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.

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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

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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

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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

 

9

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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

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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

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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

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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

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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

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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

 

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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

 

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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.

 

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“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

 

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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.

 

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