PREMIER FINANCE BILOXI CORP Securities Registration: Business Combination (S-4/A) RELATED PARTY TRANSACTIONS

The following is an excerpt from a S-4/A SEC Filing, filed by PREMIER FINANCE BILOXI CORP on 7/8/2004.

Jump to :

RELATED PARTY TRANSACTIONS

Roy Anderson, III

Roy Anderson, III is President and Chief Executive Officer of Roy Anderson Corp., our general contractor. Roy Anderson, III is also a member of GAR, LLC, one of our members, and a member of our board of managers. We have entered into a guaranteed maximum price construction contract with Roy Anderson Corp. We believe the terms of this agreement are at arm's length and are on terms which we could otherwise receive from an unaffiliated third party. See "Risk Factors-Risks Relating to the Notes-There are conflicts of interest between us and parties who have signed agreements with us."

David Ross

David S. Ross is a member of GAR, LLC and a member of our board of managers. David Ross is also the President of Millamax Development Corp. Millamax Development assigned contracts to us for the purchase of certain parcels of land on which the Hard Rock Hotel & Casino Biloxi will be located. We subsequently purchased the land subject to the assigned purchase contracts in exchange for $12,432,714. Of this $12,432,714, the assignment consideration was $5,000,000 and $7,432,714 was for the parcels of land. We believe the terms of this sale were at arm's length and were on terms which we could have otherwise received from an unaffiliated third party.

Gregg Giuffria

Gregg R. Giuffria is a member of GAR, LLC and a member of our board of managers. Gregg Giuffria received a $1,000,000 fee from Millamax Development for development services rendered to Millamax Development. We believe that the terms of his agreement with Millamax Development had a minimal effect on the terms of our purchase of land from Millamax Development and were on terms which we could have otherwise received from an unaffiliated third party.

Hard Rock Hotel Licensing/The Rank Group Plc

Hard Rock Hotel Licensing, Inc., a subsidiary of The Rank Group Plc, is the owner of the marks that we are licensing under the license agreement. If our license agreement with Hard Rock Hotel Licensing is for some reason terminated, then that termination would trigger an event of default under the investment agreement, and we could be required to prepay, subject to the intercreditor agreement, the junior subordinated note. If The Rank Group uses its position as the parent company of Hard Rock Hotel Licensing to cause Hard Rock Hotel Licensing to terminate the license agreement, we could be required to prepay, subject to the intercreditor agreement, the junior subordinated note to Rank America, Inc., a domestic subsidiary of the Rank Group. See "Risk Factors-Risks Relating to the Notes-There are conflicts of interest between us and parties who have signed agreements with us."

DESCRIPTION OF MATERIAL AGREEMENTS

The following summaries of certain provisions of the agreements below do not purport to be complete and are subject to, and qualified in their entirety by reference to, the provisions of those agreements. We urge you to read each of these agreements, which are filed as exhibits to the registration statement of which this prospectus is a part, before investing in the notes.

Contractor's Agreement

We entered into the contractor's agreement with Roy Anderson Corp., which sets forth the contractor's responsibilities relating to the construction and development of the Hard Rock Hotel & Casino Biloxi. The contractor is responsible for the construction of the hotel, a casino barge, a low rise transition building with adjoining pool and beach area, a free standing, six story parking garage and the associated site development, infrastructure and utilities system. The contractor is also responsible for the design and engineering of the parking garage. The contractor provided us with a payment and performance bond covering 100% of the work and naming us and the trustee as co-obligees.

The contractor is required to achieve substantial completion. The completion date may be extended for certain reasons, such as such as force majeure.

If the contractor fails to achieve substantial completion within three days following the completion date, we are entitled to liquidated damages in the amount of $10,000 per day from days 4-11, $25,000 per day from days 12-19 and $50,000 per day thereafter, with the maximum total capped at $1.5 million. If the contractor establishes substantial completion prior to three days before the completion date, we will pay the contractor a $10,000 per day from days 4-11, $25,000 per day from days 12-19 and $50,000 per day thereafter bonus, with the maximum total capped at $800,000.

The maximum cost to us for the completion of all of the work (including the contractor's fee and all direct purchase items purchased by us) is $82.0 million, which may be increased or decreased for changes in the scope of the work. Change orders valued at more than $500,000 also require approval by our architect and compliance with certain conditions under our disbursement agreement. If the aggregate of all change orders exceeds $5.0 million, then the architect's approval and compliance with certain conditions under our disbursement agreement are required for all subsequent change orders. We have recently entered into change orders with respect to the construction contract as a result of increased labor costs. These change orders have resulted in an increase to the guaranteed maximum price of approximately $580,000.

We are generally required to pay the contractor on a monthly basis upon submission of proper documentation. Interest at a rate of the prime rate plus 2% shall accrue on amounts not paid within thirty days after approval of payment by us and by the architect.

If we breach the terms of the contractor's agreement and such breach is not cured within 30 days after written notice from the contractor, the contractor may terminate the contractor's agreement. If work is suspended for more than 30 consecutive days from causes not the fault of the contractor, the contractor may terminate the contractor's agreement upon 30 days' notice to us.

We may terminate the contractor's agreement if after five days' written notice, the contractor fails to commence or prosecute work in accordance with the contract documents, fails to use adequate personnel or equipment to complete work in accordance with the project schedule, fails to perform its obligations under the contract documents or fails to make payments in a timely manner. We may also terminate the contractor's agreement if the contractor fails to provide assurance of future performance within ten days' receipt of a request to do so, is adjudged bankrupt, makes a general assignment for the benefit of creditors, or if a receiver is appointed for the benefit of the contractor's creditors or on account of its insolvency. In addition, we have the right, at any time, to terminate the contractor's agreement at any time. However, if we exercise this right, the contractor shall be entitled to receive payments for any pre-construction services and work executed, together with reasonable overhead and

profit of the work executed as of the date of such termination, and any amounts incurred by the contractor in connection with terminating any subcontractors, purchase orders plus any proven costs sustained in connection with the termination of the contractor's agreement.

We approved the form of the barge construction contract to be entered into between contractor and Corn Island Shipyard attached to the contractor's agreement as an exhibit. We agreed: (i) that the terms and conditions set forth in the barge construction contract satisfy all of the conditions of the contractor's agreement; (ii) that the payments for work to be performed under the terms of the barge construction contract satisfy all of the requirements of the contractor's agreement; (iii) that Corn Island Shipyard shall not be required to provide a consent to assignment in favor of the trustee and (iv) to waive any requirements set forth in the contractor's agreement and in any other contract that are inconsistent with the terms of the barge construction contract.

Architect's Agreement

We entered into the architect's agreement with Paul Steelman, Ltd., which sets forth the architect's responsibilities relating to the design and development of the Hard Rock Hotel & Casino Biloxi which include overseeing the construction of the project. The architect's services will be performed according to the project schedule. The architect, in consultation with us, will develop a written program which, along with the schematic budget, will be the basis of our construction budget, and may not be changed without our written approval.

Upon completion of the design development documents, the architect will provide such documents to the contractor so that the contractor may confirm the project guaranteed maximum price to us. If the guaranteed maximum price exceeds our construction budget, then we will have the right to require the architect to revise the construction documents so that the actual construction cost does not exceed our construction budget. The architect will do such work as part of the basic services to be performed by the architect.

The architect will review and certify the amounts due to the contractor within five days after receipt of the contractor's application for payment, and will issue to us and/or the disbursement agent an architect's certificate.

The architect's agreement may be terminated by either party upon ten days' notice if (i) the other party fails to substantially perform in accordance with the terms of the architect's agreement through no fault of the party initiating such termination, (ii) the project is abandoned by the owner for more than ninety consecutive days or (iii) the parties cannot agree on revisions to the architect's agreement required by the trustee providing financing for the project. We may also terminate the architect's agreement if the architect is adjudged bankrupt, files for voluntary dissolution, is involuntarily dissolved, conveys ownership of the architect, assigns any of its rights under the architect's agreement, or if the project is permanently abandoned. In addition, we have the right, upon not less than seven days' written notice to the architect, to terminate the architect's agreement at our convenience and without cause. If we exercise this right, the architect shall be entitled to have us pay for services performed prior to termination, together with reimbursement expenses and termination expenses for the thirty days following the date of termination.

We shall make payments to the architect within thirty days after we receive and approve the architect's application for payment and all necessary certificates and other documentation, except that amounts disputed shall not be due until the disputed matter is resolved. We may withhold payment from the architect as a set off for damages due to the architects' breach under the architect's agreement or any other construction document, if not cured by the architect within seven days after we provide the architect with notice of such breach. Invoices for additional services must be submitted to us within sixty days after the date any additional service is rendered. Amounts that remain unpaid sixty days after the invoice date will accrue interest at a rate of the prime rate plus 2% beginning on the sixtieth day after the invoice date. Unless due to a pending dispute, if we persistently fail to make

payment to the architect for services properly performed, the architect may, upon seven days' notice to us, suspend performance of services.

Compensation payable to the architect for basic services under the architect's agreement shall not exceed $5.3 million. Compensation for additional services shall be computed according to the schedule attached to the architect's agreement. We shall reimburse the architect for normal reimbursable expenses, such as drawing reproduction, computer plots, travel expenses or shipping and postage.

Cash Collateral and Disbursement Agreement

We entered into the disbursement agreement with the disbursement agent, the trustee, the independent construction consultant and Premier Finance Biloxi Corp., under which we deposited approximately $177.6 million into a construction disbursement account, an interest reserve account and a tidelands lease account, to be disbursed by the disbursement agent pursuant to the disbursement agreement.

Construction Disbursement Account. Approximately $143.5 million was deposited into a construction disbursement account and will be used to fund the development, construction and opening of the Hard Rock Hotel & Casino Biloxi. Funds in this account are invested in cash equivalents. All such funds are held in the construction disbursement account and pledged to the trustee for the benefit of itself and the holders of the notes until disbursed in accordance with the disbursement agreement.

Subject to certain exceptions, the disbursement agent will disburse funds from the construction disbursement account only upon the satisfaction of the disbursement conditions set forth in the disbursement agreement.

The disbursement agreement will permit advance construction disbursements from the construction disbursement account up to $1.0 million in the aggregate, prior to June 1, 2004, up to $3.0 million in the aggregate, prior to September 1, 2004, and up to $5.0 million in the aggregate thereafter outstanding at any time, subject to certain conditions.

Construction Budget. The disbursement agreement provides that the construction budget may be amended only upon the satisfaction of certain conditions set forth in the disbursement agreement. In addition, construction line items in the construction budget may only be increased if the funds for such increase are made available in the construction budget from certain specified sources, provided, that, the line item established for "finishes" and "pre-opening expenses" in the construction budget may not be reduced by more than 15% and the line items established for "excess liquidity," "non-gaming FF&E," "owner supplied FF&E" and "working capital" in the construction budget may not be reduced. We will also cure any anticipated cost overruns during the construction of the Hard Rock Hotel & Casino Biloxi using funds from certain specified sources and to provide certain certifications from time to time regarding project costs.

Disbursement of Funds Following the Initial Operating Date. Pursuant to the disbursement agreement, once the disbursement agent receives, among other things, an officer's certificate from us, the general contractor and the independent construction consultant confirming that (1) the Hard Rock Hotel & Casino Biloxi has been operating uninterrupted for at least 10 days prior to the date of certification, (2) all amounts required to be paid to the contractors in connection with the Hard Rock Hotel & Casino Biloxi have been paid, other than disputed amounts with contractors of not more than $2.0 million, retainage amounts of not more than $5.0 million and punchlist items of not more than $800,000 so long as 125% of any such disputed amounts with respect to the contractor's agreement, 200% of any such disputed amounts relating to any other construction contract and 100% of such retainage amounts and 175% of the cost to complete such punchlist items have been reserved in the construction disbursement account, (3) we have received final lien releases from each contractor (other than respect to disputed amounts, retainage amounts and punch list items permitted to be unpaid pursuant to clause (2) above) and amounts requested for disbursement from a single supplier with a

contract price (or expected aggregate amount to be paid in the case of "cost plus" contracts) of less than $100,000, (4) there are no mechanic's liens or other liens filed against the Hard Rock Hotel & Casino Biloxi and (5) the contractor has not delivered a certificate to the disbursement agent objecting to the amounts to be reserved under clause (2) above, then the disbursement agent will disburse all remaining funds in the construction disbursement account, if any, other than the amount reserved pursuant to clause (2) above, to the account specified by us.

Final Disbursement of Funds. Pursuant to the disbursement agreement, once the disbursement agent receives, among other things, an officer's certificate from us, the general contractor and the independent construction consultant confirming that (1) the Hard Rock Hotel & Casino Biloxi has been operating uninterrupted for at least 10 days prior to the date of certification,
(2) all amounts required to be paid to the contractors in connection with the Hard Rock Hotel & Casino Biloxi have been paid, (3) we have received final lien releases from each contractor (provided, however, that lien releases, affidavits and agreements need not be provided for unincorporated materials from a single supplier with a contract price (or expected aggregate amount to be paid in the case of "cost plus" contracts) of less than $100,000) and (4) there are no mechanic's liens or other liens filed against the Hard Rock Hotel & Casino Biloxi, then the disbursement agent will disburse all remaining funds in the construction disbursement account, if any, to the account specified by us.

Interest Reserve Account. Approximately $33.1 million was deposited into an interest reserve account. Funds in this account are invested in government securities. Funds and other assets held in the interest reserve account are pledged to the trustee for the benefit of itself and the holders of the notes. These funds will be used for the first four payments of interest on the notes. Any funds remaining in the interest reserve account after the fourth interest payment on the notes has been made in accordance with the indenture will be disbursed from the interest reserve account to an account specified by us.

Tidelands Lease Reserve Account. Approximately $1.0 million was deposited into a tidelands lease reserve account to fund rent payments on the tidelands lease for the first year of operations. In addition, the disbursement agreement requires that, with each construction disbursement request during the construction period and each month during the operating period, and in any event within two business days after we determine that the amount we reasonably expect will be due and owing to the State of Mississippi under the tidelands lease during the next succeeding 60 days is greater than the amount then on deposit in the tidelands lease reserve account, we shall: (i) deposit an amount equal to the excess into the tidelands lease reserve account; or (ii) submit a project budget amendment certificate to transfer the excess into the tidelands lease reserve account.

The disbursement agent will disburse funds from the tidelands lease reserve account only:

º •
º as directed by us in a certificate from us certifying that the tidelands lease requires that such amounts be paid; or

º •
º to the State of Mississippi upon receipt by the disbursement agent of a notice from the State of Mississippi that we are in default under the tidelands lease, and that such default may be cured by the payment of a liquidated sum of money to the State of Mississippi.

Funds in this account are invested in cash equivalents. Funds and other assets held in the tidelands lease reserve account are pledged to the trustee for the benefit of itself and the holders of the notes.

PFC Payment Account. Under the Mississippi municipal bond financing program, from time to time, we will submit requests to the disbursement agent to transfer a portion of the proceeds from the construction disbursement account into a pfc payment account as an equity contribution to Premier Finance Biloxi Corp. Upon satisfaction of the conditions contained in the disbursement agreement and review by the independent construction consultant, the disbursement agent shall transfer such funds to the pfc payment account and then immediately transfer such funds to an account held by the trustee of

the industrial development revenue bonds to enable Premier Finance Biloxi Corp. to purchase the industrial development revenue bonds from the Mississippi Business Finance Corporation. See "Management's Discussion and Analysis of Financial Condition and Results of Operation-Liquidity and Capital Resources." All amounts transferred to the pfc payment account shall be deemed to be an equity contribution by us to Premier Finance Biloxi Corp. The proceeds of the industrial development revenue bonds will be used to fund the costs of the acquisition, construction and installation of certain land-based improvements and equipment in accordance with the disbursement agreement, and the indenture governing the bond financing transaction.

Public Trust Tidelands Lease with State of Mississippi

We entered into a lease with the State of Mississippi for the use of approximately five acres of tidelands which we will use to construct and operate our casino vessel and develop a recreational marina.

Term. The term of the lease is for 30 years commencing on October 27, 2003. We have an option to renew the lease for a term of an additional 20 years and have an exclusive option to enter into a future lease at the expiration of the additional term.

Rent. We will pay annual rent of $21,900 from October 27, 2003 until the earlier of June 1, 2006 or the first day of the calendar month on which the casino portion of the Hard Rock Hotel & Casino Biloxi opens. Following such date, the annual rent will be determined according to the State of Mississippi's appraisal of the fair market rental value of tidelands leased for similar uses. We do not have the ability to challenge the initial appraisal performed by the designated appraiser selected by the State of Mississippi of the fair market rental amount for the first five year period. The fair market rental amount for each subsequent five year period will be determined in accordance with (i) the increase in the All Urban Consumer Price Index or (ii) the amount set forth in a written appraisal performed by the designated appraiser selected by the State of Mississippi. Our rights to challenge this appraisal are very limited, and the State of Mississippi may terminate the tidelands lease if we and the State of Mississippi do not agree on the rent for any subsequent five year period. Rent is due and payable before the beginning of each lease year when our casino is operating, except for the annual rent due in the first year in which our casino opens, which is to be paid in four equal installments over the course of the first 90 days following the earlier of June 1, 2006 or the first day of the calendar month on which our casino opens. We must pay interest on any rental amount that is not timely paid.

Termination and Remedies. The State of Mississippi may terminate the lease: (i) if we do not obtain satisfactory financing needed to construct the Hard Rock Hotel & Casino Biloxi within one year from the initial date of the lease, subject to 30 days advance written notice of termination from the State of Mississippi, (ii) if we do not obtain all of the necessary permits, licenses or approvals to develop and operate the Hard Rock Hotel & Casino Biloxi by June 1, 2006 or we do not maintain such necessary permits, licenses and approvals once they have been obtained, subject to 30 days advance written notice of termination from the State of Mississippi, (iii) if any monetary or other material default under the lease occurs and we fail to cure the default within 30 days following receipt of written notice from the State of Mississippi; provided that if such default cannot be cured solely by the payment of a liquidated sum of money, such cure period may be extended for a reasonable period of time not to exceed 180 days if certain conditions are satisfied,
(iv) if (A) a petition in bankruptcy is filed by us or (B) a petition in bankruptcy is filed against us and (x) we do not pay our rent due under the lease or (y) an order for relief is entered against us in connection with such petition; (v) if we fail to use the leased premises for a permitted purpose or abandon the leased premises for a period of 90 consecutive days, subject to 30 days advance written notice of termination from the State of Mississippi,
(vi) if, following 30 days written notice from the State of Mississippi, we voluntarily surrender our gaming license and do not negotiate a new lease with the State of Mississippi within 60 days thereafter; or (vii) if our use of the leased premises for gaming is restrained or enjoined by a court order due to a

challenge to the legality of the Mississippi gaming statutes or by an act of the Mississippi legislature or the United States Congress, subject to 30 days advance written notice of termination from the State of Mississippi.

However, the trustee is entitled to written notice from the State of Mississippi of any default under the lease which may give rise to a right of termination on the part of the State of Mississippi. If the State of Mississippi is entitled to terminate the lease by reason of a default (other than a default in the payment of rent or other liquidated sum of money due under the lease) or by reason of our failure to use the leased premises or abandonment of the leased premises for 90 consecutive days, and the trustee undertakes to cure such default within 60 days after receipt of such notice and thereafter makes a diligent and good faith effort to cure such default and does cure such default within the time provided for in the lease, then the lease will not terminate by reason of such default. The commencement of the 60 day period will be extended by up to 12 months if the trustee is prevented from curing a default by our bankruptcy or other order directed against us by a court or governmental agency. In addition, the State of Mississippi may not accept any voluntary cancellation, surrender, termination or abandonment of the lease by us without the prior written consent of the trustee.

If the Mississippi Gaming Commission does not issue or renew, or revokes our gaming license for the leased premises pursuant to a final, non-appealable order, we can transfer the lease to another entity which has a current gaming license issued by the Mississippi Gaming Commission. If we do not transfer the lease within 180 days from the order date, the lease will automatically terminate.

In addition, if the lease terminates prior to the end of either the initial term or the renewal term, the trustee may request that the State of Mississippi enter into a new lease on the same terms and conditions as the existing lease within 60 days after the State of Mississippi notifies the trustee of the termination. Upon the satisfaction of certain conditions, including, but not limited to, (i) the payment by the trustee of all amounts owed by us under the lease, all ad valorem taxes and special assessments imposed on the leased premises and all reasonable expenses of the State of Mississippi as a result of such termination and (ii) the cure by the trustee of any other defaults by us under the lease prior occurring prior to such termination, then the State of Mississippi will enter into a new lease with the trustee.

License Agreement with Hard Rock Hotel Licensing

On May 15, 2003, we entered into a license agreement with Hard Rock Hotel Licensing, Inc., under which it granted us an exclusive right and license to design, develop, operate, own and manage the Hard Rock Hotel & Casino Biloxi using and displaying the licensed rights at the Hard Rock Hotel & Casino Biloxi. The initial term of the license agreement is 20 years, with two 10-year renewal options.

Licensed Rights. The licensed rights include the following trademarks: Hard Rock Hotel, Hard Rock Live!, Hard Rock Casino and Hard Rock Hotel & Casino Biloxi. During the term of the license agreement, Hard Rock Hotel Licensing cannot license or operate a Hard Rock Hotel or Hard Rock Casino within the cities of Biloxi, Gulfport and Bay St. Louis. The license agreement also provides for a license of the hotel system and manuals collectively developed by us and Hard Rock Hotel Licensing to be used in the operation of the Hard Rock Hotel & Casino Biloxi but which are owned by Hard Rock Hotel Licensing. The license agreement may not be assigned or otherwise transferred by us without the prior written consent of Hard Rock Hotel Licensing.

Fees. We have paid Hard Rock Hotel Licensing a one-time non-refundable territory fee of $500,000. We have also agreed to pay Hard Rock Hotel Licensing on a monthly basis a licensing fee equal to 3% of our non-gaming revenues from operations during the term of the license agreement. This licensing fee is based on our revenues derived from the rental of hotel guest, conference and meeting rooms (including 60% of the value of complimentary rooms and services), the sale of food,

beverage and merchandise, the collection of parking fees and a portion of the proceeds of business interruption insurance received by us, but is not based on revenues derived from gaming, the Hard Rock Cafe or the Hard Rock Retail Store. We have also committed to pay Hard Rock Hotel Licensing an annual fee (payable in equal monthly installments), commencing when the Hard Rock Hotel & Casino Biloxi first opens and for each year thereafter during the term of the license agreement, of $1.0 million for the first year, $1.2 million for the second year, $1.4 million for the third and fourth years, $1.5 million for the fifth year, and then adjusted by the inflation rate thereafter. During the first 24 months of the license agreement, we are also required to pay Hard Rock Hotel Licensing a technical service fee of $1,000 per room in exchange for Hard Rock Hotel Licensing providing us with certain technical services. This technical service fee will be $306,000, based on an assumption of 306 hotel guest rooms, and is payable in 24 equal monthly installments. Upon final determination of the number of rooms, the exact fee will be reconciled accordingly.

Marketing Expenses. After we open the Hard Rock Hotel & Casino Biloxi we are required to spend at least 3.5% of our total annual revenues on advertising and publicity. We may also be required to participate and contribute 1% of our monthly revenues from operations as a contribution to Hard Rock Hotel Licensing's global marketing fund as part of its system-wide advertising campaign or sales promotion program, if and when established by Hard Rock Hotel Licensing.

Insurance. The license agreement also requires us to maintain
(i) builder's risk insurance while the Hard Rock Hotel & Casino Biloxi is being constructed, (ii) property damage insurance, general liability insurance and workers' compensation insurance at all times during the term of the license agreement and (iii) business interruption insurance and fidelity and dishonesty insurance at all times during the operation of the Hard Rock Hotel & Casino Biloxi.

Reserve Fund. The license agreement also requires us to establish a reserve fund in an amount equal to 1.5% of our total revenues during our first fiscal year and increasing to 3.5% during our fourth fiscal year and each subsequent fiscal year. The reserve fund will be used to refurbish and renovate the Hard Rock Hotel & Casino Biloxi from time to time in order to maintain an appropriate standard of a first-class hotel. We will use the reserve fund for replacements and renewals of furniture, fixtures and equipment, for renovations of public areas and guestrooms and to repair and maintain the Hard Rock Hotel & Casino Biloxi's physical facilities. We have agreed to maintain the Hard Rock Hotel & Casino Biloxi in accordance with a standard of a first class, four star resort hotel comparable to the Hard Rock Hotel & Casino located in Las Vegas, Nevada.

Hard Rock Representatives. Hard Rock Hotel Licensing has the right to assign a representative at the project site to act as its onsite representative during the construction period. Hard Rock Hotel Licensing also has the right to hire up to two design consultants to review the design plans for the Hard Rock Hotel & Casino Biloxi and to consult with the architect and contractor, the fees of which are to be reimbursed by us in an amount not to exceed $75,000. In addition, at any time while the Hard Rock Hotel & Casino Biloxi is operating, Hard Rock Hotel Licensing may designate an employee or representative to act as its onsite representative to (i) review the operations of the Hard Rock Hotel & Casino Biloxi, (ii) monitor the use by us of the licensed Hard Rock trademarks and (iii) confirm our compliance with the license agreement. We are required to reimburse Hard Rock Hotel Licensing up to $150,000 per year for the costs and expenses incurred by Hard Rock Hotel Licensing in connection with the retention, training and services provided by this representative.

Deadlines. We are required to have substantially commenced construction of the Hard Rock Hotel & Casino Biloxi within 18 months from the date of the license agreement. We have also committed to having the Hard Rock Hotel & Casino Biloxi open to the public by May 15, 2006.

Approval Rights. The license agreement also provides Hard Rock Hotel Licensing with certain approval rights with respect to (i) the use and display of the licensed Hard Rock trademarks, (ii) the

proposed site for the Hard Rock Hotel & Casino Biloxi, which has already been obtained, (iii) the financing arrangements entered into to fund the design, development, construction and opening of the Hard Rock Hotel & Casino Biloxi, including the original notes, which has already been obtained, (iv) the preliminary and final plans and specifications for the Hard Rock Hotel & Casino Biloxi, including the furniture, fixtures and equipment contained therein,
(v) the project manager, (vi) the contractors, architects and consultants used by us to complete the Hard Rock Hotel & Casino Biloxi, (vii) advertising materials, (viii) signage and other forms of displays utilizing the licensed Hard Rock trademarks and (ix) the sale, assignment or transfer of our interest in the Hard Rock Hotel & Casino Biloxi or the rights under the license agreement.

Termination. Hard Rock Hotel Licensing may only terminate the license agreement upon the occurrence of events of default. Events of default include, but are not limited to (i) our filing for bankruptcy, (ii) our failure to perform our obligations under the license agreement (including the payment of fees due thereunder after receipt of notice that any such payment is past due),
(iii) our failure to maintain all necessary gaming licenses and permits,
(iv) our failure to maintain any other necessary permits or to comply with applicable laws, (v) our conviction of a felony, (vi) the felony conviction of a licensed employee or of a person owning an interest in us, (vii) our failure to perform our obligations under the Hard Rock Cafe Lease, the Hard Rock retail store lease or the memorabilia lease, (viii) our right of possession of the real property owned or leased by us that comprise the site for the Hard Rock Hotel & Casino Biloxi is terminated or expires, (ix) our failure to obtain approval to build the Hard Rock Hotel & Casino Biloxi, (x) our failure to obtain financing for, or to substantially commence construction of, the project within 18 months from the date of the license agreement, (xi) our failure to be open and operating by May 15, 2006, (xii) our failure to obtain and maintain a liquor license for the Hard Rock Hotel & Casino Biloxi, or (xiii) if we are in default, after expiration of any applicable cure period, under any obligations to a secured party under the notes and the agreements securing our obligations under the notes.

We may terminate the license agreement upon the occurrence of certain events of default on the part of Hard Rock Hotel Licensing. We may also terminate the license agreement if, at any time after our fifth year of operations, we sell the Hard Rock Hotel & Casino Biloxi to an unrelated third party. If we terminate the license agreement as a result of a sale of the Hard Rock Hotel & Casino Biloxi to an unrelated third party, we are required to pay a termination fee to Hard Rock Hotel Licensing equal to the fees that would otherwise be payable under the license agreement if it had not been so terminated.

If however, Hard Rock Hotel Licensing terminates the license agreement as a result of our failure to substantially commence construction of the Hard Rock Hotel & Casino Biloxi within 18 months from the date of the license agreement or to open the Hard Rock Hotel & Casino Biloxi by May 15, 2006, then Hard Rock Hotel Licensing is only entitled to retain or recover (i) the initial $500,000 territory fee, (ii) the technical services fees required to be paid through the date of termination, (iii) any expenses or costs previously incurred that are required to be paid or reimbursed by us under the license agreement or the memorabilia lease and (iv) the reasonable and actual costs incurred by Hard Rock Cafe International (STP), Inc. in negotiating and preparing to perform and performing under each of the Hard Rock retail store lease and the Hard Rock cafe lease. Upon early termination or expiration of the license agreement, our right to use the licensed rights will immediately terminate.

Trustee's Cure Rights. The license agreement provides that in the event we are in default of our obligations to pay the fees required under the license agreement and we fail to cure such payment default within the time provided in the license agreement, the trustee has the right to cure such payment default within sixty days after receipt of notice of such payment default from Hard Rock Hotel Licensing. The license agreement also provides that in the event we are in default of our non-monetary obligations under the license agreement and we fail to cure such default in the time provided in the license agreement, the trustee has the right to cure such non-monetary defaults within

sixty days after receipt of notice of such non-monetary default from Hard Rock Hotel Licensing, which cure period may be extended to up to eleven months under certain circumstances. Furthermore, Hard Rock Hotel Licensing has agreed not to terminate the license agreement upon our default under any obligations to a secured party under the notes and the agreements securing our obligations under the notes unless (i) Hard Rock Hotel Licensing has provided the trustee with notice of its intent to terminate the license agreement and (ii) either (A) the trustee has elected not to foreclose on the license agreement during a foreclosure on the Hard Rock Hotel & Casino Biloxi or (B) the trustee fails to foreclose on its interest in the Hard Rock Hotel & Casino Biloxi pursuant to a specified schedule.

Right of First Refusal. If we receive a bona fide offer from a third party to purchase the Hard Rock Hotel & Casino Biloxi then we are required to give Hard Rock Hotel Licensing or its designee the opportunity to match the offer. If Hard Rock Hotel Licensing or its designee decide not to purchase the Hard Rock Hotel & Casino Biloxi on the terms and conditions previously disclosed to Hard Rock Hotel Licensing, then we can sell the Hard Rock Hotel & Casino Biloxi so long as we receive the consent of Hard Rock Hotel Licensing, which consent may not be unreasonably withheld if certain conditions are satisfied.

Non-Competition. We are also restricted during the term of the license agreement and for one year after the expiration or early termination of the license agreement from, directly or indirectly, owning, operating, or having any interest in any hotel, restaurant, hotel casino or casino within the cities of Biloxi, Gulfport or Bay St. Louis which compete with Hard Rock. Hard Rock competitors include Planet Hollywood, Motown Cafe, House of Blues, Rainforest Cafe, Country Star, Harley Davidson Cafe, ESPNZone, TGI Fridays, Chili's, Applebee's, Houlihans, or Bennigans or a restaurant operating under the same name in six or more metropolitan statistical areas with theme-related icons or memorabilia or which derives greater than 10% of its gross revenues from the sale of merchandise or any American dining theme restaurant whose primary business is the sale of burgers or barbeque. In addition, we are not permitted to operate or allow any other person to operate at the proposed site for the Hard Rock Hotel & Casino Biloxi (i) a restaurant owned, operated or licensed by a Hard Rock competitor or (ii) a gift shop or other merchandise store which sells clothing or merchandise depicting the geographic location of the Hard Rock Hotel & Casino Biloxi and bearing the trademarks of a Hard Rock competitor. Furthermore, if we want to sell or otherwise transfer any portion of the real property on which the Hard Rock Hotel & Casino Biloxi will be constructed, then, prior to such sale or transfer, we must place a restrictive covenant on the real property prohibiting the use of the property for a restaurant, hotel, hotel casino or casino with a music theme or bearing the trademarks of a Hard Rock competitor.

In addition, during the term of the license agreement, Hard Rock Hotel Licensing agrees not to, directly or indirectly, develop, own or operate any Hard Rock Hotel with a casino or Hard Rock Casino or Hard Rock Cafe within the cities of Biloxi, Gulfport or Bay St. Louis. We have been advised by Hard Rock Hotel Licensing that Mr. Peter Morton has the right to build a Hard Rock Hotel and/or Casino in the State of Louisiana and other locations west of the Mississippi River and that the exercise of these rights does not constitute a violation of the non-competition restrictions. We also have a right of first offer to purchase from Hard Rock Hotel Licensing the rights to any Hard Rock hotel system or hotel casino that may be established in Tunica County, Mississippi.

Encumbrances. We have the right under the license agreement to encumber, pledge, convey or collaterally assign our interest in the license agreement to a third party lender in order to secure payment on any loan to us. However, the rights of Hard Rock Hotel Licensing will not be subordinated to the rights of such secured lender. Until such time as a foreclosure or bankruptcy action is filed, revenues from the operation of the Hard Rock Hotel & Casino Biloxi shall be used first to satisfy our obligations to Hard Rock Hotel Licensing under the license agreement before they may be used to satisfy any of our other obligations (including any obligations to a secured party). If the trustee or any other person acquires our interest in the license agreement in a foreclosure sale, that acquisition will be

an event of default under the license agreement, unless the purchaser (i) has a net worth of at least $10.0 million, (ii) has not been convicted of a felony or had a gaming license refused or revoked, (iii) is not a Hard Rock competitor and
(iv) possesses management ability, experience and a well-established reputation for quality management in the hotel/gaming industry.

Notwithstanding any of the above, if the trustee forecloses on any security interest in some or all of the land or other collateral, the trustee may elect not to simultaneously foreclose on the license agreement or memorabilia lease by providing notice to Hard Rock Licensing. If the trustee provides such a notice, and the trustee's foreclosure on the security interest in the land or other collateral is completed, then the trustee's right to foreclose on, and any restrictions on Hard Rock Licensing's right to terminate or amend, the license agreement and memorabilia lease, or to enter into a new lease, will be deemed null and void. If the trustee provides such notice, and title to the facility is subsequently transferred to a third party, then the third party transferee must agree (i) not to operate a Hard Rock competitor on the property for two years following the transfer of title and (ii) within 30 days following termination of the license agreement, to remove all interior and exterior Hard Rock signage and decor from the hotel and casino.

Letter of Credit. Not later than six months before we open the Hard Rock Hotel & Casino Biloxi, we will be required to obtain an unconditional and irrevocable letter of credit in the amount of $3.0 million in favor of Hard Rock Hotel Licensing. The letter of credit may be drawn upon by Hard Rock Hotel Licensing in order to cure any default by us under the license agreement or the memorabilia lease. We have an affirmative obligation to restore the amount of the letter of credit if it has been drawn upon or reduced while it remains outstanding and to provide a replacement letter of credit 30 days before the existing letter of credit is due to expire. Hard Rock Hotel Licensing will release the letter of credit after two years of operation of the Hard Rock Hotel & Casino Biloxi if we are not in default under the license agreement or the memorabilia lease and all fees payable by us under the license agreement and the memorabilia lease have been paid.

Right to Payment. The license agreement requires that, until we voluntarily or involuntarily file for bankruptcy or the trustee institutes an action to foreclose on the collateral assignment of our rights under the license agreement with Hard Rock Hotel Licensing, Inc., revenues from the operation of the Hard Rock Hotel & Casino Biloxi will be used first to pay amounts due under the license agreement before we will pay any other obligation, including our obligations with respect to the notes.

Memorabilia Lease with Hard Rock STP

As provided in the license agreement, we will enter into a memorabilia lease with Hard Rock Cafe International (STP), Inc., which gives us the right to use, possess and display certain rock and roll memorabilia owned by Hard Rock STP for display in the Hard Rock Hotel & Casino Biloxi in accordance with generally accepted museum standards for preservation and protection against loss or damage.

Memorabilia. Under the memorabilia lease, the rock and roll memorabilia to be provided by Hard Rock STP under the memorabilia lease will be selected by Hard Rock STP in consultation with us, will be consistent with or greater than the rock and roll memorabilia displayed in the Hard Rock Hotel & Casino in Las Vegas, Nevada and will have an approximate appraised value of $1.5 million.

Term and Fees. The memorabilia lease shall remain in effect so long as the license agreement remains in full force and effect. Under the memorabilia lease, we are required to pay an annual rental fee equal to $150,000, payable in equal monthly installments of $12,500 during the first 24 months of the memorabilia lease. The first rental installment is due immediately prior to the shipment of the rock and roll memorabilia by Hard Rock STP and each subsequent installment is due on the 1st day of each succeeding month. After the initial 24 months of the memorabilia lease, the annual rental fee will be

adjusted by 3% to 5% in accordance with certain inflation adjustments as set forth in the memorabilia lease.

Covenants. While we are in possession of any of the leased rock and roll memorabilia, we are responsible for and assume all obligations and liability with respect to the rock and roll memorabilia. We are required, at our expense, to maintain insurance against loss, theft, damage, confiscation or destruction in an amount adequate to cover the appraised value of the rock and roll memorabilia and maintain the rock and roll memorabilia in good order, repair and condition. If, at any time during the term of the memorabilia lease, any items of rock and roll memorabilia are donated to us, as owner and operator of the Hard Rock Hotel & Casino Biloxi, or are otherwise acquired or received by us for less than full value, then such rock and roll memorabilia shall be deemed to be the property of Hard Rock STP, unless otherwise agreed in writing by us and Hard Rock STP. We are required to pay all sales taxes, use taxes, personal property taxes, ad valorem taxes, license fees, permit fees and any other taxes or government charges imposed with respect to the leased rock and roll memorabilia.

Termination and Assignment. Hard Rock STP may assign the memorabilia lease or any of its rights under the memorabilia lease without our consent, provided that any assignee is capable of fulfilling Hard Rock STP's obligations under the memorabilia lease. We may not assign, transfer or pledge the memorabilia lease or any interest in the memorabilia lease, or sublease or lend any of the rock and roll memorabilia to any other person, except as permitted in the license agreement. Either party may terminate the memorabilia lease if the other party commits a material breach that remains uncured or the other party becomes bankrupt or insolvent. In addition, Hard Rock STP may terminate the memorabilia lease if: (i) we cancel our insurance policy covering the rock and roll memorabilia; (ii) we make an unauthorized assignment of the memorabilia lease; (iii) we suffer an involuntary transfer of any interest in the memorabilia lease by operation of law; or (iv) the license agreement is terminated.

Cafe Lease Agreement with Hard Rock STP

We entered into a Hard Rock cafe lease with Hard Rock STP, which gives Hard Rock STP the right to operate the cafe premises as a restaurant and bar having a "Hard Rock Cafe" theme, with sit-down service for lunch and dinner, bar service, and the retail sale of "Hard Rock Cafe" branded merchandise. Permitted uses of the cafe premises may include a nightclub, live music and/or dancing.

Location. The cafe will be located in a prominent location on the main floor lobby of the hotel portion of the Hard Rock Hotel & Casino Biloxi and will provide for access to the hotel lobby as well as the exterior of the hotel.

Term. The initial term of the lease is 20 years, with two 10-year renewal options. The initial term of the lease will commence on the earlier of the date on which the cafe is open for business or 180 days after the date we deliver the substantially completed shell of the cafe premises to Hard Rock STP. In addition, we are required to deliver to Hard Rock STP possession of the substantially completed shell of the cafe premises at least 180 days prior to the date we open the Hard Rock Hotel & Casino Biloxi. The cafe lease automatically terminates simultaneously with the expiration or early termination of the license agreement. If we transfer the cafe lease to a third party other than the trustee, and the third party elects not to complete construction of the cafe, or if the cafe premises is damaged by fire or otherwise and the third party elects not to repair the damage, then Hard Rock STP may terminate the lease.

Rent. The cafe lease requires Hard Rock STP to pay rent to us in an amount equal to five percent of its gross sales, which rent is to be paid monthly in arrears. However, no rent is due under the cafe lease during the first 24 months of the lease period. Under the cafe lease, we are required to pay all ad valorem or real property taxes levied or assessed on the cafe premises, without any obligation on the part of Hard Rock STP to reimburse us for such taxes, and Hard Rock STP is

required to pay and discharge all personal property taxes levied, assessed or imposed on its personal property located within the cafe premises and all business taxes levied on its business conducted within the cafe premises.

Hours of Operation. During the term of the cafe lease, Hard Rock STP is required to have the cafe open for business from 11 a.m. to 10 p.m. Monday through Saturday and 11 a.m. to 9 p.m. on Sunday. The cafe may, but is not required to, be closed on Christmas Day, Thanksgiving Day and New Year's Day. Hard Rock STP is also obligated to make a diligent, good faith and reasonable effort to complete all of its preparatory work and be open for business 180 days after the date we deliver the substantially completed shell of the cafe premises to Hard Rock STP. The cafe is required to be open for business not later than 210 days after the date we deliver the substantially completed shell of the cafe premises to Hard Rock STP, subject to force majeure, condemnation, casualty, and landlord delays.

Parking and Patio. We are required to have a minimum of 1,000 parking spaces in the parking garage and are responsible for all costs and expenses for maintenance of and/or improvements to the parking garage. In addition, if the plans and specification for the Hard Rock Hotel & Casino Biloxi include an outdoor area adjacent to the cafe premises, Hard Rock STP will have the right to use such area for patron waiting areas and/or outside seating purposes in connection with the consumption of food and beverages at the cafe.

Indemnification. Hard Rock STP has agreed to indemnify, defend and hold us harmless from and against any and all obligations, liabilities, claims, suits, proceedings, losses, damages, costs, and expenses incurred by us which arise out of any injury or damage to any person or property occurring in, on or about the cafe premises, except if the same is caused by the gross negligence or intentional misconduct of us or our employees, agents or contractors. We have agreed to indemnify, defend and hold Hard Rock STP harmless from and against any and all obligations, liabilities, claims, suits, proceedings, losses, damages, costs, and expenses incurred by Hard Rock STP which arise out of any injury or damage to any person or property occurring in, on or about the Hard Rock Hotel & Casino Biloxi (other than the cafe premises), except if the same is caused by the gross negligence or intentional misconduct of Hard Rock STP or its employees, agents or contractors.

Termination. The cafe lease also provides Hard Rock STP with special termination rights if (i) a governmental entity having jurisdiction over the cafe premises permanently prohibits its opening or operation as a restaurant, bar and/or retail sales facility, (ii) Hard Rock STP is unable to obtain its liquor license, signage approval, a building permit or other permits and approval necessary to operate the cafe, (iii) Hard Rock STP loses any necessary permit previously obtained and such loss is beyond its control and not a result of neglect or wrongful failure on its part, (iv) the Hard Rock Hotel & Casino Biloxi, the common areas or the parking garage are not substantially completed by the prescribed required opening date, subject to certain permitted delays,
(v) any of the on-site work, off-site work or the shell of the cafe premises are not substantially complete by the required dates set forth in the cafe lease, and (vi) the Hard Rock Hotel & Casino Biloxi, the common areas or the parking garage are not open for business, other than as a result of casualty or damage losses, condemnation, governmental requirements or public safety concerns. In addition, the cafe lease shall automatically terminate upon a foreclosure by the trustee on the Hard Rock Hotel & Casino Biloxi, if the trustee does not simultaneously foreclose on the license agreement.

Trustee's Cure Rights. The cafe lease provides that in the event we are in default of our monetary obligations under the cafe lease and we fail to cure such payment default within the time provided in the cafe lease, the trustee has the right to cure such payment default within sixty days after receipt of notice of such payment default from Hard Rock STP. The cafe lease also provides that in the event we are in default of our non-monetary obligations under the cafe lease and we fail to cure such default in the time provided in the cafe lease, the trustee has the right to cure such non-monetary defaults within

sixty days after receipt of notice of such non-monetary default from Hard Rock STP, which cure period may be extended to up to eleven months under certain circumstances.

Insurance. The cafe lease requires Hard Rock STP to maintain casualty/business interruption insurance, comprehensive general liability insurance, property insurance, worker's compensation and employer's liability insurance and umbrella liability insurance and us to maintain property/casualty insurance and comprehensive general liability insurance.

Exclusivity. The cafe lease also provides that no portion of the Hard Rock Hotel & Casino Biloxi or any other property owned by us within a 5-mile radius of the cafe premises may be used for a competing restaurant and that we are required to provide Hard Rock STP with a leasehold title insurance policy having a policy amount of $4.0 million. Hard Rock STP also has the right to conduct special events in the cafe premises, including promotions, celebrity events, live radio broadcasts, musical events and charitable fund raising activities.

Right of Offset. If Hard Rock STP is not in default under any its obligations under the cafe lease and we fail to pay license fees due under the license agreement, Hard Rock STP has the right to offset such unpaid fees against the percentage rent due under the cafe lease. If Hard Rock STP fails to pay the percentage rent due under the cafe lease, we have the right to offset such unpaid rent against the license fees due under the license agreement. The exercise of these offset rights by either party requires prior notice, a cure period and a determination by an arbitrator.

Marketing. We have also agreed to promote Hard Rock STP's business through our marketing media and the internet, including the placement of Hard Rock STP's promotional materials in the hotel rooms at the Hard Rock Hotel & Casino Biloxi once completed. Hard Rock STP will pay for the cost incurred by us to prepare the desired advertising materials and we will pay for the cost to produce and distribute the promotional materials.

Retail Store Lease Agreement with Hard Rock STP

We entered into a Hard Rock retail lease, which gives Hard Rock STP the right to operate the retail premises as a retail store for the sale of "Hard Rock" branded merchandise, including but not limited to wearing apparel, reading materials, trading pins, souvenirs and gift items, and the sale of general sundries, accessories, gift items, snacks, beverages, books, music and videotapes.

Location. The retail store will be located in a prominent location on the main floor lobby of the hotel portion of the Hard Rock Hotel & Casino Biloxi and will be in close proximity to the cafe to be operated by Hard Rock STP.

Term. The initial term of the lease is 20 years, with two 10-year renewal options. The initial term of the lease will commence on the earlier of the date on which the retail store is open for business or 180 days after the date we deliver the substantially completed shell of the retail store premises to Hard Rock STP. In addition, we are required to deliver to Hard Rock STP possession of the substantially completed shell of the retail store premises at least 180 days prior to the date we open the Hard Rock Hotel & Casino Biloxi. The retail store lease automatically terminates simultaneously with the expiration or early termination of the license agreement.

If we transfer the retail store lease to a third party other than the trustee, and the third party elects not to complete construction of the retail store, or if the retail store premises is damaged by fire or otherwise and the third party elects not to repair the damage, then Hard Rock STP may terminate the lease.

Rent. The retail store lease requires Hard Rock STP to pay rent to us in an amount equal to five percent of its gross sales for the first three rental years and seven percent of gross sales for the remainder of the term, which rent is to be paid monthly in arrears. Under the retail store lease, we are

required to pay all ad valorem or real property taxes levied or assessed on the cafe premises, without any obligation on the part of Hard Rock STP to reimburse us for such taxes, and Hard Rock STP is required to pay and discharge all personal property taxes levied, assessed or imposed on its personal property located within the retail store premises and all business taxes levied on its business conducted within the retail store premises.

Hours of Operation. During the term of the retail store lease, Hard Rock STP is required to have the portion of the retail store selling sundry items open for business twenty-four hours per day, seven days per week (including holidays), and the remaining portions of the retail store will be open from 10:00 a.m. until 11:00 p.m. on Sunday through Wednesday of each week, and from 10:00 a.m. until 12:00 a.m. on Thursday through Saturday of each week (including holidays), subject to Hard Rock STP's right to close at an earlier time after obtaining our consent, which may not be unreasonably withheld. Hard Rock STP is also obligated to make a diligent, good faith and reasonable effort to complete all of its preparatory work and be open for business 180 days after the date we deliver the substantially completed shell of the retail store premises to Hard Rock STP. The retail store is required to be open for business not later than 210 days after the date we deliver the substantially completed shell of the cafe premises to Hard Rock STP, subject to force majeure, condemnation, casualty, and landlord delays.

Parking. We are required to have a minimum of 1,000 parking spaces in the parking garage and are responsible for all costs and expenses for maintenance of and/or improvements to the parking garage.

Indemnification. Hard Rock STP has agreed to indemnify, defend and hold us harmless from and against any and all obligations, liabilities, claims, suits, proceedings, losses, damages, costs, and expenses incurred by us which arise out of any injury or damage to any person or property occurring in, on or about the retail store premises, except if the same is caused by the gross negligence or intentional misconduct of us or our employees, agents or contractors. We have agreed to indemnify, defend and hold Hard Rock STP harmless from and against any and all obligations, liabilities, claims, suits, proceedings, losses, damages, costs, and expenses incurred by Hard Rock STP which arise out of any injury or damage to any person or property occurring in, on or about the Hard Rock Hotel & Casino Biloxi (other than the retail store premises), except if the same is caused by the gross negligence or intentional misconduct of Hard Rock STP or its employees, agents or contractors.

Termination. The retail store lease also provides Hard Rock STP with special termination rights if (i) a governmental entity having jurisdiction over the retail store premises permanently prohibits its opening or operation as a restaurant, bar and/or retail sales facility, (ii) Hard Rock STP is unable to obtain its liquor license, signage approval, a building permit or other permits and approval necessary to operate the retail store, (iii) Hard Rock STP loses any necessary permit previously obtained and such loss is beyond its control and not a result of neglect or wrongful failure on its part, (iv) the Hard Rock Hotel & Casino Biloxi, the common areas or the parking garage are not substantially completed by the prescribed required opening date, subject to certain permitted delays, (v) any of the on-site work, off-site work or the shell of the retail store premises are not substantially complete by the required dates set forth in the retail store lease, and (vi) the Hard Rock Hotel & Casino Biloxi, the common areas or the parking garage are not open for business, other than as a result of casualty or damages losses, condemnation, governmental requirements or public safety concerns. In addition, the retail store lease shall automatically terminate upon a foreclosure by the trustee on the Hard Rock Hotel & Casino Biloxi, if the trustee does not simultaneously foreclose on the license agreement.

Trustee's Cure Rights. The retail store lease provides that in the event we are in default of our monetary obligations under the retail store lease and we fail to cure such payment default within the time provided in the retail store lease, the trustee has the right to cure such payment default within sixty days after receipt of notice of such payment default from Hard Rock STP. The retail store lease

also provides that in the event we are in default of our non-monetary obligations under the retail store lease and we fail to cure such default in the time provided in the retail store lease, the trustee has the right to cure such non-monetary defaults within sixty days after receipt of notice of such non-monetary default from Hard Rock STP, which cure period may be extended to up to eleven months under certain circumstances.

Insurance. Hard Rock STP must maintain casualty/business interruption insurance, comprehensive general liability insurance, property insurance, worker's compensation and employer's liability insurance and umbrella liability insurance and we must maintain property/casualty insurance and comprehensive general liability insurance.

Exclusivity. The retail store lease also provides that (a) no portion of the Hard Rock Hotel & Casino Biloxi or any other property owned by us within a 5-mile radius of the retail store premises may be used for the sale of merchandise bearing or displaying in any manner whatsoever (i) the words "Biloxi," "Gulfport," "Gulf Coast," "Playground of the South" or "Bay St. Louis," (ii) the name of any other geographic location or region within twenty-five miles of the retail store premises, (iii) any pseudonym, marketing name or tradename representing the foregoing or (iv) the name "Hard Rock" or any variation thereof, (b) we are required to provide Hard Rock STP with a leasehold title insurance policy having a policy amount of $1.0 million and (c) no other location at the Hard Rock Hotel & Casino Biloxi may sell sundry items. However, we are permitted (x) to have waitpersons employed by us to offer, sell and deliver personal items, over-the-counter medications, toiletries, newspapers, magazines, books and games and "Hard Rock" branded music and videotapes to customers in the casino and at the pool and (y) to sell cigarettes, cigars, other tobacco products, non-alcoholic canned or bottled beverages, snacks, suntan lotions, oils and creams on the premises of the Hard Rock Hotel and Casino (other than the main lobby area).

Right of Offset. If Hard Rock STP is not in default under any its obligations under the retail store lease and we fail to pay license fees due under the license agreement, Hard Rock STP has the right to offset such unpaid fees against the percentage rent due under the cafe lease. If Hard Rock STP fails to pay the percentage rent due under the retail store lease, we have the right to offset such unpaid rent against the license fees due under the license agreement. The exercise of these offset rights by either party requires prior notice, a cure period and a determination by an arbitrator.