Exhibit 10.4
CLOSING GUARANTY OF
COMPLETION
This CLOSING GUARANTY OF COMPLETION
(this “Guaranty” ) is executed as of February 2,
2007, by MORGANS GROUP LLC , a Delaware limited liability
company, having an address at 475 Tenth Avenue, New York, New York
10018, Attention: Marc Gordon, Chief Investment Officer (
“Morgans Guarantor” ), and by DLJ MB IV HRH,
LLC , a Delaware limited liability company, having an address
c/o DLJ Merchant Banking Partners, 11 Madison Avenue, New York, New
York 10010, Attention: Ryan Sprott ( “DLJ
Guarantor” ; and collectively with Morgans Guarantor,
each individually, a “Guarantor” , and
collectively, “Guarantors” ), jointly and
severally, for the benefit of COLUMN FINANCIAL, INC. , a
Delaware corporation, having an address at 11 Madison Avenue,
New York, New York 10010 (together with its successors and assigns,
“Lender” ).
RECITALS:
A.
Pursuant to that certain Promissory Note, dated of even date
herewith, executed by HRHH HOTEL/CASINO, LLC, a Delaware limited
liability company ( “Hotel/Casino Borrower”
), HRHH CAFE,
LLC, a Delaware limited liability company ( “Café Borrower”
), HRHH
DEVELOPMENT, LLC, a Delaware limited liability company (
“Adjacent Borrower
”), HRHH
IP, LLC, a Delaware limited liability company ( “IP Borrower ”), and HRHH GAMING,
LLC, a Nevada limited liability company ( “Gaming Borrower”
; and each of
Hotel/Casino Borrower, Café Borrower, Adjacent Borrower, IP
Borrower and Gaming Borrower, individually, a “Borrower” , and collectively,
“Borrowers”
), and payable to
the order of Lender in the original principal amount of up to One
Billion Three Hundred Sixty Million and 00/100 Dollars
($1,360,000,000.00) (as the same may be amended, restated,
replaced, supplemented, or otherwise modified from time to time,
the “Note”
), Borrowers have
become indebted, and may from time to time be further indebted, to
Lender with respect to a loan (the “Loan” ) made pursuant to that
certain Loan Agreement, dated as of the date hereof, among
Borrowers and Lender (as the same may be amended, restated,
replaced, supplemented, or otherwise modified from time to time,
the “Loan
Agreement” ), which Loan is secured by,
among other things, that certain Construction Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Financing
Statement (Fixture Filing), dated as of the date hereof (as the
same may be amended, restated, replaced, supplemented, or otherwise
modified from time to time, the “Security Instrument”
), given by
Borrowers, as grantees, for the benefit of Lender, encumbering,
among other properties, certain real property and the improvements
thereon located in Las Vegas, Nevada and more particularly
described on Exhibits A-1 (the “Hotel/Casino Property”
) and A-2
(the “Adjacent
Property” ; and the Hotel/Casino
Property and the Adjacent Property, individually, a
“Property”
, and
collectively, the “Properties” ) attached hereto and made a
part hereof, and further evidenced, secured or governed by other
instruments and documents executed in connection with the Loan
(together with the Note, the Loan Agreement and the Security
Instrument, collectively, the “Loan Documents” ).
B.
Lender is not willing to make the Loan, or otherwise extend credit,
to Borrowers unless each Guarantor unconditionally guarantees
payment and performance to Lender of the Guaranteed Obligations (as
herein defined).
C.
Each Guarantor is the owner of a direct or indirect interest in
each Borrower, and each Guarantor will directly benefit from
Lender’s making the Loan to Borrowers.
D.
All capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to such term in the Loan
Agreement.
NOW, THEREFORE,
as an inducement to Lender to make the Loan to Borrowers, and to
extend such additional credit as Lender may from time to time
extend under the Loan Documents, and for $10.00 other good and
valuable consideration, the receipt and legal sufficiency of which
are hereby acknowledged, the parties do hereby agree as
follows:
ARTICLE I
NATURE AND SCOPE OF
GUARANTY
1.1
Guaranteed Obligations .
(a)
Each Guarantor hereby jointly and severally, irrevocably,
absolutely and unconditionally guarantees to Lender the full,
complete and punctual payment, performance and satisfaction of all
of the obligations, duties, covenants and agreements of Borrowers
under the Loan Agreement relating to each project contemplated by
the Initial Renovations, as shown on Schedule XIII to the Loan
Agreement, as the same may be modified with the reasonable consent
of Lender, if and when Borrowers shall begin physical construction
thereof (each such project, as and when Borrowers have elected to
commence, and have commenced, physical construction thereof,
an “Initial Renovations
Project” ), substantially in
compliance with the applicable plans and specifications, the
applicable portions of the Initial Renovations Loan Budget, the
applicable construction progress schedule and all applicable Legal
Requirements, including, without limitation:
(i)
to diligently commence, perform and complete (or cause to be
commenced, performed and completed) the construction of each
Initial Renovations Project in accordance with the terms of the
Loan Agreement;
(ii)
to pay all costs associated with each Initial Renovations Project,
including, without limitation, all hard costs, soft costs and other
obligations, liabilities, costs and expenses incurred in connection
with the completion of each Initial Renovations Project, as the
same may become due and payable;
(iii)
to keep the Properties free and clear of all Liens or claims of
Liens arising or incurred in connection with the completion of each
Initial Renovations Project, other than Permitted Encumbrances and
any such Liens being contested pursuant to, and in accordance with,
Section 3.6(b) of the Security Instrument, and if any Liens should
be filed, or should attach, with respect to any Property by reason
of the carrying out of each Initial Renovations Project, within
fifteen (15) Business Days after obtaining notice thereof (but in
any event prior to the date on which such Property or any part
thereof or interest therein may be in imminent danger of being
sold, forfeited, foreclosed,
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terminated,
cancelled or lost), other than any such Liens being contested
pursuant to, and in accordance with, Section 3.6(b) of the Security
Instrument, to either (A) cause the removal of such Liens or (B)
post security against the consequences of their possible
foreclosure and procure an endorsement to the Title Insurance
Policy insuring Lender against the consequences of the foreclosure
or enforcement of such Liens;
(iv)
to pay the premiums for all policies of insurance required to be
furnished by Borrowers pursuant to the Loan Agreement during the
performance of each Initial Renovations Project if such premiums
are not paid by Borrowers;
(v)
if Lender exercises its rights to complete any Initial Renovations
Project pursuant to this Guaranty or any of the other Loan
Documents, to pay or reimburse Lender for any and all costs and
expenses incurred by Lender in completing such Initial Renovations
Project;
(vi)
to pay all claims relating to the foregoing before they become
delinquent;
(vii)
to correct or cause to be corrected any material defect in any
Initial Renovations Project, as reasonably determined by the
applicable architect and the Construction Consultant or, if the
applicable architect and the Construction Consultant cannot
reasonably agree, then as determined pursuant to the most expedited
form of arbitration available for such disagreement under the rules
of the American Arbitration Association, such arbitration to be
held in New York, New York; and
(viii)
to pay any and all costs, expenses, liabilities, claims and amounts
required to be paid by Guarantors pursuant to Section 1.7 or
any other provision hereof (the “Enforcement
Costs” ).
(b)
Each Guarantor hereby jointly and severally, irrevocably,
absolutely and unconditionally guarantees to Lender the full,
complete and punctual payment, performance and satisfaction of all
of the obligations, duties, covenants and agreements of Borrowers
under Section 3.18 of the Loan Agreement relating to
restoration of the Properties in the event that any of (i) the
Qualification Conditions have not been satisfied on or prior to the
Construction Qualification Date, (ii) Borrowers have delivered the
Relinquishment Notice to Lender, or (iii) Borrowers have delivered
a Stop Notice to Lender, substantially in compliance with all
applicable Legal Requirements and to the reasonable satisfaction of
the Construction Consultant, including, without
limitation:
(i)
to diligently commence, perform and complete (or cause to be
commenced, performed and completed) the restoration of the
Properties to the extent required under, and in accordance with the
terms of, the Loan Agreement;
(ii)
to pay all costs associated with such restoration, including,
without limitation, all hard costs, soft costs and other
obligations, liabilities, costs and expenses incurred in connection
with the completion of such restoration, as the same may become due
and payable;
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(iii)
to keep the Properties free and clear of all Liens or claims of
Liens arising or incurred in connection with such restoration,
other than Permitted Encumbrances and any such Liens being
contested pursuant to, and in accordance with, Section 3.6(b) of
the Security Instrument, and if any Liens should be filed, or
should attach, with respect to any Property by reason of the
carrying out of such restoration, within fifteen (15) Business Days
after obtaining notice thereof (but in any event prior to the date
on which such Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed,
terminated, cancelled or lost), other than any such Liens being
contested pursuant to, and in accordance with, Section 3.6(b) of
the Security Instrument, to either (A) cause the removal of such
Liens or (B) post security against the consequences of their
possible foreclosure and procure an endorsement to the Title
Insurance Policy insuring Lender against the consequences of the
foreclosure or enforcement of such Liens;
(iv)
to pay the premiums for all policies of insurance required to be
furnished by Borrowers pursuant to the Loan Agreement during the
performance of the restorations if such premiums are not paid by
Borrowers;
(v)
if Lender exercises its rights to complete any of the restoration
pursuant this Guaranty or any of the other Loan Documents, to pay
or reimburse Lender for any and all costs and expenses incurred by
Lender in completing the restoration; and
(vi)
to pay all claims relating to the foregoing before they become
delinquent.
The obligations
and liabilities set forth in the foregoing Sections 1.1(a)
and 1.1(b) are collectively referred to herein as the
“ Guaranteed
Obligations ”; and the completion
obligations with respect to completion of any Initial Renovations
Project or restoration from any Pre-Construction Work shall be
referred herein as the “Guaranteed Work”
. Each
Guarantor hereby acknowledges having received, reviewed and
approved a true and complete copy of the Loan Agreement. Each
Guarantor hereby irrevocably and unconditionally covenants and
agrees that it is liable for the Guaranteed Obligations as a
primary obligor and not merely as a surety.
1.2
Payment and Performance by Guarantors .
(a)
If Borrowers shall fail to diligently proceed with any Guaranteed
Work and the completion thereof in accordance with the provisions
of the Loan Agreement, subject to Excusable Delay, or if Borrowers
shall otherwise fail to perform their obligations under the Loan
Agreement relating to any Guaranteed Work, or if any of the other
Guaranteed Obligations shall not be paid and performed when due,
then Guarantors, within ten (10) days after a written demand for
payment or performance has been given to Guarantors by Lender in
accordance with the notice provisions hereof, shall pay or perform
the same, it being expressly acknowledged and agreed by Guarantors
that Lender shall have no obligation to, and shall not, continue to
disburse any portion of the Construction Loan or the Initial
Renovations Reserve Fund for any such purpose.
Guarantors’ obligations hereunder shall continue in full
force and effect, notwithstanding any default by any Borrower under
any other covenants, terms or conditions set forth in the Loan
Documents, commencement and/or completion of foreclosure
proceedings or
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acquisition by
Lender of all or any portion of any Property through foreclosure or
deed in lieu of foreclosure and, in that regard, all of the
covenants, terms or conditions set forth in the Loan Documents
relating in any way to the Guaranteed Obligations shall survive any
such foreclosure or deed in lieu of foreclosure and remain binding
obligations of Borrowers guaranteed by each Guarantor hereunder
until the complete payment and performance of all of the Guaranteed
Obligations.
(b)
Intentionally Omitted.
(c)
If any Guarantor shall, within fifteen (15) days after written
demand from Lender, fail to diligently undertake the performance of
the Guaranteed Obligations, then Lender shall have the right, at
its option, either before, during or after commencing foreclosure
or sale proceedings against all or any portion of the Property, as
the case may be, and before, during or after pursuing any other
right or remedy against Borrower or Guarantor, to perform any and
all of the Guaranteed Work by or through any agent, contractor or
subcontractor of its selection, and pursuant to contracts or
subcontracts relating thereto, all as Lender in its sole discretion
deems proper. Furthermore, Lender shall have no obligation to
protect or insure any collateral for the Loan, nor shall Lender
have any obligation to perfect its security interest in any
collateral for the Loan. During the course of any of the
Guaranteed Work undertaken by Lender or any other party on behalf
of Lender, Guarantors shall pay on demand any amounts due to
contractors, subcontractors and material suppliers and for permits
and licenses necessary or desirable in connection therewith.
Guarantors’ obligations in connection with any of the
Guaranteed Work undertaken by Lender or any other party on behalf
of Lender shall not be affected by any errors or omissions of
Borrowers’ general contractor or architect, Lender’s
consulting architect, or any subcontractor or agent or employee of
any of the foregoing in the design, supervision and/or performance
of the work, it being understood that such risk is assumed by
Guarantors.
(d)
Satisfaction by Guarantors of any liability hereunder at any one
time with respect to any default by any Borrower shall not
discharge Guarantors with respect to any other default by any
Borrower at any other time, it being the intent hereof that this
Guaranty and the obligations of Guarantors hereunder shall be
continuing and may be enforced by Lender to the end that the
Guaranteed Work shall be timely completed, lien free, without loss,
cost, expense, injury or liability of any kind to Lender, subject
to the express terms hereof. To the extent permitted by
applicable law, all of the remedies set forth herein and/or
provided for in any of the Loan Documents or at law or equity shall
be equally available to Lender, and the choice by Lender of one
such alternative over another shall not be subject to question or
challenge by Guarantor or any other Person, nor shall any such
choice be asserted as a defense, setoff, or failure to mitigate
damages in any action, proceeding, or counteraction by Lender to
recover or seeking any other remedy under this Guaranty, nor shall
such choice preclude Lender from subsequently electing to exercise
a different remedy. The parties have agreed to the
alternative remedies provided herein in part because they recognize
that the choice of remedies in the event of a default hereunder
will necessarily be and should properly be a matter of good faith
business judgment, which the passage of time and events may or may
not prove to have been the best choice to maximize recovery by
Lender at the lowest cost to Borrowers and/or Guarantors. It
is the intention of the parties that such good faith choice by
Lender be given conclusive effect regardless of such subsequent
developments. No Guarantor shall have any right of
recourse
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against Lender by
reason of any action Lender may take or omit to take under the
provisions of this Guaranty or under the provisions of any of the
other Loan Documents, except to the extent of Lender’s gross
negligence, willful misconduct or fraud.
1.3
Nature of Guaranty . This Guaranty is an
irrevocable, unconditional, absolute, continuing guaranty of
payment and performance and not a guaranty of collection.
This Guaranty may not be revoked by Guarantors and shall continue
to be effective with respect to any Guaranteed Obligations arising
or created after any attempted revocation by any Guarantor and
after (if any Guarantor is a natural person) any Guarantor’s
death (in which event this Guaranty shall be binding upon such
Guarantor’s estate and such Guarantor’s legal
representatives and heirs). The fact that at any time or from
time to time the Guaranteed Obligations may be increased or reduced
shall not release or discharge the obligation of Guarantors to
Lender with respect to the Guaranteed Obligations. This
Guaranty may be enforced by Lender and any subsequent holder of the
Note and shall not be discharged by the assignment or negotiation
of all or part of the Note. This Guaranty shall terminate
upon the earlier to occur of (i) payment in full of the Debt, or
(ii) complete payment and performance of all of the Guaranteed
Work, or (iii) Final Completion of the Project; provided ,
however , that if, at the time any of the events set forth
in the foregoing clauses (i) , (ii) or (iiiv)
, as applicable, shall occur, Guarantors are then in the process of
completing any of the Guaranteed Work, Guarantors shall, at
Lender’s reasonable expense, reasonably cooperate to
transition such completion to Lender or its designee, including,
without limitation, assigning to Lender or its designee any
construction-related contracts not previously assigned to Lender,
making Guarantors’ employees available to Lender or its
designee for construction status briefings and to answer questions
regarding construction of such Guaranteed Work, and turning over to
Lender copies of Guarantors’ books, records and files
relating to the construction and completion of such Guaranteed
Work.
1.4
Guaranteed Obligations Not Reduced by Offset .
The
Guaranteed Obligations and the liabilities and obligations of
G
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