Document:

Exhibit
10.5

GUARANTY AGREEMENT (NON-QUALIFIED MANDATORY PREPAYMENT)

THIS
GUARANTY AGREEMENT (NON-QUALIFIED MANDATORY PREPAYMENT) (this “Guaranty”)
is executed as of February 2, 2007, by MORGANS GROUP LLC,
a Delaware limited liability company, having an address at 475 Tenth Avenue,
New York, New York 10018, Attention: Marc Gordon, Chief Investment Officer (“Morgans Guarantor”), and by DLJ MB IV
HRH, LLC, a Delaware limited liability company, having an address
c/o DLJ Merchant Banking Partners, 11 Madison Avenue, New York, New York 10010,
Attention: Ryan Sprott (“DLJ Guarantor”;
and collectively with Morgans Guarantor, each, individually, a “Guarantor”,  and collectively, “Guarantors”),
jointly and severally, for the benefit of COLUMN
FINANCIAL, INC., a Delaware corporation, having an address at 11
Madison Avenue, New York, New York 10010 (together with its successors and
assigns, “Lender”).

RECITALS:

A.            Pursuant
to that certain Promissory Note, dated of even date herewith, executed by HRHH HOTEL/CASINO, LLC, a Delaware
limited liability company (“Hotel/Casino
Borrower”), HRHH CAFE, LLC,
a Delaware limited liability company (“Café
Borrower”), HRHH
DEVELOPMENT, LLC, a Delaware limited liability company (“Adjacent Borrower”),
HRHH IP, LLC, a Delaware limited
liability company (“IP Borrower”),
and HRHH GAMING, LLC, a Nevada limited liability company (“Gaming
Borrower”; and each of Hotel/Casino Borrower, Café Borrower,
Adjacent Borrower, IP Borrower and Gaming Borrower, individually, a “Borrower”, and collectively, “Borrowers”), and payable to the order of
Lender in the original principal amount of up to One Billion Three Hundred
Sixty Million and 00/100 Dollars ($1,360,000,000.00) (as the same may be
amended, restated, replaced, supplemented, or otherwise modified from time to
time, the “Note”), Borrowers have become
indebted, and may from time to time be further indebted, to Lender with respect
to a loan (the “Loan”) made pursuant to that
certain Loan Agreement, dated as of the date hereof, among Borrowers and Lender
(as the same may be amended, restated, replaced, supplemented, or otherwise
modified from time to time, the “Loan Agreement”),
which Loan is secured by, among other things, that certain Construction Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Financing Statement (Fixture Filing),
dated as of the date hereof (as the same may be amended, restated, replaced,
supplemented, or otherwise modified from time to time, the “Security Instrument”), and further
evidenced, secured or governed by other instruments and documents executed in
connection with the Loan (together with the Note, the Loan Agreement and the
Security Instrument, collectively, the “Loan Documents”).

B.            Lender
is not willing to make the Loan, or otherwise extend credit, to Borrowers
unless each Guarantor unconditionally guarantees payment and performance to
Lender of the Guaranteed Obligation (as herein defined).

C.            Each
Guarantor is the owner of a direct or indirect interest in each Borrower, and
each Guarantor will directly benefit from Lender’s making the Loan to
Borrowers.

D.            All
capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to such terms in the Loan Agreement.

NOW, THEREFORE, as an inducement to Lender to make the
Loan to Borrowers, and to extend such additional credit as Lender may from time
to time extend under the Loan Documents, and for $10.00 and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:

ARTICLE 1

NATURE AND SCOPE OF GUARANTY

1.1          Guaranty
of Obligation. 
Each Guarantor hereby jointly and severally, irrevocably and
unconditionally guarantees to Lender and its successors and assigns the payment
and performance of the Guaranteed Obligation as and when the same shall be due
and payable, whether by lapse of time, by acceleration of maturity or
otherwise.  Each Guarantor hereby jointly
and severally, irrevocably and unconditionally covenants and agrees that it is
liable for the Guaranteed Obligation as a primary obligor.

(i)            Definition of Guaranteed Obligation.  As used herein, the term “Guaranteed Obligation” means the
obligation of Borrowers to pay to Lender the Non-Qualified Mandatory
Prepayment.

1.2          Nature
of Guaranty. 
This Guaranty is an irrevocable, absolute, joint and several, continuing
guaranty of payment and performance and not a guaranty of collection.  This Guaranty may not be revoked by any
Guarantor and shall continue to be effective with respect to any Guaranteed Obligation
arising or created after any attempted revocation by any Guarantor and after
(if such Guarantor is a natural person) such Guarantor’s death (in which event
this Guaranty shall be binding upon such Guarantor’s estate and such Guarantor’s
legal representatives and heirs).  The
fact that at any time or from time to time the Guaranteed Obligation may be
increased or reduced shall not release or discharge the obligation of any
Guarantor to Lender with respect to the Guaranteed Obligation.  This Guaranty may be enforced by Lender and
any subsequent holder of the Note and shall not be discharged by the assignment
or negotiation of all or part of the Note.

1.3          Guaranteed
Obligation Not Reduced by Offset.  The Guaranteed Obligation and the liabilities
and obligations of Guarantors to Lender hereunder, shall not be reduced,
discharged or released because or by reason of any existing or future offset,
claim or defense of any Borrower (except for the defense of the payment of the
Guaranteed Obligation), or any other party, against Lender or against payment
of the Guaranteed Obligation, whether such offset, claim or defense arises in
connection with the Guaranteed Obligation (or the transactions creating the
Guaranteed Obligation) or otherwise.

1.4          Payment
By Guarantors. 
If all or any part of the Guaranteed Obligation shall not be punctually
paid when due, whether at demand, maturity, acceleration or otherwise,
Guarantors shall, immediately upon demand by Lender, and without presentment,
protest, notice of protest, notice of non-payment, notice of intention to
accelerate the maturity, notice of acceleration of the maturity, or any other
notice whatsoever (except as otherwise provided herein), pay (and each agrees
jointly and severally to pay) in lawful money of the United States of America,
the amount due on the Guaranteed Obligation to Lender at Lender’s address as
set 

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forth herein.  Such demand(s) may
be made at any time coincident with or after the time for payment of all or
part of the Guaranteed Obligation, and may be made from time to time with
respect to the same or different items of Guaranteed Obligation.  Such demand shall be deemed made, given and
received in accordance with the notice provisions hereof.

1.5          No
Duty To Pursue Others.  To the extent permitted by applicable law, it
shall not be necessary for Lender (and each Guarantor hereby waives any rights
which such Guarantor may have to require Lender), in order to enforce the
obligations of any Guarantor hereunder, first to (a) institute suit or exhaust
its remedies against any Borrower or others liable on the Loan or the
Guaranteed Obligation or any other person, (b) enforce Lender’s rights against
any collateral which shall ever have been given to secure the Loan, (c) enforce
Lender’s rights against any other guarantors of the Guaranteed Obligation, (d)
join any Borrower or any others liable on the Guaranteed Obligation in any
action seeking to enforce this Guaranty, (e) exhaust any remedies available to
Lender against any collateral which shall ever have been given to secure the
Loan, or (f) resort to any other means of obtaining payment of the Guaranteed
Obligation. Lender shall not be required to mitigate damages or take any other
action to reduce, collect or enforce the Guaranteed Obligation.

1.6          Waivers.  Each Guarantor agrees to the provisions of
the Loan Documents, and, to the extent permitted by applicable law, hereby
waives notice of (a) any loans or advances made by Lender to any Borrower, (b)
acceptance of this Guaranty, (c) any amendment or extension of the Note, the
Loan Agreement or of any other Loan Documents, (d) the execution and delivery
by any Borrower and Lender of any other loan or credit agreement or of any
Borrower’s execution and delivery of any promissory notes or other documents
arising under the Loan Documents or in connection with any Property, (e) the
occurrence of any breach by any Borrower or an Event of Default, (f) Lender’s
transfer or disposition of the Guaranteed Obligation, or any part thereof, (g)
sale or foreclosure (or posting or advertising for sale or foreclosure) of any
collateral for the Guaranteed Obligation, (h) protest, proof of non-payment or
default by any Borrower, and (i) any other action at any time taken or omitted
by Lender, and, generally, all demands and notices of every kind in connection
with this Guaranty, the Loan Documents, any documents or agreements evidencing,
securing or relating to the Guaranteed Obligation and/or the obligations hereby
guaranteed.

1.7          Payment
of Expenses. 
In the event that any Guarantor should breach or fail to timely perform
any provisions of this Guaranty, Guarantors jointly and severally agree to pay
to Lender and shall promptly upon written demand by Lender, pay Lender all
reasonable costs and expenses (including court costs and attorneys’ fees)
incurred by Lender in the enforcement hereof or the preservation of Lender’s
rights hereunder.  Notwithstanding the
foregoing, in the event that (A) Lender employs counsel to enforce the
provisions of this Guaranty and (B) Lender has sold or transferred any
interests in the Note, then Guarantor shall only be responsible for the
attorney’s fees and expenses of the counsel of only one Lender.  The covenant contained in this Section 1.8
shall survive the payment and performance of the Guaranteed Obligation.

1.8          Effect
of Bankruptcy. 
In the event that, pursuant to any insolvency, bankruptcy,
reorganization, receivership or other debtor relief law, or any judgment, order
or decision thereunder, Lender must rescind or restore any payment, or any part
thereof, received by Lender in satisfaction of the Guaranteed Obligation, as
set forth herein, any prior release or discharge 

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from the terms of this Guaranty given to any Guarantor by Lender shall
be without effect, and this Guaranty shall remain in full force and
effect.  It is the intention of each
Borrower and each Guarantor that none of Guarantors’ obligations hereunder
shall be discharged except by Guarantors’ performance of such obligations and
then only to the extent of such performance.

1.9          Waiver
of Subrogation, Reimbursement and Contribution.  Notwithstanding anything to the contrary
contained in this Guaranty, as long as the Debt remains outstanding and to the
extent permitted by applicable law, each Guarantor hereby unconditionally and
irrevocably waives, releases and abrogates any and all rights such Guarantor
may now or hereafter have under any agreement, at law or in equity (including,
without limitation, any law subrogating such Guarantor to the rights of
Lender), to assert any claim against or seek contribution, indemnification or
any other form of reimbursement from any Borrower or any other party liable for
payment of any or all of the Guaranteed Obligation for any payment made by any
Guarantor under or in connection with this Guaranty or otherwise.

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

ARTICLE 2

EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING GUARANTORS’ OBLIGATIONS

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

2.1          Modifications.  Any renewal, extension, increase,
modification, alteration or rearrangement of all or any part of the Guaranteed
Obligation, the Note, the Security Instrument, the Loan Agreement, the other
Loan Documents, or any other document, instrument, contract or understanding
between any Borrower and Lender, or any other parties, pertaining to the
Guaranteed Obligation or any failure of Lender to notify any Guarantor of any
such action.

2.2          Adjustment.  Any adjustment, indulgence, forbearance or
compromise that might be granted or given by Lender to any Borrower or any
Guarantor or any other Person.

2.3          Condition
of Borrowers or Guarantors.  The insolvency, bankruptcy, arrangement,
adjustment, composition, liquidation, disability, dissolution or lack of power
of any Borrower, any Guarantor or any other party at any time liable for the
payment of all or part of the Guaranteed Obligation; or any dissolution of any
Borrower or any Guarantor, or any sale, lease or transfer of any or all of the
assets of any Borrower or any Guarantor, or any changes in the 

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shareholders, partners or members of any Borrower or any Guarantor; or
any reorganization of any Borrower or any Guarantor.

2.4          Invalidity
of Guaranteed Obligation.  The invalidity, illegality or
unenforceability of all or any part of the Guaranteed Obligation, or any
document or agreement executed in connection with the Guaranteed Obligation,
for any reason whatsoever, including, without limitation, the fact that (a) the
Guaranteed Obligation, or any part thereof, exceeds the amount permitted by
law, (b) the act of creating the Guaranteed Obligation or any part thereof is
ultra vires, (c) the officers or representatives executing the Note, the
Security Instrument, the Loan Agreement or the other Loan Documents or
otherwise creating the Guaranteed Obligation acted in excess of their
authority, (d) the Guaranteed Obligation violates applicable usury laws, (e)
any Borrower has valid defenses (other than the payment of the Guaranteed
Obligation), claims or offsets (whether at law, in equity or by agreement)
which render the Guaranteed Obligation wholly or partially uncollectible from
any Borrower, (f) the creation, performance or repayment of the Guaranteed
Obligation (or the execution, delivery and performance of any document or
instrument representing part of the Guaranteed Obligation or executed in
connection with the Guaranteed Obligation, or given to secure the repayment of
the Guaranteed Obligation) is illegal, uncollectible or unenforceable, or (g)
the Note, the Security Instrument, the Loan Agreement or any of the other Loan
Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that each Guarantor shall remain jointly and
severally liable hereon regardless of whether any Borrower, any other Guarantor
or any other Person be found not liable on the Guaranteed Obligation or any
part thereof for any reason.

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

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

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

2.8          Care
and Diligence. 
The failure of Lender or any other party to exercise diligence or
reasonable care in the preservation, protection, enforcement, sale or other
handling or treatment of all or any part of such collateral, property or
security, including, but not limited 

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to, any neglect, delay, omission, failure or refusal of Lender (a) to
take or prosecute any action for the collection of any of the Guaranteed
Obligation or (b) to foreclose, or initiate any action to foreclose, or, once
commenced, prosecute to completion any action to foreclose upon any security
therefor, or (c) to take or prosecute any action in connection with any
instrument or agreement evidencing or securing all or any part of the
Guaranteed Obligation.

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

2.10        Offset.  The Note, the Guaranteed Obligation and the
liabilities and obligations of Guarantors to Lender hereunder shall not be
reduced, discharged or released by reason of any existing or future right of
offset, claim or defense (except as may be expressly provided in the Loan
Agreement and except for the defense of payment of the Guaranteed Obligation)
of any Borrower against Lender, or any other Person, or against payment of the
Guaranteed Obligation, whether such right of offset, claim or defense arises in
connection with the Guaranteed Obligation (or the transactions creating the
Guaranteed Obligation) or otherwise.

2.11        Merger.  The reorganization, merger or consolidation
of any Borrower into or with any Person.

2.12        Preference.  Any payment by any Borrower to Lender is held
to constitute a preference under bankruptcy laws, or for any reason Lender is
required to refund such payment or pay such amount to such Borrower or someone
else.

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

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

To induce Lender to enter into the Loan Documents and
extend credit to Borrowers, each Guarantor represents and warrants to Lender as
follows:

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3.1          Benefit.  Such Guarantor is an Affiliate of each
Borrower, is the owner of a direct or indirect interest in each Borrower, and
has received, or will receive, direct or indirect benefit from the making of
this Guaranty with respect to the Guaranteed Obligation.

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

3.3          No
Representation By Lender.  Neither Lender nor any other party has made
any representation, warranty or statement to such Guarantor in order to induce
such Guarantor to execute this Guaranty.

3.4          Financial
Representations, Warranties and Covenants.  Each Guarantor hereby makes the
representations, warranties and covenants set forth on Exhibit A
attached hereto and made a part hereof, which representations, warranties and
covenants are intended to and shall form a part of this Guaranty for all
purposes.

3.5          Legality.  The execution, delivery and performance by
such Guarantor of this Guaranty and the consummation of the transactions
contemplated hereunder do not, and will not, contravene or conflict with any
law, statute or regulation whatsoever to which such Guarantor is subject or
constitute a material default (or an event which with notice or lapse of time
or both would constitute a default) under, or result in the material breach of,
any indenture, mortgage, deed of trust, charge, lien, or any contract,
agreement or other instrument to which such Guarantor is a party or which may
be applicable to such Guarantor.  This
Guaranty is a legal and binding obligation of such Guarantor and is enforceable
in accordance with its terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to the enforcement of creditors’
rights.

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

ARTICLE 4

SUBORDINATION OF CERTAIN INDEBTEDNESS

4.1          Subordination
of All Guarantor Claims.  As used herein, the term “Guarantor Claims” shall mean all debts and
liabilities of any Borrower to any Guarantor, whether such debts and
liabilities now exist or are hereafter incurred or arise, or whether the
obligations of such Borrower(s) thereon be direct, contingent, primary,
secondary, several, joint and several, or otherwise, and irrespective of
whether such debts or liabilities be evidenced by note, contract, open account,
or otherwise, and irrespective of the Person or Persons in whose favor such
debts or liabilities may, at their inception, have been, or may hereafter be
created, or the manner in which they have been or may hereafter be acquired by
any Guarantor.  The Guarantor Claims
shall include without limitation all rights and claims of any Guarantor against
any Borrower (arising as a result of subrogation or otherwise) as a result of
any Guarantor’s payment of all or a 

 7 
 

portion of the Guaranteed Obligation. 
Upon the occurrence and during the continuance of an Event of Default,
no Guarantor shall receive or collect, directly or indirectly, from any
Borrower or any other party any amount upon any Guarantor Claim.

4.2          Claims
in Bankruptcy. 
In the event of any receivership, bankruptcy, reorganization,
arrangement, debtor’s relief, or other insolvency proceedings involving any
Guarantor as debtor, Lender shall have the right to prove its claim in any such
proceeding so as to establish its rights hereunder and receive directly from
the receiver, trustee or other court custodian dividends and payments which
would otherwise be payable upon Guarantor Claims.  Each Guarantor hereby assigns such dividends
and payments to Lender.  Should Lender
receive, for application against the Guaranteed Obligation, any such dividend
or payment which is otherwise payable to any Guarantor, and which, as between
any Borrower and any Guarantor, shall constitute a credit against the Guarantor
Claims, then upon payment to Lender in full of the Guaranteed Obligation, such
Guarantor shall become subrogated to the rights of Lender to the extent that
such payments to Lender on the Guarantor Claims have contributed toward the
liquidation of the Guaranteed Obligation, and such subrogation shall be with
respect to that proportion of the Guaranteed Obligation which would have been
unpaid if Lender had not received dividends or payments upon the Guarantor
Claims.

4.3          Payments
Held in Trust. 
Notwithstanding anything to the contrary in this Guaranty, in the event
that any Guarantor shall receive any funds, payments, claims or distributions
which are prohibited by this Guaranty, such Guarantor agrees to hold in trust
for Lender an amount equal to the amount of all funds, payments, claims or
distributions so received, and agrees that it shall have absolutely no dominion
over the amount of such funds, payments, claims or distributions so received
except to pay such funds, payments, claims and/or distributions promptly to
Lender, and such Guarantor covenants promptly to pay the same to Lender.

4.4          Liens
Subordinate. 
Each Guarantor agrees that any liens, security interests, judgment
liens, charges or other encumbrances upon any Borrower’s assets securing
payment of any Guarantor Claim shall be and remain inferior and subordinate to
any liens, security interests, judgment liens, charges or other encumbrances
upon such Borrower’s assets securing payment of the Guaranteed Obligation,
regardless of whether such encumbrances in favor of such Guarantor or Lender
presently exist or are hereafter created or attach.  Without the prior written consent of Lender
as long as the Debt is outstanding, no Guarantor shall (a) exercise or enforce
any creditor’s right it may have against any Borrower, or (b) foreclose,
repossess, sequester or otherwise take steps or institute any action or
proceedings (judicial or otherwise, including, without limitation, the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor’s relief or insolvency proceeding) to enforce any liens, mortgages,
deeds of trust, security interests, collateral rights, judgments or other
encumbrances on assets of any Borrower held by any Guarantor.

 8 
 

ARTICLE 5

MISCELLANEOUS

5.1          Waiver.  No failure to exercise, and no delay in
exercising, on the part of Lender, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right.  The rights of Lender hereunder shall be in
addition to all other rights provided by law. 
No modification or waiver of any provision of this Guaranty, nor consent
to departure therefrom, shall be effective unless in writing and no such
consent or waiver shall extend beyond the particular case and purpose
involved.  No notice or demand given in
any case shall constitute a waiver of the right to take other action in the
same, similar or other instances without such notice or demand.  Pursuant to Nevada Revised Statutes (“NRS”) Section 40.495(2), each Guarantor
hereby waives the provisions of NRS Section 40.430.

5.2          Notices.  Except as otherwise required by applicable
law, all notices, consents, approvals and requests required or permitted
hereunder or under any other Loan Document (each, a “Notice”)
shall be given in writing and shall be effective for all purposes if (a) hand
delivered, (b) sent by reputable overnight courier, (c) sent by (i) certified
or registered United States mail, postage prepaid, return receipt requested or
(ii) expedited prepaid delivery service, either commercial or United States
Postal Service, with proof of attempted delivery, or (d) sent by telecopier
(with answer back acknowledged and followed by a hard copy via one of the other
methods described above), addressed as follows (or to such other address and
Person as shall be designated from time to time by any party hereto, as the
case may be, in a Notice to the other parties hereto in the manner provided for
in this Section 5.2):

	
   

  	
  Guarantor:

  	
  DLJ MB IV HRH, LLC

  
	
   

  	
   

  	
  c/o DLJ Merchant Banking Partners

  
	
   

  	
   

  	
  11 Madison Avenue

  
	
   

  	
   

  	
  New York, New York 10010

  
	
   

  	
   

  	
  Attention: Ryan Sprott

  
	
   

  	
   

  	
  Facsimile No.: (212) 743-1667

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  Latham & Watkins LLP

  
	
   

  	
   

  	
  885 Third Avenue

  
	
   

  	
   

  	
  Suite 1000

  
	
   

  	
   

  	
  New York, New York 10022

  
	
   

  	
   

  	
  Attention: Michelle Kelban, Esq.

  
	
   

  	
   

  	
  Facsimile No.: (212) 751-4864

  

 

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  with a copy to:

  	
  Latham & Watkins LLP

  
	
   

  	
   

  	
  633 West Fifth Street

  
	
   

  	
   

  	
  Suite 4000

  
	
   

  	
   

  	
  Los Angeles, California 90071

  
	
   

  	
   

  	
  Attention: Paul Fuhrman, Esq.

  
	
   

  	
   

  	
  Facsimile No.: (213) 891-8763

  
	
   

  	
   

  	
   

  
	
   

  	
  Guarantor:

  	
  Morgans Group LLC

  
	
   

  	
   

  	
  475 Tenth Avenue

  
	
   

  	
   

  	
  New York, New York 10018

  
	
   

  	
   

  	
  Attention:  Marc Gordon, Chief Investment
  Officer

  
	
   

  	
   

  	
  Facsimile No.: (212) 277-4270

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  Wachtell, Lipton, Rosen & Katz

  
	
   

  	
   

  	
  51 West 52nd Street

  
	
   

  	
   

  	
  29th Floor

  
	
   

  	
   

  	
  New York, New York 10019

  
	
   

  	
   

  	
  Attention: Stephen Gellman, Esq.

  
	
   

  	
   

  	
  Facsimile No.: (212) 403-2000

  
	
   

  	
   

  	
   

  
	
   

  	
  Lender:

  	
  Column Financial, Inc.

  
	
   

  	
   

  	
  11 Madison Avenue

  
	
   

  	
   

  	
  New York, New York 10010

  
	
   

  	
   

  	
  Attention: Edmund Taylor

  
	
   

  	
   

  	
  Facsimile No.: (212) 352-8106

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  Column Financial, Inc.

  
	
   

  	
   

  	
  One Madison Avenue

  
	
   

  	
   

  	
  New York, New York 10019

  
	
   

  	
   

  	
  Legal and Compliance Department

  
	
   

  	
   

  	
  Attention: Casey McCutcheon, Esq.

  
	
   

  	
   

  	
  Facsimile No.: (917) 326-8433

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  Thelen Reid Brown Raysman & Steiner, LLP

  
	
   

  	
   

  	
  875 Third Avenue

  
	
   

  	
   

  	
  New York, New York 10022

  
	
   

  	
   

  	
  Attention: Jeffrey B. Steiner, Esq.

  
	
   

  	
   

  	
  Facsimile No.: (212) 603-2001

  
	
   

  	
   

  	
  Hard Rock / Rand Peppas

  

 

A Notice shall be deemed
to have been given: in the case of hand delivery or delivery by a reputable
overnight courier, at the time of delivery; in the case of registered or
certified mail, when delivered or the first attempted delivery on a Business
Day; in the case of expedited prepaid delivery and telecopy, upon the first
attempted delivery on a Business Day; or in the case of telecopy, upon sender’s
receipt of a machine-generated confirmation of successful transmission on a
Business Day after advice by telephone to recipient that a telecopy Notice is
forthcoming; provided, that within three (3) Business Days thereafter, a
hard copy of such Notice 

 10 
 

shall have been delivered
pursuant to the provisions of clause (a), (b) or (c) of
this Section 5.2.  Any failure to
deliver a Notice by reason of a change of address not given in accordance with
this Section 5.2, or any refusal to accept a Notice, shall be deemed to
have been given when delivery was attempted. 
Any Notice required or permitted to be given by any party hereunder or
under any other Loan Document may be given by its respective counsel.  Additionally, any Notice required or
permitted to be given by Lender hereunder or under any other Loan Document may
also be given by the Servicer.

5.3          Governing
Law.  This
Guaranty shall be governed in accordance with the terms and provisions of
Section 10.3 of the Loan Agreement.

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

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

5.6          Parties
Bound; Assignment. 
This Guaranty shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns and legal
representatives; provided, however, that no Guarantor may, without the prior
written consent of Lender, assign any of its rights, powers, duties or
obligations hereunder except as may otherwise be permitted under the Loan
Agreement.

5.7          Fully Recourse.  The Guaranteed Obligation is a joint and
several recourse obligation of Guarantors and is not restricted by any
limitation on personal liability.  Notwithstanding
anything to the contrary in this Guaranty, in the Loan Agreement or in any
other Loan Document, no present or future Constituent Member other than (i) a
Guarantor, and (ii) with respect to the DLJ Guarantor, DLJ Merchant Banking Partners IV, L.P., MBP IV Plan Investors, L.P.,
DLJMB HRH Co-Investments, L.P., DLJ Offshore Partners IV, L.P., and DLJ
Merchant Banking Partners IV (Pacific), L.P. (such limited partnerships,
collectively, the “DLJMB Parties”)
as provided in that certain commitment letter of the DLJMB Parties of even date
herewith addressed to the DLJ Guarantor, nor any present or future shareholder,
officer, director, employee, trustee, beneficiary, advisor, member, partner,
principal, participant or agent of or in any Guarantor or of or in any Person
that is or becomes a Constituent Member, other than Guarantors and such DLJMB
Parties, shall have any personal liability, directly or indirectly, under or in
connection with this Guaranty, or any amendment or amendments hereto made at
any time or times, heretofore or hereafter, and Lender on behalf of itself and
its successors and assigns, hereby waives any and all such personal liability.

 11 
 

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

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

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

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

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

5.13        Waiver
of Right To Trial By Jury.  EACH
GUARANTOR HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WAIVES ANY RIGHT
TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE LOAN AGREEMENT, THE SECURITY 

 12 
 

INSTRUMENT,
OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING
IN CONNECTION THEREWITH.  THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH GUARANTOR,
AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO
WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY EACH
GUARANTOR.

5.14        Cooperation.  Each Guarantor acknowledges that Lender and
its successors and assigns may (a) sell this Guaranty, the Note and other Loan Documents
to one or more investors as a whole loan, (b) participate the Loan secured by
this Guaranty to one or more investors, (c) deposit this Guaranty, the Note and
other Loan Documents with a trust, which trust may sell certificates to
investors evidencing an ownership interest in the trust assets, or (d)
otherwise sell the Loan or one or more interests therein to investors (the
transactions referred to in clauses (a) through (d) are
hereinafter each referred to as “Secondary
Market Transactions”).  Each
Guarantor shall reasonably cooperate with Lender at Lender’s cost and expense
in effecting any such Secondary Market Transaction and shall reasonably
cooperate to implement all requirements imposed by any Rating Agency involved
in any Secondary Market Transaction. 
Each Guarantor shall provide such information and documents relating to
such Guarantor, Borrowers, the Properties and any tenants of the Improvements
as Lender may reasonably request in connection with such Secondary Market
Transaction.  In addition, each Guarantor
shall make available to Lender all information concerning its business and
operations that Lender may reasonably request in connection with such Secondary
Market Transaction.  Lender shall be permitted
to share all such information with the investment banking firms, Rating
Agencies, accounting firms, law firms and other third party advisory firms
involved with the Loan and the Loan Documents or the applicable Secondary
Market Transaction provided such parties are held to customary confidentiality
standards.  It is understood that the
information provided by any Guarantor to Lender may ultimately be incorporated
into the offering documents for the Secondary Market Transaction and that
various investors may also see some or all of the information.  Lender and all of the aforesaid third party
advisors and professional firms shall be entitled to rely on the information
supplied by, or on behalf of, any Guarantor in the form as provided by such
Guarantor.  Lender may publicize the
existence of the Loan in connection with its marketing for a Secondary Market
Transaction, or otherwise as part of its business development.  Notwithstanding anything to the contrary
contained in this Guaranty, in the event of a Secondary Market Transaction,
Guarantors shall be entitled to deal with and rely upon only one Servicer
(having at least ten (10) years experience servicing loans) for all owners of
interest in the Loan in connection with all matters relating to the Loan and
shall not incur any costs greater than those that would be incurred if the lead
lender were the only Lender (including enforcement costs).  Any such transaction shall be at Lender’s
sole cost and expense, including, without limitation, the cost of any reports,
certifications or opinions required of Guarantors in connection with any such
transaction.  No such transaction shall
result in a material increase in the obligations or potential liability of
Guarantors under this Guaranty and the Loan Documents by reason of any
requested covenant, representation, warranty, indemnity or certification or
otherwise.  Without limitation on the
foregoing, in no event shall Guarantors have liability (by way of
certification, indemnity or otherwise) for information or statements contained
in third party reports used in connection with the secondary marketing
transaction.

 13 
 

5.15        Termination.  Subject to Section 5.16 hereof, this
Guaranty shall terminate upon the payment of the Debt in full. 
Alternatively, subject to Section 5.16 hereof, this Guaranty shall terminate
upon the earliest to occur of (i) Borrowers’ satisfaction of the
Qualification Conditions on or before the Construction Qualification
Date, (ii) Borrowers’ payment of the Non-Qualified Mandatory
Prepayment, or (iii) Borrowers’ delivery of a Non-Qualified Prepayment
Letter of Credit (or a combination of the foregoing clauses (ii)
and (iii)).  Upon any such
termination of this Guaranty, Lender shall, at Borrowers’ reasonable expense
(including Lender’s reasonable attorneys’ fees), promptly execute and deliver
such documents as may be reasonably requested by Borrowers or Guarantors to
evidence release of this Guaranty.

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

5.17        Usage
of Terms. 
As used in this Guaranty, the phrase “any Borrower” shall mean “any one
or more Borrowers, including all of the Borrowers” and the phrase “any
Guarantor” shall mean “any one or more Guarantors, including all of the
Guarantors”.

[NO FURTHER TEXT ON THIS PAGE]

 14 

EXECUTED as of the day and year first above written.

	
  

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  MORGANS GROUP LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Morgans Hotel Group Co.,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
  as Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Richard Szymanski

  
	
   

  	
   

  	
  Name:

  	
  Richard Szymanski

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DLJ MB IV HRH, LLC

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ryan Sprott

  
	
   

  	
   

  	
  Name:  Ryan Sprott

  
	
   

  	
   

  	
  Title:    Vice President

  
						

 

  
 

Exhibit A

FINANCIAL
REPRESENTATIONS,  WARRANTIES AND
COVENANTS

1.             Guarantor’s
Financial Condition.      (a)           As of the date hereof after giving
effect to this Guaranty and, in the case of the DLJ Guarantor, the equity and
other commitments of the DLJMB Parties insofar as relate to the DLJ Guarantor, and throughout the term of
the Loan, such Guarantor is and will be solvent and has and will have
(i) assets which, fairly valued, exceed its obligations, liabilities
(including contingent liabilities as determined in accordance with GAAP) and
debts, and (ii) property and assets sufficient to satisfy and repay its
obligations and liabilities.

(b)           At all times throughout the term of
this Guaranty, the Guarantors shall maintain (i) Guarantors Net Worth in excess
of $400,000,000.00 in the aggregate, and (ii) a minimum amount of Guarantors
Effective Liquidity in excess of $200,000,000.00 in the aggregate. Within
one-hundred twenty (120) days following the end of each calendar year, and,
upon Lender’s written request, within forty-five (45) days following the end of
any calendar quarter, each Guarantor shall deliver or cause to be delivered to
Lender a complete copy of such Guarantor’s and, in the case of the DLJ
Guarantor, the DLJMB Parties’ annual, and, if requested, quarterly financial
statements audited by a “Big Four” accounting firm, BDO Seidman LLP, or other
independent certified public accountant reasonably acceptable to Lender
prepared in accordance with GAAP, including in each case statements of profit
and loss and a balance sheet for such Guarantor and the DLJMB Parties, as the
case may be, together with a certificate of each Guarantor (which certificate
in the case of the Morgans Guarantor shall pertain only to the Morgans
Guarantor, and in the case of the DLJ Guarantor shall pertain only to the DLJ
Guarantor and the DLJMB Parties) (i) setting forth in reasonable detail such
Guarantor’s and each DLJMB Parties’ Net Worth as of the end of the prior
calendar year or quarter, as the case may be, based thereon, and then Effective
Liquidity, and (ii) certifying that such financial statements are true,
correct, accurate and complete in all material respects and fairly present the
financial condition and results of the operations of such Guarantor, and, in
the case of DLJ Guarantor, the DLJMB Parties, provided, however, that in the
event the DLJ Guarantor, any DLJMB Party or the Morgans Guarantor is not
otherwise required to, and does not, cause to be prepared such audited
financial statements in the ordinary course of its business, it may deliver the
unaudited statements which are delivered to its investors or otherwise prepared
in the ordinary course of its business, accompanied by such certification.

(c)           Such Guarantors shall not, and DLJ
Guarantor shall not cause or permit and further represents and covenants that
the DLJMB Parties shall not, at any time while a default in the payment of the
Guaranteed Obligations has occurred and is continuing beyond any applicable
grace period or following any notice thereof, (i) enter into or effectuate any
transaction with any Affiliate of such Guarantors or any of DLJMB Parties, as
the case may be, which would reduce such Guarantors’ or DLJMB Party’s then Net
Worth or Effective Liquidity, or (ii) sell, pledge, mortgage or otherwise
Transfer to any other Person (including any of its Affiliates) any assets or
any interest therein, other than (in the case of either clauses (i) or (ii) of
this Section (c)) (x) if in 

  
 

the ordinary
course of  business, consistent with past
practice and for reasonably equivalent value, or (y) for reasonably equivalent
value.

(d)           As used in this Section 1 and Section
4 below, the following terms shall have the following meanings:

“Distributable
Cash” means, with respect to any Person, and subject to the
following proviso, the amount of all capital surplus, retained earnings or net
profits of such Person held in the form of cash or cash equivalents (including
cash reserves established from undistributed net profits from any prior fiscal
period), then freely and lawfully distributable to the holders of all equity
interests of such Person as dividends or distributions or in redemption of such
equity interests in accordance with all laws and operative agreements,
documents or instruments governing the formation and capitalization of such
Person, the receipt of which by the holders of such equity interests, if so
paid, will not give rise to any liability of the recipient to return or to
repay such amounts to such Person, and the payment or distribution of which by
such Person to such equity holders (i) will not violate any term or condition
of any agreement or instrument to which such Person is subject or by which its
properties or assets is bound, and (ii) has been consented to or approved by all
other Persons not controlled by Morgans Guarantor whose consent to or approval
of such payment or distribution is required under any of such operative,
governing or other agreements, documents or instruments; provided that
Lender is given, from time to time, such information as it may reasonably
request (including income statements and balance sheets of any such Person that
satisfy the requirements for  financial
statements set forth in Section 1(c) above, together with a certificate of the
chief financial officer of Morgans confirming that, to the best of his or her
knowledge, the foregoing calculations and financial statements are accurate in
all material respects) confirming the foregoing.

“Effective
Liquidity” means, with respect to any Person, as of a given date,
the sum of (i) all unrestricted cash and cash equivalents held by such Person
and, in the case of Morgans Guarantor, the Distributable Cash of its direct or
indirect wholly owned subsidiaries membership or other equity interests in
which are not pledged to or otherwise encumbered by any lien, charge or other
encumbrance in favor any Person other than Morgans Guarantor or Lender; (ii)
the aggregate amount of available borrowing of such Person under credit
facilities and other lines of credit; and (iii) except as provided in the
following sentence, the aggregate maximum amount, if any, of all committed and
undrawn or uncalled capital available to such Person (as to any Person its “Available Capital”) under the terms of any partnership,
limited liability, statutory business trust, or similar agreement of such
Person from any Constituent Member (other than (x) any Constituent Member of
another Constituent Member that is publicly traded, and (y) in the case of the
DLJ Guarantor, any limited partner of DLJMB HRH Co-Investments, L.P., a DLJMB
Party (“Co-Investments LP”)), less, (iv)
the aggregate amount of any accrued but unpaid liabilities or obligations of
such Person under the facilities or agreements described in the preceding
clauses (ii) and (iii), other than (for purposes of this clause (iv)) the
principal amount of Indebtedness under any such facilities.  In addition, and notwithstanding anything
herein to the contrary, the Available 

  
 

Capital of Co-Investments
LP for purposes of determining its Effective Liquidity shall equal, as of a
given date, either (i) Co-Investments LP’s Available Capital, or (ii), if
greater, and subject to the following proviso, an aggregate amount not
exceeding one hundred fifty (150%) percent of the aggregate Available Capital
of the other DLJMB Parties, provided that Lender is given, from time to
time, such information as it may reasonably request (including an opinion of
counsel to Co-Investments LP in respect of the following clause (y)) to confirm
that the limited partners of Co-Investments LP (x) are financially capable of
funding such amount, and (y) are and remain obligated to make capital
contributions to Co-Investments LP in such aggregate amounts in order to cause
the DLJ Guarantor or DLJMB Parties to pay and perform the Guaranteed
Obligations.

“Guarantors
Effective Liquidity” means, with respect to the Guarantors, as of a
given date, the sum of the Effective Liquidity of (i) the DLJ Guarantor and,
without duplication,  each of the DLJMB
Parties, and (ii) the Morgans Guarantor.

“Guarantors
Net Worth” means, with respect to the Guarantors, as of a given
date, the sum of (i) the Net Assets of the Morgans Guarantor, and (ii) the Net
Worth of (x) the DLJ Guarantor and (y), without duplication, each of the DLJMB
Parties, including for purposes of this computation, and subject to the
following proviso, the Net Worth of any limited partner of Co-Investments LP
that shall have entered into an equity commitment letter satisfactory to
Lender, for the express benefit of Lender, pursuant to which such limited
partner of Co-Investments LP agrees to, and recognizes the rights of Lender in
place and instead of the general partner or manager of Co-Investments LP to
require such limited partner of Co-Investments LP to, make contributions to
Co-Investments LP directly to Lender, in an aggregate amount not  exceeding one hundred fifty (150%) percent of
the aggregate Net Worth of the DLJMB Parties other than Co-Investments LP, provided
that Lender is given, from time to time, such information as it may reasonably
request (including an opinion of counsel to Co-Investments LP in respect of the
following clause (B)) to confirm (A) the Net Worth of the limited partners of
Co-Investments LP, and (B) that they are and remain obligated to make capital
contributions to Co-Investments LP in such aggregate amounts in order to cause
the DLJ Guarantor or DLJMB Parties to pay and perform the Guaranteed
Obligations.

“Net Assets” means, with respect to the Morgans Guarantor
only, as of a given date, an amount equal to the aggregate fair market value of
Morgans Guarantor’s  assets and
properties (i) as reasonably determined by Lender in good faith applying such
customary and reasonable market factors as Lender shall then apply to similar
assets and properties, or (ii) at the election of Morgans Guarantor, as
determined by appraisals prepared by an independent MAI real estate “state
certified general appraiser” (as defined under regulations or guidelines issued
pursuant the Financial Institutions Reform Recovery Enforcement Act of 1989, 12
U.S.C. 1811 et. Seq., as amended) selected by the Morgans Guarantor and
approved by Lender (which approval shall not be unreasonably withheld, delayed,
or conditioned) at Morgans Guarantor’s sole cost and expense and not more than
ninety (90) days prior to such date, minus the amount of all
Indebtedness of Morgans Guarantor and its consolidated subsidiaries as of such
date, but in no event shall such amount be less than zero.

  
 

“Net
Worth” shall mean, with respect to any Person as of a given
date, (i) such Person’s total assets as of such date, less (ii) such
Person’s total liabilities as of such date, in each case, as they would be
reflected in a balance sheet prepared in accordance with GAAP.

2.             Financial and
other Information; Dividends and Distributions.  Each Guarantor with respect to (i) itself,
severally and not jointly, and (ii) in the case of DLJ Guarantor, the DLJMB
Parties, represents, warrants and covenants to Lender during the term of the
Loan that:

(a)           all financial data
and other financial information that, as of any applicable date, has been
delivered to Lender with respect to such Guarantor, and in the case of DLJ
Guarantor, the DLJMB Parties (i) is true, complete and correct in all material
respects as of the dates of such reports, (ii) accurately represent, in
all material respects, the financial condition of such Guarantor and the DLJMB
Parties as of the date of such reports, and (iii) has been prepared in
accordance with GAAP throughout the periods covered, except as disclosed
therein; and

(b)           except for the payment of
employee salaries and benefits and other administrative expenses and dividends
or other distributions in the ordinary course of business consistent with past
practice, or with Lender’s prior written consent exercised in its sole
discretion, it shall not sell, pledge, mortgage or otherwise transfer any of
its material assets, or any interest therein, on terms materially less
favorable than would be obtained in an arms-length transaction for fair consideration,
or, with respect to any such transactions between or among the DLJMB Parties
and any of their respective affiliates, on terms materially less favorable to
such DLJMB Parties than would be obtained in comparable transactions with
Persons who are not affiliates.

3.             Confidentiality; Cooperation.  Lender agrees to treat all financial
statements and other financial information of any Guarantor and the DLJMB
Parties that are not publicly available, confidentially, provided that,
each Guarantor recognizes that Lender shall, and hereby authorizes Lender to,
include such financial information or extracts therefrom in any Disclosure
Documents or similar disclosure with respect to any syndication of the Loan, so
long as in each case the affected Guarantor shall have the right, prior to
their dissemination,  to review and
approve any such Disclosure Documents or similar documents (such approval not
to be unreasonably withheld, delayed or conditioned) and the recipients of any
such Disclosure Documents are subject to customary obligations to preserve the
confidentiality of such information, to the extent applicable to such
syndication.  In connection therewith and
with respect to all such financial information, each Guarantor shall cooperate
with and indemnify and hold harmless Lender to the same extent provided in
Section 9.2 of the Loan Agreement as if it were a party thereto and each
reference to “Borrowers” therein were instead a reference to such Guarantor.

4.             Substitute Guarantors.  If at any time, subject to all of the terms
and conditions of the Loan Agreement or any other Loan Document,  a
Guarantor shall seek to be released from its obligations under this Guaranty
and substitute any replacement guarantor for the Guaranteed Obligations
following any Transfer of an interest (direct or indirect) in HR Holdings, any
Guarantor Transfer or otherwise (any such replacement guarantor permitted under
the Loan Documents or otherwise consented to by Lender, being referred to
herein as a “Substitute 

  
 

Guarantor”), then (a) the requirements of the first sentence of Section 1(b)
above shall be modified such that, as to each Person providing any
Guaranty pursuant to the Loan Agreement, including any Substitute Guarantor, at
all times that such Guaranty shall be required to be outstanding in accordance
with the Loan Agreement, (x) such Person’s Net Worth (or in the event that the
Morgans Guarantor shall remain a guarantor hereunder at such time, as to the
Morgans Guarantor only, its Net Assets, and in the event that the DLJ Guarantor
shall remain a guarantor hereunder at such time, the Net Worth of the DLJ
Guarantor and the DLJMB Parties calculated in accordance with clause (ii) of
the definition of “Guarantors Net Worth” above) shall equal not less than an
amount equal to the lesser of (1) $200,000,000.00 or (2) the product of
$400,000,000.00 and such Person’s then percentage interest (directly or
indirectly) in all profits and losses of HR Holdings, and (y) such Person’s
Effective Liquidity shall be in excess of an amount equal to the lesser of (1)
$100,000,000.00 or (2) the product of $200,000,000.00 and such Person’s then
percentage interest (directly or indirectly) in all profits and losses of HR
Holdings, and (b) the provisions of this Exhibit A with respect to
financial reporting, financial condition, transactions, dividends and
distributions, confidentiality and cooperation shall apply to all such Persons,
provided that, in all cases at least one of the Persons providing any
Guaranty is a Qualified Real Estate Guarantor.

5.             Conflicts.  Nothing in this Exhibit A shall be
read in any manner or construed or deemed to alter, modify, amend or waive any
term or condition of any Loan Document, except to the extent this Exhibit A
is expressly incorporated by reference therein, including by Section 3.4
of the Guaranty.  In the event of any
conflicts between the terms and conditions hereof and the terms and conditions
of any Loan Document, the terms and conditions of the other Loan Documents
shall control and be binding in all respects.Exhibit
10.18

PROMISSORY
NOTE

	
  $85,000,000.00

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
  May 2, 2007

  

FOR VALUE RECEIVED THE
ENTITIES SET FORTH ON THE SIGNATURE
PAGE TO THIS NOTE, each having its principal place of business at
518 17th Street, 17th Floor, Denver,
Colorado 80202 (jointly and severally, collectively, “Borrower”), hereby
unconditionally promise to pay to the order of COLUMN FINANCIAL, INC., a Delaware
corporation, as lender, having an address at 11 Madison Avenue, New York, New York
10010 (together with its successors and/or assigns, “Lender”),  or at
such other place as the holder hereof may
from time to time designate in writing, the principal sum of EIGHTY-FIVE MILLION ($85,000,000.00), in lawful money of the
United States of America with interest thereon
to be computed from the date of this Note at the Interest Rate, and to be paid
in accordance with the terms of this
Note and that certain Loan Agreement, dated the date hereof, between Borrower and Lender (as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time, the “Loan Agreement”).  All capitalized terms not defined herein shall have the respective meanings
set forth in the Loan Agreement.

ARTICLE I

PAYMENT TERMS

Borrower
agrees to pay the principal sum of this Note and interest on the unpaid
principal sum of this Note from time to time outstanding at the rates and at
the times specified in Article 2 of the
Loan Agreement and the outstanding balance of the principal sum of this Note and
all accrued and unpaid interest thereon shall be due and payable on the
Maturity Date.

ARTICLE II

DEFAULT AND ACCELERATION

The
Debt shall without notice become immediately due and payable at the option of Lender if any payment required in this Note is
not paid on or prior to the date when due or if not paid on the Maturity
Date or on the happening of any other Event of Default.

ARTICLE III

LOAN DOCUMENTS

This
Note is secured by the Mortgages and the other Loan Documents. All of the
terms, covenants and conditions contained in the Loan Agreement, the Mortgages
and the other Loan Documents are hereby
made part of this Note to the same extent and with the same force as if they were fully set forth herein. In the event
of a conflict or inconsistency between the terms of this Note and the Loan Agreement, the terms and provisions of the
Loan Agreement shall govern.

ARTICLE IV

SAVINGS CLAUSE

Notwithstanding
anything to the contrary, (a) all agreements and communications between
Borrower and Lender are hereby and shall automatically be limited so that,
after taking into account all amounts deemed
interest, the interest contracted for, charged or received by Lender shall
never exceed the Maximum Legal Rate, (b) in calculating whether any interest exceeds
the Maximum Legal Rate, all such interest shall be amortized, prorated,
allocated and spread over the full amount and term of all principal
indebtedness of Borrower to Lender and (c) if through any contingency or event
Lender receives or is deemed to receive interest in excess of the Maximum Legal Rate, any such excess shall be
deemed to have been applied toward payment of the principal of any and
all then outstanding indebtedness of Borrower to Lender.

ARTICLE V

NO ORAL CHANGE

This
Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Borrower or Lender, but only by an agreement in
writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or
termination is sought.

ARTICLE VI

WAIVERS

Borrower
and all others who may become liable for the payment of all or any part of the
Debt do hereby severally waive presentment and demand for payment, notice of
dishonor, notice of intention to accelerate,
notice of acceleration, protest and notice of protest and non­payment and all other notices of any kind. No
release of any security for the Debt or extension of time for payment of this
Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Loan
Agreement or the other Loan Documents made by agreement between Lender or any other Person shall release, modify,
amend, waive, extend, change,
discharge, terminate or affect the liability of Borrower, and any other Person
who may become liable for the payment
of all or any part of the Debt, under this Note, the Loan Agreement or the other Loan Documents. No notice
to or demand on Borrower shall be deemed to be a waiver of the obligation of Borrower or of the right of Lender
to take further action without
further notice or demand as provided for in this Note, the Loan Agreement or
the other Loan Documents. If Borrower is a partnership, the agreements herein
contained shall remain in force and
be applicable, notwithstanding any changes in the individuals or entities
comprising the partnership, and the term “Borrower,” as used herein,
shall include any alternate or successor partnership, but any predecessor
partnership and their partners shall not thereby be released from any liability. If Borrower is a corporation, the
agreements contained herein shall remain in full force and be applicable notwithstanding any changes in the shareholders
comprising, or the officers and
directors relating to, the corporation, and the term “Borrower” as used herein,
shall include any alternative or
successor corporation, but any predecessor corporation shall not be

 2
 

relieved of liability
hereunder. If any Borrower is a limited liability company, the agreements
herein contained shall remain in force and be applicable, notwithstanding any
changes in the members comprising the
limited liability company, and the term “Borrower” as used herein, shall
include any alternate or successor limited liability company, but any
predecessor limited liability company
and their members shall not thereby be released from any liability. Nothing in
the foregoing three sentences shall
be construed as a consent to, or a waiver of, any prohibition or restriction
on transfers of interests in such partnership, corporation or limited liability
company, as applicable, which may be set
forth in the Loan Agreement or any other Loan Document.

ARTICLE VII

TRANSFER

Upon
the transfer of this Note, Borrower hereby waiving notice of any such transfer,
Lender may deliver all the collateral mortgaged, granted, pledged or assigned
pursuant to the Loan Documents, or any part
thereof, to the transferee who shall thereupon become vested with all
the rights herein or under applicable law given to Lender with respect thereto,
and Lender shall thereafter forever be
relieved and fully discharged from any liability or responsibility in the matter; but Lender shall
retain all rights hereby given to it with respect to any liabilities and the collateral not so
transferred.

ARTICLE VIII

EXCULPATION

The
provisions of Section 9.4 of the Loan Agreement are hereby incorporated by
reference into this Note to the same extent and with the same force as if fully
set forth herein.

ARTICLE IX

GOVERNING LAW

This
Note shall be governed by and construed in accordance with the terms and provisions of Section 10.3 of the Loan Agreement.

ARTICLE X

NOTICES

All
notices or other written communications hereunder shall be delivered in accordance with Section 10.6 of the Loan
Agreement.

 3
 

ARTICLE XI

STATE SPECIFIC
PROVISIONS

Borrower hereby expressly
(a) waives any right it may have under California Civil Code Section 2954.10 to
prepay this Note in whole or in part, without prepayment premium or penalty,
upon acceleration of the Maturity Date pursuant to the Loan Documents; and (b)
agrees that if a prepayment of all or any portion of this Note is made,
following the acceleration of the Maturity Date by Lender pursuant to the Loan
Documents on account of a transfer, sale, assignment, or other disposition
prohibited or restricted by the Loan Documents, Borrower shall be obligated to
pay, concurrently therewith, the Required Yield Maintenance Premium. By
initialing this provision in the space provided below, Borrower hereby declares
that Lender’s agreement to make the Loan pursuant to the Loan Documents at the
interest rate and other monetary payment terms set forth in the Loan Documents
constitutes adequate consideration, given individual weight by the undersigned,
for the waiver and agreement contained in this Article 11.

	
  

  	
  INITIALS:

  	
  MTM

  	
   

  

[NO FURTHER TEXT ON THIS PAGE]

 4

IN
WITNESS WHEREOF, Borrower has duly executed this Note as of the day and year
first above written.

	
  

  	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRT-DCT PENCADER LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  TRT-DCT Industrial JV I General Partnership, a
  Delaware general partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Fund II LLC, a Delaware limited
  liability company, a General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Operating Partnership LP, a Delaware
  limited partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Trust, Inc., a Maryland corporation,
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ MATTHEW T. MURPHY

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Matthew T. Murphy

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President of Finance and Accounting

  

 

 

	
  

  	
   

  	
  DCT MARINE DRIVE SC LLC,

  	
   

  
	
   

  	
   

  	
  a Delaware limited liability company

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  TRT-DCT Industrial JV I General Partnership,

  a Delaware general partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Fund II LLC,

  a Delaware limited liability company,

  a General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Operating Partnership LP,

  a Delaware limited partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Trust, Inc.,

  a Maryland corporation, its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ MATTHEW T. MURPHY

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Matthew T. Murphy

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President of Finance and Accounting

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DCT SILVER SPRINGS LLC,

  	
   

  
	
   

  	
   

  	
  a Delaware limited liability company

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  TRT-DCT Industrial JV I General Partnership,

  a Delaware general partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Fund II LLC,

  a Delaware limited liability company,

  a General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Operating Partnership LP,

  a Delaware limited partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Trust, Inc., a Maryland corporation,
  its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ MATTHEW T. MURPHY

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Matthew T. Murphy

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President of Finance and Accounting

  
												

 

 

	
  

  	
  TRT-DCT HANSON WAY LLC,

  a Delaware limited liability company

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  TRT-DCT Industrial JV I General Partnership, a
  Delaware general partnership, its sole member

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  DCT Industrial Fund II LLC, a Delaware limited liability company, a General Partner

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Operating Partnership LP, a Delaware
  limited partnership, its sole member

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Trust, Inc., a Maryland corporation, its general partner

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ MATTHEW T. MURPHY

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Matthew T. Murphy

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President of Finance and Accounting

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  DCT SOUTHFIELD LLC,

  a Delaware limited liability company

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
  TRT-DCT Industrial JV I General Partnership, a
  Delaware general partnership, its sole member

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  DCT Industrial Fund II LLC, a Delaware limited liability company, a General Partner

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Operating Partnership LP, a Delaware
  limited partnership, its sole member

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Trust, Inc., a Maryland corporation, its general partner

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ MATTHEW T. MURPHY

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Matthew T. Murphy

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President of Finance and Accounting

  	 

 

 

 

	
  

  	
  TRT-DCT COMMERCE CIRCLE LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  TRT-DCT Industrial JV I General Partnership, a Delaware
  general partnership, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  DCT Industrial Fund II LLC, a Delaware limited liability company, a General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Operating Partnership LP, a Delaware
  limited partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Trust, Inc., a Maryland corporation, its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ MATTHEW T.
  MURPHY

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Matthew T. Murphy

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President of Finance and Accounting

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TRT-DCT VETERANS CORPORATE CENTER LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  TRT-DCT Industrial JV I General Partnership, a
  Delaware general partnership, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  DCT Industrial Fund II LLC, a Delaware limited liability company, a General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Operating Partnership LP, a Delaware
  limited partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  DCT Industrial Trust, Inc., a Maryland corporation, its general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ MATTHEW T.
  MURPHY

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Matthew T. Murphy

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President of Finance and Accounting

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