<PAGE>   1
                                                                   EXHIBIT 10.5


                                                                [EXECUTION COPY]












================================================================================
                                    GUARANTY


                         dated as of September 29, 1997


                                       of


                               GRAND CASINOS, INC.
                        AND ITS SUBSIDIARIES NAMED HEREIN


                                   in favor of


                         THE BENEFICIARIES NAMED HEREIN




================================================================================



<PAGE>   2



                                TABLE OF CONTENTS

SECTION                                                                  PAGE
-------                                                                  ----

1.  Guaranty...............................................................1

2.  Guarantor's Guaranteed Obligations Unconditional.......................3

3.  Waiver and Agreement...................................................5

4.  Assignment.............................................................6

5.  Waiver of Subrogation..................................................6

6.  Rights of the Beneficiaries............................................7

7.  Term of Guaranty.......................................................7

8.  Agreement of Guarantor.................................................7

9.  Representations and Warranties.........................................7

10.  Completion Guaranty...................................................8

11.  Further Assurances....................................................8

12.  Notices, Etc..........................................................9

13.  Amendments, Etc.......................................................9

14.  Severability..........................................................9

15.  Joinder...............................................................9

16.  Choice of Law.........................................................9

17.  Successors and Assigns................................................9




<PAGE>   3


                                                                        


                                    GUARANTY


         THIS GUARANTY (this "Guaranty"), dated as of September 29, 1997, made
by GRAND CASINOS, INC., a Minnesota corporation ("Parent"), and each of the
undersigned corporations, together with each other Person who may become a party
hereto pursuant to Section 15 of this Guaranty (each, including Parent, a
"Guarantor"), in favor of the Beneficiaries named below pursuant to that certain
Participation Agreement, dated as of September 29, 1997 (the "Participation
Agreement"), among BL Resorts I, LLC, a Minnesota limited liability company ("BL
Resorts"), GCG Resorts I, LLC, a Minnesota limited liability company ("GCG
Resorts" and, together with BL Resorts, the "Initial Lessees"), each other
Subsidiary of Parent that becomes a Lessee with respect to the Operative
Documents in the manner specified in Section 9.22 of the Participation Agreement
(collectively, with the Initial Lessees, "Lessees"), as Lessees and Construction
Agents, Hancock Bank, not in its individual capacity but solely as Lessor and
Trustee, BA Leasing & Capital Corporation, a California corporation, as Arranger
and Administrative Agent, the Co-Agents identified therein, and the Lenders
identified therein. Capitalized terms used and not otherwise defined in this
Guaranty shall have the meaning assigned to such terms in Appendix 1 to the
Participation Agreement.

         WHEREAS, Parent is the direct beneficial owner of all the issued and
outstanding membership interests of Lessees and Construction Agents; and

         WHEREAS, pursuant to the Master Lease and the Participation Agreement,
Trustee has agreed, on behalf of the Trust and each Lender, to purchase the
Facilities and Facility F, F&E relating thereto and lease such Facilities and
Facility F, F&E to Lessees pursuant to the Master Lease and Lease Supplements to
be executed from time to time in connection therewith; and

         WHEREAS, each Guarantor is entering into this Guaranty in order to
induce the parties to the Participation Agreement to enter into the transactions
contemplated thereby;

         NOW, THEREFORE, each Guarantor covenants and agrees as follows:

         SECTION 2. Guaranty. Each Guarantor jointly and severally hereby
absolutely, unconditionally and irrevocably guarantees to Trustee (both
individually and in its capacity as Trustee), the Administrative Agent, each
Lender, the Bank and each other Indemnitee and their respective successors and
assigns (individually, a "Beneficiary" and, collectively, the "Beneficiaries"):

                  (a) the due, punctual and full payment of all amounts
         (including amounts payable as damages in case of default and any
         amounts due pursuant to Article VII of the Participation Agreement and
         Section 3.2 and Article IV of each of the Construction Agency
         Agreements)payable by each of the Lessees and Construction Agents 
         pursuant to 

                                       -1-


<PAGE>   4


                                                                       Guaranty


         
         the Master Lease, the Lease Supplements, the Construction Agency
         Agreements, the Participation Agreement, or any other Operative
         Document to which any Lessee or Construction Agent is or is to be a
         party, whether such obligations now exist or arise hereafter, as and
         when the same shall become due and payable in accordance with the terms
         thereof (including in all cases all such amounts which would become due
         but for the operation of the automatic stay under Section 362(a) of the
         United States Bankruptcy Code, 11 U.S.C. ss.362(a), the operation of
         Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11
         U.S.C. ss.502(b) and ss.506(b) or the commencement or operation of any
         other bankruptcy, insolvency, reorganization or like proceeding
         relating to any Lessee or Construction Agent); and

                  (b) the due, prompt and faithful performance of, and
         compliance with, all other obligations, covenants, terms, conditions
         and undertakings of each of the Lessees contained in the Participation
         Agreement, the Master Lease, the Lease Supplements or any other
         Operative Documents to which any Lessee is or may be a party in
         accordance with the terms thereof or of each of the Construction Agents
         contained in the Participation Agreement, the Construction Agency
         Agreements or any other Operative Document to which any Construction
         Agent is or may be a party in accordance with the terms thereof.

(such obligations referred to in clauses (a) and (b) above being hereinafter
called the "Guaranteed Obligations"); provided, however, that such Guarantor
shall be liable under this Guaranty only for the maximum amount of such
liability that can be hereby incurred without rendering this Guaranty, as it
relates to such Guarantor, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount and, provided
further that, in the case of any Guarantor that is also a Lessee, such Guarantor
shall be liable under this Guaranty only for that portion of the Guaranteed
Obligations with respect to which such Guarantor is not liable as a Lessee.

         Each Guarantor further will pay any and all reasonable costs and
expenses (including reasonable fees and disbursements of counsel, which may
include allocated costs of staff counsel of any Beneficiary) that may be paid or
incurred by any Beneficiary in collecting any Guaranteed Obligations or in
preserving or enforcing any rights under this Guaranty or under the Guaranteed
Obligations, it being understood that no Guarantor shall be obligated to pay
hereunder to the extent that the applicable Lessees have made such corresponding
payments under the Operative Documents.

         This Guaranty constitutes an unconditional and irrevocable guaranty of
payment, performance and compliance and not of collectability, is in no way
conditioned or contingent upon any attempt to collect from or enforce
performance or compliance by any Lessee or 
                                       -2-


<PAGE>   5


                                                                       Guaranty

Construction  Agent  or  upon  any  other  event,  contingency  or  circumstance
whatsoever,  and shall be binding upon and against each Guarantor without regard
to the validity or  enforceability  of the Master Lease, the Lease  Supplements,
the  Participation  Agreement,  the Construction  Agency Agreements or any other
Operative Document.

         If for any reason whatsoever any Lessee or Construction Agent shall
fail or be unable duly, punctually and fully to pay such amounts as and when the
same shall become due and payable or to perform or comply with any such
obligation, covenant, term, condition or undertaking, each applicable Guarantor
will immediately pay or cause to be paid such amounts to the Person or Persons
entitled to receive the same under the terms of the Operative Documents, as
appropriate, together with interest at the Overdue Rate on any amount due and
owing from the date the same shall have become due and payable to the date of
payment, or perform or comply with any such obligation, covenant, term,
condition or undertaking or cause the same to be performed or complied with.

         SECTION 3. Guarantor's Guaranteed Obligations Unconditional. The
covenants and agreements of each Guarantor set forth in this Guaranty shall be
primary obligations of such Guarantor, and shall be continuing, absolute and
unconditional, shall not be subject to any counterclaim, setoff, deduction,
diminution, abatement, recoupment, suspension, deferment, reduction or defense
(other than full and strict compliance by such Guarantor with its obligations
hereunder), whether based upon any claim that any Lessee, Construction Agent,
such Guarantor, or any other Person may have against any Beneficiary or any
other Person or otherwise, and shall remain in full force and effect without
regard to, and shall not be released, discharged or in any way affected by, any
circumstance or condition whatsoever (whether or not such Guarantor, any Lessee
or Construction Agent shall have any knowledge or notice thereof) including,
without limitation:

                  (a) any amendment, modification, addition, deletion,
         supplement or renewal to or of or other change in the Guaranteed
         Obligations, the Master Lease, the Lease Supplements, the Construction
         Agency Agreements or any Operative Document, or any of the agreements
         referred to in any thereof, or any other instrument or agreement
         applicable to any such agreements or any of the parties to such
         agreements, or to any of the Facilities or any Facility F,F&E, or any
         assignment, mortgage or transfer thereof or of any interest therein, or
         any furnishing or acceptance of additional security for, guaranty of or
         right of offset with respect to, any of the Guaranteed Obligations; or
         the failure of any security or the failure of any Beneficiary to
         perfect or insure any interest in any collateral;

                  (b) any failure, omission or delay on the part of any Lessee,
         Construction Agent, Beneficiary or other Person to conform or comply
         with any term of any instrument or agreement referred to in clause (a)
         above;


                                       -3-


<PAGE>   6


                                                                       Guaranty


                  (c) any waiver, consent, extension, indulgence, compromise,
         release or other action or inaction under or in respect of any
         instrument, agreement, guaranty, right of offset or security referred
         to in clause (a) above or any obligation or liability of any Lessee,
         Construction Agent or Beneficiary, or any exercise or non-exercise by
         any Beneficiary or any other Person of any right, remedy, power or
         privilege under or in respect of any such instrument, agreement,
         guaranty, right of offset or security or any such obligation or
         liability;

                  (d) any bankruptcy, insolvency, reorganization, arrangement,
         readjustment, composition, liquidation or similar proceeding with
         respect to any Lessee or Construction Agent, any Beneficiary or any
         other Person, or any of their respective properties or creditors, the
         imposition of any stay or injunction in connection with any such
         proceeding, or any action taken by any trustee or receiver or by any
         court in any such proceeding;

                  (e) any limitation on (i) the liability or obligations of any
         Lessee, Construction Agent, such Guarantor or any other Person under
         any agreement or instrument referred to in clause (a) above, or (ii)
         the enforceability or validity of any of the Guaranteed Obligations or
         any security for the Guaranteed Obligations;

                  (f) any other guaranty of the Guaranteed Obligations or any
         discharge, termination, cancellation, frustration, irregularity,
         invalidity or unenforceability, in whole or in part, of any of the
         foregoing, or any other agreement or instrument, referred to in clause
         (a) above or any term of any thereof;

                  (g) any defect in the title, compliance with specifications,
         condition, design, operation or fitness for use of, or any damage to or
         loss or destruction of, or any interruption or cessation in the
         construction or use of, any Facility or any Facility F,F&E by any
         Lessee, Construction Agent or any other Person for any reason
         whatsoever (including any governmental prohibition or restriction,
         condemnation, requisition, seizure or any other act on the part of any
         governmental or military authority, or any act of God or of the public
         enemy) regardless of the duration thereof (even though such duration
         would otherwise constitute a frustration of the Master Lease, any Lease
         Supplement or any Construction Agency Agreement), whether or not
         resulting from accident and whether or not without fault on the part of
         any Lessee, Construction Agent, or other Person;

                  (h) any merger or consolidation of any Lessee, Construction
         Agent or such Guarantor into or with any other Person or any sale,
         lease or transfer of any of the assets 


                                       -4-


<PAGE>   7
                                                                        Guaranty

       of any  Lessee,  Construction  Agent  or such  Guarantor  to any  other 
       Person; Guaranty


                (i)  any  change  in the  ownership  of any of the  membership
       interests  of any Lessee or  Construction  Agent or any  organizational
       change in any Lessee or Construction Agent;

                (j) a failure of the Master Lease or any Lease  Supplement  to
       become effective;

                (k) any  assignments,  transfers  or  subleases  of any  Lease
       Supplement  or any of  any  Lessee's  rights  thereunder  including  an
       assignment,  transfer or sublease  pursuant to Article IV of the Master
       Lease; or

                (l) any other occurrence or circumstance  whatsoever,  whether
       similar or dissimilar to the foregoing and any other  circumstance that
       might otherwise constitute a legal or equitable defense or discharge of
       the  liabilities of a guarantor or surety or that might otherwise limit
       recourse against such Guarantor.

       The  unconditional   obligations  of  each  Guarantor  set  forth  herein
constitute the full recourse  obligations of such Guarantor  enforceable against
it to the full extent of all its assets and properties.

       SECTION 4. Waiver and Agreement. Each Guarantor waives any and all notice
of the  creation,  renewal,  extension  or  accrual  of  any  of the  Guaranteed
Obligations  and notice of or proof of  reliance  by any  Beneficiary  upon this
Guaranty or acceptance of this Guaranty, and the Guaranteed Obligations, and any
of them,  shall  conclusively  be  deemed to have been  created,  contracted  or
incurred in reliance upon this Guaranty. Each Guarantor  unconditionally waives,
to the extent  permitted by law: (a)  acceptance  of this  Guaranty and proof of
reliance by any Beneficiary hereon; (b) notice of any of the matters referred to
in Section 2, or any right to consent or assent to any thereof;  (c) all notices
that may be required by statute,  rule of law or otherwise,  now or hereafter in
effect, to preserve intact any rights against such Guarantor,  including without
limitation,  any demand,  presentment,  protest,  proof or notice of  nonpayment
under any  agreement or  instrument  referred to in clause (a) of Section 2, and
notice of default or any failure on the part of any Lessee to perform and comply
with any covenant,  agreement,  term or condition of any agreement or instrument
referred  to in  clause  (a) of  Section  2; (d) any  right to the  enforcement,
assertion  or exercise  against any Lessee or  Construction  Agent of any right,
power,  privilege or remedy conferred in any agreement or instrument referred to
in clause (a) of Section 2 or otherwise; (e) any requirement of diligence on the
part of any Person;  (f) any  requirement of any  Beneficiary to take any action
whatsoever,  to exhaust any remedies or to mitigate the damages resulting from a
default by any Person under any  agreement or  instrument  referred to in clause
(a) of Section 2; (g) any notice of any sale,  transfer or other  disposition by
any  Person  of any  right  under,  title to or  interest  in any  agreement  or
instrument referred to in 

                                       -5-


<PAGE>   8


                                                                       Guaranty

clause  (a) of  Section  2 or the  Collateral;  and (h) any  other  circumstance
whatsoever  that might  otherwise  constitute  a legal or  equitable  discharge,
release or defense of a  guarantor  or  surety,  or that might  otherwise  limit
recourse against such Guarantor.

         Each Guarantor agrees that this Guaranty shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of any Lessee or Construction Agent is rescinded or must be otherwise restored
by any of the Beneficiaries, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise.

         Each Guarantor further agrees that, without limiting the generality of
this Guaranty, if a Lease Event of Default or Construction Agency Event of
Default shall have occurred and be continuing and Trustee or its assignee is
prevented by applicable law from exercising its remedies under the Master Lease
or if any Construction Agency Agreement or any agreement or instrument referred
to in clause (a) of Section 2 shall be terminated as a result of the rejection
or disaffirmance thereof by any trustee, receiver or liquidating agent of any
Lessee, Construction Agent, or other Person upon the insolvency, bankruptcy or
reorganization of such Lessee, Construction Agent or other Person, such
Guarantor's Guaranteed Obligations hereunder shall continue to the same extent
as if Trustee had exercised any remedies available under the Master Lease or had
such Construction Agency Agreement or other agreement or instrument not been
rejected or disaffirmed.

         SECTION 5. Assignment. Each Guarantor hereby acknowledges that it is
contemplated that on the date hereof the Trustee will assign to the
Administrative Agent for the benefit of the Lenders all of the Trustee's rights,
title and interest in and to this Guaranty in respect of any Guaranteed
Obligations hereunder which are part of the Trust Estate and such Guarantor
hereby agrees to such assignment.

         SECTION 6. Waiver of Subrogation. Each Guarantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
any Lessee or Construction Agent that arise from the existence, payment,
performance or enforcement of such Guarantor's obligations under this Guaranty
or any other Operative Document, including any right of subrogation,
reimbursement, exoneration, or indemnification, any right to participate in any
claim or remedy of Beneficiaries against any Lessee or Construction Agent or any
Collateral which the Administrative Agent now has or hereafter acquires, whether
or not such claim, remedy or right arises in equity or under contract, statute
or common law, including the right to take or receive from any Lessee or
Construction Agent, directly or indirectly, in cash or other property or by
set-off or in any manner, payment or security on account of such claim or other
rights. If any amount shall be paid to any Guarantor in violation of the
preceding sentence and the Guaranteed Obligations shall not have been
indefeasibly paid in cash, such amount shall be deemed to have been paid to such
Guarantor for the benefit of, and held in trust for, the 

                                       -6-


<PAGE>   9


                                                                        Guaranty

Beneficiaries, and shall forthwith be paid to the Administrative Agent to be
credited and applied  pursuant to the terms of the Loan Agreement and the Trust
Agreement. Each Guarantor acknowledges that it will receive substantial economic
benefits from the financing arrangements contemplated by the Operative Documents
and that the waiver set forth in this Section 5 is knowingly made in 
contemplation of such benefits.  Each Guarantor hereby absolutely, 
unconditionally and irrevocably waives and agrees not to assert or take
advantage of any defense based upon an election of remedies by the 
Administrative Agent, including an election to proceed by non-judicial rather
than judicial foreclosure, which destroys or impairs any right of subrogation of
such Guarantor or the right of such Guarantor to proceed against any Person for
reimbursement or both.

         SECTION 7. Rights of the Beneficiaries. This Guaranty is made for the
benefit of, and shall be enforceable by, each Beneficiary as its interest may
appear or by the Administrative Agent on behalf of the Beneficiaries.

         SECTION 8. Term of Guaranty. This Guaranty and all guaranties,
covenants and agreements of each Guarantor contained herein shall continue in
full force and effect and shall not be discharged until such time as all the
Guaranteed Obligations shall be indefeasibly paid in full in cash and all the
agreements of such Guarantor hereunder and the Lessees and Construction Agents
hereunder and under the Master Lease and all Lease Supplements thereto, the
Participation Agreement and the other Operative Documents shall have been duly
performed. If, as a result of any bankruptcy, dissolution, reorganization,
insolvency, arrangement or liquidation proceedings (or proceedings similar in
purpose or effect), or if for any other reason any payment received by any
Beneficiary in respect of the Guaranteed Obligations is rescinded or must be
returned by such Beneficiary, this Guaranty shall continue to be effective as if
such payment had not been made and, in any event, as provided in the preceding
sentence.

         SECTION 9. Agreement of Guarantor. Each Guarantor assumes the
responsibility for being and keeping itself informed of the financial condition
of each of the Lessees and Construction Agents and of all other circumstances
with respect to any of the Guaranteed Obligations, and such Guarantor agrees
that no Beneficiary shall be under any duty to advise such Guarantor of
information known to it regarding such condition or any such circumstance,
whether or not any Beneficiary has a reasonable opportunity to communicate such
information or has reason to believe that any such information is unknown to
such Guarantor or materially increases the risk to such Guarantor beyond the
risk such Guarantor intends to assume hereunder.

         SECTION 10.  Representations and Warranties.  Each Guarantor (other 
than Parent) hereby represents and warrants to each Beneficiary as follows:

                  (a) Such Guarantor is a corporation duly organized, validly
         existing and in good 
                                       -7-


<PAGE>   10


                                                                        Guaranty

         standing under the laws of the jurisdiction of its incorporation, and
         has full corporate power and authority to enter into this Guaranty and
         the other Operative Documents to which it is a party and to carry out
         the transactions contemplated hereby and thereby.

                  (b) The execution and delivery by such Guarantor of this
         Guaranty and the other Operative Documents to which it is a party and
         the consummation by such Guarantor of the transactions contemplated
         hereby and thereby have been duly authorized by all necessary corporate
         action of such Guarantor. This Guaranty and the other Operative
         Documents to which such Guarantor is a party have each been duly
         executed and delivered by such Guarantor and each constitutes the
         legal, valid and binding obligation of such Guarantor enforceable
         against such Guarantor in accordance with its terms, subject to the
         effect of bankruptcy, insolvency, reorganization, moratorium or similar
         laws at the time in effect affecting the rights of creditors generally
         and subject to the effects of general principles of equity (regardless
         of whether considered in a proceeding in law or equity).

                  (c) The execution and delivery of this Guaranty and the other
         Operative Documents to which such Guarantor is a party and the
         consummation by such Guarantor of the transactions contemplated hereby
         do not (i) contravene or result in a default under such Guarantor's
         articles of incorporation or bylaws, (ii) contravene or result in a
         default under any contractual restriction, law or governmental
         regulation or court decree or order binding on such Guarantor, (iii)
         require any filings, consents or authorizations which have not been
         duly obtained or (iv) result in the creation or imposition of any Lien
         on such Guarantor's properties, other than Permitted Liens.

         SECTION 11. Completion Guaranty. Each Guarantor jointly and severally
hereby absolutely, unconditionally and irrevocably guarantees to each
Beneficiary that if any Construction Agent fails to cause the Completion Date of
any applicable Facility to occur on or before the Construction Termination Date,
such Guarantor shall within five days thereafter, with the written consent of
such Construction Agent, acknowledging that it will not be released thereby from
any obligations under the Operative Documents, which consent may be waived by
Trustee, notify Trustee that such Guarantor will perform in place of the
applicable Construction Agent all obligations of such Construction Agent then
remaining unperformed to cause title to each such unfinished Facility to be
conveyed to Trustee and to complete the construction and installation of each
such unfinished Facility in accordance with the provisions of the applicable
Construction Agency Agreement and the Participation Agreement, including any
obligation of such Construction Agent under the applicable Construction Agency
Agreement or any other Operative Document to pay to Trustee, the applicable
Prime Contractor or any other Person at any time any amount which Trustee may
determine is required to complete installation and construction of each such
unfinished Facility or to reimburse Trustee, any Lender or any Person 

                                       -8-


<PAGE>   11


                                                                        Guaranty

for any amount incurred at any time by Trustee, such Lender or such Person in
performing such obligations on behalf of such Construction Agent as permitted by
the applicable Construction Agency Agreement or the other Operative Documents.

         SECTION 12. Further Assurances. Each Guarantor hereby agrees to execute
and deliver all such instruments and take all such action as any Beneficiary may
from time to time reasonably request in order to fully effectuate the purposes
of this Guaranty.

         SECTION 13. Notices, Etc. All notices, demands, requests, consents,
approvals and other instruments hereunder shall be in writing and shall be
deemed to have been properly given if given as provided for in Section 9.3 of
the Participation Agreement.

         SECTION 14. Amendments, Etc. No amendment to or waiver of any provision
of this Guaranty, nor consent to any departure by any Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Beneficiaries, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

         SECTION 15. Severability. In case any provisions of this Guaranty or
any application thereof shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions and statements
and any other application thereof shall not in any way be affected or impaired
thereby. To the extent permitted by law, each Guarantor hereby waives any
provision of law that renders any term or provision hereof invalid or
unenforceable in any respect.

         SECTION 16. Joinder. Any other Person may become a Guarantor under and
become bound by the terms and conditions of this Guaranty by executing and
delivering to the Administrative Agent an Instrument of Joinder substantially in
the form attached hereto as Exhibit A, accompanied by (a) such documentation as
the Administrative Agent may require to establish the due organization, valid
existence and good standing of such Person, its qualification to engage in
business in each material jurisdiction in which it is required to be so
qualified, its authority to execute, deliver and perform this Guaranty, and the
identity, authority and capacity of each responsible official thereof authorized
to act on its behalf and (b) a written legal opinion from counsel to such
Person, which legal opinion shall (i) include or otherwise address with respect
to such Person and its joinder to the Guaranty all related matters similar to
those set forth in Exhibit M-1 to the Participation Agreement and (ii) be
provided by counsel reasonably acceptable to the Required Lenders.

         SECTION 17. Choice of Law. THIS GUARANTY HAS BEEN DELIVERED IN AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS GUARANTY SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF NEW YORK,
INCLUDING SECTION 5-
                                       -9-


<PAGE>   12


                                                                       Guaranty

1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW BUT EXCLUDING ALL OTHER CHOICE OF
LAWS AND CONFLICTS RULES OF SUCH STATE, EXCEPT TO THE EXTENT THAT THE EXERCISE
OF CERTAIN RIGHTS OR REMEDIES  HEREUNDER OR UNDER THE OTHER OPERATIVE DOCUMENTS
MAY REQUIRE COMPLIANCE WITH GAMING LAWS.

         SECTION 18. Successors and Assigns. This Guaranty shall be binding upon
each Guarantor and its successors, transferees and assigns and inure to the
benefit of and be enforceable by the respective successors, transferees, and
assigns of the Beneficiaries; provided, however, that such Guarantor may not
delegate any of its obligations hereunder without the prior written consent of
the Trustee and each Lender.


                            [Signature pages follow]

                                      -10-


<PAGE>   13


                                                                       Guaranty



         IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed as of the date first above written.


                                  GRAND CASINOS, INC.


                                  By:      ______________________________
                                           Name: Timothy J. Cope
                                           Title: Chief Financial Officer




                                  GRAND CASINOS RESORTS, INC.


                                  By:      ______________________________
                                           Name: Timothy J. Cope
                                           Title: Chief Financial Officer



                                  GRAND CASINOS OF MISSISSIPPI, INC. -
                                  GULFPORT


                                  By:      ______________________________
                                           Name: Timothy J. Cope
                                           Title: Chief Financial Officer




                                  GRAND CASINOS OF MISSISSIPPI, INC. - BILOXI


                                  By:      ______________________________
                                           Name: Timothy J. Cope
                                           Title: Chief Financial Officer

                                      -11-


<PAGE>   14


                                                                       Guaranty




                                  GRAND CASINOS BILOXI THEATER, INC.


                                  By:      __________________________________
                                           Name: Timothy J. Cope
                                           Title: Chief Financial Officer



                                  MILLE LACS GAMING CORPORATION


                                  By:      __________________________________
                                           Name: Timothy J. Cope
                                           Title: Chief Financial Officer



                                  GRAND CASINOS OF LOUISIANA, INC. -
                                  TUNICA-BILOXI


                                  By:      __________________________________
                                           Name: Timothy J. Cope
                                           Title: Chief Financial Officer



                                  GRAND CASINOS OF LOUISIANA, INC. -
                                  COUSHATTA


                                  By:      __________________________________
                                           Name: Timothy J. Cope
                                           Title: Chief Financial Officer


                                  GCA ACQUISITION SUBSIDIARY, INC.

                                      -12-


<PAGE>   15


                                                                       Guaranty





                                  By:      __________________________________
                                           Name: Timothy J. Cope 
                                           Title: Chief Financial Officer



                                  BL       DEVELOPMENT CORP.


                                  By:      __________________________________
                                           Name: Timothy J. Cope 
                                           Title: Chief Financial Officer



                                  BL       RESORTS I, INC.


                                  By:      __________________________________
                                           Name: Timothy J. Cope 
                                           Title: Chief Financial Officer



                                  GCG      RESORTS I, INC.


                                  By:      __________________________________
                                           Name: Timothy J. Cope 
                                           Title: Chief Financial Officer


                                  BL       RESORTS I, LLC



                                  By:      ___________________________ 
                                           Name: Timothy J. Cope 
                                           Title: Chief Financial Officer



                                      -13-

<PAGE>   16


                                                                       Guaranty




                                  GCG      RESORTS I, LLC



                                  By:      ___________________________ 
                                           Name: Timothy J. Cope 
                                           Title: Chief Financial Officer


                                      -14-


<PAGE>   17



                                    EXHIBIT A
                                       TO
                                    GUARANTY

                              INSTRUMENT OF JOINDER


                  THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of
___________________, _____, by ____________________________________________, a
___________________________ ("Joining Party"), and delivered to BA Leasing &
Capital Corporation, as Administrative Agent, pursuant to the Guaranty, dated as
of September 29, 1997, made by Grand Casinos, Inc., a Minnesota corporation
("Parent"), and the other Guarantors identified therein, in favor of the
Administrative Agent and the other Beneficiaries described therein (the
"Guaranty"). Terms used but not defined in this Joinder shall have the meanings
defined for those terms in the Guaranty.

                                    RECITALS

                  (a) The Guaranty was made by the Guarantors in favor of the
Beneficiaries with respect to the Participation Agreement and the other
Operative Documents.

                  (b) Joining Party is a Subsidiary of Parent and has elected to
become a Guarantor under the terms and conditions of the Guaranty.

                  (c) Joining Party expects to realize direct and indirect
benefits as a result of the availability of the financing arrangements provided
by the Operative Documents.

NOW THEREFORE, Joining Party agrees as follows:

                                    AGREEMENT

                  (1) By this Joinder, Joining Party becomes a "Guarantor" under
and pursuant to Section 15 of the Guaranty. Joining Party agrees that, upon its
execution hereof, it will become a Guarantor under the Guaranty with respect to
all Guaranteed Obligations heretofore or hereafter incurred under the Operative
Documents, and will be bound by all terms, conditions, and duties applicable to
a Guarantor under the Guaranty, in each case for all purposes of the Operative
Documents as if Joining Party was a originally a party to the Guaranty and the
Participation Agreement.

                  (2) The effective date of this Joinder is __________________.
  
                                 "Joining Party"
    


                                      -15-


<PAGE>   18





                                 ________________________________
                                 a _________________________



                                 By:______________________________

                                   Title:_____________________________



ACKNOWLEDGED:

BA LEASING & CAPITAL
CORPORATION, as Administrative Agent



By:________________________________

Title:_______________________________

                                      -16-