”), between JPMORGAN CHASE BANK, N.A. , a banking association chartered under the laws of the United States of America, having an address at 270 Park Avenue, New York, New York 10017 (“ Lender ”), and HARRAH’S LAS VEGAS MEZZ 3, LLC , a Delaware limited liability company (together, with its successors and permitted assigns, “ Harrah’s LV Individual Borrower ”), HARRAH’S ATLANTIC CITY MEZZ 3, LLC , a Delaware limited liability company (together with its successors and permitted assigns, “ Harrah’s AC Individual Borrower ”), RIO MEZZ 3, LLC , a Delaware limited liability company (together with its successors and permitted assigns, “ Rio Individual Borrower ”), FLAMINGO LAS VEGAS MEZZ 3, LLC , a Delaware limited liability company (together with its successors and permitted assigns, “ Flamingo Individual Borrower ”), PARIS LAS VEGAS MEZZ 3, LLC , a Delaware limited liability company (together with its successors and permitted assigns, “ Paris Individual Borrower ”), and HARRAH’S LAUGHLIN MEZZ 3, LLC , a Delaware limited liability company (together with its successors and permitted assigns, “ Laughlin Individual Borrower ”; Harrah’s LV Individual Borrower, Harrah’s AC Individual Borrower, Rio Individual Borrower, Flamingo Individual Borrower, Paris Individual Borrower and Laughlin Individual Borrower, individually and collectively, as the context may require, “ Borrower ”), each having its principal place of business at the addresses set forth on Schedule I attached hereto.

W I T N E S S E T H:

WHEREAS , pursuant to that certain Mortgage Loan Agreement, dated as of January 28, 2008 (the “ Original Mortgage Loan Agreement ”), by and between JPMorgan Chase Bank, N.A. (together with its successors and assigns, “ Mortgage Lender ”), Harrah’s Las Vegas Propco, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Harrah’s LV Mortgage Borrower ”), Harrah’s Atlantic City Propco, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Harrah’s AC Mortgage Borrower ”), Rio Propco, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Rio Mortgage Borrower ”), Flamingo Las Vegas Propco, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Flamingo Mortgage Borrower ”), Tahoe Propco, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Original Tahoe Mortgage Borrower ”), and Showboat Atlantic City Propco, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Original Showboat Mortgage Borrower ”; Original Showboat Mortgage Borrower and Original Tahoe Mortgage Borrower, each an “ Original Released Mortgage Borrower ”; Harrah’s LV Mortgage Borrower, Harrah’s AC Mortgage Borrower, Rio Mortgage Borrower, Flamingo Mortgage Borrower, Original Tahoe Mortgage Borrower and Original Showboat Mortgage Borrower, collectively, the “ Original Mortgage Borrower ”), Mortgage Lender made a loan to Original Mortgage Borrower in the original principal amount of Four Billion and No/100 Dollars ($4,000,000,000.00) (the “ Original Mortgage Loan ”);

WHEREAS , pursuant to that certain First Mezzanine Loan Agreement, dated as of January 28, 2008 (the “ Original First Mezz Loan Agreement ”), by and between Lender, Harrah’s Las Vegas Mezz 1, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Harrah’s LV Mezz 1 Borrower ”), Harrah’s Atlantic City Mezz 1, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Harrah’s AC Mezz 1 Borrower ”), Tahoe Mezz 1, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Tahoe Mezz 1 Borrower ”), Rio Mezz 1, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Rio Mezz 1 Borrower ”), Flamingo Las Vegas Mezz 1, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Flamingo Mezz 1 Borrower ”), Showboat Atlantic City Mezz 1, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Showboat Mezz 1 Borrower ”; Showboat Mezz 1 Borrower and Tahoe Mezz 1 Borrower, each an “ Original Released First Mezz Borrower ”; Harrah’s LV Mezz 1 Borrower, Harrah’s AC Mezz 1 Borrower, Tahoe Mezz 1 Borrower, Rio Mezz 1 Borrower, Flamingo Mezz 1 Borrower and Showboat Mezz 1 Borrower, individually and collectively referred to, as the context may require, as “ Original First Mezz Borrower ”), Lender made a loan to Original Borrower in the original principal amount of Three Hundred Million and No/100 Dollars ($300,000,000.00) (the “ Original First Mezz Loan ”);

WHEREAS , pursuant to that certain Second Mezzanine Loan Agreement, dated as of January 28, 2008 (the “ Original Second Mezz Loan Agreement ”), by and between Lender, Harrah’s Las Vegas Mezz 2, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Harrah’s LV Mezz 2 Borrower ”), Harrah’s Atlantic City Mezz 2, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Harrah’s AC Mezz 2 Borrower ”), Tahoe Mezz 2, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Tahoe Mezz 2 Borrower ”), Rio Mezz 2, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Rio Mezz 2 Borrower ”), Flamingo Las Vegas Mezz 2, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Flamingo Mezz 2 Borrower ”), Showboat Atlantic City Mezz 2, LLC, a Delaware limited liability company (together with its successors and permitted assigns, “ Showboat Mezz 2 Borrower ”; Showboat Mezz 2 Borrower and Tahoe Mezz 2 Borrower, each an “ Original Released Second Mezz Borrower ”; Harrah’s LV Mezz 2 Borrower, Harrah’s AC Mezz 2 Borrower, Tahoe Mezz 2 Borrower, Rio Mezz 2 Borrower, Flamingo Mezz 2 Borrower and Showboat Mezz 2 Borrower, individually and collectively referred to, as the context may require, as “ Original Second Mezz Borrower ”), Lender made a loan to Original Second Mezz Borrower in the original principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000.00) (the “ Original Second Mezz Loan ”);

WHEREAS , pursuant to that certain Third Mezzanine Loan Agreement, dated as of January 28, 2008 (the “ Original Agreement ”), by and between Lender, Harrah’s LV Individual Borrower, Harrah’s AC Individual Borrower, Rio Individual Borrower, Flamingo Individual Borrower, Tahoe Propco, LLC, a Delaware limited liability company (“ Original

 

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Tahoe Borrower ”), and Showboat Atlantic City Propco, LLC, a Delaware limited liability company (“ Original Showboat Borrower ”; Original Showboat Borrower and Original Tahoe Borrower, each an “ Original Released Borrower ”; Harrah’s LV Individual Borrower, Harrah’s AC Individual Borrower, Rio Individual Borrower, Flamingo Individual Borrower, Original Tahoe Borrower and Original Showboat Borrower, collectively, the “ Original Borrower ”), Lender made a loan to Original Borrower in the original principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000.00) (the “ Original Loan ”);

WHEREAS , as a condition precedent to the obligation of Lender to make the Original Loan to Borrower, Borrower entered into that certain Pledge and Security Agreement (Third Mezzanine Loan), dated as of January 28, 2008, in favor of Lender (as amended, supplemented or otherwise modified from time to time, the “ Original Pledge Agreement ”), pursuant to which Borrower granted to Lender a first priority security interest in the Collateral (as such term is defined in the Original Pledge Agreement);

WHEREAS , pursuant to Section 2.5.2 of the Original Agreement and the Original Mortgage Loan Agreement, Original Borrower and Original Mortgage Borrower agreed to promptly use all reasonable best efforts to substitute, and Lender and Mortgage Lender agreed (subject to the terms set forth in Section 2.5.2 of the Original Agreement and the Original Mortgage Loan Agreement, respectively) that it shall accept the substitution of, the Paris Las Vegas (as defined below) and the Harrah’s Laughlin (as defined below) for the Individual Properties (as such term is defined in the Original Loan Agreement) referred to as “Harrah’s Lake Tahoe”, “Harvey’s Lake Tahoe”, “Bill’s Lake Tahoe” and “Showboat Atlantic City” and the portion of the Flamingo Las Vegas (as defined below) known as “O’Shea’s”, as more particularly described in “Parcel 2” on Schedule XXV hereto (“ O’Shea’s ”) known as “O’Shea’s” in a reasonably satisfactory manner, provided that certain conditions precedent to Lender’s and Mortgage Lender’s obligation, respectively, to accept such substitution were satisfied;

WHEREAS , the conditions precedent set forth in Section 2.5.2 of each of the Original Agreement and the Original Mortgage Loan Agreement (except for those conditions precedent in each with respect to the release of “O’Shea’s”) were satisfied to the satisfaction of (or otherwise waived by) Lender and Mortgage Lender, respectively, and notwithstanding that “O’Shea’s” will not be released as of the date hereof, Borrower, Mortgage Borrower, Lender and Mortgage Lender hereby agree to substitute the Paris Las Vegas and Harrah’s Laughlin for the Individual Properties (as such term is defined in the Original Agreement) referred to as “Harrah’s Lake Tahoe”, “Harvey’s Lake Tahoe”, “Bill’s Lake Tahoe” and “Showboat Atlantic City”;

WHEREAS , Mortgage Lender and Mortgage Borrower have agreed to amend and restate the Original Mortgage Loan Agreement in its entirety pursuant to, and in accordance with, that certain Amended and Restated Loan Agreement, dated as of the date hereof, between Mortgage Borrower (as defined below) and Mortgage Lender in order to evidence such changes to the Original Mortgage Loan (the Original Mortgage Loan, as so amended, the “ Mortgage Loan ”), including, without limitation, (i) the substitution of the Paris Las Vegas and the Harrah’s Laughlin for “Harrah’s Lake Tahoe”, “Harvey’s Lake Tahoe”, “Bill’s Lake Tahoe” and “Showboat Atlantic City”, and (ii) the substitution of the Original Tahoe Mortgage Borrower and the Original Showboat Mortgage Borrower with Paris Mortgage Borrower and Laughlin Mortgage Borrower as “Borrowers” with respect to the Loan;

 

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WHEREAS , Lender and Borrower have agreed to amend and restate the Original Agreement in its entirety pursuant to, and in accordance with this Agreement, in order to evidence such changes to the Original Loan (the Original Loan as so amended, the “ Loan ”), including, without limitation, (i) the substitution of the limited liability company interests in the Original Tahoe Mortgage Borrower and the Original Showboat Mortgage Borrower with the limited liability company interests in Paris Mortgage Borrower and Laughlin Mortgage Borrower as a portion of the collateral for the Loan, and (ii) the substitution of the Original Tahoe Borrower and the Original Showboat Borrower with Paris Individual Borrower and Laughlin Individual Borrower as “Borrowers”;

WHEREAS , Borrower and Lender have agreed to amend and restate the Original Pledge Agreement in its entirety in accordance with, and pursuant to, the terms of that certain Amended and Restated Pledge and Security Agreement, dated as of the date hereof, between Borrower and Lender (as amended, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), pursuant to which Borrower grants to Lender a first priority security interest in the Collateral (as defined in the Pledge Agreement);

WHEREAS , First Mezzanine Borrower is the legal and beneficial owner of all of the interests in Mortgage Borrower;

WHEREAS , Second Mezzanine Borrower is the legal and beneficial owner of all of the interests in First Mezzanine Borrower;

WHEREAS , Borrower is the legal and beneficial owner of all of the interests in Second Mezzanine Borrower;

WHEREAS , Borrower and Lender have agreed to execute this Agreement and this Agreement shall supersede the Original Agreement as to Borrower and Lender with regard to the Loan.

NOW THEREFORE , in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, as well as the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows:

 

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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 “A+” by S&P and “Aa3” from Moody’s, which rating shall not include a “t” or otherwise reflect a termination risk and is otherwise reasonably acceptable to Lender.

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

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

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

“ Aggregate Debt Service ” shall mean, with respect to any particular period of time, the sum of (a) the Debt Service, (b) the Mortgage Debt Service and (c) the Other Mezzanine Debt Service.

“ Aggregate Material Adverse Effect ” shall mean any event or condition that, either singly or in the aggregate, could reasonably be expected to have or result in a material adverse effect upon (a) the business, operations, economic performance, prospects, assets or condition (financial or otherwise) of (i) Mortgage Borrower, Senior Mezzanine Borrower or Borrower (taken as a whole), (ii) Guarantor, (iii) Operating Company (taken as a whole), (iv) the Operating Lease or the Operating Lease Guaranty (taken as a whole) or (v) the Properties (taken as a whole), the Collateral, the Senior Mezzanine Collateral, the Hotel Components (taken as a whole) or the Casino Components (taken as a whole); (b) the ability of Mortgage Borrower (taken as a whole), Senior Mezzanine Borrower (taken as a whole), Borrower (taken as a whole) or Guarantor to perform, in all material respects, its obligations under the Loan Documents, Senior Mezzanine Loan Documents or Mortgage Loan Documents (taken as a whole) to which such entity is a party; (c) the ability of Operating Company (taken as a whole) to perform, in all material respects, the obligations under the Operating Leases (taken as a whole); or the ability of Guarantor (Operating Lease) (taken as a whole) to perform, in all material respects, the obligations under the Operating Lease Guaranty (taken as a whole); (d) the enforceability or validity of (i) the Operating Lease (taken as a whole) or the Operating Lease Guaranty (taken as a whole), (ii) the Loan Documents, Senior Mezzanine Loan Documents or Mortgage Loan Documents (taken as a whole) or the perfection or priority of the Liens created under the Loan Documents, Senior Mezzanine Loan Documents or Mortgage Loan Documents (taken as a whole); (e) the value of, or cash flow from, the Properties or the operations thereof (taken as a whole) or the Collateral; or (f) the material rights, interests and remedies of Lender under the Loan Documents (taken as a whole).

“ Allocated Loan Amount ” shall mean, for an Individual Property, the amount set forth on Schedule II attached hereto.

“ ALTA ” shall mean American Land Title Association, or any successor thereto.

 

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“ Alteration ” shall mean, with respect to any Individual Property, any alteration, improvement, demolition, construction or removal of all or any portion of the Improvements at such Individual Property.

“ Annual Budget ” shall mean, individually and collectively as the context requires, (a) the Borrower Annual Budget and (b) the Operating Company Annual Budget.

“ Applicable Interest Rate ” shall mean the rate or rates at which the outstanding principal amount of the Loan bears interest from time to time in accordance with the provisions of Section 2.2.3 hereof.

“ Approved Guarantor ” means (x) Holdings, for so long Holdings meets the Minimum Value Test, or (y) any other guarantor that meets the Minimum Value Test and is otherwise reasonably satisfactory to Lender.

“Assignee” shall have the meaning set forth in Section 9.5 hereof.

“ Assignment and Acceptance ” shall have the meaning set forth in Section 9.8 hereof.

“ Award ” shall mean any compensation paid by any Governmental Authority in connection with a Condemnation with respect to all or any part of any Individual 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, or soliciting or causing to be solicited petitioning creditors for any involuntary petition against such Person; (c) such Person filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other 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 its 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 Title 11 of the United States Code, 11 U.S.C. §101, et seq., as the same may be amended from time to time, and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, and any comparable foreign laws relating to bankruptcy, insolvency or creditors’ rights or any other Federal or state bankruptcy or insolvency law.

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

 

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“ Borrower ” shall have the meaning set forth in the introductory paragraph hereto, together with its successors and permitted assigns. As used herein, the term “Borrower” shall mean one of the Borrowers individually, or the Borrowers collectively, as the context shall require.

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

“ Borrower Annual Budget ” shall mean the operating budget of Mortgage Borrower, prepared by Mortgage Borrower for the applicable Fiscal Year or other period.

“ Borrower Entity ” shall have the meaning set forth in Section 11.1 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.

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

“ Capitalized Software Expenditures ” shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by a Person during such period in respect of licensed or purchased software or internally developed software and software enhancements that, in accordance with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of such Person.

“ Cash Management Account ” shall have the meaning set forth in the Mortgage Loan Agreement.

“ Casino Components ” shall mean, collectively, those portions of each Individual Property devoted to the operation of casino gaming operations, 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. The Casino Components are more particularly described and set forth in each Operating Lease, as appropriate.

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

“ Change in Control ” shall mean (1) a “Change in Control” as defined in the Credit Agreement, dated as of the Original Closing Date, among Hamlet Merger Inc., a Delaware corporation, Harrah’s Operating Company, Inc., a Delaware corporation, the Lenders party thereto from time to time, Bank of America, N.A., as administrative agent and collateral agent for the Lenders, and certain other parties thereto, or (2) a Change in Control as defined in clause (b) of said definition except that references therein to Borrower shall be deemed to refer to Holdings.

“ Closing Date ” shall mean the date of this Agreement.

 

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“ 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 ” shall have the meaning set forth in the Pledge Agreement.

“ Collateral Assignment of Interest Rate Cap Agreement ” shall mean that certain Amended and Restated Collateral Assignment of Interest Rate Cap Agreement, dated as of the date hereof, executed by Borrower and Lender in connection with the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Collection Account ” shall have the meaning set forth in the Mortgage Loan Agreement.

“ Collection Banks ” shall mean (a) any Eligible Institution, (b) after the date hereof, any successor Eligible Institution(s) designated by Mortgage Borrower as Collection Bank and reasonably approved by Lender from time to time in accordance with the terms hereof, or (b) any other financial institution otherwise reasonably approved by Lender and, if a Securitization has occurred, with respect to which a Rating Agency Confirmation has been obtained.

“ 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 Individual Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting such Individual Property or any part thereof.

“ Consolidated Net Income ” shall mean, with respect to any Person for any period, the aggregate of the Net Income of such Person for such period, on a consolidated basis; provided, however, that, without duplication,

(i) any net after-tax extraordinary, nonrecurring or unusual gains or losses or income or expense or charge (less all fees and expenses relating thereto), including, without limitation, any severance, relocation or other restructuring expenses, any expenses related to any reconstruction, decommissioning, recommissioning or reconfiguration of fixed assets for alternative uses, fees, expenses or charges relating to new product lines, curtailments or modifications to pension and post-retirement employee benefit plans, excess pension charges, acquisition integration costs, facilities opening costs, project start-up costs, business optimization costs, signing, retention or completion bonuses, shall be excluded,

(ii) any net after tax income or loss from disposed, abandoned, transferred, closed or discontinued operations and any net after tax gain or loss on disposal of disposed, abandoned, transferred, closed or discontinued operations shall be excluded,

(iii) any net after tax gain or loss (less all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by the management of the Borrower) shall be excluded,

 

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(iv) Consolidated Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,

(v) effects of purchase accounting adjustments (including the effects of such adjustments pushed down to such Person) in component amounts required or permitted by GAAP, resulting from the application of purchase accounting in relation to any consummated acquisition or the amortization or write-off of any amounts thereof, net of taxes, shall be excluded,

(vi) any impairment charges or asset write-offs, in each case pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP, shall be excluded,

(vii) any non cash compensation charge or expenses realized or resulting from stock option plans, employee benefit plans or post-employment benefit plans, or grants or sales of stock, stock appreciation or similar rights, stock options, restricted stock, preferred stock or other rights shall be excluded,

(viii) accruals and reserves that are established or adjusted within twelve months after the Original Closing Date and that are so required to be established or adjusted in accordance with GAAP or as a result of adoption or modification of accounting policies shall be excluded,

(ix) non-cash gains, losses, income and expenses resulting from fair value accounting required by the applicable standard under GAAP and related interpretations shall be excluded,

(x)(i) the non-cash portion of “straight-line” rent expense shall be excluded and (ii) the cash portion of “straight-line” rent expense which exceeds the amount expensed in respect of such rent expense shall be included,

(xi) to the extent covered by insurance and actually reimbursed, or, so long as such Person has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is (i) not denied by the applicable carrier in writing within 180 days and (ii) in fact reimbursed within 365 days of the date of such evidence (with a deduction for any amount so added back to the extent not so reimbursed within 365 days), expenses with respect to liability or casualty events or business interruption shall be excluded, and

(xii) non-cash charges for deferred tax asset valuation allowances shall be excluded.

“ Contribution Agreement ” shall mean that certain Amended and Restated Contribution Agreement (Third Mezzanine Loan), dated as of the date hereof, between Borrower and Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

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“ 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.

“ Convention Center Parcel ” shall mean the parcel shown on Schedule XXII and comprising a part of the Harrah’s Atlantic City Property.

“ Convention Center Project ” shall mean that certain conference center currently contemplated to be constructed on the Convention Center Parcel by the Mortgage Borrower and/or the Operating Company owning the Harrah’s Atlantic City Property, and more fully described in the schematic designs for the Convention Center Project provided by Mortgage Borrower to Mortgage Lender. The Convention Center Project will not be funded with the proceeds of the Loan (but will be funded by Mortgage Borrower, including with capital contributions).

“ Counterparty ” shall mean, with respect to the Interest Rate Cap Agreement and any Replacement Interest Rate Cap Agreement, any Acceptable Counterparty.

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

“ Debt ” shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Notes together with all interest accrued and unpaid thereon (including any interest that would accrue on the outstanding principal amount of the Loan through and including the end of any applicable Interest Period, even if such Interest Period extends beyond any applicable Payment Date, prepayment date or the Maturity Date) and all other sums due to Lender in respect of the Loan under the Notes, this Agreement, the Pledge Agreement and the other Loan Documents.

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

“ Debt Service Coverage Ratio ” shall mean a ratio for the applicable period in which:

(a) the numerator is EBITDAR of the Operating Company for the four (4) quarter period preceding the date of determination, as set forth in the financial statements required hereunder; and

(b) the denominator is the sum of (i) the aggregate amount of Mortgage Debt Service which was due and payable for such preceding four (4) quarter period calculated, for these purposes, assuming that (A) the spread on the Mortgage Loan is the Spread (as defined in the Mortgage Loan Agreement) and (B) LIBOR is equal to the lesser of (y) LIBOR on the date of determination, or (z) the applicable Strike Price, (ii) the aggregate amount of Mezzanine Debt Service (including the Debt Service) which was due and payable for such preceding four (4) quarter period calculated, for these purposes, assuming that (A) the spread on the Mezzanine Loans is the “Spread” as defined in each

 

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Mezzanine Loan Agreement and (B) LIBOR is equal to the lesser of (y) LIBOR on the date of determination, or (z) the applicable Strike Price (as defined in the Mortgage Loan Agreement), and (iii) the aggregate amount of the Permitted Mezzanine Debt Service which was due and payable for such preceding four (4) quarter period (or the annualized amount, if the Permitted Mezzanine Loan were outstanding for less than 12 calendar months) calculated, for these purposes, assuming that (A) the spread on the Permitted Mezzanine Loan is the “Spread” (as defined in the documents evidencing the Permitted Mezzanine Loan Documents and (B) LIBOR is equal to the lesser of (y) LIBOR on the date of determination, or (z) the strike price under the related interest rate cap purchased in connection with the Permitted Mezzanine Loan);

provided , however , that, solely for the purpose of Section 2.5 , the Debt Service Coverage Ratio shall be determined as described in Section 2.5.1(c) .

“ 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) two percent (2%) above the Applicable Interest Rate.

“ Delinquency ” shall mean, with respect to each Individual Property, the latest date on which Taxes or Other Charges may be paid (with respect to such Individual Property) without the payment of a premium, penalty or interest.

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

“ Disclosure Document ” shall mean a prospectus, prospectus supplement, private placement memorandum, offering memorandum, offering circular, term sheet, road show presentation materials or other offering documents or marketing materials, in each case in preliminary or final form, used to offer Securities in connection with a Securitization.

“ EBITDAR ” shall mean, with respect to any Person for any period, the Consolidated Net Income of such Person plus the sum of (in each case without duplication and to the extent the respective amounts described in subclauses (i) through (vi) below reduced such Consolidated Net Income (and were not excluded therefrom) for the respective period for which EBITDAR is being determined):

(i) provision for Taxes based on income, profits or capital for such period, including, without limitation, state, franchise and similar taxes and foreign withholding taxes (including penalties and interest related to taxes or arising from tax examinations);

(ii) Interest Expense for such period (net of interest income for such period);

(iii) depreciation and amortization expenses for such period including, but not exclusively, the amortization of intangible assets, deferred financing fees and Capitalized Software Expenditures and amortization of unrecognized prior service costs and actuarial gains and losses related to pensions and other post-employment benefits;

 

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(iv) any expenses or charges (other than depreciation or amortization expense as described in the preceding clause (iii)) related to any acquisition, disposition, recapitalization or the incurrence, modification or repayment of Indebtedness permitted to be incurred by this Agreement (including a refinancing thereof) (whether or not successful), including (y) any amendment or other modification of such Indebtedness, and (z) commissions, discounts, yield and other fees and charges (including any interest expense) related to any such Indebtedness;

(v) restructuring charges or reserves (which, for the avoidance of doubt, shall include, without limitation, the effect of inventory optimization programs, retention, severance, systems establishment costs, contract termination costs, future lease commitments and excess pension charges), to the extent that such expenses, charges or reserves are considered to be extraordinary expenses under GAAP;

(vi) any costs or expense incurred pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of such Person;

(vii) with respect to the Operating Company, the Fixed Rent payable under the Operating Lease; and

(viii) if the Captive Insurance Company shall be utilized to provide terrorism coverage hereunder, the amount of the premiums expended by Mortgage Borrower to obtain such terrorism coverage to the extent such amount exceeds the Terrorism Premium Limit and such excess is retained by the Captive Insurance Company;

provided that EBITDAR shall be reduced by the sum of the following for the respective period for which EBITDAR is being determined:

(A) management fees equal to the greater of (x) 3 percent per annum of gross revenues at the Properties and (y) the actual management fees payable under any management agreement (provided the foregoing shall not be construed as Lender’s approval of any management agreement except in accordance with the terms hereof), without double counting actual amounts incurred and otherwise reflected in the calculation of EBITDAR, and

(B) FF&E reserves equal to 3 percent per annum of gross hotel and casino revenues at the Properties without double counting actual amounts incurred and otherwise reflected in the calculation of EBITDAR.

“ EBITDAR (Closing Date) ” shall mean Six Hundred Twenty-Six Million Five Hundred Thousand and No/100 Dollars ($626,500,000.00).

 

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“ Eighth Mezzanine Borrower ” shall mean, collectively, the entities set forth on Schedule XX hereto, each a Delaware limited liability company, together with their respective successors and permitted assigns. As used herein, the term “Eighth Mezzanine Borrower” shall mean one of the Eighth Mezzanine Borrowers individually, or the Eighth Mezzanine Borrowers collectively, as the context shall require.

“ Eighth Mezzanine Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments due under the Eighth Mezzanine Notes.

“ Eighth Mezzanine Lender ” shall mean JPMorgan Chase Bank, N.A., in its capacity as the holder of the Eighth Mezzanine Loan, together with its successors and assigns.

“ Eighth Mezzanine Loan ” shall mean that certain loan in the original principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000) made by Eighth Mezzanine Lender to Eighth Mezzanine Borrower as of the Original Closing Date.

“ Eighth Mezzanine Loan Agreement ” shall mean that certain Amended and Restated Eighth Mezzanine Loan Agreement, dated as of the date hereof, between Eighth Mezzanine Borrower and Eighth Mezzanine Lender, as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Eighth Mezzanine Loan Documents ” shall mean the Eighth Mezzanine Loan Agreement, the Eighth Mezzanine Notes and all other documents and instruments executed and delivered in connection with the Eighth Mezzanine Loan, as such documents may be amended, modified and restated in accordance with their respective terms.

“ Eighth Mezzanine Notes ” shall mean the “Notes” as defined in the Eighth Mezzanine Loan Agreement.

“ Eligibility Requirements ” means, with respect to any Person, that such Person (a) has total assets (in name or under management) in excess of $4,000,000,000 and (except with respect to a pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder’s equity of $1,000,000,000 and (b) is regularly engaged in the business of owning and operating commercial real estate properties, (c) is not currently, and its principals are not currently, subject to a Bankruptcy Action and for the immediately preceding 10 years, neither it nor any material subsidiary has been subject to a Bankruptcy Action, and (d) has not been, and its principals have not been, convicted and is not under current indictment for a felony or crime involving moral turpitude, has not been found by a court of competent jurisdiction to have violated federal or state securities laws, and is not an organized crime figure.

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

 

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“ 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 “A” by Fitch and S&P and “A2” by Moody’s). After a Securitization of all or any portion of the Loan, only the ratings of those Rating Agencies rating the Securities shall be taken into account in determining whether institutions or trust companies constitute Eligible Institutions.

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

“ Environmental Indemnity ” shall mean, collectively (i) that certain Environmental Indemnity Agreement (Third Mezzanine Loan), dated as of January 28, 2008, executed by Original Borrower and Guarantor in connection with the Loan for the benefit of Lender and the Noteholders, as acknowledged and confirmed by Original Borrower and Guarantor herein, and as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time (the “ Original Environmental Indemnity ”), and (ii) that certain Environmental Indemnity Agreement (Third Mezzanine Loan), dated as of the date hereof, executed by Paris Individual Borrower, Laughlin Individual Borrower and Guarantor in connection with the Loan for the benefit of Lender and the Noteholders, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Equipment ” shall mean, with respect to each Individual Property, any equipment now owned or hereafter acquired by Mortgage Borrower or Operating Company, which is used at or in connection with the Improvements or such Individual Property or is located thereon or therein, including (without limitation) all Gaming Equipment, all machinery, equipment, furnishings, and electronic data-processing and other office equipment now owned or hereafter acquired by or on behalf of Mortgage Borrower or Operating Company and any and all additions, substitutions and replacements of any of the foregoing), together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto.

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

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

 

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“ FF&E ” shall mean, with respect to each Individual Property, collectively, furnishings, fixtures (other than Fixtures) and Equipment located in the guest rooms, hallways, lobbies, restaurants, lounges, meeting and banquet rooms, parking facilities, public areas or otherwise in any portion of such Individual Property, including (without limitation) all fixed asset supplies (including, but not limited to, linen, china, glassware, tableware, uniforms, other hotel inventory and similar items, whether used in connection with public space or guest rooms), beds, chairs, bookcases, tables, carpeting, drapes, couches, luggage carts, luggage racks, bars, bar fixtures, radios, television sets, intercom and paging equipment, electric and electronic equipment, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, stoves, ranges, refrigerators, laundry machines, tools, machinery, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, cabinets, lockers, shelving, dishwashers, garbage disposals, washer and dryers, gaming equipment and other casino equipment and all other customary hotel and casino resort equipment and other tangible property owned by Mortgage Borrower or Operating Company, or in which Mortgage Borrower or Operating Company has or shall have an interest, now or hereafter located at such Individual Property and useable in connection with the present or future operation and occupancy of such Individual Property; provided , however , that FF&E shall not include items owned by tenants under space Leases (other than the Operating Lease) or by third party operators (other than Operating Company).

“ FF&E Reserve Account ” shall have the meaning set forth in Section 7.3 hereof.

“ FF&E Reserve Fund ” shall have the meaning set forth in Section 7.3 hereof.

“ Fifth Mezzanine Borrower ” shall mean, collectively, the entities set forth on Schedule XVII hereto, each a Delaware limited liability company, together with their respective successors and permitted assigns. As used herein, the term “Fifth Mezzanine Borrower” shall mean one of the Fifth Mezzanine Borrowers individually, or the Fifth Mezzanine Borrowers collectively, as the context shall require.

“ Fifth Mezzanine Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments due under the Fifth Mezzanine Notes.

“ Fifth Mezzanine Lender ” shall mean JPMorgan Chase Bank, N.A., in its capacity as the holder of the Fifth Mezzanine Loan, together with its successors and assigns.

“ Fifth Mezzanine Loan ” shall mean that certain loan in the original principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000) made by Fifth Mezzanine Lender to Fifth Mezzanine Borrower as of the Original Closing Date.

“ Fifth Mezzanine Loan Agreement ” shall mean that certain Amended and Restated Fifth Mezzanine Loan Agreement, dated as of the date hereof, between Fifth Mezzanine Borrower and Fifth Mezzanine Lender, as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Fifth Mezzanine Loan Documents ” shall mean the Fifth Mezzanine Loan Agreement, the Fifth Mezzanine Notes and all other documents and instruments executed and delivered in connection with the Fifth Mezzanine Loan, as such documents may be amended, modified and restated in accordance with their respective terms.

 

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“ Fifth Mezzanine Notes ” shall mean the “Notes” as defined in the Fifth Mezzanine Loan Agreement.

“ First Mezzanine Borrower ” shall mean, collectively, the entities set forth on Schedule XIV hereto, each a Delaware limited liability company, together with their respective successors and permitted assigns. As used herein, the term “First Mezzanine Borrower” shall mean one of the First Mezzanine Borrowers individually, or the First Mezzanine Borrowers collectively, as the context shall require.

“ First Mezzanine Borrower Company Agreements ” shall mean, collectively, the Limited Liability Company Agreements of First Mezzanine Borrower, by each Borrower, as sole member, dated as of the date hereof.

“ First Mezzanine Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments due under the First Mezzanine Note.

“ First Mezzanine Lender ” shall have the meaning set forth in the Recitals.

“ First Mezzanine Loan ” shall have the meaning set forth in the Recitals.

“ First Mezzanine Loan Agreement ” shall have the meaning set forth in the Recitals.

“ First Mezzanine Loan Documents ” shall mean the First Mezzanine Loan Agreement, the First Mezzanine Notes, and all other documents and instruments executed and delivered in connection with the First Mezzanine Loan, as such documents may be amended, modified and restated in accordance with their respective terms.

“ First Mezzanine Notes ” shall mean the “Notes” as defined in the First Mezzanine Loan Agreement.

“ First Mezzanine Pledge Agreement ” shall mean that certain Pledge and Security Agreement (First Mezzanine Loan), dated as of the date hereof, between First Mezzanine Borrower and First Mezzanine Lender, as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ 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.

“ Fitch ” shall mean Fitch, Inc.

“ Fixed Rent ” shall mean the Base Rent (as defined in the Operating Lease) payable under the Operating Lease.

“ Fixtures ” shall mean, with respect to each Individual Property, all Equipment now owned, or the ownership of which is hereafter acquired, by Mortgage Borrower which is so related to the Land and the Improvements forming part of the Individual Property in question that it is deemed fixtures or real property under applicable Legal Requirements, including,

 

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without limitation, all building or construction materials intended for construction, reconstruction, alteration, decoration or repair of or installation on the applicable Individual Property, construction equipment, appliances, machinery, plant equipment, fittings, apparatuses, fixtures and other items now or hereafter attached to, installed in or used in connection with (temporarily or permanently) any of the Improvements or the Land, including, but not limited to, engines, devices for the operation of pumps, pipes, plumbing, call and sprinkler systems, fire extinguishing apparatuses and equipment, heating, ventilating, incinerating, electrical, air conditioning and air cooling equipment and systems, gas and electric machinery, appurtenances and equipment, pollution control equipment, security systems, disposals, dishwashers, refrigerators and ranges, recreational equipment and facilities of all kinds, and water, electrical, storm and sanitary sewer facilities, utility lines and equipment (whether owned individually or jointly with others, and, if owned jointly, to the extent of Mortgage Borrower’s interest therein) and all other utilities whether or not situated in easements, all water tanks, water supply, water power sites, fuel stations, fuel tanks, fuel supply, and all other structures, together with all accessions, appurtenances, additions, replacements, betterments and substitutions or any of the foregoing and the proceeds thereof.

“ Flamingo Individual Borrower ” shall have the meaning set forth in the introductory paragraph hereto.

“ Flamingo Las Vegas ” shall mean that certain Individual Property identified on Schedule II as the “Flamingo Las Vegas” and having a street address of 3555 Las Vegas Boulevard South, Las Vegas, Nevada.

“ Flamingo Mortgage Borrower ” shall have the meaning set forth in the recitals hereto.

“ Force Majeure ” shall mean any delay caused by reason of strike, lock-out or other labor trouble, casualty, governmental preemption of priorities or other controls in connection with a national or other public emergency or shortages of fuel, supplies or labor resulting therefrom or other causes beyond Borrower’s reasonable control.

“ Foreign Taxes ” shall have the meaning set forth in Section 2.2.3(e) hereof.

“ Fourth Mezzanine Borrower ” shall mean, collectively, the entities set forth on Schedule XVI hereto, each a Delaware limited liability company, together with their respective successors and permitted assigns. As used herein, the term “Fourth Mezzanine Borrower” shall mean one of the Fourth Mezzanine Borrowers individually, or the Fourth Mezzanine Borrowers collectively, as the context shall require.

“ Fourth Mezzanine Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments due under the Fourth Mezzanine Notes.

“ Fourth Mezzanine Lender ” shall mean JPMorgan Chase Bank, N.A., in its capacity as the holder of the Fourth Mezzanine Loan, together with its successors and assigns.

 

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“ Fourth Mezzanine Loan ” shall mean that certain loan in the original principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000) made by Fourth Mezzanine Lender to Fourth Mezzanine Borrower as of the Original Closing Date.

“ Fourth Mezzanine Loan Agreement ” shall mean that certain Amended and Restated Fourth Mezzanine Loan Agreement, dated as of the date hereof, between Fourth Mezzanine Borrower and Fourth Mezzanine Lender, as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Fourth Mezzanine Loan Documents ” shall mean the Fourth Mezzanine Loan Agreement, the Fourth Mezzanine Notes and all other documents and instruments executed and delivered in connection with the Fourth Mezzanine Loan, as such documents may be amended, modified and restated in accordance with their respective terms.

“ Fourth Mezzanine Notes ” shall mean the “Notes” as defined in the Fourth Mezzanine Loan Agreement.

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

“ Gaming Authorities ” shall mean, in any jurisdiction in which Borrower, Senior Mezzanine Borrower, Mortgage Borrower, Operating Company or any of their respective subsidiaries manages or conducts any casino, gaming business or activities, the applicable gaming board, commission, or other governmental gaming regulatory authority, body or agency which (a) has, or may at any time after the Original Closing Date have, jurisdiction over the gaming activities at any of the Properties or any successor to such authority or (b) is, or may at any time after the Original Closing Date be, responsible for interpreting, administering and enforcing the Gaming Laws.

“ Gaming Equipment ” shall mean any and all gaming devices, 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, player tracking systems, cashless wagering systems, electronic betting systems, mobile gaming systems and associated equipment which are located at the Casino Components, owned or leased by Operating Company or Mortgage Borrower and used or useable exclusively in the present or future operation of slot machines and live games at the Casino Component, together with all improvements and/or additions thereto.

“ Gaming Laws ” or “ Gaming Regulations ” shall mean all applicable constitutions, treaties, laws, statutes and municipal ordinances pursuant to which any Gaming Authority possesses regulatory, licensing or permitting authority over gaming, gambling or casino or casino-related activities and all rules, rulings, orders, ordinances and regulations of any Gaming Authority applicable to the gambling, casino, gaming businesses or casino or casino-related activities of Borrower, Senior Mezzanine Borrower, Mortgage Borrower or the Operating Companies or any of their respective subsidiaries in any jurisdiction, as in effect from time to time, including the policies, interpretations and administration thereof by the Gaming Authorities.

 

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“ Gaming License ” shall mean, in any jurisdiction in which Borrower, Senior Mezzanine Borrower, Mortgage Borrower, Operating Company or any of their respective subsidiaries conducts any casino and gaming business or activities, 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 the Gaming Authorities or otherwise necessary for the operation of gaming, the gaming business or a resort casino.

“ Gaming Liquidity Requirement ” shall mean the minimum bankroll requirements for cash and cash equivalents required to be maintained by each Operating Company pursuant to Gaming Laws in an amount no greater than is mandated by applicable law, which requirements may be subject to (a) adjustment in an amount equal to any incremental increase or decrease in the amount of the Gaming Liquidity Requirement that is required to be maintained by Operating Company under applicable Gaming Laws as a result of any increase or decrease in gaming business at the applicable Casino Component, or (b) subject to increase or decrease due to any change in the applicable requirements under Gaming Laws generally.

“ Gaming Operating Reserve ” shall mean, with respect to the Casino Component, such cash funds and reserves that are held and maintained on-site at each Individual Property by Operating Company, in its capacity as the duly licensed operator of the Casino Component, including (without limitation) casino chips, tokens, checks and markers; provided , however , that all such Gaming Operating Reserves (a) are established and maintained in compliance with all applicable Gaming Liquidity Requirements, (b) are solely for use in the day-to-day operation and management of each Casino Component in the ordinary course of business, and (c) in the case of each Individual Property, are in amounts customary and generally comparable for casinos comparable to the Individual Property in question.

“ 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, all Gaming Authorities having jurisdiction over the Properties (and any operations conducted thereat), Mortgage Borrower, Borrower and Operating Company. For the avoidance of doubt, the term “Governmental Authority” shall include, and be deemed to include, all Gaming Authorities.

“ Guarantor ” shall mean, collectively, Guarantor (FF&E), Guarantor (Recourse Carveouts), Guarantor (Operating Lease) and any guarantor under any completion guaranty provided under Section 5.1.21 .

“ Guarantor (FF&E) ” shall mean any Approved Guarantor. Initially, Guarantor (FF&E) shall mean Holdings, and its successors. If Holdings (or any replacement Guarantor (FF&E)) fails to meet the Minimum Value Test, then Borrower shall replace Holdings (or such replacement Guarantor (FF&E)), as the guarantor under the Guaranty (FF&E), with an Approved Guarantor.

“ Guarantor (Operating Lease) ” shall mean Holdings, and its successors.

 

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“ Guarantor (Recourse Carveouts) ” shall mean Holdings, and its successors.

“ Guaranty ” shall mean, collectively, the Guaranty (FF&E), the Guaranty (Recourse Carveouts), the Operating Lease Guaranty and any completion guaranty provided under Section 5.1.21 .

“ Guaranty (FF&E) ” shall mean that certain Guaranty (FF&E) (Third Mezzanine Loan), dated as of the Original Closing Date, from Guarantor (FF&E) to Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Guaranty (Recourse Carveouts) ” shall mean that certain Guaranty (Recourse Carveouts) (Third Mezzanine Loan), dated as of the Original Closing Date, from Guarantor (Recourse Carveouts) to Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Harrah’s AC Individual Borrower ” shall have the meaning set forth in the introductory paragraph hereto.

“Harrah ’ s AC Mortgage Borrower ” shall have the meaning set forth in the recitals hereto.

“ Harrah’s Atlantic City Property ” shall mean that certain Individual Property identified on Schedule II as “Harrah’s Atlantic City” and having a street address of 777 Harrah’s Boulevard, Atlantic City, New Jersey.

“ Harrah’s LV Individual Borrower ” shall have the meaning set forth in the introductory paragraph hereto.

“ Harrah’s LV Mortgage Borrower ” shall have the meaning set forth in the recitals hereto.

“ Harrah’s Laughlin ” shall mean that certain Individual Property identified on Schedule II as “Harrah’s Laughlin” and having a street address of 2900 South Casino Drive, Laughlin, Nevada.

“ Holdings ” shall mean Harrah’s Entertainment, Inc., and its successors.

“ Hotel Components ” shall mean, collectively, those portions of each Individual Property devoted to the operation of a hotel and related facilities, excluding the Casino Component, but including (without limitation) (a) all guest rooms and suites, hotel amenities, restaurants, conference centers, meeting, banquet and other public rooms, spa, parking spaces and other facilities of the hotel portion of such Individual Property, and (b) any theaters or performing arts spaces in the Individual Property in question. The Hotel Components are more particularly described and set forth in each Operating Lease, as applicable.

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

 

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

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

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

“ Independent Director ” or “ Independent Manager ” shall mean a natural person who is not and will not be while serving and has not been during the five years preceding his or her initial appointment to such position any of the following: (a) a stockholder (other than a stockholder who owns a de minimis amount of shares and receive de minimis income therefrom, or who indirectly owns stock through its interest in one or more mutual funds), member (other than as a Special Member or Springing Member of Borrower), director, manager (except in his or her capacity as an Independent Manager on the Board of Managers of Borrower), officer, employee, partner, attorney, trustee or counsel of Borrower or any Affiliate of Borrower or any direct or indirect parent of either of them, including Holdings, (b) a creditor, customer (other than a retail customer of an Individual Property), supplier or other Person who derives any of its purchases or revenues from its activities with Borrower or any Affiliate of Borrower, including Holdings, (c) a Person or other entity controlling or under common control with any such stockholder, partner, member, director, manager or officer, customer, supplier or other Person excluded from serving as Independent Director or Independent Manager described in the foregoing subclause (a) or subclause (b), or (d) a member of the immediate family by blood or marriage of any such stockholder, member, manager, director, officer, employee, partner, attorney, customer, supplier or other Person excluded from serving as Independent Director or Independent Manager in subclause (a) or subclause (b). A natural person who satisfies the foregoing definition other than subclause (b) above shall not be disqualified from serving as an Independent Manager, if such individual is an independent director provided by a nationally recognized company that provides professional independent directors and managers, it being hereby acknowledged and agreed that Corporation Service Company satisfies such criteria. Further, a natural person who otherwise satisfies the foregoing definition except for subclause (a) by reason of being the independent director of a “special purpose entity” affiliated with the Borrower shall not be disqualified from serving as an Independent Director of the Borrower if such individual is either (i) a Professional Independent Director or (ii) the fees and other income that such individual earns from serving as independent director of affiliates of the Borrower in any given year constitute in the aggregate less than five percent (5%) of such individual’s annual income for that year. Notwithstanding the immediately preceding sentence, an Independent Director may not simultaneously serve as Independent Director of the Borrower and independent director of a special purpose entity that owns a direct or indirect equity interest in the Borrower

 

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or a direct or indirect interest in any co-borrower with the Borrower. For purposes of this paragraph, a “special purpose entity” is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve such entity’s separateness that are substantially similar to the “special purpose entity” provisions of this Agreement. Notwithstanding anything herein to the contrary, an Independent Director may not simultaneously serve as Independent Director of a Borrower and an independent director of a special purpose entity that owns a direct or indirect equity interest in any Borrower; provided, however, that one Independent Director of Borrower (but not both Independent Directors simultaneously) may serve as an independent director of each Other Mezzanine Borrower.

“ Individual Material Adverse Effect ” shall mean any event or condition that, either singly or in the aggregate, could reasonably be expected to have or result in a material adverse effect upon (a) the business, operations, economic performance, prospects, assets or condition (financial or otherwise) of (i) any Borrower, any Senior Mezzanine Borrower or any Mortgage Borrower, (ii) Guarantor, (iii) any Operating Company, (iv) any Operating Lease or Operating Lease Guaranty or (v) the Collateral, the Senior Mezzanine Collateral or any Individual Property or any Hotel Component or Casino Component thereon; (b) the ability of any Borrower, any Senior Mezzanine Borrower, any Mortgage Borrower or Guarantor to perform, in all material respects, its obligations under each of the Loan Documents, Senior Mezzanine Loan Documents or Mortgage Loan Documents to which it is a party; (c) the ability of any Operating Company to perform, in all material respects, its obligations under its Lease; (d) the enforceability or validity of (i) any Operating Lease or Operating Lease Guaranty, or (ii) any Loan Document, Senior Mezzanine Loan Document, Mortgage Loan Document or the perfection or priority of any Lien created under any Loan Document, Senior Mezzanine Loan Document or Mortgage Loan Document; (e) the value of, or cash flow from, any Individual Property, the Collateral, the Senior Mezzanine Collateral or the operations thereof; or (f) the material rights, interests and remedies of Lender under any of the Loan Documents.

“ Individual Property ” shall mean, individually, any one of the properties identified on Schedule II (it being the Improvements thereon and all Fixtures and all Equipment, FF&E and personal property owned by Mortgage Borrower and encumbered by a Mortgage, together with all rights pertaining to such property and Improvements, as more particularly described in the Granting Clauses of each Mortgage and referred to therein as the “ Property ”).

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

“ Institutional Lender ” shall mean any Person reasonably acceptable to Lender in all respects that is either (a) a real estate investment trust, bank, saving and loan association, investment bank, insurance company, trust company, commercial credit corporation, pension plan, pension fund or pension advisory firm, mutual fund, government entity or plan, provided that any such Person referred to in this clause (a) satisfies the Eligibility Requirements; (b) an investment company, money management firm or “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, or an institutional “accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended, provided that any such Person referred to in this clause (b) satisfies the Eligibility

 

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Requirements; (c) an institution substantially similar to any of the foregoing entities described in clauses (a) or (b) that satisfies the Eligibility Requirements; (d) any entity controlled by any of the entities described in clauses (a) or (c) above; or (e) an investment fund, limited liability company, limited partnership or general partnership where a Permitted Fund Manager or an entity that is otherwise an Institutional Lender under clauses (a), (b), (c) or (d) of this definition acts as the general partner, managing member or fund manager and at least fifty percent (50%) of the equity interests in such investment fund are owned, directly or indirectly, by one or more entities that are otherwise Institutional Lenders under clauses (a), (b), (c) or (d) of this definition.

“ Insurance Premiums ” shall have the meaning set forth in the Mortgage Loan Agreement.

“ Insurance Proceeds ” shall have the meaning set forth in the Mortgage Loan Agreement.

“ Interest Expense ” shall mean, with respect to any Person for any period, the sum of (a) gross interest expense of such Person for such period on a consolidated basis, including (i) the amortization of debt discounts, (ii) the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any payments or accruals with respect to equipment financing and equipment leases allocable to interest expense, (b) capitalized interest of such Person, and (c) commissions, discounts, yield and other fees and charges incurred in connection with any indebtedness which are payable to any Person other than Borrower. For purposes of the foregoing, interest on equipment financing or equipment leases shall be deemed to accrue at an interest rate reasonably determined by the Borrower to be the rate of interest implicit in such equipment financing or equipment lease in accordance with GAAP.

“ Interest Period ” shall mean (a) for the first interest period hereunder, the period commencing on the Original Closing Date and ending on (and including) February 14, 2008, and (b) for each interest period thereafter (commencing with the interest period beginning on February 15, 2008), the period commencing on the fifteenth (15th) day of each calendar month and ending on (and including) the fourteenth (14th) day of the following calendar month. Each Interest Period above shall be a full month and shall not be shortened by reason of any payment of the Loan prior to the expiration of such Interest Period. Notwithstanding the foregoing, Lender shall have the right, in connection with a Securitization, to change the Interest Period and Payment Date, provided that in doing so, Lender shall not increase Borrower’s costs hereunder (other than the direct costs of implementing such change, such as legal fees, which Borrower hereby agrees to pay).

“ 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 between Borrower and an Acceptable Counterparty or a Replacement Interest Rate Cap Agreement.

“ JPM ” shall mean JPMorgan Chase Bank, N.A. and its successors in interest.

 

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“ Laughlin Individual Borrower ” shall have the meaning set forth in the introductory paragraph hereto.

“ Laughlin Individual Mortgage Borrower ” shall have the meaning set forth in the recitals hereto.

“ Lease ” shall mean any lease (including the Operating 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 Individual Property (other than short term arrangements with transient hotel guests entered into in the usual course of business), 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 (including the Operating Lease Guaranty).

“ Legal Requirements ” shall mean, with respect to each Individual Property and the Collateral, all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting such Individual Property, the Senior Mezzanine Collateral, the Collateral or any part thereof (including, without limitation, all Gaming Laws), or affecting the construction, use, alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto (including, without limitation, all Gaming Licenses and Operating Permits), and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, Mortgage Borrower or Operating Company, at any time in force affecting such Individual Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to such Individual Property or any part thereof, or (b) in any way limit the use and enjoyment thereof. Legal Requirements shall include any (x) judicial, administrative or other governmental or quasi governmental order, injunction, writ, judgment, decree, ruling, interpretation, finding or other directive, whether domestic or foreign; (y) arbitrator’s, mediator’s or referee’s decision, finding, award or recommendation; or (z) charter, rule, regulation or other organizational or governance document of any self-regulatory or governing body or organization. For the avoidance of doubt, the term “Legal Requirements” shall include, and be deemed to include, all applicable Gaming Laws and Gaming Regulations.

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

“ Lender’s Share ” shall mean a fraction, the numerator of which is the outstanding principal amount of the Loan and the denominator of which is the sum of the outstanding principal amounts of the Mortgage Loan, the Loan and the Other Mezzanine Loans (in each case, as of the date of determination).

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

 

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“ LIBOR ” shall mean, with respect to each Interest Period, the rate (expressed as a percentage per annum and rounded to the next nearest 1/100 of 1%) for deposits in U.S. dollars, for a one-month period, that appears on Reuters Screen LIBOR01 Page (or the successor thereto) as of 11:00 a.m., London time, on the related Determination Date. If such rate does not appear on Reuters Screen LIBOR01 Page 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 to provide such bank’s offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in U.S. dollars for a one-month period as of 11:00 a.m., London time, on such Determination Date for the amounts of not less than U.S. $1,000,000. If at least two such offered quotations are so provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, Lender shall request any three major banks in New York City selected by Lender 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. Notwithstanding the foregoing, for the Interest Period ending February 14, 2008, LIBOR was 3.31%.

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

“ Lien ” shall mean, with respect to each Individual Property, the Senior Mezzanine Collateral and the Collateral, any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or restriction on transfer of, on or affecting Borrower, Senior Mezzanine Borrower, Mortgage Borrower, any Individual Property, the Senior Mezzanine Collateral or the Collateral, any portion of either 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, in each case whether arising by contract, operation of law, or otherwise.

“ Liquidation Event ” shall have the meaning set forth in Section 2.4.2 hereof.

“ Loan ” shall have the meaning set forth in the recitals hereto.

“ Loan Adjustment ” shall have the meaning set forth in Section 2.1.6 hereof.

“ Loan Amount ” shall mean, as determined from time to time, the outstanding principal amount of the Loan.

 

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“ Loan Documents ” shall mean, collectively, this Agreement, the Note, the Pledge Agreement, the Environmental Indemnity, the O&M Agreement, the Guaranty (Recourse Carveouts), the Guaranty (FF&E), the Collateral Assignment of Interest Rate Cap Agreement, the Contribution Agreement and all other documents executed and/or delivered in connection with the Loan.

“ Loan Party ” shall mean, collectively, Mortgage Borrower, Borrower, Senior Mezzanine Borrower, Principal and Guarantor.

“ 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 Lease ” shall mean any of the following: (a) with respect to any Individual Property, any Lease (i) covering in excess of forty thousand (40,000) net rentable square feet at such Individual Property or (ii) made with a tenant that is a tenant under another Lease at such Individual Property (or with a tenant that is an Affiliate of a tenant under another Lease at such Individual Property) if any such Leases, together, cover in excess of forty thousand (40,000) net rentable square feet or more at such Individual Property, (b) any Lease of space at any Individual Property with an Affiliate of Mortgage Borrower, or (c) any Lease that is not the result of arm’s length negotiations; provided , however , that the Operating Lease shall not constitute a Major Lease for purposes of this Agreement.

“ Material Alteration ” shall mean any Alteration with respect to all or a portion of any Individual Property that (i) when aggregated with all other Alterations at such Individual Property then being conducted involve an estimated total cost in excess of an amount equal to ten percent (10%) of the sum of the Allocated Loan Amount for such Individual Property and the “Allocated Loan Amounts” under (and as defined in each of) the Mortgage Loan Agreement and the Other Mezzanine Loan Agreements for such Individual Property or (ii) when aggregated with all other Alterations at the Properties, including such Individual Property, then being conducted, involve an estimated total cost in excess of an amount equal to five percent (5%) of the sum of the Loan Amount, the Mortgage Loan Amount and the Other Mezzanine Loan Amount (and, as used herein, “ Threshold Amount ” shall mean whichever of said 5% or 10% amount shall have been exceeded, provided that if both shall have been exceeded, then the lower of such two amounts shall be the “Threshold Amount”); provided , that , in determining whether one or more Alterations comprise a Material Alteration, there shall not be included (a) merely decorative work such as painting, wall papering, carpeting and replacement of FF&E to the extent the same are of a routine and recurring nature, performed in the ordinary course of business; (b) tenant improvement work performed by a tenant pursuant to the terms of any Lease (other than the Operating Lease) entered into in accordance with the terms hereof, so long as such work does not adversely affect any structural component of any Improvements, any utility or HVAC system contained in any Improvements or the exterior of any building constituting a part of any Improvements, (c) any Alterations which are performed in connection with the Restoration of any portion of any Individual Property after the occurrence of a Casualty or Condemnation in accordance with the terms and provisions of this Agreement, or (d) the Tower Project or the Convention Center Project.

 

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“ Maturity Date ” shall mean the Scheduled Maturity Date or such other date on which the final payment of principal of the Notes becomes due and payable as therein or herein provided, whether at such Scheduled Maturity, 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, 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.

“ Mezzanine Borrowers ” shall mean, collectively, the Borrower, the First Mezzanine Borrower, the Second Mezzanine Borrower, the Fourth Mezzanine Borrower, the Fifth Mezzanine Borrower, the Sixth Mezzanine Borrower, the Seventh Mezzanine Borrower, the Eighth Mezzanine Borrower, the Ninth Mezzanine Borrower and any New Mezzanine Borrower.

“ Mezzanine Collection Account ” shall have the meaning set forth in Section 2.6.4 hereof.

“ Mezzanine Debt Service ” shall mean, with respect to any particular period of time, the sum of (a) the Debt Service, (b) the First Mezzanine Debt Service, (c) the Second Mezzanine Debt Service, (d) the Fourth Mezzanine Debt Service, (e) the Fifth Mezzanine Debt Service, (f) the Sixth Mezzanine Debt Service, (g) the Seventh Mezzanine Debt Service, (h) the Eighth Mezzanine Debt Service, (i) the Ninth Mezzanine Debt Service, and (j) debt service on any New Mezzanine Loan.

“ Mezzanine Lenders ” shall mean, collectively, Lender, the First Mezzanine Lender, the Second Mezzanine Lender, the Fourth Mezzanine Lender, the Fifth Mezzanine Lender, the Sixth Mezzanine Lender, the Seventh Mezzanine Lender, the Eighth Mezzanine Lender, the Ninth Mezzanine Lender and Lender, as lender under any New Mezzanine Loan.

“ Mezzanine Loan Agreements ” shall mean, collectively, this Agreement, the First Mezzanine Loan Agreement, the Second Mezzanine Loan Agreement, the Fourth Mezzanine Loan Agreement, the Fifth Mezzanine Loan Agreement, the Sixth Mezzanine Loan Agreement, the Seventh Mezzanine Loan Agreement, the Eighth Mezzanine Loan Agreement, the Ninth Mezzanine Loan Agreement and any New Mezzanine Loan Agreement.

“ Mezzanine Loan Amount ” shall mean, as determined from time to time, the outstanding principal amount of the Mezzanine Loans.

“ Mezzanine Loan Documents ” shall mean, collectively, the Loan Documents, the First Mezzanine Loan Documents, the Second Mezzanine Loan Documents, the Fourth Mezzanine Loan Documents, the Fifth Mezzanine Loan Documents, the Sixth Mezzanine Loan Documents, the Seventh Mezzanine Loan Documents, the Eighth Mezzanine Loan Documents, the Ninth Mezzanine Loan Documents and any loan documents entered into in connection with any New Mezzanine Loan.

 

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“ Mezzanine Loans ” shall mean, collectively, this Loan, the First Mezzanine Loan, the Second Mezzanine Loan, the Fourth Mezzanine Loan, the Fifth Mezzanine Loan, the Sixth Mezzanine Loan, the Seventh Mezzanine Loan, the Eighth Mezzanine Loan, the Ninth Mezzanine Loan and any New Mezzanine Loan.

“ Minimum Value Test ” shall mean, with respect to any Person, that the greater of the book value or the fair market value of the assets of such Person (excluding, for purposes of making such determination, the value of the Properties) exceeds Five Billion and No/100 Dollars ($5,000,000,000.00) in the aggregate, as certified to Lender in an Officer’s Certificate prepared in good faith based on the most recent financial statements of such Person.

“ Monthly Disbursements ” shall have the meaning provided in Section 2.6.2 .

“ Monthly FF&E Reserve Amount ” means the monthly deposit for FF&E required pursuant to Section 7.3 of this Agreement.

“ Monthly Tax and Insurance Amount ” means the monthly deposit for Taxes and Insurance required pursuant to Section 7.2 of this Agreement.

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

“ Mortgage ” shall mean (a) with respect to each Individual Property (other than a Swap Property), that certain first priority Mortgage (or Deed of Trust or Deed to Secure Debt) and Security Agreement, dated as of the Original Closing Date, executed and delivered by Mortgage Borrower as security for the Mortgage Loan and encumbering such Individual Property, as each of the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, and (b) with respect to each Swap Property, that certain first priority Mortgage (or Deed of Trust or Deed to Secure Debt) and Security Agreement, dated as of the date hereof, executed and delivered by Mortgage Borrower as security for the Mortgage Loan and encumbering such Swap Property, as each of the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Mortgage Borrower ” shall mean, collectively, the entities set forth on Schedule XIII hereto, each a Delaware limited liability company, together with their respective successors and permitted assigns. As used herein the term “Mortgage Borrower” shall mean one of the Mortgage Borrowers individually or the Mortgage Borrowers collectively, as the context shall require.

“ Mortgage Borrower Company Agreements ” shall mean, collectively, (a) the Limited Liability Company Agreements of Mortgage Borrower (other than Paris Mortgage Borrower and Harrah’s Laughlin Mortgage Borrower), by each Borrower, as sole member, dated as of the Original Closing Date, and (b) the Limited Liability Company Agreements of Paris Mortgage Borrower and Harrah’s Laughlin Mortgage Borrower, respectively, by the related Borrower, as sole member, dated as of the date hereof.

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

 

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“ Mortgage Lender ” shall have the meaning set forth in the recitals hereto.

“ Mortgage Loan ” shall have the meaning set forth in the recitals hereto.

“ Mortgage Loan Agreement ” shall have the meaning set forth in the recitals hereto.

“ Mortgage Loan Amount ” shall mean, as determined from time to time, the outstanding principal amount of the Mortgage Loan.

“ Mortgage Loan Default ” shall mean a “Default” as defined in the Mortgage Loan Agreement.

“ Mortgage Loan Documents ” shall mean the Mortgage Loan Agreement, the Mortgage Note, the Mortgage and all other documents and instruments executed and delivered in connection with the Mortgage Loan, as such documents may be amended, modified and restated in accordance with their respective terms.

“ Mortgage Loan Event of Default ” shall mean an “Event of Default” as defined in the Mortgage Loan Agreement.

“ Mortgage Loan Reserve Funds ” shall mean the “Reserve Funds” as defined in the Mortgage Loan Agreement.

“ Mortgage Note ” shall mean the “Note” as defined in the Mortgage Loan Agreement.

“ Net Income ” shall mean, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.

“ Net Liquidation Proceeds After Debt Service ” shall mean, with respect to any Liquidation Event, all amounts paid to or received by or on behalf of Borrower, Senior Mezzanine Borrower or Mortgage Borrower in connection with such Liquidation Event, including, without limitation, proceeds of any sale, refinancing or other disposition or liquidation, less (a) Lender’s, Senior Mezzanine Lender’s and/or Mortgage Lender’s reasonable costs incurred in connection with the recovery thereof, (b) amounts required or permitted to be deducted therefrom and amounts paid pursuant to the Mortgage Loan Documents and Senior Mezzanine Loan Documents to Mortgage Lender and/or Senior Mezzanine Lender (as applicable), (c) in the case of a foreclosure sale, disposition or Transfer of the Property in connection with realization thereon following a Mortgage Loan Event of Default, such reasonable and customary costs and expenses of sale or other disposition (including attorneys’ fees and brokerage commissions), (d) in the case of a foreclosure sale, disposition or Transfer of any Senior Mezzanine Collateral in connection with realization thereon following a Senior Mezzanine Loan Default under any Senior Mezzanine Loan Documents, such reasonable and customary costs and expenses of sale or other disposition (including attorneys’ fees and brokerage commissions), (e) in the case of a foreclosure sale, such costs and expenses incurred by Mortgage Lender under the Mortgage Loan Documents as Mortgage Lender shall be entitled

 

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to receive reimbursement for under the terms of the Mortgage Loan Documents, (f) in the case of a foreclosure sale, such costs and expenses incurred by Senior Mezzanine Lender under the Senior Mezzanine Loan Documents as Senior Mezzanine Lender shall be entitled to receive reimbursement for under the terms of the Senior Mezzanine Loan Documents, (g) in the case of a refinancing of the Mortgage Loan and/or Senior Mezzanine Loan, such costs and expenses (including attorneys’ fees) of such refinancing as shall be reasonably approved by Mortgage Lender and/or Senior Mezzanine Lender, as the case may be, and (h) the amount of any prepayments required pursuant to the Mortgage Loan Documents, Senior Mezzanine Loan Documents, and/or the Loan Documents, in connection with any such Liquidation Event.

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

“ New Mezzanine Borrower ” shall have the meaning set forth in Section 2.1.7 .

“ New Mezzanine Loan ” shall have the meaning set forth in Section 2.1.7 .

“ Ninth Mezzanine Borrower ” shall mean, collectively, the entities set forth on Schedule XXI hereto, each a Delaware limited liability company, together with their respective successors and permitted assigns. As used herein, the term “Ninth Mezzanine Borrower” shall mean one of the Ninth Mezzanine Borrowers individually, or the Ninth Mezzanine Borrowers collectively, as the context shall require.

“ Ninth Mezzanine Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments due under the Ninth Mezzanine Note.

“ Ninth Mezzanine Lender ” shall mean JPMorgan Chase Bank, N.A., in its capacity as the holder of the Ninth Mezzanine Loan, together with its successors and assigns.

“ Ninth Mezzanine Loan ” shall mean that certain loan in the original principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000) made by Ninth Mezzanine Lender to Ninth Mezzanine Borrower as of the Original Closing Date.

“ Ninth Mezzanine Loan Agreement ” shall mean that certain Amended and Restated Ninth Mezzanine Loan Agreement, dated as of the date hereof, between Ninth Mezzanine Borrower and Ninth Mezzanine Lender, as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Ninth Mezzanine Loan Documents ” shall mean the Ninth Mezzanine Loan Agreement, the Ninth Mezzanine Note and all other documents and instruments executed and delivered in connection with the Ninth Mezzanine Loan, as such documents may be amended, modified and restated in accordance with their respective terms.

“ Ninth Mezzanine Notes ” shall mean the “Notes” as defined in the Ninth Mezzanine Loan Agreement.

“ Note ” or “ Notes ” shall mean, collectively, Note A-1, Note A-2, Note A-3, Note A-4, Note A-5, Note A-6, Note A-7, Note A-8 and Note A-9.

 

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“ Note A-1 ” shall mean that certain Amended and Restated Promissory Note A-1 (Third Mezzanine Loan), dated the date hereof, executed by Borrower and Lender and payable to the order of Lender in the amount of Forty One Million Two Hundred Fifty Four Thousand Five Hundred Eighty Three and 33/100 Dollars ($41,254,583.33), as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Note A-2 ” shall mean that certain Amended and Restated Promissory Note A-2 (Third Mezzanine Loan), dated the date hereof, executed by Borrower and Lender and payable to the order of Lender in the amount of Forty One Million Two Hundred Fifty Four Thousand Five Hundred Eighty Three and 33/100 Dollars ($41,254,583.33), as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Note A-3 ” shall mean that certain Amended and Restated Promissory Note A-3 (Third Mezzanine Loan), dated the date hereof, executed by Borrower and Lender and payable to the order of Lender in the amount of Forty One Million Two Hundred Fifty Four Thousand Five Hundred Eighty Three and 34/100 Dollars ($41,254,583.34), as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Note A-4 ” shall mean that certain Amended and Restated Promissory Note A-4 (Third Mezzanine Loan), dated the date hereof, executed by Borrower and Lender and payable to the order of Lender in the amount of Forty One Million Two Hundred Fifty Four Thousand Five Hundred Eighty Three and 34/100 Dollars ($41,254,583.34), as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Note A-5 ” shall mean that certain Amended and Restated Promissory Note A-5 (Third Mezzanine Loan), dated the date hereof, executed by Borrower and Lender and payable to the order of Lender in the amount of Forty One Million Two Hundred Fifty Four Thousand Five Hundred Eighty Three and 33/100 Dollars ($41,254,583.33), as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Note A-6 ” shall mean that certain Amended and Restated Promissory Note A-6 (Third Mezzanine Loan), dated the date hereof, executed by Borrower and Lender and payable to the order of Lender in the amount of Forty One Million Two Hundred Fifty Four Thousand Five Hundred Eighty Three and 33/100 Dollars ($41,254,583.33), as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Note A-7 ” shall mean that certain Amended and Restated Promissory Note A-7 (Third Mezzanine Loan), dated the date hereof, executed by Borrower and Lender and payable to the order of Lender in the amount of Nine Million One Hundred Fifty Seven Thousand Five Hundred and No/100 Dollars ($9,157,500.00), as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Note A-8 ” shall mean that certain Amended and Restated Promissory Note A-8 (Third Mezzanine Loan), dated the date hereof, executed by Borrower and Lender and payable to the order of Lender in the amount of Nine Million One Hundred Fifty Seven Thousand Five Hundred and No/100 Dollars ($9,157,500.00), as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

 

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“ Note A-9 ” shall mean that certain Amended and Restated Promissory Note A-9 (Third Mezzanine Loan), dated the date hereof, executed by Borrower and Lender and payable to the order of Lender in the amount of Nine Million One Hundred Fifty Seven Thousand Five Hundred and No/100 Dollars ($9,157,500.00), as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Noteholders ” shall mean, collectively, the holders of the Notes from time to time and a “ Noteholder ” shall mean any holder of a Note from time to time ( provided that the transfer of a Note shall not result in any prior Noteholder’s loss of any indemnification provided for hereunder to a Noteholder).

“ OC Accounts ” shall have the meaning set forth in Section 2.6.1(c) .

“ O&M Agreement ” shall mean, with respect to each Individual Property (to the extent required by the environmental reports referenced in Section 3.1.3(e) hereof, that certain Amended and Restated Operations and Maintenance Agreement (Third Mezzanine Loan), dated as of the date hereof, between 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.

“ Officer’s Certificate ” shall mean a certificate delivered to Lender by Borrower which is signed by an authorized senior officer of Borrower or the general partner or managing member of Borrower, as applicable.

“ Off-Shore Accounts ” shall mean the accounts more particularly described on Schedule V .

“ Operating Company ” shall mean, collectively, the tenants under the Operating Leases, and their successors and permitted assigns.

“ Operating Company Annual Budget ” shall mean, individually and collectively as the context requires, with respect to each Operating Company, the operating budget of such Operating Company, including all planned Capital Expenditures, prepared by such Operating Company for the applicable Fiscal Year or other period.

“ Operating Lease ” shall mean, individually and collectively, as the context may require, those certain Lease Agreements listed on Schedule VI , having a term of fifteen (15) years commencing on the Original Closing Date (or, with respect to those Operating Leases relating to a Swap Property, as of the date hereof), as the same may be amended, supplemented, replaced or otherwise modified from time to time in accordance with the provisions hereof. Each Operating Lease dated as of the Original Closing Date only shall be referred to herein as an “ Original Operating Lease ”.

“ Operating Lease Guaranty ” shall mean, individually and collectively, as the context may require, those certain Lease Guaranty Agreements listed on Schedule VIA , executed and delivered by Guarantor (Operating Lease), dated as of the Original Closing Date (or, with respect to each Operating Lease Guaranty relating to a Swap Property, as of the date hereof), unconditionally guaranteeing the payment and performance by the Operating Company of all of

 

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its obligations under the Operating Lease, as such Lease Guaranty Agreements may be amended, supplemented, replaced or otherwise modified from time to time in accordance with the provisions hereof. Each Operating Lease Guaranty dated as of the Original Closing Date only shall be referred to herein as an “ Original Operating Lease Guaranty ”.

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

“ Original Agreement ” shall have the meaning set forth in the recitals hereto.

“ Original Borrower ” shall have the meaning set forth in the recitals hereto.

“ Original Closing Date ” shall mean January 28, 2008.

“ Original Loan ” shall have the meaning set forth in the recitals hereto.

“ Original Mortgage Borrower ” shall have the meaning set forth in the recitals hereto.

“ Original Mortgage Loan ” shall have the meaning set forth in the recitals hereto.

“ Original Mortgage Loan Agreement ” shall have the meaning set forth in the recitals hereto.

“ Original Pledge Agreement ” shall have the meaning set forth in the recitals hereto.

“ Original Showboat Borrower ” shall have the meaning set forth in the recitals hereto.

“ Original Showboat Mortgage Borrower ” shall have the meaning set forth in the recitals hereto.

“ Original Tahoe Borrower ” shall have the meaning set forth in the recitals hereto.

“ Original Tahoe Mortgage Borrower ” shall have the meaning set forth in the recitals hereto.

“ O’Shea’s ” shall have the meaning ascribed to such term in the Mortgage Loan Agreement.

“ Other Borrower Collateral ” shall have the meaning set forth in Section 11.2.1 hereof.

“ Other Borrowers ” shall have the meaning set forth in Section 11.1 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 Individual Property, now or hereafter levied or assessed or imposed against such Individual Property or any part thereof.

 

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“ Other Mezzanine Borrowers ” shall mean, individually or collectively as the context may require, all of the Mezzanine Borrowers other than Borrower.

“ Other Mezzanine Debt Service ” shall mean, individually or collectively as the context may require, all of the Mezzanine Debt Service other than the Debt Service.

“ Other Mezzanine Lenders ” shall mean, individually or collectively as the context may require, all of the Mezzanine Lenders other than Lender.

“ Other Mezzanine Loans ” shall mean, individually or collectively as the context may require, all of the Mezzanine Loans other than the Loan.

“ Other Mezzanine Loan Agreements ” shall mean, individually or collectively as the context may require, all of the Mezzanine Loan Agreements other than this Agreement.

“ Other Mezzanine Loan Amounts ” shall mean, as determined from time to time, the outstanding principal amounts of all of the Mezzanine Loans other than the Loan.

“ Owner’s Title Policy ” shall mean those certain ALTA extended coverage owner’s policies of title insurance issued in connection with the closing of the Mortgage Loan insuring the Mortgage Borrower as the owner of the Property.

“ Paris Las Vegas ” shall mean that certain property identified in Schedule II as Paris Las Vegas, having a street address of 3655 South Las Vegas Boulevard, Las Vegas, Nevada.

“ Paris Individual Borrower ” shall have the meaning set forth in the introductory paragraph hereto.

“ Paris Individual Mortgage Borrower ” shall have the meaning set forth in the recitals hereto.

“ Participant ” shall have the meaning set forth in Section 9.6 hereof.

“ Participant Register ” shall have the meaning set forth in Section 9.6 hereof.

“ Payment Date ” shall mean the ninth (9 ^th ) calendar day of each calendar month during the term of the Loan, and if such day is not a Business Day, then the Business Day immediately preceding such day, commencing on March 9, 2008 and continuing to and including the Maturity Date. Notwithstanding the foregoing, the Payment Date in the final Interest Period shall be the Maturity Date ( i.e ., the second to last Business Day in such Interest Period rather than the ninth calendar day of such month).

 

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“ Permitted Encumbrances ” shall mean, with respect to an Individual Property, collectively (a) the Liens and security interests created by the Mortgage Loan Documents; (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policies relating to such Individual Property or any part thereof; (c) Liens, if any, for Taxes and Other Charges imposed by any Governmental Authority not yet due or delinquent; (d) the Operating Lease; (e) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s reasonable discretion; (f) any Lien being contested by Borrower in good faith by appropriate proceedings, provided that (i) no Default or Event of Default has occurred and remains uncured, (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any applicable material instrument to which Mortgage 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, (iii) no Individual Property nor any part thereof or interest therein will be in imminent danger of being sold, forfeited, terminated, cancelled or lost, (iv) such proceeding shall suspend the enforcement of the contested Lien against Mortgage Borrower and any Individual Property, and (v) Borrower shall furnish such security as may be required by GAAP or as may be reasonably requested by Lender; (g) statutory Liens for amounts not yet due and payable, provided that no Individual Property nor any part thereof or interest therein will be in imminent danger of being sold, forfeited, terminated, cancelled or lost; (h) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security; (i) any Lien securing the financing of FF&E (including equipment leases) entered into by Mortgage Borrower or Operating Company in the ordinary course of business, subject to the limitations specified in the definitions of “Permitted Indebtedness” and “Permitted Indebtedness (Operating Company)”, as applicable; (j) rights of tenants under Leases, as tenants only; (k) rights of hotel guests at the Hotel Components of the Properties; (l) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred or entered into in the ordinary course of business which do not, in each case, have an Individual Material Adverse Effect; and (m) liens granted by Operating Company securing equipment financing leases and/or equipment acquisition financings permitted hereunder as “Permitted Indebtedness (Operating Company),” subject to the final sentence of said definition, or as “Permitted Indebtedness”.

“ Permitted Fund Manager ” means any Person that on the date of determination (a) is one of the entities listed on Schedule VII or any other nationally-recognized manager of investment funds investing in debt or equity interests relating to commercial real estate, (b) is investing through a fund with committed capital of at least $1,000,000,000, (c) is not subject to a Bankruptcy Action, (d) has not been, and none of its material subsidiaries has been, subject to a Bankruptcy Action for the preceding 5 years, (e) has not been convicted and is not under current indictment for a felony or crime involving moral turpitude, (f) has not been found by a court of competent jurisdiction to have violated federal or state securities laws, and (g) is not an organized crime figure (as determined by Lender in its reasonable discretion).

“ Permitted Indebtedness ” shall have the meaning assigned to such term in the Mortgage Loan Agreement.

“ Permitted Indebtedness (Operating Company) ” shall mean, collectively, (a) trade and operational debt (including equipment financing leases, such as leases with providers of Gaming Equipment) relating to the operation of the Properties and the routine administration of Operating Company incurred in the ordinary course of business with trade creditors and in amounts as are normal and reasonable under the circumstances, are not

 

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evidenced by a note, are required to be paid within ninety (90) days after same are incurred (except in the case of equipment leases) and are paid when due, (b) accrued and unpaid payroll, benefits and payroll taxes with respect to employees of Operating Company or its Affiliates engaged with respect to the Properties incurred in the ordinary course of business and paid when due, (c) debt owed to affiliates, provided such debt is made subject to an intercreditor and standstill agreement in favor of Lender in form and substance reasonably satisfactory to Lender, and (d) such other Indebtedness specifically permitted pursuant to the Operating Lease (including the Gaming Equipment Facility Agreements (as defined in the Mortgage Loan Agreement)). In no event shall the Permitted Indebtedness (Operating Company) and Permitted Indebtedness of each Operating Company and Mortgage Borrower on an aggregate basis, excluding for purposes of this sentence the Indebtedness described in subclause (b) of the preceding sentence, exceed five percent (5%) of the sum of the Loan Amount, the Mortgage Loan Amount and the Other Mezzanine Loan Amounts in the aggregate (each as determined from time to time).

“ Permitted Investments ” shall have the meaning set forth in the Mortgage Loan Agreement.

“ Permitted Mezzanine Debt Loan-to-Value Ratio ” shall mean the ratio, as of a particular date, in which (a) the numerator is equal to the sum of (i) the outstanding principal amount of the Mortgage Loan, (ii) the outstanding principal amount of the Mezzanine Loans, and any New Mezzanine Loan, plus (iii) the amount of the Permitted Mezzanine Loan, and (b) the denominator is equal to the appraised value of the Properties subject to the Lien of the Mortgage as determined by Lender based on Appraisals obtained by Lender (at Borrower’s sole cost and expense) and satisfactory to Lender and dated no earlier than ninety (90) days prior to the date of determination or such other Appraisals as are approved by Lender in its sole discretion.

“ Permitted Mezzanine Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments due under the Permitted Mezzanine Loan Documents.

“ Permitted Mezzanine DSCR ” shall mean, for the applicable period, the ratio of (a) EBITDAR for such period from the Properties to (b) the sum of (i) the Mortgage Debt Service and Mezzanine Debt Service for such period, plus (ii) principal and/or interest due and payable (or, for purposes of the calculation to be made pursuant to Section 2.8(d) , that would have been due and payable had the Permitted Mezzanine Loan then been in place) for such period on the Permitted Mezzanine Loan at the interest rate set forth in the Permitted Mezzanine Loan Documents or, if the Permitted Mezzanine Loan is a floating rate loan, assuming that (A) the spread on the Permitted Mezzanine Loan is the “Spread” as defined in the documents evidencing the Permitted Mezzanine Loan and (B) LIBOR is equal to the lesser of (y) LIBOR on the date of determination, or (z) the strike price under the related interest rate cap purchased in connection with the Permitted Mezzanine Loan.

“ Permitted Mezzanine Loan ” shall have the meaning set forth in Section 2.8 hereof.

 

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“ Permitted Mezzanine Loan Documents ” shall have the meaning set forth in Section 2.8(g) hereof.

“ Permitted Mezzanine Loan Election ” shall have the meaning set forth in Section 2.8 hereof.

“ Permitted Mezzanine Loan Lender ” shall have the meaning set forth in Section 2.8 hereof.

“ 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.

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

“ Pledge Agreement ” shall have the meaning set forth in the recitals hereto.

“ Pledged Company Interests ” shall have the meaning set forth in the Pledge Agreement.

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

“ Prepayment Date ” shall have the meaning specified in Section 2.4.1 hereof.

“ Prescribed Laws ” shall mean, collectively, (a) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (The USA PATRIOT Act), as amended, (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-eighth of one percent (0.125%). 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 quasi-governmental 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.

 

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“ 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.

“ Principal ” shall mean Fourth Mezzanine Borrower.

“Projections” shall have the meaning set forth in Section 9.10 hereof.

“ Properties ” shall mean, collectively, each and every Individual Property which is subject to the terms of this Agreement. For the avoidance of doubt, “Properties” shall not include those real properties commonly known as “Harrah’s Lake Tahoe”, “Harvey’s Lake Tahoe”, “Bill’s Lake Tahoe” and/or “Showboat Atlantic City”.

“ Provided Information ” shall mean any and all financial and other information provided at any time by, or on behalf of, Borrower, Senior Mezzanine Borrower, or Mortgage Borrower with respect to the Properties, Borrower, any Affiliates of Borrower, including Holdings, Guarantor and/or Operating Company.

“ Qualified Transferee ” means (a) any of the Mezzanine Lenders, (b) Apollo Management, L.P., TPG Capital, L.P. f/k/a Texas Pacific Group, their respective Affiliates and senior or executive principals of Apollo Management, L.P. or TPG Capital, L.P. who are the holders from time to time of voting interests in Holdings, and investment funds Controlled by either of them (but excluding for purposes of this clause (b) “portfolio companies” of the foregoing), or (c) one or more of the following:

(i) a real estate investment trust, bank, saving and loan association, investment bank, insurance company, trust company, commercial credit corporation, pension plan, pension fund or pension advisory firm, mutual fund, government entity or plan, provided that any such Person referred to in this clause (i) satisfies the Eligibility Requirements;

(ii) an investment company, money management firm or “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, or an institutional “accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended, provided that any such Person referred to in this clause (ii) satisfies the Eligibility Requirements;

(iii) an institution substantially similar to any of the foregoing entities described in clauses (c)(i) or (c)(ii) that satisfies the Eligibility Requirements;

(iv) any entity Controlled by any of the entities described in clause (a) or clauses (c)(i) or (c)(iii) above, or Holdings or any entity Controlled by Holdings (provided in each case there shall have occurred no Change in Control);

 

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(v) a Qualified Trustee in connection with a securitization of, the creation of collateralized debt obligations (“ CDO ”) secured by or financing through an “owner trust” of, any Mezzanine Loan (collectively, “ Securitization Vehicles ”), so long as (A) the special servicer or manager of such Securitization Vehicle has the Required Special Servicer Rating and (B) the entire “controlling class” of such Securitization Vehicle, other than with respect to a CDO Securitization Vehicle, is held by one or more entities that are otherwise Qualified Transferees under clauses (c)(i) , (ii) , (iii)  or (iv)  of this definition; provided that the operative documents of the related Securitization Vehicle require that (1) in the case of a CDO Securitization Vehicle, the “equity interest” in such Securitization Vehicle is owned by one or more entities that are Qualified Transferees under clauses (c)(i) , (ii) , (iii)  or (iv)  of this definition and (2) if any of the relevant trustee, special servicer, manager fails to meet the requirements of this clause (v) , such Person must be replaced by a Person meeting the requirements of this clause (v) within thirty (30) days; or

(vi) an investment fund, limited liability company, limited partnership or general partnership where a Permitted Fund Manager or an entity that is otherwise a Qualified Transferee under clauses (c)(i) , (ii) , (iii)  or (iv)  of this definition acts as the general partner, managing member or fund manager and at least 50% of the equity interests in such investment vehicle are owned, directly or indirectly, by one or more entities that are otherwise Qualified Transferees under clauses (c)(i) , (ii) , (iii)  or (iv)  of this definition;

provided , however , that no Transferee shall be a Qualified Transferee if (and for so long as) such Transferee is, or is Controlled by, an Embargoed Person or a Person that has been found “unsuitable,” for any reason, by a Gaming Authority.

“ Qualified Trustee ” means (a) a corporation, national bank, national banking association or a trust company, organized and doing business under the laws of any state or the United States of America, authorized under such laws to exercise corporate trust powers and to accept the trust conferred, having a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal or state authority, (b) an institution insured by the Federal Deposit Insurance Corporation or (c) an institution whose long-term senior unsecured debt is rated either of the then in effect top two rating categories of each of the Rating Agencies.

“ Rating Agencies ” shall mean each of S&P, Moody’s and Fitch, or any other nationally recognized statistical rating agency which has been approved by Lender and that rates a Securitization of the Loan (or any component thereof).

“ Rating Agency Confirmation ” means, collectively, a written affirmation from each of the Rating Agencies that the credit rating of the Securities given by such Rating Agency of such Securities immediately prior to the occurrence of the event with respect to which such Rating Agency Confirmation is sought will not be qualified, downgraded or withdrawn as a result of the occurrence of such event, which affirmation may be granted or withheld in such Rating Agency’s sole and absolute discretion. In the event that, at any given time, no such Securities shall have been issued and are then outstanding, then the term Rating Agency Confirmation shall be deemed instead to require the written approval of Lender based on its good faith determination of whether the Rating Agencies would issue a Rating Agency Confirmation if any such Securities were outstanding.

 

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“ Regulation AB ” shall have the meaning set forth in Section 5.1.11(f) hereof.

“ Regulation S-K ” shall mean Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended.

“ Regulation S-X ” shall mean Regulation S-X under the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended.

“ Related Loan ” shall have the meaning set forth in Section 5.1.11(f) hereof.

“ Related Property ” shall have the meaning set forth in Section 5.1.11(f) hereof.

“ Release ” shall have the meaning set forth in Section 2.5.1 hereof.

“ Release Borrower ” shall have the meaning set forth in Section 2.5.1 hereof.

“ Release Price ” shall mean, in connection with a release of an Individual Property from the Lien of a Mortgage as provided in Section 2.5 , an amount equal to (a) one hundred ten percent (110%) of the applicable Allocated Loan Amount with respect to each Individual Property (other than the Paris Las Vegas), and (b) one hundred twenty percent (120%) of the applicable Allocated Loan Amount for the Paris Las Vegas.

“ Rents ” shall mean, with respect to each Individual Property, and without duplication, all rents, rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas-or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Mortgage Borrower or the Operating Company (or employees of Mortgage Borrower or the Operating Company) from any and all sources arising from or attributable to such Individual Property, and proceeds, if any, from business interruption or other loss of income or insurance, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants, bars, meeting rooms, banquet rooms and recreational facilities, all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Mortgage Borrower or any operator or manager of the Hotel Components or the commercial spaces located in 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), license, lease, sublease and concession fees and rentals, health club membership fees, food and beverage wholesale and retail sales, service charges, vending machine sales and proceeds, if any, from business interruption or other loss of income insurance.

“ Replacement Interest Rate Cap Agreement ” means an interest rate cap agreement from an Acceptable Counterparty with terms identical to the Interest Rate Cap Agreement except that the same shall be effective in connection with replacement of the Interest Rate Cap Agreement following a downgrade, withdrawal or qualification of the long-term

 

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unsecured debt rating of the Counterparty; provided that to the extent any such interest rate cap agreement does not meet the foregoing requirements, a “Replacement Interest Rate Cap Agreement” shall be such interest rate cap agreement approved in writing by each of the Rating Agencies and Lender with respect thereto.

“ Reserve Account ” shall mean any one of the Tax and Insurance Escrow Account, the FF&E Reserve Account and any other escrow fund or reserve account established pursuant to the Loan Documents.

“ Reserve Funds ” shall mean, collectively, the Tax and Insurance Escrow Fund, the FF&E Reserve Fund and any other escrow fund established pursuant to the Loan Documents.

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

“ Revenue ” shall mean all Rents and items of income or revenue (of any kind) collected by Mortgage Borrower or Operating Company.

“ Rio Individual Borrower ” shall have the meaning set forth in the introductory paragraph hereto.

“ Rio Mortgage Borrower ” shall have the meaning set forth in the recitals hereto.

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

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

“ Scheduled Maturity Date ” shall mean February 13, 2013.

“ Second Mezzanine Borrower ” shall mean, collectively, the entities set forth on Schedule XIV hereto, each a Delaware limited liability company, together with their respective successors and permitted assigns. As used herein, the term “Second Mezzanine Borrower” shall mean one of the Second Mezzanine Borrowers individually, or the Second Mezzanine Borrowers collectively, as the context shall require.

“ Second Mezzanine Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments due under the Second Mezzanine Note.

“ Second Mezzanine Lender ” shall mean JPMorgan Chase Bank, N.A., in its capacity as the holder of the Second Mezzanine Loan, together with its successors and assigns.

 

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“ Second Mezzanine Loan ” shall mean that certain loan in the original principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000) made by Second Mezzanine Lender to Second Mezzanine Borrower as of the Original Closing Date.

“ Second Mezzanine Loan Agreement ” shall mean that certain Second Mezzanine Loan Agreement, dated as of the date hereof, between Second Mezzanine Borrower and Second Mezzanine Lender, as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Second Mezzanine Loan Documents ” shall mean the Amended and Restated Second Mezzanine Loan Agreement, the Second Mezzanine Notes and all other documents and instruments executed and delivered in connection with the Second Mezzanine Loan, as such documents may be amended, modified and restated in accordance with their respective terms.

“ Second Mezzanine Notes ” shall mean the “Notes” as defined in the Second Mezzanine Loan Agreement.

“ Second Mezzanine Pledge Agreement ” shall mean that certain Pledge and Security Agreement (Second Mezzanine Loan), dated as of the date hereof, between Second Mezzanine Borrower and Second Mezzanine Lender, as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ 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.

“ Senior Mezzanine Borrower ” shall mean, collectively, First Mezzanine Borrower and Second Mezzanine Borrower.

“ Senior Mezzanine Collateral ” shall mean, collectively, the “Collateral” as defined in each Senior Mezzanine Loan Agreement.

“ Senior Mezzanine Lender ” shall mean First Mezzanine Lender and Second Mezzanine Lender.

“ Senior Mezzanine Loan ” shall mean the First Mezzanine Loan and the Second Mezzanine Loan.

“ Senior Mezzanine Loan Agreement ” shall mean the First Mezzanine Loan Agreement and the Second Mezzanine Loan Agreement.

“ Senior Mezzanine Loan Default ” shall mean, collectively, a “Default” under any of the Senior Mezzanine Loan Documents.

“ Senior Mezzanine Loan Documents ” shall mean, collectively, the First Mezzanine Loan Documents and the Second Mezzanine Loan Documents.

 

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“ Senior Mezzanine Loan Event of Default ” shall mean, collectively, an “Event of Default” under any of the Senior Mezzanine Loan Documents.

“ Senior Mezzanine Loan Reserve Funds ” shall mean, collectively, the “Reserve Funds” as defined in the Senior Mezzanine Loan Agreement.

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

“ Servicing Agreement ” shall have the meaning set forth in Section 9.4 hereof.

“ Seventh Mezzanine Borrower ” shall mean, collectively, the entities set forth on Schedule XIX hereto, each a Delaware limited liability company, together with their respective successors and permitted assigns. As used herein, the term “Seventh Mezzanine Borrower” shall mean one of the Seventh Mezzanine Borrowers individually, or the Seventh Mezzanine Borrowers collectively, as the context shall require.

“ Seventh Mezzanine Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments due under the Seventh Mezzanine Note.

“ Seventh Mezzanine Lender ” shall mean JPMorgan Chase Bank, N.A., in its capacity as the holder of the Seventh Mezzanine Loan, together with its successors and assigns.

“ Seventh Mezzanine Loan ” shall mean that certain loan in the original principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000) made by Seventh Mezzanine Lender to Seventh Mezzanine Borrower as of the Original Closing Date.

“ Seventh Mezzanine Loan Agreement ” shall mean that certain Amended and Restated Seventh Mezzanine Loan Agreement, dated as of the date hereof, between Seventh Mezzanine Borrower and Seventh Mezzanine Lender, as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Seventh Mezzanine Loan Documents ” shall mean the Seventh Mezzanine Loan Agreement, the Seventh Mezzanine Note and all other documents and instruments executed and delivered in connection with the Seventh Mezzanine Loan, as such documents may be amended, modified and restated in accordance with their respective terms.

“ Seventh Mezzanine Notes ” shall mean the “Notes” as defined in the Seventh Mezzanine Loan Agreement.

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

“ Significant Obligor ” shall have the meaning set forth in Section 5.1.11(f) hereof.

 

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“ Sixth Mezzanine Borrower ” shall mean, collectively, the entities set forth on Schedule XVIII hereto, each a Delaware limited liability company, together with their respective successors and permitted assigns. As used herein, the term “Sixth Mezzanine Borrower” shall mean one of the Sixth Mezzanine Borrowers individually, or the Sixth Mezzanine Borrowers collectively, as the context shall require.

“ Sixth Mezzanine Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments due under the Sixth Mezzanine Notes.

“ Sixth Mezzanine Lender ” shall mean JPMorgan Chase Bank, N.A., in its capacity as the holder of the Sixth Mezzanine Loan, together with its successors and assigns.

“ Sixth Mezzanine Loan ” shall mean that certain loan in the original principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000) made by Sixth Mezzanine Lender to Sixth Mezzanine Borrower as of the Original Closing Date.

“ Sixth Mezzanine Loan Agreement ” shall mean that certain Amended and Restated Sixth Mezzanine Loan Agreement, dated as of the date hereof, between Sixth Mezzanine Borrower and Sixth Mezzanine Lender, as the same may hereafter be amended, supplemented, or otherwise modified from time to time.

“ Sixth Mezzanine Loan Documents ” shall mean the Sixth Mezzanine Loan Agreement, the Sixth Mezzanine Notes and all other documents and instruments executed and delivered in connection with the Sixth Mezzanine Loan, as such documents may be amended, modified and restated in accordance with their respective terms.

“ Sixth Mezzanine Notes ” shall mean the “Notes” as defined in the Sixth Mezzanine Loan Agreement.

“ Special Member ” shall mean a Springing Member in a given Delaware limited liability company who has become a member in such limited liability company to the extent so provided in such limited liability company’s operating agreement.

“ Special Purpose Entity ” shall mean a corporation, limited partnership or limited liability company which at all times on and after the Original Closing Date (or, with respect to each of Paris Individual Borrower and Laughlin Individual Borrower, the date hereof):

(a) is organized solely for the purpose of (i) owning, holding, selling, transferring, exchanging, managing and operating the Collateral, entering into this Agreement with the Lender, refinancing the Collateral in connection with a permitted repayment of the Loan, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing; or (ii) acting as a general partner of the limited partnership that owns the Collateral or member of the limited liability company that owns the Collateral;

(b) is not engaged and will not engage in any business unrelated to (i) the ownership of the Collateral, (ii) acting as general partner of the limited partnership that owns the Collateral or (iii) acting as a member of the limited liability company that owns the Collateral, as applicable;

 

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(c) does not have and will not have any assets other than those related to the Collateral or its partnership interest in the limited partnership or the member interest in the limited liability company that owns the Collateral or acts as the general partner or managing member thereof, as applicable;

(d) has not engaged, sought or consented to and will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation, merger, sale of all or substantially all of its assets, transfer of partnership or membership interests (if such entity is a general partner in a limited partnership or a member in a limited liability company) or amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation or operating agreement (as applicable) with respect to the matters set forth in this definition;

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

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

(g) if such entity is a limited liability company with more than one member, has at least one member that is a Special Purpose Entity that is a Delaware corporation or limited liability company that has at least two (2) Independent Directors;

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

(i) if such entity is (i) a limited liability company, has articles of organization, a certificate of formation and/or an operating agreement, as applicable, (ii) a limited partnership, has a limited partnership agreement, or (iii) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity will not, while any obligations remain outstanding under the Loan Documents: (A) dissolve, merge, liquidate, consolidate; (B) sell all or substantially all of its assets or the assets of the Borrower (as applicable), except as permitted in connection with the release of an Individual Property as provided in Section 2.5.1 ; (C) engage in any other business activity, or amend its organizational documents with respect to the matters set forth in this definition without the consent of the Lender; or (D) without the affirmative vote of two (2) Independent Directors and of all other directors of the corporation (that is such

 

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entity or the general partner or managing or co-managing member of such entity), file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to itself or to any other entity in which it has a direct or indirect legal or beneficial ownership interest;

(j) is and will remain solvent and pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from and to the extent of its assets as the same shall become due, and is maintaining and will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; provided , however , that the foregoing shall not require the Member to make additional capital contributions to the company;

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

(l) has maintained and will maintain its bank accounts, books and records separate from any other Person and will file its own tax returns separate from those of any other Person, except to the extent the company is treated as a “disregarded entity” for tax purposes and is not required to file tax returns under applicable law;

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

(n) has not commingled and will not commingle its funds or assets with assets of any other Person;

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

(p) has conducted and will conduct its business in its own name;

(q) has maintained and will maintain its financial statements, accounting records and other entity documents separate and apart from any other Person and will have its assets listed on the financial statement of any other Person; provided , however , that the company’s assets may be included in a consolidated financial statement of its Affiliate, provided, that, (i) appropriate notation shall be made on such consolidated financial statements to indicate the separateness of the company from such Affiliate and to indicate the company’s assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person and (ii) such assets shall also be listed on the company’s own separate balance sheet;

(r) 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 a sufficient number of employees (if any) in light of its contemplated business operations;

(s) has observed and will observe all partnership, corporate or limited liability company formalities necessary to maintain its separate existence;

 

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(t) has and will not incur, create, or assume any Indebtedness other than (i) the Loan and (ii) certain Indebtedness to Affiliates that was incurred in connection with the formation of Borrower and Operating Company and the transfer of the Properties to Mortgage Borrower and was satisfied and/or released in full prior to the funding of the Loan hereunder;

(u) has not and will not assume or guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person except as co-borrowers of the Loan;

(v) has not and will not acquire obligations or securities of its partners, members or shareholders or any Affiliate (other than Mortgage Borrower);

(w) 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;

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

(y) has not pledged and will not pledge its assets for the benefit of any Person except as co-borrowers of the Loan;

(z) has held itself out and identified itself and will hold itself out to the public and all other Persons 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 Borrower and not as a division or part of any other Person;

(aa) 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;

(bb) 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);

(cc) correct any known misunderstanding regarding its separate identity and 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;

(dd) except for capital contributions or capital distributions permitted under the terms and conditions of this Agreement and properly reflected on the books and records of this company, has not entered into or been a party to, and will not enter into or be

 

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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 (including an appropriate shared services agreement with Affiliates);

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

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

(gg) does not and will not have any of its obligations guaranteed by any Affiliate (except each Borrower as a co-borrower under the Loan);

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

(ii) form, acquire, or hold any subsidiary (whether corporate, partnership, limited liability company, or other) or own any equity interest in any other entity (other than, with respect to Borrower, its interest in Third Mezzanine Borrower, and with respect to Principal, its interest in Borrower).

For the purposes of this definition as well as Section 4.1.30 , all references to co-borrower shall include the Harrah’s LV Individual Borrower, the Harrah’s AC Individual Borrower, the Rio Individual Borrower and the Flamingo Individual Borrower as well as (i) the Original Tahoe Borrower and the Original Showboat Borrower from the Original Closing Date to the date hereof, (ii) the Paris Individual Borrower and the Laughlin Individual Borrower from and after the date hereof and (iii) Holdings, Paris Holding, Inc. and Harrah’s Laughlin, Inc. for the limited time that such entities assumed the obligations of the Original Loan in connection with the substitution of the Swap Property pursuant to Section 2.5.2 of the Original Loan Agreement.

“ SPE Party ” shall mean Borrower and any other Person that is required to be a “Special Purpose Entity” under applicable Rating Agency criteria so as to make Borrower a Special Purpose Entity.

“ Spread ” shall mean 3.00%.

“ Spread Maintenance Outside Date ” shall mean February 10, 2009.

 

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“ Spread Maintenance Premium ” shall mean, in connection with any repayment of any of the outstanding principal amount of the Loan prior to and including the Spread Maintenance Outside Date (whether a voluntary or mandatory prepayment), an amount equal to the product of (a) the principal amount of such prepayment, (b) the Spread and (c) a fraction, the numerator of which shall be the actual number of days from (but excluding) the date of such prepayment (or, if later, the last date of the Interest Period during which interest on the amount of such payment shall have been paid by Borrower, as required in this Agreement) through (and including) the Spread Maintenance Outside Date and the denominator of which is three hundred sixty (360).

“ Springing Member ” shall mean a Person who has signed the limited liability company agreement of a given Delaware limited liability company, which agreement provides that, upon the withdrawal, dissolution or disassociation of the last remaining member of such limited liability company (subject to applicable Gaming Laws), such Person shall become a member of such limited liability company having no economic interest therein.

“ State ” shall mean, with respect to an Individual Property, the State or Commonwealth in which such Individual Property or any part thereof is located.

“ Survey ” shall mean a survey of the Individual Property in question prepared pursuant to the requirements contained in Section 3.1.3(c) hereof.

“ Swap Property ” means, individually and collectively, as the context may require, each of the Paris Las Vegas and the Harrah’s Laughlin.

“Syndication” shall have the meaning set forth in Section 9.5 hereof.

“ 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 Individual Property or part thereof.

“ Termination Date ” shall have the meaning set forth in Section 11.6 hereof.

“ Threshold Amount ” shall have the meaning set forth in the definition of Material Alteration.

“ Title Insurance Policies ” shall mean, with respect to each Individual Property, an ALTA mortgagee title insurance policy in a form acceptable to Lender (or, if an Individual Property is in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued with respect to such Individual Property and insuring the lien of the Mortgage encumbering such Individual Property.

“ Tower Project ” shall mean that certain “New Atlantic City Tower Project” more fully described in (a) the Site, Design and Floor Plans, dated October 5, 2005, and prepared by Paul Steelman Design Group, and (b) Harrah’s Hotel/Podium/Garage Expansion: Summary of Project Costs, each delivered to Lender. The Tower Project will include a podium (of approximately 175,000 square feet) connecting the current Bayview Tower to a new approximately nine hundred (900) room tower to be built. The Tower Project will not be funded with the proceeds of the Loan (but will be funded by Mortgage Borrower or Operating Company, including with capital contributions).

 

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“ Transfer ” shall mean to, directly or indirectly, sell, assign, convey, mortgage, transfer, pledge, hypothecate, encumber, grant a security interest in, exchange or otherwise dispose of any beneficial interest or grant any option or warrant with respect to, or where used as a noun, a direct or indirect sale, assignment, conveyance, transfer, pledge or other disposition of any beneficial interest by any means whatsoever whether voluntary, involuntary, by operation of law or otherwise. A Transfer shall include, but not be limited to, (a) an installment sales agreement wherein Mortgage Borrower agrees to sell an Individual Property or any part thereof or Borrower agrees to sell the Collateral, in each case, for a price to be paid in installments; (b) an agreement by Mortgage Borrower leasing all or a substantial part of an Individual 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, Mortgage Borrower’s right, title and interest in and to any Leases or any Rents; (c) if a Person restricted or affected by the provisions of this Agreement is a corporation, any merger, consolidation or sale or pledge of such corporation’s stock or the creation or issuance of new stock; (d) if a Person restricted or affected by the provisions of this Agreement is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the sale or pledge of the partnership interest of any general partner or any profits or proceeds relating to such partnership interest, or the sale or pledge of limited partnership interests or any profits or proceeds relating to such limited partnership interest or the creation or issuance of new limited partnership interests; (e) if a Person restricted or affected by the provisions of this Agreement 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; (f) if a Person restricted or affected by the provisions of this Agreement is a trust or nominee trust, any merger, consolidation or the sale or pledge of the legal or beneficial interest in such Person or the creation or issuance of new legal or beneficial interests; or (g) any direct or indirect sale, assignment, conveyance, transfer, pledge or other disposition (by any means whatsoever whether voluntary, involuntary, by operation of law or otherwise) of the Collateral, the Senior Mezzanine Collateral or any part thereof or any legal or beneficial interest therein.

“ Transferee ” shall mean the Person to whom a Transfer is being effected.

“ Trigger Event ” shall mean, as of the end of any calendar quarter, any period of time during which EBITDAR from the Properties, calculated for the trailing twelve (12) month period immediately prior to the applicable calculation date, is less than eighty-five percent (85%) of the EBITDAR (Closing Date), as determined by Lender.

“ Trigger Event Cure ” shall mean that EBITDAR (excluding, in making such calculation, any capital contributions made to or for the benefit of Borrower, Mortgage Borrower or Operating Company, or payments made on the account of Borrower, Mortgage Borrower or Operating Company by any Affiliate of Borrower, Mortgage Borrower or Operating Company) from the Properties, calculated for the trailing twelve (12) month period immediately prior to the applicable calculation date, is equal to or greater than eighty-five percent (85%) of the EBITDAR (Closing Date) for two (2) consecutive calendar quarters.

 

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“ True Lease Opinion ” shall mean (a) with respect to each Operating Lease (other than those Operating Leases relating to a Swap Property) those certain true lease opinion letters dated as of the Original Closing Date and delivered by Cleary Gottlieb Steen & Hamilton LLP in connection with the Loan, and updated by Cleary Gottlieb Steen & Hamilton LLP as of the date hereof, and (b) with respect to each Operating Lease relating to a Swap Property, those certain true lease opinion letters dated as of the date hereof and delivered by Cleary Gottlieb Steen & Hamilton LLP in connection with the Loan.

“ UCC ” or “ Uniform Commercial Code ” shall mean the Uniform Commercial Code as in effect in the applicable State in which an Individual Property is located.

“ UCC Title Insurance Policy ” shall have the meaning set forth in Section 3.13(b) 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 or other “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended.

“Windstorm Insurance Intercreditor Agreement” means that certain Windstorm Insurance Intercreditor Agreement, dated as of the Original Closing Date, by and among Lender, the Mortgage Lender, the Other Mezzanine Lenders, each of the “Other Owners” named therein and made a party thereto, Holdings, Bank of America, N.A., and the “Other Secured Parties” named therein and made a party thereto, as supplemented by that certain Supplemental Agreement Regarding Windstorm Insurance Intercreditor Agreement, dated as of the date hereof, by and among Original Showboat Mortgage Borrower, Holdings and Mortgage Lender, as the same may hereafter be further amended, supplemented, or otherwise modified from time to time.

Section 1.2. Principles of Construction . All references to sections and schedules are to sections 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. 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. With respect to cross-references contained herein to the Mortgage Loan Documents or to the Other Mezzanine Loan Documents (including with respect to any cross-references to defined terms therein), unless otherwise specifically provided herein, such cross-references shall be with respect to the Mortgage Loan Documents or the Other Mezzanine Loan Documents as the case may be, in existence as of the date hereof, and no modification or amendment to such cross-referenced sections of the Mortgage Loan Documents

 

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or the Other Mezzanine Loan Documents shall be binding upon Lender unless Lender shall have expressly agreed in writing to be bound by such modification or amendment. Terms used herein and not otherwise defined herein (but defined in the Mortgage Loan Agreement) shall have the meaning set forth in the Mortgage Loan Agreement as of the Closing Date, notwithstanding any subsequent amendment of the Mortgage Loan Agreement to such defined terms unless Lender shall have consented to such amendment. The words “Borrower shall cause Mortgage Borrower to”, “Borrower shall not permit Mortgage Borrower to”, “Borrower shall cause Senior Mezzanine Borrower to”, “Borrower shall not permit Senior Mezzanine Borrower to”, “Borrower shall cause Operating Company to” or “Borrower shall not permit Operating Company to” (or words of similar meaning) shall mean Borrower shall cause Mortgage Borrower, Senior Mezzanine Borrower or Operating Company (subject to the provisions of Section 5.3 ), as applicable, to so act or not to so act, as applicable. All uses of the words “term of the Loan” or words of similar import when used in this Agreement shall refer to the “term of the Loan” commencing as of the Original Closing Date.

Section 1.3. Direction of Mortgage Borrower or with Respect to the Properties. Borrower and Lender hereby acknowledge and agree that, as to any clauses or provisions contained in this Agreement or any of the other Loan Documents to the effect that (i) Borrower shall cause Mortgage Borrower and/or Senior Mezzanine Borrower to act or to refrain from acting in any manner or (ii) Borrower shall cause to occur or not to occur, or otherwise be obligated in any manner with respect to, any matters pertaining to Mortgage Borrower, Senior Mezzanine Borrower or any of the Properties, such clause or provision, in each case, is intended to mean, and shall be construed as meaning, that Borrower has undertaken to act and is obligated to act only in Borrower’s capacity as the sole member of Senior Mezzanine Borrower but not directly with respect to Senior Mezzanine Borrower, Mortgage Borrower or any of the Properties or in any other manner which would violate any of the covenants contained in Section 4.1.30 (Special Purpose Entity) hereof or other similar covenants contained in Borrower’s organizational documents.

 

II.

GENERAL TERMS

Section 2.1. Loan Commitment; Disbursement to Borrower .

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 Borrower hereby agrees to accept the Loan on the Original Closing Date.

2.1.2 Single Disbursement to Borrower . Borrower may request and receive only one borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed.

2.1.3 The Note, the Pledge Agreement and Loan Documents . The Loan shall be evidenced by the Note (in the aggregate principal amount of Two Hundred Seventy Five Million and No/100 Dollars ($275,000,000)) and secured by the Pledge Agreement and the other Loan Documents.

 

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2.1.4 Use of Proceeds . Borrower shall use the proceeds of the Loan solely to (a) make an equity contribution to Mortgage Borrower (through each Senior Mezzanine Borrower) in order to cause Mortgage Borrower to use such amounts for any use permitted pursuant to Section 2.1.4 of the Mortgage Loan Agreement, (b) pay costs and expenses incurred in connection with the closing of the Loan, as approved by Lender, and (c) distribute the balance, if any, to Borrower.

2.1.5 Component Notes . Lender shall have the right at any time to modify the Loan in order to create an additional note or additional notes, adjust the interest rate spread on the Notes or notes, reduce the number of notes, reallocate the principal balances of the Notes or notes or eliminate the component note structure of the Loan provided that (a) the aggregate stated principal amount of the Loan on the date of each such adjustment shall equal the aggregate stated principal amount of the Loan immediately prior to such adjustment, and (b) the weighted average spread of the Loan on the date of such adjustment shall equal the weighted average spread which was applicable to the Loan immediately prior to such adjustment (Borrower acknowledging that such new notes or modified notes may, in connection with the application of principal to such new notes or modified note following the occurrence of an Event of Default, but not otherwise, subsequently cause the weighted average spread of such new notes or modified notes to change). In connection with any such modification of the Note and notes, or the creation of additional note(s), (i) Borrower shall cooperate with all reasonable requests of Lender and shall execute and deliver such documents as shall reasonably be requested by Lender in connection therewith, all in form and substance reasonably satisfactory to Lender and, to the extent applicable, the Rating Agencies, including, without limitation, (y) revised title insurance policies and Interest Rate Protection Agreements, and (z) such amendments to the Loan Documents as are reasonably requested; (ii) Lender shall have received opinions of legal counsel with respect to due execution, authority and enforceability of the amended Loan Documents, and additional or updated nonconsolidation opinions for the Loan, each in form reasonably acceptable to Lender and prospective investors and in form acceptable to the Rating Agencies; and (iii) Lender shall pay the actual, reasonable out-of-pocket costs and expenses incurred by Borrower in connection with the foregoing, including, without limitation, the actual, reasonable out-of-pocket legal fees incurred by Borrower in connection with any of the foregoing matters. For the avoidance of doubt, and notwithstanding anything to the contrary contained herein, such modifications and any modifications under Sections 2.1.6 and 2.1.7 below shall not, absent an Event of Default, adversely affect the overall economics to Borrower of the Loan, taken as a whole, or expose Borrower to any additional costs (other than as set forth above) or increased risk of any liability (beyond that or greater than that existing in the Loan Documents in effect on the date hereof), and Borrower shall not be required to execute any document or agreement which would materially decrease its rights or materially increase its obligations relative to those set forth herein and in the other Loan Documents.

2.1.6 Adjustment of Mortgage Loan and Mezzanine Loans . Lender shall have the right at any time to adjust the respective principal amounts of the Mortgage Loan and the Mezzanine Loans (or either one of them) and/or to adjust the interest rate spread on the Mortgage Loan and the Mezzanine Loans (or either one of them) (such adjustment, a “ Loan Adjustment ”), provided that (a) the aggregate stated principal amount of the Mortgage Loan and the Mezzanine Loans on the date of each such Loan Adjustment shall equal the aggregate stated principal amount of the Mortgage Loan and the Mezzanine Loans immediately prior to such

 

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Loan Adjustment, and (b) Lender shall have the right to adjust the interest rate spread on the Mortgage Loan and the Mezzanine Loans, provided that the weighted average spread of the Mortgage Loan and the Mezzanine Loans on the date of each such Loan Adjustment shall equal the weighted average spread which was applicable to the Mortgage Loan and the Mezzanine Loans immediately prior to such Loan Adjustment (it being acknowledged that the weighted average spread will remain constant except in connection with the application of principal to such new notes or modified notes following the occurrence of an Event of Default). In connection with any Loan Adjustment, (i) Mortgage Borrower and Mezzanine Borrowers shall cooperate with all reasonable requests of Lender and shall execute and deliver such documents as shall reasonably be requested by Lender in connection therewith, all in form and substance reasonably satisfactory to Lender and, to the extent applicable, the Rating Agencies, including, without limitation, (y) revised title insurance policies, mezzanine endorsements, UCC policies and Interest Rate Protection Agreements, and (z) such amendments to the Mortgage Loan Documents and the Mezzanine Loan Documents as are reasonably requested in connection with the Loan Adjustment (provided that such amendments do not or would not (i) materially decrease the rights of the Mortgage Borrower or Mezzanine Borrowers, or, absent an Event of Default, materially increase the obligations of the Mortgage Borrower or the Mezzanine Borrowers, as the case may be, under the Mortgage Loan Documents or the Mezzanine Loan Documents (as applicable) or (ii) absent an Event of Default, expose the Mortgage Borrower or any of the Mezzanine Borrowers to additional costs or increased risk of any liability under the Mortgage Loan Documents or the Mezzanine Loan Documents (as applicable) (beyond that or greater than that existing in the Mortgage Loan Documents, or the Mezzanine Loan Documents, as applicable, on the date hereof); (ii) Lender shall have received opinions of legal counsel with respect to due execution, authority and enforceability of the amended Mortgage Loan Documents or Mezzanine Loan Documents, as appropriate, and additional or updated nonconsolidation opinions for the Mortgage Loan and the Mezzanine Loans, each in form reasonably acceptable to Lender and prospective investors and in form acceptable to the Rating Agencies; and (iii) Lender shall pay the actual, reasonable out-of-pocket costs and expenses incurred by Borrower in connection with the foregoing, including, without limitation, the actual, reasonable out-of-pocket legal fees incurred by Borrower in connection with any of the foregoing matters.

2.1.7 Creation of New Mezzanine Loans . Lender shall at all times have the right to create one or more additional mezzanine loans (each, a “ New Mezzanine Loan ”), adjust the respective principal amounts of the Mortgage Loan and the Mezzanine Loans (or any one of them) upon the creation of the New Mezzanine Loan and/or to adjust the interest rate spread on the Mortgage Loan and the Mezzanine Loans (or any one of them) upon the creation of the New Mezzanine Loan, and to reallocate the principal balance and the interest rate spreads of the Mortgage Loan, the Mezzanine Loans and any New Mezzanine Loan amongst each other (or any one of them), provided that (a) the aggregate stated principal amount of the Mortgage Loan, the Mezzanine Loans and the New Mezzanine Loans on the date of such adjustment (and the creation of the New Mezzanine Loan) shall equal the aggregate stated principal amount of the Mortgage Loan, the Mezzanine Loans and the New Mezzanine Loan(s) immediately prior to such adjustment, (b) Lender shall have the right to adjust the interest rate spread on the Mortgage Loan, the Mezzanine Loans and the New Mezzanine Loan(s), provided that the weighted average spread of the Mortgage Loan, the Mezzanine Loans and the New Mezzanine Loan(s) on the date of such adjustment shall equal the weighted average spread which was applicable to the Mortgage Loan and the Mezzanine Loans (and the New Mezzanine Loans, if applicable)

 

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immediately prior to such adjustment (it being acknowledged that the weighted average spread will remain constant except in connection with the application of principal to such new notes or modified notes following the occurrence of an Event of Default), and (c) the terms and provisions of each of the Mortgage Loan and the Mezzanine Loans (and the New Mezzanine Loans, if applicable) shall otherwise remain unchanged. In connection with any New Mezzanine Loan, (i) Borrower shall cause the formation of one or more special purpose, bankruptcy remote entities as required by Lender in order to serve as the borrower under any New Mezzanine Loan (each, a “ New Mezzanine Borrower ”) and the applicable organizational documents of Mortgage Borrower and each Mezzanine Borrower (and of each previously created New Mezzanine Borrower, if applicable) shall be amended and modified as necessary or required in the formation of any New Mezzanine Borrower; (ii) Mortgage Borrower and Mezzanine Borrowers (and each previously created New Mezzanine Borrower, if applicable) shall cooperate with all reasonable requests of Lender and shall execute and deliver such documents as shall reasonably be requested by Lender in connection therewith, all in form and substance reasonably satisfactory to Lender and, to the extent applicable, the Rating Agencies, including, without limitation, (x) revised title insurance policies, mezzanine endorsements, UCC policies and Interest Rate Protection Agreements, (y) in connection with the creation of any New Mezzanine Loan, a promissory note and loan documents necessary to evidence such New Mezzanine Loan, and (z) such amendments to the Mortgage Loan Documents and the Mezzanine Loan Documents (and the loan documents of any previously created New Mezzanine Borrower, if applicable) as are reasonably necessary in connection with the creation of such New Mezzanine Loan (provided that such amendments do not or would not (i) materially decrease the rights of the Mortgage Borrower or Mezzanine Borrowers (and any previously created New Mezzanine Borrowers, if applicable), or, absent an Event of Default, materially increase the obligations of the Mortgage Borrower or the Mezzanine Borrowers (and any previously created New Mezzanine Borrowers, if applicable), as the case may be, under such borrower’s applicable loan documents, or (ii) absent an Event of Default, expose the Mortgage Borrower or any of the Mezzanine Borrowers (or any previously created New Mezzanine Borrowers, if applicable) to additional costs or increased risk of any liability under such borrower’s applicable loan documents (beyond that or greater than that existing in the existing loan documents on the date hereof)); (iii) Lender shall have received opinions of legal counsel with respect to due execution, authority and enforceability of the amended Mortgage Loan Documents, the amended Mezzanine Loan Documents and the loan documents for the New Mezzanine Loan, as appropriate, and additional or updated nonconsolidation opinions for the Mortgage Loan, the Mezzanine Loans and each such New Mezzanine Loan, as appropriate, each in form reasonably acceptable to Lender and prospective investors and in form acceptable to the Rating Agencies; and (iv) Lender shall pay the actual, reasonable out-of-pocket costs and expenses incurred by Borrower in connection with the foregoing, including, without limitation, the actual, reasonable out-of-pocket legal fees incurred by Borrower in connection with any of the foregoing matters.

Section 2.2. Interest Rate .

2.2.1 Interest Generally . Except as herein provided with respect to interest accruing at the Default Rate, interest on the principal balance of the Loan outstanding from time to time shall accrue from the Original Closing Date up to and including the Maturity Date (including, without limitation, all interest that would accrue on the outstanding principal balance of the Loan through the end of the Interest Period during which the Maturity Date occurs (even if

 

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such period extends beyond the Maturity Date)) at the Applicable Interest Rate. Interest on the outstanding principal balance of the Loan existing on the commencement of an Interest Period shall accrue for the entire Interest Period and shall be owed by Borrower for the entire Interest Period regardless of whether any principal portion of the Loan is repaid prior to the expiration of such Interest Period.

2.2.2 Interest Calculation . Interest on the outstanding principal balance of the Loan 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 (that is, the Applicable Interest Rate or the Default Rate, as then applicable, expressed as an annual rate divided by 360) by (c) the outstanding principal balance.

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 Section 2.2.3(f) .

(b) Subject to the terms and conditions of this Section 2.2.3 , the Loan shall be a LIBOR Loan and Borrower shall pay interest on the outstanding principal amount of the Loan at LIBOR plus the Spread for the applicable Interest Period. Any change in the rate of interest hereunder due to a change in the Applicable Interest Rate shall become effective as of the opening of business on the first day on which such change in the Applicable Interest Rate shall become effective. Each determination by Lender of the Applicable Interest Rate shall be conclusive and binding for all purposes, absent manifest error.

(c) In the event that Lender shall have determined (which determination shall be conclusive and binding upon Borrower 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 Borrower 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 last day of the then current 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 (which determination shall be conclusive and binding upon Borrower 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 Borrower 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 last day of the then current Interest Period.

(e) With respect to a LIBOR Loan, all payments made by Borrower hereunder shall be made free and clear of, and without reduction for or on account of, income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions, reserves or withholdings imposed, levied, collected, withheld or assessed by any Governmental Authority and imposed on any

 

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non-U.S. Lender due to a change in U.S. law after the date such non-U.S. Lender acquired its interest in the Loan (such non-excluded taxes, levies, imports, duties, charges, fees, deductions, reserves or withholdings being referred to collectively as “ Foreign Taxes ”), excluding (i) income and franchise taxes, (ii) any Taxes imposed by reason of any connection between the non-U.S. Lender and the taxing jurisdiction other than entering into this Agreement and receiving payments hereunder, and (iii) any Taxes imposed by reason of the non-U.S. Lender’s failure to complete and deliver to the Borrower, prior to the date on which the first payment to such Lender is due hereunder and (so long as it remains eligible to do so) from time to time thereafter, (x) (i) an Internal Revenue Service Form W-9 (or successor form) establishing that the Lender is not subject to U.S. backup withholding tax, (ii) an Internal Revenue Service Form W-8BEN (or successor form) certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party that reduces the rate of withholding tax on payments of interest to zero, or (iii) an Internal Revenue Service Form W-8ECI certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, as appropriate; and (y) any successor or additional form required by the Internal Revenue Service or any taxing authority reasonably requested by the Borrower in order to secure an exemption from, or reduction in the rate of, Foreign Taxes. If any Foreign Taxes are required to be withheld from any amounts payable to Lender hereunder, the amounts so payable to Lender shall be increased to the extent necessary to yield to Lender (after payment of all Foreign Taxes) interest or any such other amounts payable hereunder at the rate or in the amounts specified hereunder. Whenever any Foreign Tax is payable pursuant to applicable law by Borrower, as promptly as possible thereafter, Borrower shall send to Lender an original official receipt, if available, or certified copy thereof showing payment of such Foreign Tax. Borrower hereby indemnifies Lender for any incremental Foreign Taxes, interest or penalties that may become payable by Lender which may result from any failure by Borrower to pay any such Foreign Tax when due to the appropriate taxing authority or any failure by Borrower to remit to Lender the required receipts or other required documentary evidence thereof (provided such documents are reasonably available to the Borrower).

(f) 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 and the events giving rise thereto affect similarly situated banks or financial institutions generally, (i) the obligation of Lender hereunder to make a LIBOR Loan or to convert a Prime 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.

(g) 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 (whether or not having the force of law) hereafter issued from any central bank or other Governmental Authority and the events giving rise thereto affect similarly situated banks or financial institutions generally:

(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, the office of Lender that holds the Loan which is not otherwise included in the determination of LIBOR hereunder;

 

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(ii) shall hereafter require the Lender to hold additional capital against the Loan in excess of that currently required by Governmental Authorities to be held against loans similar in nature to the Loan; or

(iii) shall hereafter impose on Lender any other condition affecting loans to borrowers subject to LIBOR-based interest rates and Lender determines that, by reason thereof, the cost to Lender of making or maintaining the Loan to Borrower is increased, or any amount received by Lender hereunder in respect of any portion of the Loan is reduced, in each case by an amount deemed by Lender in good faith to be material;

then, in any such case, Borrower shall promptly pay Lender, upon demand, any additional amounts necessary to compensate Lender for such additional cost or reduced amount receivable which Lender deems to be material as determined in good faith by Lender. If Lender becomes entitled to claim any additional amounts pursuant to this Section 2.2.3(g) , Lender shall provide Borrower 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. A certificate as to any additional costs or amounts payable pursuant to the foregoing sentence submitted by Lender to Borrower shall be conclusive in the absence of manifest error. This provision shall survive payment of the Note and the satisfaction of all other obligations of Borrower under this Agreement and the Loan Documents.

(h) Lender shall not be entitled to claim compensation pursuant to this Section 2.2.3 for any Foreign Taxes or other amounts incurred or which accrued more than ninety (90) days before the date Lender notified Borrower of the change in law or other circumstance on which such claim of compensation is based and delivered to Borrower 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 shall be conclusive and binding upon all parties hereto absent manifest error.

(i) For purposes of this Section 2.2.3 , the term “Lender” shall be deemed to include each Noteholder and Lender’s (as well as each Noteholder’s) present and future participants in the Loan to the extent of Foreign Taxes imposed by reason of such Noteholder or participant’s interest in the Loan and each such Noteholder’s or participant’s increased costs or reduction in amount received or receivable hereunder or any reduced rate of return, in each case payable by Borrower under this Section 2.2.3 .

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 Borrower under Section 2.2.3 , including, if requested by Borrower, 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 material additional costs, expenses or risk to Lender that are not reimbursed by Borrower and (b) would not be disadvantageous in any other material respect to Lender as determined by Lender in its sole, but reasonable discretion.

 

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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 of the Loan 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.

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 Borrower be obligated or required to pay interest on the principal balance of the Loan 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, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to 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) On or prior to 5:00 p.m. (New York time) on the Original Closing Date, Borrower shall enter into an Interest Rate Cap Agreement with a LIBOR strike price equal to the required Strike Price. The 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 with Lender (or into an account or otherwise as directed by Lender) any amounts due Borrower under such Interest Rate Cap Agreement unless and until otherwise instructed by Lender (it being agreed as between Lender and Borrower that Lender will so instruct the Counterparty at such time as the Debt shall not longer exist, provided that the Debt shall be deemed to exist if the Collateral is transferred by secured party sale or otherwise), (iv) shall be for a period equal to the initial term of the Loan and (v) shall have an initial notional amount equal to the principal balance of the Loan. Borrower 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 the Interest Rate Cap Agreement, and shall deliver to Lender an executed counterpart of such Interest Rate Cap Agreement (which shall, by its terms, authorize the assignment to Lender and require that payments be paid directly into an account pledged to Lender as provided above in this Section 2.2.7 ). Provided no Event of Default has occurred and is continuing, amounts contained in the foregoing pledged account shall be released to Borrower on a monthly basis to the extent not applied toward debt service on the Loan.

 

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

(c) In the event of any downgrade, withdrawal or qualification of the rating of the Counterparty by S&P or Moody’s to below the ratings set forth in the definition of “Acceptable Counterparty”, Borrower (i) shall replace the Interest Rate Cap Agreement with a Replacement Interest Rate Cap Agreement (or cause the Counterparty or an Affiliate thereof to post collateral acceptable to Lender and the Rating Agencies) not more than fifteen (15) Business Days following receipt of notice of such downgrade, withdrawal or qualification (and meeting the requirements set forth in this Section 2.2.7 ) from an Acceptable Counterparty, (ii) if a new cap is provided to Lender, then if requested by Lender shall provide to Lender an opinion of counsel to such Acceptable Counterparty in the form and containing the substance of the form of opinion set forth in Exhibit A to the Mortgage Loan Agreement (which such changes as shall be reasonably approved by Lender), and (iii) shall collaterally assign to Lender, pursuant to an assignment in the form of the Collateral Assignment of Interest Rate Cap Agreement, all of its right, title and interest to receive any and all payments under the Replacement Interest Rate Cap Agreement.

(d) In the event that Borrower fails to purchase and deliver to Lender the Interest Rate Cap Agreement or fails to maintain the Interest Rate Cap Agreement in accordance with the terms and provisions of this Agreement, Lender may purchase the Interest Rate Cap Agreement and the cost incurred by Lender in purchasing such Interest Rate Cap Agreement shall be paid by Borrower to Lender with interest thereon at the Default Rate from the date such cost was incurred by Lender until such cost is reimbursed by Borrower to Lender.

(e) In connection with any Interest Rate Cap Agreement provided to Lender as herein required, if requested by Lender, Borrower 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) in the form and containing the substance of the form of opinion set forth in Exhibit A of the Mortgage Loan Agreement (which such changes as shall be reasonably approved by Lender).

(f) In connection with any prepayment of the Loan, provided no Event of Default shall have occurred and be continuing, Borrower may reduce the amount of any Interest Rate Cap Agreement (so that the same shall be in an initial notional amount equal to the principal balance of the Loan following such prepayment), provided that such reduction shall not affect any of the other terms of the Interest Rate Cap Agreement or the Collateral Assignment of Interest Rate Cap Agreement (or Lender’s rights in respect thereof).

 

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Section 2.3. Loan Payment .

2.3.1 Payments Generally . On the Original Closing Date Borrower made a payment to Lender of interest accruing hereunder during the period from the Original Closing Date up to and including February 14, 2008, calculated in the manner set forth herein, and on the Payment Date occurring in March 2008 and on each Payment Date thereafter to and including the Maturity Date, Borrower shall make a payment to Lender of interest accruing hereunder during the entire Interest Period in which such Payment Date occurs, calculated in the manner set forth herein. All amounts due pursuant to this Agreement and the other Loan Documents shall be payable without setoff, counterclaim, defense or any other deduction whatsoever. Each payment shall be applied pro rata and pari passu (a) first to accrued and unpaid interest on all of the Notes and (b) the balance shall be applied to principal of all the Notes.

2.3.2 Payment on Maturity Date . Borrower shall pay to Lender on the Maturity Date the outstanding principal balance of the Loan, all accrued and unpaid interest and all other amounts due hereunder and under the Note, the Pledge Agreement and the other Loan Documents, including, without limitation, all interest that would accrue on the outstanding principal balance of the Loan through and including the end of the Interest Period in which the Maturity Date occurs (even if such Interest Period extends beyond the Maturity Date).

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 Borrower by the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of one percent (1%) of such unpaid sum or 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; provided , however , that, except with respect to the payment of any monthly Debt Service payments with respect to which no notice or demand shall be required, no such late payment charge shall be due unless such payment of principal, interest or other sum shall be delinquent for more than five (5) Business Days following the date of demand therefor. Any such amount shall be secured by the Pledge Agreement 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 3:00 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 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.

Section 2.4. Prepayments .

2.4.1 Voluntary Prepayments . Borrower may, at its option, prepay the Debt in whole or in part, provided, the following conditions are satisfied:

(a) No Event of Default shall have occurred and be continuing (unless, in the case of a prepayment upon the release of an Individual Property, the Event of Default relates solely to such Individual Property and therefore would be fully cured by the release of such Individual Property);

 

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(b) Borrower shall provide prior written notice to Lender specifying the date upon which the prepayment is to be made (the “ Prepayment Date ”), which notice shall be delivered to Lender not less than ten (10) days prior to such Prepayment Date (or such shorter period of time as may be permitted by Lender in its sole discretion), and which notice shall be irrevocable; provided , that , notwithstanding the foregoing, Lender hereby agrees that Borrower may revoke any notice of prepayment up until the date that is one (1) Business Day prior to the proposed Prepayment Date (provided that Borrower shall be required to pay Lender, promptly upon demand, any actual, out-of-pocket expenses incurred by Lender resulting from any such revocation));

(c) each such prepayment, in the case of partial prepayments, shall be in an amount not less than Five Million and No/100 Dollars ($5,000,000.00), unless the outstanding principal balance of the Loan (prior to such prepayment) shall be less than Five Million and No/100 Dollars ($5,000,000.00), in which event the amount of the prepayment shall be in such amount as shall prepay the Debt and all other amounts due in connection therewith in full, as more fully provided herein;

(d) if such prepayment is made on or prior to the Payment Date occurring in the Interest Period in which such prepayment was made, then, in connection with such prepayment Borrower shall pay to Lender, simultaneously with such prepayment, all interest on the principal balance of the Note then being prepaid which would have accrued through the end of the Interest Period then in effect notwithstanding that such Interest Period extends beyond the Prepayment Date;

(e) if such prepayment is made after a Payment Date occurring in the Interest Period in which such prepayment was made, but prior to the last two (2) Business Days in such Interest Period, Borrower shall make such prepayment without paying any interest thereon (Borrower having already paid interest on such amount on the Payment Date occurring in such Interest Period);

(f) if such prepayment is made on either of the last two (2) Business Days in an Interest Period, Borrower will pay to Lender, simultaneously with such prepayment, interest on the principal amount of the Loan prepaid through the last day of the Interest Period immediately following the Interest Period in which such prepayment occurs, calculated at the Applicable Interest Rate;

(g) if such prepayment is a prepayment of the Loan in full, Lender shall have received a written consent to the repayment from the lender under each Other Mezzanine Loan (and, if any, a Permitted Mezzanine Loan) or receipt by Lender of other evidence satisfactory to Lender that all conditions imposed under the terms of each Other Mezzanine Loan and Permitted Mezzanine Loan shall have been complied with by the borrower thereunder or otherwise waived by the applicable lender, including the simultaneous pro rata prepayment of each Other Mezzanine Loan and Permitted Mezzanine Loan if required thereunder; and

 

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(h) if such prepayment is made on or prior to the Spread Maintenance Outside Date, then in connection with any such prepayment, Borrower shall pay to Lender, simultaneously with such prepayment, the Spread Maintenance Premium in respect of such prepayment.

Any prepayment received by Lender on a day other than a Payment Date (but not any amount received between a Payment Date and the second to last Business Day in an Interest Period) shall be held by Lender in an interest-bearing account as collateral security for the Loan and shall be applied to the Debt on the next occurring Payment Date (with all interest and other income earned on such amount being for the account of Borrower and being remitted by Lender to Borrower promptly following such next Payment Date). Any prepayment made pursuant to this Section 2.4.1 shall be applied pro rata and pari passu (a) first to accrued and unpaid interest on all of the Notes and (b) the balance shall be applied to principal of all the Notes. Lender agrees that it shall provide a written consent to the repayment of the Loan upon satisfaction of the conditions set forth in clauses (a) through (f)  and clause (h) of this Section 2.4.1 .

2.4.2 Mandatory Prepayments from Net Proceeds . (a) On the next occurring Payment Date following the date on which Lender actually receives any Net Proceeds, if Lender is not obligated to make such Net Proceeds available to Borrower for the Restoration of any Individual Property, Borrower shall prepay, or authorize Lender to apply Net Proceeds as a prepayment of, the outstanding principal balance of the Note in an amount equal to, (x) if no Event of Default shall have occurred and be continuing, the product of (i) a fraction, the numerator of which is outstanding principal amount of the Loan and the denominator is the outstanding principal amount of the Mortgage Loan, the Loan and the Other Mezzanine Loans times (ii) the Net Proceeds, together with interest accruing on such amount calculated through and including the end of the Interest Period in which such Payment Date occurs (with the balance of the Net Proceeds to be paid over to the Fourth Mezzanine Lender, for application in accordance with the Fourth Mezzanine Loan Agreement), and (y) if an Event of Default shall have occurred and be continuing, 100% of the Net Proceeds. No Spread Maintenance Premium shall be due in connection with any prepayment made pursuant to this Section 2.4.2(a) . Any prepayment received by Lender pursuant to this Section 2.4.2(a) on a date other than a Payment Date shall be held by Lender as collateral security for the Loan in an interest bearing account, with such interest accruing to the benefit of Borrower, and shall be applied by Lender on the next Payment Date. Following the prepayment made as described in this Section 2.4.2(a) , the Allocated Loan Amount for the affected Individual Property, as set forth in this Agreement, shall be reduced in an amount equal to such prepayment. Any prepayment of the Notes made pursuant to this Section 2.4.2(a) shall be applied pro rata and pari passu (a) first to accrued and unpaid interest on all of the Notes and (b) the balance shall be applied to principal of all the Notes.

(b) In the event of (i) a Transfer of any Individual Property or any Senior Mezzanine Collateral in connection with the realization thereon following a Mortgage Loan Default or a Senior Mezzanine Loan Default, as applicable, (ii) any refinancing of any Individual Property, any Senior Mezzanine Collateral, any Senior Mezzanine Loan or the Mortgage Loan, or (iii) the receipt by Mortgage Borrower of any excess proceeds realized under its owner’s title insurance policy after application of such proceeds by Mortgage Borrower to cure any title defect (each, a “ Liquidation Event ”), Borrower shall cause the related Net Liquidation Proceeds After

 

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Debt Service to be remitted directly to Lender (or as directed by Lender). On each date on which Lender actually receives a distribution of Net Liquidation Proceeds After Debt Service, Borrower shall prepay the outstanding principal balance of the Note in an amount equal to one hundred percent (100%) of such Net Liquidation Proceeds After Debt Service, together with interest accruing on such amount calculated through and including the end of the Interest Period in which such payment occurs. Any amounts of Net Liquidation Proceeds After Debt Service in excess of the Debt shall be remitted to Fourth Mezzanine Lender (or to an account designated by Fourth Mezzanine Lender). Any prepayment received by Lender pursuant to this Section 2.4.2(b) on a date other than a Payment Date shall be held by Lender as collateral security for the Loan in an interest bearing account, with such interest accruing to the benefit of Borrower, and shall be applied by Lender on the next Payment Date. A Spread Maintenance Premium or fee may be due in connection with any prepayment made pursuant to this Section 2.4.2(b) if made prior to the Spread Maintenance Outside Date. Following the prepayment made as described in this Section 2.4.2(b) , the Allocated Loan Amount for the affected Individual Property, as set forth in this Agreement, shall be reduced in an amount equal to such prepayment. Any prepayment of the Notes made pursuant to this Section 2.4.2(b) shall be applied pro rata and pari passu (a) first to accrued and unpaid interest on all of the Notes and (b) the balance shall be applied to principal of all the Notes.

(c) Borrower shall immediately notify Lender of any Liquidation Event once Borrower has knowledge of such event. Borrower shall be deemed to have knowledge of (i) a sale (other than a foreclosure sale) of any Individual Property on the date on which a contract of sale for such sale is entered into, and a foreclosure sale, on the date notice of such foreclosure sale is given, and (ii) a refinancing of any Individual Property, on the date on which a commitment for such refinancing has been entered into. The provisions of this Section 2.4.2(c) shall not be construed to contravene in any manner the restrictions and other provisions regarding refinancing of the Mortgage Loan or Transfer of any Individual Property set forth in this Agreement, the other Loan Documents and the Mortgage Loan Documents.

2.4.3 Prepayments After Default . If, following the occurrence and during the continuance of an Event of Default, payment of all or any part of the Debt is tendered by Borrower or any other Person and accepted by Lender or otherwise recovered by Lender (including through application of any Reserve Funds), Borrower shall pay to Lender, in addition to the outstanding principal balance, (a) all accrued and unpaid interest at the Default Rate (including, without limitation, (i) in the event that such prepayment is received on a Payment Date or on any date in any Interest Period prior to a Payment Date, interest accruing (at the Default Rate) on such amount calculated through and including the end of the Interest Period in which such payment occurs, or (ii) in the event that such prepayment is received on a date after a Payment Date up to (and including) the last day of the Interest Period in which such Payment Date occurs, interest accruing (at the Default Rate) on such amount calculated through and including the end of the Interest Period in which the next Payment Date occurs, (b) the Spread Maintenance Premium, if such prepayment is made prior to the Spread Maintenance Outside Date, and (c) any and all other amounts payable under the Loan Documents. Any payment under this Section 2.4.3 shall be applied in such order, priority and proportions as Lender may direct in its sole and absolute discretion.

 

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Section 2.5. Release of Collateral . 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 or assignment of any Lien of the Pledge Agreement on the Collateral.

2.5.1 Release of Individual Property . Concurrently with the release of an Individual Property from the Lien of the Mortgage (and related Mortgage Loan Documents) pursuant to Section 2.5.1 of the Mortgage Loan Agreement (a “ Release ” and such Individual Property, a “ Release Property ”), Borrower may obtain the release of the related Individual Borrower with an indirect ownership interest in such Individual Property (a “ Release Borrower ”) and such Release Borrower’s obligations under the Loan Documents with respect to the Release Property (other than those expressly stated to survive), upon the satisfaction of each of the following conditions:

(a) No Event of Default shall have occurred and be continuing (unless, in the case of a prepayment upon the release of an Individual Property, the Event of Default relates solely to such Individual Property and therefore would be fully cured by the release of such Individual Property);

(b) Borrower shall submit to Lender, not less than ten (10) Business Days prior to the date of such release, a release of Lien of the Pledge Agreement (and related Loan Documents), only with respect to such Release Borrower, for execution by Lender. Such release shall contain standard provisions, if any, protecting the rights of the releasing lender;

(c) After giving effect to such release, the Debt Service Coverage Ratio for the Properties then remaining subject to the Liens of the Mortgages (including giving pro forma effect to the payment of the Release Price and any additional prepayment(s) made by Borrower in connection with such release) shall be equal to or greater than the greatest of (i) the Debt Service Coverage Ratio for the twelve (12) full calendar months immediately preceding the release of the Individual Property (assuming the contemplated release had not occurred, i.e., for all Properties subject to the Liens of the Mortgage prior to the proposed release), (ii) 90% of the Debt Service Coverage Ratio as of the Closing Date, and (iii) 1.0;

(d)(i) The Individual Property to be released shall be conveyed to a Person other than a Mortgage Borrower or Mezzanine Borrower, and other than to an Affiliate of Mortgage Borrower unless, in the latter case, such Affiliate is refinancing the Loan with a construction or development loan (or repaying the Loan with equity contributions to such Affiliate) and (ii) it is such Affiliate’s immediate intention to materially redevelop such Individual Property, which loan (or equity contribution) and intention shall be described in reasonable detail and represented to in an Officer’s Certificate submitted to Lender concurrently with (or prior to) the materials described in clause (b) of this Section 2.5.1 ;

(e) Lender shall have received a wire transfer of immediately available federal funds in an amount equal to the Release Price for the applicable Individual Property, together with (i) all accrued and unpaid interest calculated at the Applicable Interest Rate on the amount of principal being prepaid as provided in Section 2.4.1(d) or (e) , as applicable, (ii) the Spread Maintenance Premium, if applicable and (iii) all other sums due under this Agreement, the Note or the other Loan Documents in connection with a partial prepayment;

 

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(f) Lender shall have received a written consent to the transfer from the lender under the Mortgage Loan and each of the Other Mezzanine Loans (and, if any, a Permitted Mezzanine Loan) or receipt by Lender of other evidence satisfactory to Lender that all conditions imposed under the terms of the Mortgage Loan, and each of the Other Mezzanine Loans and Permitted Mezzanine Loan shall have been complied with by the borrower thereunder or otherwise waived by the applicable lender, including the simultaneous pro rata prepayment of each Mortgage Loan, the Other Mezzanine Loans and Permitted Mezzanine Loan if required thereunder; and

(g) Lender shall have received payment of all Lender’s reasonable out-of-pocket costs and expenses, including reasonable counsel fees and disbursements incurred in connection with the release of the Individual Property and or Release Borrower from the lien of the Pledge Agreement and the review and approval of the documents and information required to be delivered in connection therewith. Lender acknowledges that it shall not charge any fee (other than costs and expenses, as provided in the preceding sentence) in connection with the release of an Individual Property or Release Borrower.

Lender agrees that it shall provide a written consent to the transfer upon satisfaction of the conditions set forth in clauses (a) through (e)  and clause (g) of this Section 2.5.1 .

2.5.2 Release of Convention Center Parcel . At any time after the Original Closing Date, Mortgage Borrower may obtain the release of the Convention Center Parcel pursuant to the Mortgage Loan Agreement, without the payment of a Release Price and upon the satisfaction by Borrower of each of the following conditions:

(a) No Event of Default shall have occurred and be continuing (unless, in the case of a release of the Convention Center Parcel, the Event of Default relates solely to such parcel and therefore would be fully cured by the release of the Convention Center Parcel);

(b) The Convention Center Parcel shall be conveyed to a Person other than a Mortgage Borrower or any Mezzanine Borrower;

(c) Mortgage Borrower will enter into a restrictive covenant agreement, restricting the use of the Convention Center Parcel to the development of a Convention Center and ancillary uses which agreement shall be in form and substance reasonably satisfactory to Lender;

(d) Prior to the transfer and release of the Convention Center Parcel, each applicable municipal authority exercising jurisdiction over the Convention Center Parcel shall have approved, a lot-split ordinance or other applicable action under local law dividing the Convention Center Parcel from the remainder of the Harrah’s Atlantic City Property, and a separate tax identification number has been issued for the Convention Center Parcel (with the result that, upon the transfer and release of the Convention Center Parcel, no part of the remaining Harrah’s Atlantic City Property shall be part of a tax lot which includes any portion of the Convention Center Parcel);

 

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(e) All requirements under all laws, statutes, rules and regulations (including, without limitation, all zoning and subdivision laws, setback requirements, sideline requirements, parking ratio requirements, use requirements, building and fire code requirements, environmental requirements and wetlands requirements) applicable to the Harrah’s Atlantic City Property necessary to accomplish the lot split shall have been fulfilled, and all necessary variances, if any, shall have been obtained, and Borrower shall have delivered to Lender either (1) letters or other evidence from the appropriate municipal authorities confirming such compliance with laws, or (2) a zoning report or legal opinion confirming such compliance with laws, in each case in substance reasonably satisfactory to Lender;

(f) As a result of the lot split, the remaining Harrah’s Atlantic City Property with all easements appurtenant and other Permitted Encumbrances thereto will not be in violation of any then applicable law, statute, rule or regulation (including, without limitation, all zoning and subdivision laws, setback requirements, sideline requirements, parking ratio requirements, use requirements, building and fire code requirements, environmental requirements and wetland requirements) and al