Document:

EXHIBIT 10.6

                             COLUMN FINANCIAL, INC.
                              Eleven Madison Avenue
                            New York, New York 10010

May 11, 2006

Morgans Hotel Group Co.
475 10th Ave.
New York, NY 10018
Attention: Ed Scheetz

Re: US$700,000,000.00 Credit Facility
-------------------------------------

Gentlemen:

     On  behalf  of  MHG  HR  Acquisition  Corp,  a  Delaware  corporation  (the
"PURCHASER")  that is owned in whole or in part by,  and  controlled  by Morgans
Hotel Group Co. ("MHG" or "YOU"),  you have  requested  Column  Financial,  Inc.
("COLUMN" and, together with its affiliates, the "LENDER," "WE" or "US") to, and
we  are  prepared  to,  make  available  to the  Purchaser  and  certain  of its
affiliates,  pursuant to a transaction  structure to be mutually  agreed upon by
the parties hereto, acting reasonably, the credit facility described in the term
sheet annexed  hereto as EXHIBIT A (the "TERM SHEET") in an aggregate  principal
amount not to exceed US$700,000,000.00, subject to adjustment as provided in the
Term  Sheet (the  "AGGREGATE  COMMITMENT"),  consisting  of (a) one or more CMBS
Loans (as  hereinafter  defined) or (b) to the extent that the conditions to the
availability  of CMBS Loans have not been  satisfied or waived as to any portion
of the  Aggregate  Commitment,  a bridge loan (the  "BRIDGE  LOAN") in an amount
equal to such portion of the  Aggregate  Commitment  (up to the entire amount of
the  Aggregate  Commitment,  subject  to the terms and  conditions  hereof),  to
finance (i) the acquisition (the  "ACQUISITION")  by the Purchaser,  directly or
indirectly,  pursuant  to a certain  Agreement  and Plan of Merger to be entered
into by and  among  Purchaser  and/or a  wholly-owned  subsidiary  of  Purchaser
("MERGERCO"),  Hard Rock Hotel, Inc., a corporation  organized under the laws of
the State of Nevada  ("TARGET"),  and the  stockholders  of Target (the  "MERGER
AGREEMENT"),   the  Other  Transaction  Documents  (as  defined  in  the  Merger
Agreement) and the other  agreements,  documents and instruments  required to be
delivered in connection  with the Acquisition  pursuant to the Merger  Agreement
and/or  the  Other  Transaction  Documents  (the  Merger  Agreement,  the  Other
Transaction  Documents,  the PMR/RWB Escrow  Agreement (as defined in the Merger
Agreement),  the Morton Indemnification Agreement (as defined in the Term Sheet)
and  such  other  agreements,  documents  and  instruments,   collectively,  the
"TRANSACTION  DOCUMENTS"),  of (A) 100% of the  issued and  outstanding  capital
stock of Target,  which owns and  operates  the Hard Rock Hotel and Casino  (the
"RESORT"),  (B) 100% of the tangible and intangible assets of PM Realty,  LLC, a
Nevada limited liability company ("PMR") and HR Condominium  Investors  (Vegas),
L.L.C.,  a Delaware  limited  liability  company  ("HRCI"),  including,  without
limitation,  certain land and any  improvements  thereon  adjacent to the Resort
(the  "ADJACENT  PROPERTY"),  (C)

<PAGE>

certain  trademarks and other  intellectual  property rights related to the
operation of the Resort that are  currently  owned by Peter A. Morton and/or his
affiliates, as described on EXHIBIT C hereto (the "INTELLECTUAL PROPERTY"),  and
(D)  additional  land adjacent to the Resort owned by Red White & Blue Pictures,
Inc.  ("PICTURES")  and Picture's  rights in the  improvements  thereon commonly
known  as the  Hard  Rock  Cafe  (the  "CAFE  PROPERTY"),  (ii)  the  repayment,
restructuring  or redemption of certain  existing  indebtedness  of Target,  and
(iii) all transaction  costs of the  Acquisition and the foregoing  refinancings
(the  transactions  described  in  the  foregoing  CLAUSES  (i)  through  (iii),
collectively, the "TRANSACTIONS").

     As a result of the  Acquisition,  the Purchaser will gain control of all of
Target's assets,  including the Resort, the Adjacent Property, the Cafe Property
and the other properties set forth in EXHIBIT B (collectively, the "PROPERTIES")
and the Intellectual Property.

     In connection with the Transactions, the Purchaser is requesting the credit
facility  described  in the Term Sheet (the "CREDIT  FACILITY")  in an aggregate
principal  amount to be disbursed  in full upon the closing of the  Acquisition,
equal to the Aggregate Commitment, subject to adjustment as provided in the Term
Sheet,  comprised of (x) one or more mortgage and/or  mezzanine loans (the "CMBS
LOANS") to be borrowed by one or more newly formed,  single purpose,  bankruptcy
remote  direct or indirect  subsidiaries  of Purchaser  or the Holdco  Mezzanine
Borrower (the "CMBS BORROWERS")  and/or (y) to the extent that the conditions to
the  availability  of the CMBS Loans have not been satisfied or waived as to any
portion of the  Aggregate  Commitment,  a Bridge  Loan  (together  with the CMBS
Loans, the "LOANS" and each a "LOAN") to be borrowed by Purchaser or one or more
newly  formed  single  purpose,  bankruptcy  remote  subsidiaries  of  Purchaser
(collectively,  "HOLDCO"; Purchaser or Holdco, in its capacity as borrower under
the Bridge Loan, the "BRIDGE  BORROWER" and,  together with the CMBS  Borrowers,
the "BORROWERS").

     To facilitate the foregoing,  and as a condition to the Acquisition and any
financing under the Term Sheet, the Purchaser will cause the  reorganization  of
certain businesses, operations and assets of Target, in each case as required in
order to effectuate the foregoing consistent with the material terms of the Term
Sheet.

1.       COMMITMENT.

     In connection  with the  foregoing,  Lender is pleased to advise you of its
commitment to provide the entire  principal  amount of the Aggregate  Commitment
upon the terms and subject to the conditions set forth in this commitment letter
(including  the Term  Sheet and other  attachments  hereto,  collectively,  this
"COMMITMENT LETTER").

2.       REPRESENTATIONS AND WARRANTIES.

     You  hereby   represent   and  covenant  that  (a) all   information   (the
"INFORMATION"),   other  than  the   financial   information   and   projections
("PROJECTIONS"),  that  have been or will be made  available  to Lender by or on
behalf  of  you  or  any  of  your   representatives   in  connection  with  the
Transactions,  when taken as a whole, is or will be, when furnished,  correct in
all material  respects  and does not or will not,  when  furnished,  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
in order to make the statements  contained therein not materially  misleading in
light of the  circumstances  under  which such  statements  are made and

                                      -2-

(b) the  Projections  that have been or will be made available to Lender by
or on behalf of you or any of your representatives have been or will be prepared
in good faith based upon  customary and  reasonable  accounting  principles  and
based upon  assumptions  that are reasonable at the time they are made available
to Lender (it being  understood  that the Projections are subject to significant
uncertainties  and  contingencies,  many of which are beyond your control and no
assurance can be given that any  particular  Projection  will be realized).  You
agree that if at any time prior to the  closing  of the Credit  Facility  or any
Loan you become aware that any of the  representations in the preceding sentence
are  incorrect,  in any  material  respect,  you will  promptly  supplement  the
Information  and the  Projections so that such  representations  will be correct
under those  circumstances.  In connection with our arranging and syndicating of
the Credit Facility,  and the origination,  syndication or securitization of any
Loan, we will be entitled to use and rely primarily on the  Information  and the
Projections without responsibility for independent verification thereof.

3.       FEES; DEPOSITS; CERTAIN RIGHTS.

     As consideration for Lender's  commitment  hereunder,  and the agreement of
Lender to perform the services and make available the Credit Facility  described
herein,  you agree to pay (or to cause the  Borrowers to pay) to Lender the fees
set forth in this Commitment  Letter and in the fee letter dated the date hereof
and delivered herewith with respect to the Credit Facility (the "FEE LETTER").

     In order to commence our  underwriting  review,  the Purchaser shall pay to
Lender,  in addition to the Commitment Fee payable under the Fee Letter, a total
of  US$1,000,000.00  (the "GOOD FAITH DEPOSIT"),  of which  $250,000.00 shall be
payable upon the  execution of this  Commitment  Letter by you and the remaining
$750,000.00  shall  be  payable  upon  execution  and  delivery  of  the  Merger
Agreement. The Good Faith Deposit shall be used for actual reasonable documented
expenses  incurred by Lender in  connection  with third party  reports and other
out-of-pocket   expenses,   including,   without   limitation,   the   fees  and
disbursements of Lender's external legal counsel and auditors,  travel expenses,
credit review costs,  underwriting  and due diligence  fees and expenses and the
fees of all third parties  relating to any such  underwriting  and due diligence
review;  if the Good  Faith  Deposit  is  insufficient  to cover the cost of any
reports or professional fees incurred by Lender, then you shall remit to Lender,
immediately upon demand,  any such additional  amounts necessary to pay for such
expenses.

4.       CONDITIONS.

     In addition to those conditions set forth in the Term Sheet, the commitment
of Lender  hereunder is subject to (i) Transaction  Documents,  substantially in
the form submitted to Lender for approval, having been executed and delivered by
the Purchaser and each of the other parties thereto,  and being and remaining in
effect and there being no material  amendment,  supplement or other modification
to any of the terms or conditions thereof or any of the schedules or attachments
thereto or any material  waiver by any party thereto or extension of any term or
condition  thereof,  in each  case  to the  extent  adverse  to  Lender,  unless
consented  to by Lender in Lender's  sole  discretion,  exercised in good faith,
and, in all other cases, in Lender's reasonable  discretion,  (ii) the Purchaser
having received cash equity contributions from you and any non-controlling third
party investors  selected by you and otherwise  reasonably  acceptable to Lender

                                      -3-

(the "THIRD PARTY  EQUITY") in such amounts  that,  when added to the  Aggregate
Commitment  and the cash held by Target and its  consolidated  subsidiaries,  if
any,  (collectively,  the "AGGREGATE  CONSIDERATION") are sufficient to, without
duplication,  (A) consummate the Transactions,  (B) defease, repay, discharge or
otherwise satisfy in full the Company Bonds (as defined in the Merger Agreement)
other than any Company  Junior Notes (as defined in the Merger  Agreement)  that
are not tendered in the tender offer  relating  thereto (with  repayment of such
Company  Junior Notes to be and remain  subordinate in all respects to all Loans
under the  Credit  Facility  and with all  covenants  thereunder  that  would be
violated by the  consummation  of the  Transactions  or any  closings  under the
Credit  Facility,  as well as certain other covenants  required by Lender in its
sole but reasonable discretion,  having been eliminated),  (C) satisfy all other
existing indebtedness of Target and its consolidated subsidiaries, if any, other
than (1) customary trade payables not overdue, (2) amounts payable under capital
and  equipment  leases in the ordinary  course of business,  and (3) any Company
Bonds  that  shall  have been  defeased  and for  which  funds  shall  have been
deposited  in escrow on or prior to the Closing  Date for  repayment  on the day
after  Closing,  (D) pay all  liabilities  and  obligations  of  Target  and its
consolidated subsidiaries,  if any, arising as a result of the Acquisition,  (E)
pay all fees and  expenses  in  connection  with the  Transactions  (as  defined
below),  and (F) fund reserves as required by the Term Sheet or  otherwise,  and
such  Aggregate  Consideration  shall be applied as  provided  in the  foregoing
CLAUSES (A) through (F) on the Closing Date,  (iii) Lender having received true,
correct and complete copies of all written information and materials supplied to
you, the Purchaser or your affiliates  prior to the Closing Date pursuant to the
terms and conditions of the Merger Agreement, (iv) the execution and delivery of
definitive documentation with respect to the Credit Facility consistent with the
terms of this Commitment Letter and otherwise reasonably satisfactory to Lender,
acting in good faith,  (v) there not having  occurred and be continuing a Parent
Condition Failure or Company Condition Failure (as such terms are defined in the
Merger   Agreement),   (vi)  there  not  having  occurred  (A)  except  for  the
Transactions,  since  December  31,  2005,  any  event  that  has  had or  would
reasonably  be expected to have a "Material  Adverse  Effect" (as defined in the
Merger  Agreement) or (B) any material  adverse change in the business,  assets,
results  of  operations  or  financial  condition  of MHG and  its  consolidated
subsidiaries,  taken  as a  whole,  since  the  date  of the  audited  financial
statements  included in MHG's 2005 Annual  Report on Form 10-K as filed with the
Securities and Exchange  Commission (any of the events  described in this clause
(vi) being referred to herein as a "COLLATERAL  ADVERSE EFFECT"),  (vii) each of
the  conditions  precedent  to the  Acquisition  set  forth  in the  Transaction
Documents   having  been  satisfied  and  the  Acquisition   being   consummated
simultaneously with the closing of the Credit Facility and any Loan being funded
at such time,  (viii) Lender having received all fees and  reimbursements of all
out-of-pocket  expenses  payable by the Borrowers in connection  with the Credit
Facility and any Loan being funded  simultaneously with the Acquisition pursuant
to this  Commitment  Letter and the Fee Letter,  (ix) Purchaser  and/or MergerCo
having entered into an agreement,  in form and substance acceptable to Lender in
its  reasonable  discretion,  with a minimum  term of one year from the  Closing
Date,  with any of the persons  specified on SCHEDULE 1 hereto or another person
or  entity  acceptable  to  Lender  in its  sole,  but  reasonable,  discretion,
exercised  in good faith and giving due regard to factors  such as prior  gaming
and  licensing  experience,  industry  reputation,  creditworthiness  and  other
factors  customarily  considered in recruiting,  selecting and hiring persons or
entities for gaming  operations  and  licensing in the State of Nevada (any such
person or entity,  the "GAMING  LICENSEE")  that shall seek to obtain all Gaming
Approvals (as defined in the Merger Agreement), and (x) your compliance with the
terms and  conditions  of this  Commitment  Letter  and the Fee  Letter,  if any
failure to so comply

                                      -4-

(except with respect to the other  conditions  set forth in this  paragraph (the
"OTHER CONDITIONS"), which such Other Conditions shall be satisfied without
qualification) could reasonably be expected to have a Material Adverse Effect or
a Collateral  Adverse  Effect,  it being  understood  that Lender shall make the
Credit Facility available and shall advance Loans thereunder as provided herein,
subject,   however  to  the  satisfaction  of  each  of  the  Other  Conditions,
notwithstanding your breach of a representation,  warranty or covenant contained
in Sections 2, 5, 6, 7 (other than the first  sentence of Section 7), 9 or 13 of
this  Commitment  Letter or any  provision  of the Fee  Letter  (other  than the
obligations referred to in clause (viii) above), so long as neither a Collateral
Adverse Effect nor a Material  Adverse  Effect shall occur as a result  thereof;
PROVIDED  that the  funding of any Loan under  such  circumstances  shall not be
deemed to  constitute  a waiver  by or on  behalf  of Lender of any of  Lender's
rights or  remedies  under this  Commitment  Letter,  the Fee  Letter,  the Loan
Documents or otherwise in respect of such breach.

     Notwithstanding  anything to the contrary  contained in the Loan  Documents
(as defined in the Term Sheet) or Section 2 of this Commitment  Letter, it shall
not be a condition  to the  availability  of the Bridge Loan on the Closing Date
that any representation or warranty relating to Target, its affiliates and their
businesses  and assets be true and correct as of the Closing Date other than (a)
the  representations  and  warranties  made by Target and its  affiliates in the
Merger Agreement and the Other  Transaction  Documents (as defined in the Merger
Agreement) (the accuracy of which will be certified by Target and its affiliates
on  the  Closing  Date)  in  each  case,  to  the  extent  any  breach  of  such
representations  and warranties by Target and/or its  affiliates  would give you
the right to terminate the Merger  Agreement,  and (b) the  representations  and
warranties  of Borrowers to be included in the Loan  Documents,  as described in
the Term Sheet,  relating to corporate power and authority,  due  authorization,
execution and delivery, legality, validity, binding effect and enforceability of
the Credit Facility, the validity, perfection and first priority of the security
interests  in the  Properties,  the  Bridge  Collateral,  the  Holdco  Mezzanine
Collateral,  the IP Collateral and the other  collateral for the CMBS Loans, and
no  conflicts  with,  among other  things,  agreements  binding upon you or your
affiliates (the representations and warranties described in clauses (a) and (b),
collectively,  the "CLOSING  REPRESENTATIONS"),  it being  understood and agreed
that the accuracy of each of the Closing Representations shall be a condition to
the availability of the Credit Facility and the funding of any Loans thereunder.
Notwithstanding the foregoing,  Lender's funding of any Loan on the Closing Date
despite the existence of any breach of a representation or warranty contained in
the Loan Documents shall not be deemed to constitute a waiver of any of Lender's
rights or remedies  under the Loan  Documents  or  otherwise  in respect of such
breach,  and  Lender  shall not be  required  to fund any Loan  under the Credit
Facility if any breach by any party of any  representation or warranty contained
in the Loan Documents,  the Merger Agreement,  the Other Transaction  Documents,
this  Commitment  Letter or  elsewhere  could  reasonably  be expected to have a
Collateral Adverse Effect.

     No  term,  condition,  right,  remedy  or  other  provision  of the  Merger
Agreement or any of the Other Transaction  Documents shall be deemed to limit or
otherwise modify, in any manner, any of the terms,  conditions,  qualifications,
limitations,  rights or remedies of Lender set forth in this  Commitment  Letter
and no approval or deemed approval or waiver or deemed waiver  thereunder  shall
be deemed to represent Lender's approval or waiver under this Commitment Letter,
unless Lender shall have expressly granted such approval or waiver in writing.

                                      -5-

5.       INDEMNIFICATION.

     You agree (a) to indemnify and hold harmless Lender,  any Syndicated Lender
(as  defined in SECTION 13 below) and their  respective  affiliates  and each of
their respective officers,  directors,  employees,  agents, controlling persons,
members and  successors  and assigns (each,  an  "INDEMNIFIED  PERSON") from and
against any and all losses, claims, damages,  liabilities and expenses, joint or
several,  to which any such Indemnified Person may become subject arising out of
or in connection  with this  Commitment  Letter,  the  Transactions,  the Credit
Facility or any related transaction, or any claim, litigation,  investigation or
proceeding  relating  to any of the  foregoing,  regardless  of whether any such
Indemnified  Person is a party thereto (and regardless of whether such matter is
initiated by a third party or by the Borrowers, the Purchaser,  Target or any of
their respective affiliates), and to reimburse each such Indemnified Person upon
demand for any reasonable  legal or other expenses  incurred in connection  with
investigating  or defending  any of the  foregoing,  PROVIDED that the foregoing
indemnity  will not,  as to any  Indemnified  Person,  apply to losses,  claims,
damages,  liabilities  or related  expenses  to the  extent  they are found in a
final,  non-appealable  judgment of a court of  competent  jurisdiction  to have
resulted  from the willful  misconduct or gross  negligence of such  Indemnified
Person,  and (b to reimburse Lender,  from time to time, upon presentation of a
summary statement,  for all reasonable out-of-pocket expenses (including but not
limited to expenses of Lender's due diligence investigation,  consultants' fees,
syndication expenses,  travel expenses and fees, disbursements and other charges
of counsel), in each case, incurred in connection with the Credit Facility,  and
the preparation,  negotiation and enforcement of this Commitment Letter, the Fee
Letter,  the definitive  documentation for the Credit Facility and any ancillary
documents or security arrangements in connection therewith.  Notwithstanding any
other provision of this Commitment Letter, no Indemnified Person shall be liable
for any indirect,  special, punitive or consequential damages in connection with
its activities related to the Credit Facility.

6.       SHARING INFORMATION; ABSENCE OF FIDUCIARY RELATIONSHIP; AFFILIATE
         ACTIVITIES.

     You acknowledge that Lender and any Syndicated Lenders and their respective
affiliates  may be providing  debt  financing,  equity capital or other services
(including  financial  advisory services) to other companies in respect of which
you may have conflicting  interests regarding the transactions  described herein
or otherwise.  Neither we nor any of our affiliates  will disclose  confidential
information obtained solely from you by virtue of the transactions  contemplated
by this Commitment Letter or our other relationships with you to other companies
or in any manner in connection  with the performance by us of services for other
companies.  You also  acknowledge  that neither we nor any of our affiliates has
any obligation to use in connection with the  transactions  contemplated by this
Commitment Letter or to furnish to you, confidential  information obtained by us
from other companies.

     You  further  acknowledge  and  agree  that (a) no  fiduciary  relationship
between you and Lender is  intended to be or has been  created in respect of any
of the  transactions  contemplated  by this Commitment  Letter,  irrespective of
whether Lender has advised or is advising you on other matters,  (b) Lender,  on
the  one  hand,  and  you,  on the  other  hand,  have an  arms-length  business
relationship  that does not directly or indirectly give rise to, nor do you rely
on, any fiduciary duty on the part of Lender,  (c) you are capable of evaluating
and  understanding,  and  you  understand  and  accept,  the  terms,  risks  and
conditions of the transactions  contemplated by this Commitment

                                      -6-

Letter,  (d) you have been  advised that we are engaged in a broad range of
transactions  that may  involve  interests  that  differ  from  your  interests,
including  the  foregoing,  and  that we have no  obligation  to  disclose  such
interests and transactions to you by virtue of any fiduciary, advisory or agency
relationship,  and (e) you waive,  to the fullest  extent  permitted by law, any
claims  you may have  against  Lender for  breach of  fiduciary  duty or alleged
breach of fiduciary duty and agree that Lender shall have no liability  (whether
direct or indirect)  to you in respect of such a fiduciary  duty claim or to any
person  asserting  a  fiduciary  duty  claim  on  behalf  of or in right of you,
including your stockholders, employees or creditors.

     You further  acknowledge  that Column and its  affiliates  are full service
securities firms engaged in securities trading and brokerage  activities as well
as providing  investment banking and other financial  services.  In the ordinary
course of business,  Column or its affiliates may provide investment banking and
other  financial  services  to,  and/or  acquire,  hold or sell,  for  their own
accounts and the accounts of customers,  equity,  debt and other  securities and
financial  instruments  (including bank loans and other  obligations) of, you or
your  respective  affiliates,  the Borrowers,  the  Purchaser,  Target and other
companies with which you or your  affiliates,  the  Borrowers,  the Purchaser or
Target may have commercial or other relationships and/or conflicts of interest.

7.       ASSIGNMENTS, AMENDMENTS, GOVERNING LAW, ETC.

     This Commitment Letter (i) shall not be assignable by you without our prior
written  consent,  which such  consent  may be granted or  withheld  in our sole
discretion,  and any attempted assignment without such consent shall be null and
void,  (ii) is intended to be solely for the benefit of the parties  hereto (and
Indemnified Persons),  and (iii) is not intended to confer any benefits upon, or
create any rights in favor of, any person  other than the  parties  hereto  (and
Indemnified  Persons).  Lender may assign and delegate its obligations hereunder
to any of its affiliates or any prospective Syndicated Lender (as defined below)
whereupon  Lender  will be  released  from the  portion  of its  obligations  so
assigned;  PROVIDED that any such  assignment by Lender shall not relieve Lender
of its obligation to fund any Loan upon satisfaction of the terms and conditions
therefore set forth in the Term Sheet.  Any and all obligations of, and services
to be provided by, Lender hereunder  (including,  without  limitation,  Lender's
commitment) may be performed and any and all rights of Lender (or any Syndicated
Lender pursuant to SECTION 13 below) may be exercised by or through any of their
respective affiliates or branches.  This Commitment Letter may not be amended or
any  provision  hereof  waived or modified  except by an  instrument  in writing
signed by Lender and you. This  Commitment  Letter may be executed in any number
of counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one agreement. Delivery of an executed counterpart of
a signature page of this Commitment  Letter by facsimile  transmission  shall be
effective  as  delivery  of a  manually  executed  counterpart  hereof.  Section
headings used herein are for convenience of reference only, are not part of this
Commitment Letter and are not to affect the construction of, or to be taken into
consideration  in  interpreting,  this Commitment  Letter.  You acknowledge that
information  and documents  relating to the Credit  Facility may be  transmitted
through  Syndtrak,  Intralinks,  the  internet,  e-mail,  or similar  electronic
transmission  systems,  and that  Lender  shall  not be liable  for any  damages
arising  from  the  unauthorized  use by  others  of  information  or  documents
transmitted  in such manner.  Lender may place  advertisements  in financial and
other  newspapers  and  periodicals  or on a home  page  or  similar  place  for
dissemination  of information

                                      -7-

on the Internet or worldwide web as it may choose,  and  circulate  similar
promotional  materials in the form of a "tombstone" or otherwise  describing the
names of the Borrowers and their  affiliates  (or any of them),  and the amount,
type and  closing  date of such  Transactions,  all at  Lender's  expense.  This
Commitment Letter supersedes all prior understandings,  whether written or oral,
between us with respect to the Credit Facility.  THIS COMMITMENT LETTER SHALL BE
GOVERNED  BY,  AND  CONSTRUED  IN  ACCORDANCE  WITH,  THE  LAWS OF THE  STATE OF
NEW YORK.

8.       JURISDICTION.

     Each of the parties  hereto  hereby  irrevocably  and  unconditionally  (a)
submits, for itself and its property,  to the non-exclusive  jurisdiction of any
New York State court or Federal court of the United States of America sitting in
New York  City,  and any  appellate  court  from any  thereof,  in any action or
proceeding  arising out of or relating to this Commitment Letter, the Fee Letter
or the transactions  contemplated  hereby,  or for recognition or enforcement of
any  judgment,  and agrees  that all  claims in  respect  of any such  action or
proceeding  may be heard and  determined in such New York State court or, to the
extent  permitted  by law, in such  Federal  court,  (b) waives,  to the fullest
extent it may legally and  effectively do so, any objection  which it may now or
hereafter have to the laying of venue of any suit, action or proceeding  arising
out of or relating to this Commitment  Letter or the  transactions  contemplated
hereby in any New York State court or in any such Federal court, (c) waives,  to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court and (d) agrees that a
final  judgment in any such action or proceeding  shall be conclusive and may be
enforced in other  jurisdictions  by suit on the judgment or in any other manner
provided by law.

9.       CONFIDENTIALITY.

     (a) This Commitment  Letter is delivered to you on the  understanding  that
neither  this  Commitment  Letter  nor any of its  terms or  substance,  nor the
involvement  of  Lender  or any  Syndicated  Lender  pursuant  hereto,  shall be
disclosed by you, directly or indirectly, to any other person except (i) to your
officers,  directors,  employees,  attorneys,  accountants  and  advisors  on  a
confidential  and  need-to-know  basis or (ii) as  required by applicable law or
compulsory  legal  process  (in  which  case you  agree to  inform  us  promptly
thereof); PROVIDED that you may disclose this Commitment Letter, but not the Fee
Letter,  and the  contents  hereof  (A) to Target and its  officers,  directors,
employees,   attorneys,   accountants   and  advisors  on  a  confidential   and
need-to-know  basis,  (B) to any  Third  Party  Equity,  (C)  to  other  lenders
providing any portion of the financing for the Transactions as permitted hereby,
(D) in any  prospectus or other  offering  memorandum  relating to any financing
contemplated  by the Credit  Facility,  (E) to any rating agencies that shall be
engaged to rate any  portion  of the Loans in  connection  with any  Syndication
(hereinafter  defined),  or (F) in any  press  release  reasonably  approved  by
Lender.

     (b)  Notwithstanding  anything  herein to the  contrary,  any party to this
Commitment  Letter  (and any  employee,  representative  or other  agent of such
party) may disclose to any and all persons,  without limitation of any kind, the
tax  treatment  and  tax  structure  of the  transactions  contemplated  by this
Commitment Letter and all materials of any kind (including opinions or other tax
analyses)  that  are  provided  to it  relating  to such tax  treatment  and tax
structure, except

                                      -8-

that (i) tax treatment and tax structure  shall not include the identity of any
existing  or  future  party  (or  any  affiliate  of  such  party)  to this
Commitment Letter, and (ii) no party shall disclose any information  relating to
such tax treatment and tax structure to the extent  nondisclosure  is reasonably
necessary in order to comply with applicable  securities laws. For this purpose,
the tax treatment of the transactions  contemplated by this Commitment Letter is
the purported or claimed U.S. federal income tax treatment of such  transactions
and the tax structure of such  transactions  is any fact that may be relevant to
understanding the purported or claimed U.S. federal income tax treatment of such
transactions.

10.      SURVIVING PROVISIONS.

     The   compensation,   reimbursement,   indemnification,    confidentiality,
syndication,  jurisdiction,  governing law, and waiver of jury trial  provisions
contained  herein and in the Fee Letter and the Term Sheet shall  remain in full
force and effect regardless of whether definitive financing  documentation shall
be executed and delivered and notwithstanding the termination of this Commitment
Letter  or   Lender's   commitment   hereunder;   PROVIDED   that  none  of  the
indemnification  provisions  set forth  herein shall apply to MHG from and after
the funding of any Loans under the Credit Facility and MHG is expressly released
from its indemnification obligations hereunder;  PROVIDED, FURTHER, that nothing
in the  foregoing  proviso  shall  apply to, or in any way limit or modify,  any
separate  guaranty  or  indemnity  that may be  provided  by MHG  under the Loan
Documents,  or any obligation of Target after the Acquisition as a result of the
merger contemplated by the Merger Agreement.

11.      WAIVER OF JURY TRIAL.

     EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY ACTION,  PROCEEDING,  CLAIM OR  COUNTERCLAIM  BROUGHT BY OR ON BEHALF OF ANY
PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT  LETTER OR THE PERFORMANCE OF
SERVICES HEREUNDER.

12.      PATRIOT ACT NOTIFICATION.

     Lender and any  Syndicated  Lenders  hereby notify you that pursuant to the
requirements  of the USA PATRIOT Act,  Title III of Pub. L. 107-56  (signed into
law  October 26,  2001) (as the same may be extended  and in effect from time to
time,  the  "PATRIOT  ACT"),  Lender and each  Syndicated  Lender is required to
obtain,  verify and record  information  that  identifies the  Borrowers,  which
information  includes the name,  address,  tax  identification  number and other
information  regarding the Borrowers  that will allow Lender or such  Syndicated
Lender to identify the Borrowers in accordance with the PATRIOT Act. This notice
is given in accordance with the requirements of the PATRIOT Act and is effective
as to Lender.

13.      SYNDICATION, ASSIGNMENT, PARTICIPATION.

     (a) Lender  reserves  the right,  as the case may be, prior to or after the
closing of the Credit  Facility or any loan  thereunder  to  syndicate,  assign,
participate,   sell,   securitize  or  otherwise   transfer   (collectively,   a
"SYNDICATION")  all or any  portion of the  Credit  Facility  and any  remaining
commitment  hereunder  to one or more  banks,  financial  institutions  or other

                                      -9-

institutional  or conduit lenders (the  "SYNDICATED  LENDERS").  We may commence
Syndication  efforts  promptly upon the execution of this Commitment  Letter and
you agree  actively to assist us in  completing a  Syndication  satisfactory  to
Lender, in its reasonable judgment, provided that the success of any Syndication
shall not be a condition to Lender's commitment  hereunder.  Lender acknowledges
and agrees that no assignment and assumption by any assignee of any  obligations
of Lender in respect of any portion of its  commitment  hereunder  shall relieve
Lender  of its  obligations  hereunder  with  respect  to  such  portion  of the
Commitments  prior to the Closing Date. Such  assistance  shall include (i) your
using  commercially  reasonable  efforts to ensure that any Syndication  efforts
benefit  materially from your and the Target's  existing  lending and investment
banking  relationships,  (ii) direct  contact  between  your senior  management,
representatives and advisors and the proposed Syndicated Lenders (and your using
commercially   reasonable   efforts  to  cause  direct  contact  between  senior
management,  representatives  and advisors of Target),  (iii) your assistance in
the  preparation  of a  Confidential  Information  Memorandum  (and  your  using
commercially  reasonable  efforts to cause the  assistance  by  Target)  for any
facility  hereunder and other marketing  materials to be used in connection with
the Syndication,  (iv) using your commercially  reasonable efforts,  both before
and after the launch of the  Syndication,  to assist the  Syndicated  Lenders to
obtain ratings for any Loans from each of Standard & Poor's Ratings  Service and
Moody's Investors Service,  Inc., (v) your providing or causing to be provided a
detailed  business plan or  projections of Target and its  subsidiaries  for the
years 2006  through  2010 and for the eight  quarters  beginning  with the first
quarter of 2006, and (vi) the hosting,  with Lender,  of one or more meetings of
prospective  Syndicated Lenders (and your using commercially  reasonable efforts
to cause direct contact between senior management,  representatives and advisors
of Target at such meetings).  To assist us in our Syndication efforts, you agree
promptly  to prepare  and  provide  to us all  information  with  respect to the
Borrowers  and their  respective  subsidiaries,  the  Acquisition  and the other
transactions  contemplated hereby,  including all Information and Projections as
we  may  reasonably  request.  You  agree,  at our  request,  to  assist  in the
preparation of a version of the  Confidential  Information  Memorandum and other
marketing  materials  and  presentations  to be  used  in  connection  with  the
Syndication of the Credit Facility, including information and documentation that
are either (i)  publicly  available  or (ii) not  material  with  respect to the
Purchaser,  Target or their  respective  subsidiaries or any of their respective
securities for purposes of foreign,  United States Federal and state  securities
laws or (iii) not subject to any confidentiality  obligation set forth herein or
any other agreement regarding confidentiality between the undersigned and Target
(all  such  information  and  documentation  being  "PUBLIC  INFORMATION").  Any
information  and  documentation  that is not Public  Information  is referred to
herein as "PRIVATE  INFORMATION".  You further agree that each document provided
by you to us or to any  Syndicated  Lender in connection  with the facilities or
indebtedness  hereunder or any Syndication  thereof will be identified by you as
either (i)  containing  Private  Information  or (ii)  containing  solely Public
Information.

     (b) Lender will manage all aspects of any Syndication,  including decisions
as to the  selection  of  institutions  to be  approached  and when they will be
approached,  when their  commitments will be accepted,  which  institutions will
participate,  the allocation of the commitments  among Syndicated  Lenders,  any
naming rights and the amount and distribution of fees among Syndicated  Lenders.
To assist us in our  Syndication  efforts,  you agree  promptly  to prepare  and
provide (and to use commercially  reasonable efforts to cause Target to provide)
to us all information with respect to the Purchaser,  Target,  the Borrowers and
their  respective

                                      -10-

subsidiaries,  the  Acquisition  and the  other  transactions  contemplated
hereby,  including  all  financial  information  and  projections,   as  we  may
reasonably request.

14.      ACCEPTANCE, EFFECTIVENESS AND TERMINATION.

     (a) If the foregoing  correctly sets forth our agreement,  please  indicate
your  acceptance  of the terms of this  Commitment  Letter  (including  the Term
Sheet) and the Fee Letter by  returning to us executed  counterparts  hereof and
thereof, together with the Good Faith Deposit, not later than 5:00 p.m., Eastern
Standard Time, on May 12, 2006 (the "EXPIRATION DATE"). Notwithstanding anything
herein to the contrary,  Lender shall not be obligated to provide any portion of
the Aggregate Commitment, and the Aggregate Commitment shall not be available to
you,  unless and until Target  and/or its  affiliates  shall have  accepted your
Acquisition  proposal in writing and executed and delivered the Merger Agreement
and you shall have paid the Commitment Fee in accordance with the Fee Letter.

     (b) Lender's obligations  hereunder will expire, and this Commitment Letter
shall  be null  and  void,  in the  event  that we have  not  received  executed
counterparts  of this  Commitment  Letter and the Fee Letter,  together with the
portion of the Good Faith  Deposit  payable upon your  execution  hereof,  on or
prior  to the  Expiration  Date.  In  addition,  (i) if the  Target  and/or  its
affiliates have not accepted your Acquisition  proposal in writing, and executed
the  Merger  Agreement,  on or  prior  to May  15,  2006  (the  "BID  ACCEPTANCE
EXPIRATION  DATE"),  (ii) if the Merger  Agreement shall have been terminated at
any time, or (iii) if your Acquisition proposal shall have been accepted and the
Merger  Agreement  shall have been  executed  on or prior to the Bid  Acceptance
Expiration  Date,  but the  conditions  to the  financing  contemplated  by this
Commitment  Letter  shall  not  have  been  satisfied  or such  financing  shall
otherwise  not have been  consummated  on or prior to February  11, 2007 or such
later date to which the Outside Date under the Merger  Agreement shall have been
extended  with our  prior  consent  (the  "OUTSIDE  CLOSING  DATE"),  then  this
Commitment  Letter and our  commitment  to provide the  Aggregate  Commitment as
provided herein shall, in each such case,  automatically  terminate and be of no
further force or effect.

                            [signature page follows]

                                      -11-

         We are pleased to have been given the opportunity to assist you in
connection with the financing for the Transactions.

                                                     Very truly yours,

                                                     COLUMN FINANCIAL, INC.

                                                     By:    /s/ Anthony Orso
                                                         -----------------------
                                                         Name:  Anthony Orso
                                                         Title: Vice President

Accepted and agreed to as of
the date first above written:

MHG HR ACQUISITION CORP

By:    /s/ W. Edward Scheetz
    --------------------------
    Name:  W. Edward Scheetz
    Title: President

MORGANS HOTEL GROUP CO.

By:    /s/ W. Edward Scheetz
    --------------------------
    Name:  W. Edward Scheetz
    Title: Chief Executive Officer

                                      -12-
<PAGE>

                                                                       EXHIBIT A

                           CREDIT FACILITY TERM SHEET

                     MAXIMUM $700,000,000.00 CREDIT FACILITY
                    SUMMARY OF PRINCIPAL TERMS AND CONDITIONs

Capitalized  terms used but not defined  herein shall have the meanings given to
such terms in the Commitment Letter (the  "COMMITMENT") to which this Term Sheet
is attached as EXHIBIT A. All monetary  amounts set forth in this Term Sheet are
denominated in United States Dollars.

LENDER:        Column Financial, Inc. or one or more of its affiliates

CREDIT
FACILITY:      A credit facility (the "CREDIT FACILITY"), in an aggregate amount
               up to the Aggregate Commitment,  comprised of (a) (i) one or more
               mortgage  loans  to the  owner  of one or more of the  Properties
               (collectively, the "MORTGAGE LOANS") and/or one or more levels of
               mezzanine   financing   relating   thereto   (collectively,   the
               "MEZZANINE  LOANS")  and/or  (ii) a mezzanine  loan (the  "HOLDCO
               MEZZANINE  LOAN";  and,  together with the Mortgage Loans and the
               Mezzanine  Loans,  the "LONG-TERM  LOANS") to Purchaser or one or
               more newly formed, single purpose, bankruptcy remote wholly-owned
               subsidiaries  of Purchaser that will, upon the  effectiveness  of
               the Acquisition, directly or indirectly own all of the Properties
               and the Intellectual Property (collectively, "HOLDCO") and/or (b)
               to the extent that the  conditions  to the  availability  of CMBS
               Loans  set  forth  below  have not been  satisfied,  or waived by
               Lender, as to any portion of the Aggregate  Commitment,  a bridge
               loan (the "BRIDGE LOAN" and,  together with the Long-Term  Loans,
               the "LOANS") in a principal  amount  equal to the Bridge  Funding
               Amount,  to  Purchaser  or Holdco,  in each case,  as required by
               Lender. Each of the Loans may be severed, at Lender's discretion,
               into two or more tranches of notes, including but not limited to,
               senior and junior notes or participations;  PROVIDED that, except
               as the  result  of  amortization  of the Loans  arising  from any
               prepayments  thereof following any Property release,  casualty or
               condemnation or event of default,  the weighted  average interest
               rate of all tranches of notes shall, at all times during the term
               of the Credit  Facility,  in the  aggregate,  equal the  weighted
               average interest rate of the Loans as of the Closing Date.

AVAILABILITY;
NET
REFINANCING
OF BRIDGE
LOAN:          The  Bridge  Loan must be fully  drawn in a single  drawing at or
               immediately   prior  to  the  Effective  Time  under  the  Merger
               Agreement (the "CLOSING DATE"). Amounts borrowed under the Credit
               Facility that are repaid or prepaid may not be reborrowed, except
               that the Bridge Loan may be refinanced  as one or more  Long-Term
               Loans  by  Lender  in its sole  discretion  as  described  in the
               immediately  following  paragraph.  Any amounts to be advanced as
               Long-Term  Loans in repayment of the Bridge Loan may, in the sole
               discretion  of Lender be  advanced  on a net  financing  basis by
               increasing the amount outstanding under any outstanding Long-Term
               Loan by such amount and decreasing the amount  outstanding  under
               the Bridge Loan by a corresponding amount.

                                   Exhibit A-1

<PAGE>

CONVERSION TO
CMBS
FINANCING:     To the extent that any  portion of the  Aggregate  Commitment  is
               funded as a Bridge Loan,  such Bridge Loan will be  refinanced as
               Long-Term  Loans  under  the  Credit  Facility,  so  long  as the
               conditions  to  Long-Term  Loans   described   herein  have  been
               satisfied or waived, or the Bridge Loan may be refinanced, at the
               election  of Lender and  Purchaser,  with  other  CMBS  financing
               arranged  with  Lender  on  terms  no less  favorable  to  Bridge
               Borrower than the terms  applicable to Long-Term Loans hereunder,
               subject,   however,  to  Lender's   then-effective   underwriting
               criteria  and terms for loans of such  type,  but any  failure to
               convert the Bridge Loan to CMBS financing as contemplated  hereby
               shall not relieve  the  Borrowers  from any of their  obligations
               hereunder with respect to any Loans.

PROPERTIES:    The Hard Rock Hotel and Casino (the  "RESORT"),  certain land and
               any  improvements  thereon  adjacent to the Resort (the "ADJACENT
               PROPERTY"),  additional  land adjacent to the Resort owned by Red
               White & Blue Pictures,  Inc. ("PICTURES") and Picture's rights in
               the  improvements  thereon  commonly  known as the Hard Rock Cafe
               (the  "CAFE  PROPERTY")  and  other   properties,   all  as  more
               particularly   identified   on   EXHIBIT  B  to  the   Commitment
               (collectively, the "Properties").

INTELLECTUAL
PROPERTY:      The  trademarks  and other  intellectual  property  identified on
               EXHIBIT C to the Commitment,  together with all rights therein or
               arising thereunder (collectively, the "INTELLECTUAL PROPERTY").

AGGREGATE
COMMITMENT:    The  lesser of (a)  $700,000,000.00  or (b) 82.5% of  Capitalized
               Cost,  MINUS, in either case, the amount of any Company Bonds (as
               defined in the Merger  Agreement) that are not defeased,  repaid,
               discharged  or otherwise  satisfied as of the Closing  Date.  For
               purposes of the  foregoing,  "CAPITALIZED  COST" means the sum of
               (i) the  aggregate  consideration  paid by the  Purchaser and its
               affiliates in connection with the Acquisition, (ii) the aggregate
               closing costs  incurred by the  Purchaser in connection  with the
               Acquisition,  including,  without limitation, such costs as title
               search and  policy  fees and  premiums,  survey  fees,  brokerage
               commissions,  attorneys  fees and expenses and the costs incurred
               for the preparation of engineering,  environmental, marketing and
               other due diligence  reports in anticipation of the  Acquisition,
               but  excluding  fees  or  expenses  of  any  nature  paid  to any
               affiliate of the Purchaser (except for such sums as are disclosed
               in writing to Lender and, in any event, are not in excess of sums
               which would  otherwise be payable to an unrelated third party for
               similar services), (iii) all costs and fees incurred by Lender in
               connection  with  the  preparation,  negotiation,   consummation,
               execution, administration,  repayment, collection and enforcement
               of the Credit  Facility  and any  approval,  consent,  amendment,
               modification  or  waiver  related   thereto,   and  (iv)  amounts
               necessary  to fund the  reserves  required  pursuant to this Term
               Sheet.  The costs and fees  referred to in the  foregoing  clause
               (iii) and the reserve amounts referred to in the foregoing clause
               (iv) may be funded,  in Lender's sole discretion,  on a net basis
               from the proceeds of any Loans funded on the Closing Date.

BRIDGE
FUNDING
AMOUNT:        The  Aggregate  Commitment  less any amount  funded as  Long-Term
               Loans on the Closing Date.

                                   Exhibit A-2

<PAGE>

BORROWERS:     In the case of the  Bridge  Loan,  Purchaser  or Holdco  (in such
               capacity,  the "BRIDGE  BORROWER").  Lender  shall be  reasonably
               satisfied  with the  capitalization,  structure,  single  purpose
               nature and equity ownership of the Bridge  Borrower,  both before
               and after giving effect to the Acquisition.

               In the case of Mortgage  Loans or  Mezzanine  Loans,  one or more
               newly  formed,  single  purpose,   bankruptcy  remote  direct  or
               indirect  subsidiaries  of  Purchaser  or  Holdco  with each such
               borrower having two  independent  directors and owning one of the
               Properties  (each, a "CMBS BORROWER" and  collectively  the "CMBS
               BORROWERS").  Lender  shall  be  reasonably  satisfied  with  the
               capitalization,  structure,  single  purpose  nature  and  equity
               ownership  of each CMBS  Borrower  under the  Mortgage  Loans and
               Mezzanine  Loans,  after giving  effect to the  Acquisition.  The
               obligations of CMBS Borrowers shall be joint and several.

               In the case of the Holdco Mezzanine Loan, Purchaser or Holdco (in
               such capacity, the "HOLDCO MEZZANINE BORROWER" and, together with
               the CMBS Borrowers,  the "LONG-TERM BORROWERS" and, together with
               the CMBS  Borrowers and the Bridge  Borrower,  the  "BORROWERS").
               Lender shall be  reasonably  satisfied  with the  capitalization,
               structure,  single  purpose  nature and equity  ownership  of the
               Holdco Mezzanine Borrower, both before and after giving effect to
               the Acquisition.

               Each Borrower shall deliver a customary non-consolidation opinion
               with  respect  to its  parent  and any other  guarantors  that is
               reasonably acceptable to Lender.

USE OF
PROCEEDS:      The proceeds of the Loans shall be used by the  Borrowers  solely
               to (a) finance the aggregate  consideration payable to consummate
               the Acquisition under the Acquisition Agreement,  (b) satisfy all
               existing  indebtedness  of Target and its  subsidiaries,  if any,
               other than trade payables and capital and equipment leases in the
               ordinary  course  of  business  and (c)  pay  fees  and  expenses
               required to be paid by  Purchaser or any of its  subsidiaries  in
               connection with the  Transactions.  The proceeds of the Long-Term
               Loans shall be loaned,  directly or indirectly,  by the Borrowers
               to the Purchaser on the Closing Date as an inter-company loan, on
               customary  terms  reasonably  acceptable  to  Lender,  solely for
               purposes of consummating the Acquisition.

INTEREST
RATE:          The  Interest  Rate  will be  30-day  LIBOR  plus the  applicable
               Interest Rate Spread.  The Interest Rate shall be adjusted on the
               first  day of  each  calendar  month  or such  other  day of each
               calendar month as determined by Lender (rounded up to the nearest
               1/100th  of 1%),  based upon the LIBOR rate in effect on the date
               that is two London  business days prior to the  adjustment  date.
               Interest  will be payable  monthly  in  arrears on an  actual/360
               basis. Payments on the Loans shall be made on the 9th day of each
               calendar month (the "PAYMENT DATE").

INTEREST
RATE SPREAD:   BRIDGE LOAN:  385 basis  points;  provided that the Interest Rate
               Spread  applicable  to the Bridge Loan will  increase by 25 basis
               points every 90 days after the Closing Date until the Bridge Loan
               is either  refinanced or repaid in full. In connection  with each
               such increase in the Interest Rate Spread, Bridge

                                   Exhibit A-3

<PAGE>

               Borrower  shall obtain an adjusted  Interest  Rate Cap that gives
               effect to such increase.

               LONG-TERM LOANS: 385 basis points

INTEREST
RATE CAP:      Each  Borrower  will be required to purchase an interest rate cap
               (the  "INTEREST  RATE  CAP")  (i)  for  the  initial  term of its
               applicable Loan, at a 30-day LIBOR strike price which shall be no
               greater than 5.5%,  and (ii) for any extension term of such Loan,
               at such strike price and on such terms and conditions as shall be
               acceptable  to Lender in its sole  discretion  at such time.  The
               Interest  Rate  Cap  provider  must be  rated  at  least  "AA" by
               Standard & Poor's Rating Services and Moody's Investors  Service,
               Inc.  and  otherwise be  reasonably  acceptable  to Lender.  Each
               Interest  Rate Cap  shall be in a  notional  amount  equal to the
               aggregate amount of the applicable Loan.

AMORTIZATION:  Interest only,  subject to any prepayments  permitted or required
               hereunder  (see "PROPERTY  RELEASES" and "MANDATORY  PREPAYMENTS"
               below).

LOAN
ORIGINATION
FEE:           BRIDGE LOAN:  0.50% of the Bridge Funding Amount

               LONG-TERM LOANS:  0.50% of the principal amount of such Long-Term
               Loan;  provided that no Loan  Origination Fee shall be payable on
               any  Long-Term  Loan  that  is  funded  in  connection  with  the
               refinancing  of any  portion  of the Bridge  Loan  within 90 days
               after the Closing Date. A Loan  Origination  Fee shall be payable
               with  respect to all  Long-Term  Loans funded on the Closing Date
               and all  Long-Term  Loans  funded  later  than 90 days  after the
               Closing Date.

               In each  case,  the Loan  Origination  Fee  shall be  earned  and
               payable on the date of funding of the Loans.

EXIT FEE:      On repayment or  prepayment  of any portion of any Loan,  an exit
               fee of 0.50% of the paid  amount  (including,  at  maturity,  the
               entire  outstanding  principal  amount of the Loans) shall be due
               and  payable to Lender,  unless  any such Loan is  refinanced  by
               Lender  or any of its  affiliates  including,  in the case of the
               Bridge  Loan,  refinancing  as a Long-Term  Loan under the Credit
               Facility.

TERM:          BRIDGE  LOAN:  The Bridge Loan shall have a term of one year from
               the Closing Date.

               LONG-TERM  LOANS:  The Long-Term Loans shall have an initial term
               of two years from the Closing Date.

EXTENSION:     BRIDGE LOAN:  One six month  extension.  Such  extension  will be
               granted upon the request of Bridge Borrower,  upon written notice
               to  Lender  not less  than one (1)  month  nor more  than two (2)
               months prior to the end of the initial term, PROVIDED that, INTER
               ALIA, the following  conditions are satisfied by Bridge Borrower:
               (i) there exists no event of default (or any event that, with the
               giving of notice or the passage of time or both would  constitute
               an event of default) at the time the option is  exercised or when
               the option  commences,  (ii) payment of an  extension  fee in the
               amount  of  0.25% of the  outstanding  principal  balance  of the
               Bridge Loans,  (iii) the purchase of an Interest Rate

                                   Exhibit A-4

<PAGE>

               Cap for the  extension  period  at the  strike  rate as set forth
               above, and (iv) a continued  increase in the Interest Rate Spread
               by 25 basis points per quarter during the extended term.

               LONG-TERM  LOANS:  Two  one-year  extension  options.  Each  such
               extension   will  be  granted   upon  the  request  of  Long-Term
               Borrowers,  upon  written  notice to Lender not less than one (1)
               month  nor  more  than  six (6)  months  prior  to the end of the
               current term, provided that, INTER ALIA, the following conditions
               are satisfied by Long-Term  Borrowers:  (i) there exists no event
               of default (or any event  that,  with the giving of notice or the
               passage of time or both would  constitute an event of default) at
               the time the option is  exercised  or when the option  commences,
               (ii)  payment of an  extension  fee,  with  respect to the second
               extension  option only, in an amount of 0.25% of the  outstanding
               principal balance of the Loans, (iii) the purchase of an Interest
               Rate Cap for the  extension  period at a strike rate as set forth
               above,  (iv) upon exercise of the second  extension  option,  the
               Interest  Rate Spread shall  increase to 410 basis points and (v)
               immediately   prior  to  the   second   extension,   Debt   Yield
               (hereinafter  defined) for the Credit  Facility shall be not less
               than 11%,  including  as the  result of any  permitted  voluntary
               prepayment at such time in accordance herewith.

               The entire outstanding  principal balance of each Loan,  together
               with any accrued and unpaid  interest  thereon,  shall be due and
               payable  at the  expiration  of the  term  of such  Loan  and any
               extensions thereto.

COLLATERAL:    The  Bridge  Loan  shall  be  secured  by (i) a  perfected  first
               priority pledge of 100% of the equity ownership interests of each
               of the Long-Term Borrowers, (ii) a perfected security interest in
               the Interest  Rate Cap referred to above,  (iii) an assignment of
               and  security  interest  in all  leases,  rents,  room  revenues,
               deposits,   letters  of  credit,  income  and  profits,   reserve
               accounts,  contracts,  agreements, and personal property relating
               to the  Properties  and any and all  assets of any kind or nature
               whatsoever  of the  Purchaser  and its  subsidiaries,  including,
               without  limitation,  the IP Collateral (as defined  below),  and
               (iv) at Lender's  option,  a perfected  first mortgage on the fee
               simple interest in the land and  improvements as to each Property
               (collectively, the "BRIDGE COLLATERAL").

               The Mortgage Loans shall be secured by, among other things, (i) a
               perfected  first mortgage on the fee simple  interest in the land
               and  improvements as to each Property (each, a "MORTGAGE  LIEN"),
               (ii)  an  assignment  of all  related  leases,  rents,  deposits,
               letters of credit, income and profits, (iii) a perfected security
               interest in the  Interest  Rate Cap referred to above and (iv) an
               assignment  and/or a  perfected  security  interest  in all other
               construction  and  other   contracts,   agreements  and  personal
               property  relating to the  Properties,  including sales contracts
               and  related   deposits   (collectively,   the   "MORTGAGE   LOAN
               COLLATERAL")

               Any Mezzanine Loans shall be secured by, among other things,  (i)
               a perfected first priority pledge of 100% of the equity ownership
               interests in the  applicable  CMBS  Borrower (or, with respect to
               multiple  levels of  Mezzanine  Loans,  such  holder of  indirect
               interests  in the  applicable  CMBS  Borrower  as  determined  by
               Lender),  (ii) a  perfected  security  interest  in  any  reserve
               accounts established on behalf of Lender, subject to the Mortgage
               Loans and

                                   Exhibit A-5

<PAGE>

               any senior Mezzanine Loans,  (iii) a perfected  security interest
               in the  applicable  Interest  Rate  Cap,  and (iv) an  assignment
               and/or a  perfected  security  interest  in all other  contracts,
               agreements and personal  property,  subject to the Mortgage Loans
               and any senior Mezzanine Loans (the "MEZZANINE COLLATERAL").

               The Holdco  Mezzanine  Loan  shall be secured by (i) a  perfected
               first priority pledge of 100% of the equity  ownership  interests
               of each of the CMBS Borrowers, (ii) a perfected security interest
               in the  Interest  Rate Cap  referred to above,  (iii) a perfected
               security  interest in any reserve accounts  established on behalf
               of Lender, subject to the Mortgage Loans and any senior Mezzanine
               Loans,  and (iv) to the extent  obtainable,  an assignment of and
               security interest in all leases, rents, room revenues,  deposits,
               letters  of  credit,   income  and  profits,   reserve  accounts,
               contracts,  agreements,  and  personal  property  relating to the
               Properties  and  any  and  all  assets  of  any  kind  or  nature
               whatsoever  of  the  Holdco  Mezzanine  Borrower,  including,  at
               Lender's option as described below,  the IP Collateral,  subject,
               in  all  events,   to  the  Mortgage   Loans  and  the  Mezzanine
               Loans(collectively, the "HOLDCO MEZZANINE COLLATERAL").

               The Bridge  Loan  and/or one or more of the Long Term  Loans,  as
               determined by Lender in its sole discretion,  shall be secured by
               (i)  a  perfected  first  priority   security   interest  in  the
               Intellectual  Property,  (ii) an  assignment  and/or a  perfected
               first priority security interest in all contracts, agreements and
               tangible and intangible  personal property relating in any manner
               to the Intellectual  Property (the Intellectual  Property and the
               other property described in this clause (ii),  collectively,  the
               "IP COLLATERAL"), and (iii) a collateral assignment of Borrowers'
               rights  under  that  certain  Indemnification   Agreement  to  be
               executed  on the  Closing  Date by  Peter A.  Morton  in favor of
               Borrowers (the "MORTON  INDEMNIFICATION  AGREEMENT"),  as well as
               the PWR/RWB Escrow Agreement (as defined in the Merger Agreement)
               (such additional collateral, together with the IP Collateral, the
               Holdco  Mezzanine  Collateral,   the  Mezzanine  Collateral,  the
               Mortgage  Loan   Collateral  and  the  Bridge   Collateral,   the
               "COLLATERAL").

HOLDCO
MEZZANINE
GUARANTEE:     As consideration for the intercompany loans between Borrowers and
               Purchaser described under "Use of Proceeds" above, Purchaser will
               execute a guaranty  and  indemnity  with  respect to the recourse
               obligations  of  the  Holdco  Mezzanine   Borrower  and  MergerCo
               described  under  "Recourse"  below.  Such guaranty and indemnity
               shall be secured by a pledge of, and recourse  under the guaranty
               shall be limited to,  Purchaser's  equity  interest in the Holdco
               Mezzanine  Borrower and MergerCo.  Purchaser shall covenant that,
               except for the payment of employee salaries and benefits,  not to
               voluntarily  dispose of its assets  other than on an  arms-length
               basis in exchange for fair consideration or declare any dividends
               or other distributions.

RECOURSE:      Except as set forth  below,  the  Bridge  Loan  and/or the Holdco
               Mezzanine  Loan, as determined by Lender in its sole  discretion,
               shall be  recourse  only to the  Bridge  Collateral,  the  Holdco
               Mezzanine  Collateral  and/or the IP Collateral  (whether such IP
               Collateral is held  directly or indirectly by Bridge  Borrower or
               Holdco  Mezzanine  Borrower,  as the case may be, or collaterally
               assigned to Bridge Borrower or Holdco  Mezzanine  Borrower by any
               of their direct or indirect  subsidiaries having rights therein),
               as applicable.

                                   Exhibit A-6

<PAGE>

               Except as set forth below,  the Mortgage  Loans and the Mezzanine
               Loans will be recourse only to the Properties,  the Mortgage Loan
               Collateral and/or the Mezzanine Collateral, as the case may be.

               Notwithstanding   the  foregoing,   certain   principals  of  the
               Purchaser and the Borrowers,  as determined by Lender in its sole
               discretion,  including,  without limitation,  Morgans Hotel Group
               Co.,  (collectively,  the  "GUARANTORS")  shall  be  jointly  and
               severally liable for any actual losses, damages,  liabilities and
               reasonable  expenses  incurred  by Lender  pursuant  to  standard
               non-recourse  carve-outs,  including,  but not  limited  to:  (i)
               misappropriation          of         insurance          proceeds,
               condemnation/expropriation  proceeds,  and/or any tenant security
               deposits  by  Borrowers  or  a  party  controlled  by  Borrowers,
               including  any  property  manager,   in  violation  of  the  Loan
               Documents,  (ii) the misapplication,  by Borrower, any affiliated
               managing agent or other agent of Borrower or any other party with
               whom Borrower shall collude or cooperate, of rents collected more
               than one month in advance,  (iii) revenues and rents collected by
               Borrower or any  manager or agent of  Borrower  after an event of
               default under the Loan Documents (as hereinafter defined) and not
               delivered  to  Lender,  (iv)  physical  damage to the  Properties
               arising from  intentional  misconduct or gross  negligence of any
               Borrower or any Guarantor, or any of their authorized principals,
               officers,  agents or employees, and any removal of assets forming
               part of the  Properties in violation of the Loan  Documents,  (v)
               failure to pay (or deposit  into  reserves  held by Lender  funds
               sufficient  to pay) taxes or other  liens with  priority  over or
               equal to Lender's Loan  Documents,  (vi) damages arising from any
               fraud or misrepresentation  of any Borrower or any Guarantor,  or
               any  of  their  authorized   principals,   officers,   agents  or
               employees, (vii) failure to pay charges for labor or materials or
               other  charges  that  have  become  liens on any  portion  of the
               Properties,  (viii) all of the obligations and indemnities in the
               Loan  Documents  with  respect to hazardous  substances  or toxic
               substances or the failure of any of the Properties to comply with
               environmental laws (Borrowers and each Guarantor will jointly and
               severally execute a separate environmental indemnity agreement at
               closing), (ix) the failure of any Borrower to maintain its status
               as a single purpose entity in accordance with the Loan Documents,
               (x) the failure of any Borrower to obtain Lender's consent to any
               subordinate  financing or other  voluntary lien  encumbering  any
               Property,  (xi) the interference by Borrower or any Guarantor (or
               any  of  their  respective  affiliates  that  control  any of the
               foregoing) with Lender's  pursuit of its rights or remedies under
               the Loan  Documents  following  an Event of  Default,  except  if
               Borrower or Guarantor  shall  succeed in such action after Lender
               has  exhausted  all appeals and  judicial  remedies  with respect
               thereto,  (xii)  failure  to  maintain  insurance  under  blanket
               insurance policies to the extent permitted hereunder,  (xiii) any
               breach by any Borrower of any Closing  Representation,  and (xiv)
               any breach by  Borrowers  of the  negative  covenants in the Loan
               Documents concerning the exercise of any rights or remedies under
               the  Morton  Indemnification  Agreement  or  the  PWR/RWB  Escrow
               Agreement   without  the  prior  written  consent  of  Lender  or
               satisfaction  of any  indemnification  claims  from  the  PWR/RWB
               Escrow  Fund (as  defined  in the  Merger  Agreement)  other than
               pursuant to the Morton Indemnification Agreement.

               Each Borrower and each  Guarantor  shall be jointly and severally
               personally  liable for the full amount of the Credit  Facility in
               the event that (a) any Borrower fails to obtain Lender's  consent
               to any assignment,  transfer or conveyance of any Property or any
               of the IP Collateral not permitted by the Loan Documents; (b) (1)
               any Borrower or any Guarantor  files a voluntary

                                   Exhibit A-7

<PAGE>

               petition  under the United  States  Bankruptcy  Code or any other
               federal or state  bankruptcy or insolvency  law, (2) any Borrower
               or any Guarantor  files an answer  consenting to, or any Borrower
               or any  Guarantor  (or any of their  respective  affiliates  that
               control any Borrower or  Guarantor)  consents or acquiesces to or
               joins in, any involuntary  petition filed against any Borrower or
               Guarantor, as the case may be, under the United States Bankruptcy
               Code or any other federal or state  bankruptcy or insolvency law,
               (3) any  Borrower or any  Guarantor  (or any of their  respective
               affiliates  that control any Borrower or Guarantor)  consents to,
               or  otherwise  acquiesces  or  joins  in an  application  for the
               appointment of a custodian,  receiver,  trustee,  or examiner for
               any Borrower or any portion of any Property or any portion of the
               IP Collateral  (other than any such appointment at the request or
               petition of Lender or its affiliates), or (4) any Borrower or any
               Guarantor  makes an assignment  for the benefit of creditors,  or
               admits, in writing or in any legal proceeding,  its insolvency or
               inability  to  pay  its  debts  as  they  become  due;  or (c) an
               involuntary  petition  is  filed  against  any  Borrower  or  any
               Guarantor  under the United States  Bankruptcy  Code or any other
               federal or state  bankruptcy or insolvency law by or on behalf of
               any  party  other  than  Lender,  and any  such  petition  is not
               dismissed  within 90 days,  or any Borrower or any  Guarantor (or
               any of their  respective  affiliates that control any Borrower or
               Guarantor)  solicits  or  causes  to  be  solicited   petitioning
               creditors for any  involuntary  petition  against any Borrower or
               any  Guarantor,   unless,   in  the  case  of  any  voluntary  or
               involuntary petition,  receivership or assignment by or affecting
               any Guarantor, one or more guarantors acceptable to Lender in its
               sole  discretion  remains  or becomes a  guarantor  of the Credit
               Facility  as  required  by  this   paragraph  and  the  preceding
               paragraph.

CROSS DEFAULT;
CO-BORROWING:  Lender shall have the right,  without the consent of any Borrower
               or any other  Person,  to determine the extent to which any Loans
               are  cross-defaulted  with each other and the extent to which two
               or more Borrowers  shall be jointly and severally  liable for all
               or any portion of the Credit Facility.

VOLUNTARY
PREPAYMENT;
SPREAD
MAINTENANCE:   BRIDGE LOAN: The Bridge Loan may be prepaid, in whole or in part,
               upon not less 10 days' prior written notice, at the option of the
               Bridge  Borrower at any time;  PROVIDED that no such notice shall
               be required in connection with any refinancing as Long-Term Loans
               under the Credit Facility.

               LONG-TERM LOANS: The Long-Term Loans may be prepaid,  in whole or
               in part, upon not less than 10 days' prior written notice, at the
               option of the applicable Long-Term Borrower at any time; PROVIDED
               that (a) each  prepayment  shall be in an  amount  not less  than
               $5,000,000.00  and (b) if such  prepayment  is made  prior to the
               first  Payment  Date  occurring  after the date that is 18 months
               from the Closing Date (the "LOCKOUT RELEASE DATE"),  Lender shall
               receive a "SPREAD MAINTENANCE  PREMIUM" in an amount equal to the
               product of (a) the principal amount of such  prepayment,  (b) the
               Interest  Rate Spread and (c) a fraction,  the numerator of which
               shall  equal  the  actual  number  of days  from the date of such
               payment  through the Lockout  Release Date and the denominator of
               which is 360.  If any  prepayment  is made on a date other than a
               Payment Date,  such  prepayment  shall be accompanied by interest
               accrued on such prepayment  amount through and including the next
               succeeding Payment Date.

                                   Exhibit A-8

<PAGE>

DUE ON SALE;
NEGATIVE
PLEDGE:        As more  particularly set forth in the Loan Documents,  any sale,
               transfer,   pledge,   assignment  or   conveyance   (directly  or
               indirectly,  voluntarily or involuntarily, by operation of law or
               otherwise,  and  whether or not for  consideration  or of record)
               (each,  a "TRANSFER") of all or any part of the Properties or the
               IP  Collateral  or of any  direct  or  indirect  interest  in any
               Borrower or any  Guarantor  (other than  customary  transfers  of
               public securities that do not give rise to a change of control of
               any  Borrower)  shall give Lender the right to declare the entire
               balance  of the  Credit  Facility  immediately  due and  payable;
               PROVIDED that (i) holders of direct or indirect  interests in any
               Borrower  may Transfer up to an aggregate of 49% of the direct or
               indirect  interests  in such  Borrower  so long as the control of
               such  Borrower does not change,  Borrowers  deliver prior written
               notice of any such Transfer to Lender and if the transferee, as a
               result of such Transfer, owns, directly or indirectly,  more than
               49% of the interests in any Borrower, Borrowers deliver a revised
               non-consolidation opinion acceptable to Lender in connection with
               such transfer and, if such Transfer  occurs after  Securitization
               (as  hereinafter  defined),  a Rating Agency  confirmation,  (ii)
               holders  of direct or  indirect  interests  in any  Borrower  may
               Transfer such  interests (A) to any other  Borrower or any member
               or partner of any  Borrower  (other  than  members or partners of
               Purchaser)  who is a member or partner of such Borrower as of the
               Closing  Date,  so long as the control of any  Borrower  does not
               change or (B) by  maintenance,  devise or bequest or by operation
               of law upon the death of a natural  person that was the holder of
               such  interest  to a  member  of the  immediate  family  of  such
               interest  holder or a trust  established  for the benefit of such
               immediate family member, provided that (x) no such Transfer shall
               result  in  a  change  of  the   day-to-day   operations  of  the
               Properties,  (y)  Borrowers  shall  give  Lender  notice  of such
               Transfer  together with copies of all instruments  effecting such
               Transfer  not  less  than ten (10)  days  after  the date of such
               transfer,  (z) the legal and financial structure of Borrowers and
               their members or partners, as applicable,  and the single purpose
               nature and  bankruptcy  remoteness of Borrowers and their members
               or partners,  as applicable  after such  Transfer,  shall satisfy
               Lender's  then  current  applicable   underwriting  criteria  and
               requirements,  so long as Borrowers  deliver prior written notice
               of any such transfer to Lender and if the transferee, as a result
               of such transfer, owns, directly or indirectly,  more than 49% of
               the  interests  in any  Borrower,  Borrowers  deliver  a  revised
               non-consolidation opinion acceptable to Lender in connection with
               such Transfer and, if such Transfer  occurs after  Securitization
               (as hereinafter defined), a Rating Agency confirmation, and (iii)
               the  Property  Releases  set  forth  below  shall  be  permitted.
               Notwithstanding  the foregoing,  the Purchaser  shall control the
               Long-Term Borrowers and own, directly or indirectly, at least 51%
               of each Long-Term Borrower at all times.

               In  addition,  for  so  long  as the  Holdco  Mezzanine  Loan  is
               outstanding,  neither the Purchaser  nor any of its  subsidiaries
               shall  Transfer  any  portion  of  the  equity  interests  of the
               Purchaser or Target;  PROVIDED that holders of direct or indirect
               equity interests in the Purchaser may transfer up to an aggregate
               of 49% of the  such  interests  so  long  as the  control  of the
               Purchaser  does not change;  and PROVIDED  FURTHER that customary
               transfers of public  securities that do not give rise to a change
               of control of Purchaser or any Borrower  shall be permitted.  Any
               Transfer in violation of the foregoing  shall give the Lender the
               right  to  declare  the  entire   balance  of  all  Loans  to  be
               immediately due and payable.

                                   Exhibit A-9

<PAGE>

PROPERTY
RELEASES:      In connection with any Long-Term  Loan, the applicable  Long-Term
               Borrower  shall  be  permitted  to  obtain a  release  (a) of the
               Mortgage  Lien on any Property  securing such  Long-Term  Loan in
               connection  with the  sale of such  Property  to an  unaffiliated
               third  party  or  (b) of  Lender's  security  interest  in the IP
               Collateral  in  connection  with the  transfer  of all of such IP
               Collateral to an unaffiliated  third party;  PROVIDED that, INTER
               ALIA, the following  conditions  (the "RELEASE  CONDITIONS")  are
               satisfied:  (i) the  applicable  Long-Term  Borrower shall pay to
               Lender the Release Price (hereinafter defined) for the applicable
               Property or IP Collateral,  together with the Spread  Maintenance
               Premium,  if any, on the amount so prepaid,  all interest accrued
               through the next payment date, and the  applicable  Exit Fee (ii)
               no default  exists,  (iii) the Debt Yield after giving  effect to
               the  release is equal to or greater  than the greater of the Debt
               Yield in  effect  as of the  Closing  Date or the  Debt  Yield in
               effect  immediately  prior to the date of such release,  (iv) the
               applicable   Long-Term  Borrower  shall  have  paid  all  of  the
               reasonable  third party legal fees and out-of  pocket third party
               expenses incurred by Lender, (v) the LTV (as hereinafter defined)
               after giving effect to the release shall be equal to or less than
               the lesser of the LTV in effect as of the date  hereof or the LTV
               in  effect  immediately  prior  to the  Closing  Date,  (vi)  the
               applicable  Long-Term  Borrowers  shall execute such documents as
               reasonably necessary by Lender to reflect such release and (viii)
               if any  prepayment  is made on a date other than a Payment  Date,
               such prepayment  shall be accompanied by interest accrued on such
               prepayment  amount  through  and  including  the next  succeeding
               Payment Date.

               "RELEASE  PRICE"  shall  mean  the  greater  of (A) the net  sale
               proceeds from the applicable  sale (expenses shall be approved by
               Lender but in no event shall they  exceed 8% of the sales  price)
               and (B) 125% of the allocated  loan amount (x) for the applicable
               Property, as set forth on EXHIBIT B to the Commitment, or (y) for
               the IP Collateral,  as set forth on EXHIBIT C to the  Commitment,
               in each case as determined by Lender. "DEBT YIELD" shall mean the
               ratio,  expressed  as a  percentage,  of the net  cash  flow  (as
               determined in accordance with Lender's then current  underwriting
               standards for similar  transactions) of the remaining  Properties
               as of  the  date  of  computation,  divided  by  the  outstanding
               principal  balance of the Loans as of such date. "LTV" shall mean
               the  ratio,  expressed  as  a  percentage,   of  the  outstanding
               principal  balance  of the  Loans  on the  date  of  computation,
               divided by the value of the remaining Properties as determined by
               Lender in its reasonable discretion.

PARTIAL
RELEASE OF
ADJACENT
PROPERTY:      In  connection  with any  Long-Term  Loan secured by the Adjacent
               Property, the applicable Long-Term Borrower shall be permitted to
               obtain a partial release of the Mortgage Lien on a portion of the
               Adjacent  Property in  connection  with a sale of such portion of
               the  Adjacent   Property   (each,  a  "RELEASE   PARCEL")  to  an
               unaffiliated  third  party;  PROVIDED  that  each of the  Release
               Conditions  set forth above shall have been  satisfied (but based
               upon a Release Price determined as set forth in the definition of
               that term set forth above, but using an allocated loan amount for
               the Release  Parcel in an amount  specified by Lender in its sole
               but   reasonable   discretion)   and  the  following   additional
               conditions,  inter  alia,  are  satisfied:  (i)  the  sale of the
               Release Parcel and the remaining portion of the Adjacent Property
               after  giving  effect  to  the  release  shall  comply  with  all
               applicable zoning,  land use,  certificate of occupancy and other
               applicable  laws and  regulations,  (ii) the use and operation of
               the Release Parcel by the purchaser thereof shall (A) comply with
               all  applicable  zoning,  land use,  certificate of occupancy and
               other applicable

                                   Exhibit A-10

<PAGE>

               laws and regulations, (B) not be in violation of the terms of any
               lease applicable to the Adjacent Property,  and (C) be consistent
               with, in Lender's reasonable  discretion,  the other then-current
               uses of the Adjacent  Property,  and the purchaser of the Release
               Parcel  shall  have  executed  and  delivered  to the  applicable
               Long-Term   Borrower  a  written   agreement   acknowledging  the
               foregoing  obligations  on the  part of such  purchaser;  (ii) if
               Lender shall deem the same to be  necessary,  Long-Term  Borrower
               shall cause to be created and  properly  recorded,  a  reciprocal
               easement  agreement  (or such other  agreement or  instrument  as
               Lender shall require in its sole discretion) for ingress, egress,
               parking, utilities and any common areas and common area expenses,
               for the benefit of the Release  Parcel and the remaining  portion
               of  the  Adjacent  Property,  that  is  acceptable  in  form  and
               substance to Lender in its sole discretion;  (iii) the applicable
               Long-Term  Borrower  shall deliver to Lender,  at such  Long-Term
               Borrower's  sole cost and expense,  ALTA/ASCM  surveys of each of
               the remaining  portion of the Adjacent  Property and such Release
               Parcel,  which  surveys  shall  conform  to the  requirements  of
               Lender; (iv) a title insurance company acceptable to Lender shall
               issue an  endorsement to the applicable  title  insurance  policy
               regarding the validity of Lender's lien on the remaining  portion
               of the Adjacent Property after such partial release and any other
               endorsements   reasonably   requested  by  Lender  in  connection
               therewith;  (v) any such partial  release  shall be at no cost or
               expense to Lender;  and (vi) the  applicable  Long-Term  Borrower
               shall deliver to Lender such  amendments to the Loan Documents as
               shall be necessary to  effectuate  such  release,  as well as all
               documents and information reasonably requested by Lender in order
               to verify the satisfaction of the foregoing conditions.

PARTIAL
RELEASE
OF IP
COLLATERAL:    In  connection   with  any  Long-Term  Loan  secured  by  the  IP
               Collateral,  the applicable Long-Term Borrower shall be permitted
               to  obtain a release  of  Lender's  lien on a  portion  of the IP
               Collateral  in  connection  with a sale of such portion of the IP
               Collateral  (the  "RELEASE IP") to an  unaffiliated  third party;
               PROVIDED  that each of the  Release  Conditions  set forth  above
               shall  have  been  satisfied  (but  based  upon a  Release  Price
               determined as set forth in the  definition of that term set forth
               above,  but using an allocated  loan amount for the Release IP in
               an  amount  specified  by  Lender  in  its  sole  but  reasonable
               discretion)  and the  applicable  Long-Term  Borrower  shall have
               delivered  to Lender such  amendments  to the Loan  Documents  as
               shall be necessary to effectuate such release.

MANDATORY
PREPAYMENT:    BRIDGE LOAN: The Bridge Loan shall be prepaid,  INTER ALIA,  with
               (a) 100% of the net cash  proceeds of any mortgage  financing (or
               refinancing  thereof)  by  the  Bridge  Borrower  or  any  of its
               subsidiaries  of the Properties or the IP Collateral,  including,
               without limitation,  any Long-Term Loan, (b) 100% of the net cash
               proceeds of all asset sales or other  dispositions  by the Bridge
               Borrower  or any of its  subsidiaries  (including  insurance  and
               condemnation proceeds and any purchase price refund in respect of
               any  acquisition)  of any of the Properties or the IP Collateral,
               and (c) 100% of the net cash proceeds of issuances,  offerings or
               placements  of  debt  obligations  of  Purchaser  or  any  of its
               subsidiaries.

               LONG-TERM  LOANS:  The  Long-Term  Loans shall be prepaid,  INTER
               ALIA,  with 100% of the  applicable  Release  Price in connection
               with any asset sale or other  disposition  by any Borrower or any
               of  subsidiary  of any  Borrower  and

                                  Exhibit A-11

<PAGE>

               100% of any insurance and  condemnation  proceeds from any of the
               Properties.

               SCHEDULED  AMORTIZATION  PAYMENT:  On or  prior  to the one  year
               anniversary of the Closing Date, Borrowers shall make a principal
               prepayment on the  then-outstanding  Loans  (including the Bridge
               Loan,  if the term thereof  shall have been  extended as provided
               herein)  under the Credit  Facility in an amount  equal to either
               (a) if  such  prepayment  is  made  without  any  release  of any
               Property,  $70,000,000.00 (the "MINIMUM AMORTIZATION PAYMENT") or
               (b) if such  prepayment is made in  connection  with a release of
               the  Mortgage  Lien  on the  Adjacent  Property  under  the  Loan
               Documents,  the greatest of (x) the net proceeds from any sale or
               refinancing of the Adjacent Property at such time (expenses shall
               be  approved  by Lender but in no event  shall they  exceed 8% of
               gross proceeds of such sale or refinancing),  (y) $250,000,000.00
               or (z) such amount as would be sufficient, after giving effect to
               such  prepayment  of the Loans,  to result in a Debt Yield of not
               less than 12%. Any prepayment under the preceding  sentence shall
               be accompanied by all interest  accrued  through the next payment
               date, the applicable  Exit Fee,  payment of all of the reasonable
               third party  legal fees and out-of  pocket  third party  expenses
               incurred by Lender, if any, and payment of any other amounts then
               due and payable  pursuant to the Loan  Documents,  other than any
               Spread Maintenance Premium thereon.

               If, at any time prior to the one year  anniversary of the Closing
               Date, the IP Collateral is sold and released from the lien of the
               Loan  Documents,  Borrowers  may,  at their  option,  apply up to
               $20,000,000.00   of  the   proceeds   of  such  sale  toward  the
               satisfaction of the Minimum Amortization Payment.

               If the Minimum Amortization Payment shall have been paid in full,
               then the allocated loan amount for the Adjacent Property shall be
               reduced to either (i)  $144,000,000.00,  if no proceeds  from any
               sale of the IP Collateral were applied to the satisfaction of the
               Minimum Amortization Payment or (ii)  $160,000,000.00,  if the IP
               Collateral  shall  have  been  sold  and  $20,000,000.00  of  the
               proceeds  of  such  sale  shall  have  been  applied  toward  the
               satisfaction of the Minimum  Amortization  Payment as provided in
               the preceding paragraph.

               If, at any time prior to the one year  anniversary of the Closing
               Date,  Borrowers  effect a partial  release  with  respect to the
               Adjacent  Property in the manner described under "Partial Release
               of  Adjacent  Property"  above  that  results in  repayment  of a
               portion  of  the  outstanding  Loans,  the  Minimum  Amortization
               Payment  shall be  reduced  as a result of such  repayment  by an
               amount to be  determined by Lender and  reasonably  acceptable to
               Borrowers.

DEFAULT RATE:  Four percent (4.0%) over the non-default rate (no grace period).

LATE CHARGES:  Five percent (5.0%) for any overdue payment (no grace period).

REPRESENTATIONS
WARRANTIES;
LOAN
DOCUMENTS:     The  definitive  documentation  relating  to the Loans (the "LOAN
               DOCUMENTS")   will  contain   representations,   warranties   and
               covenants that are usual and customary for  transactions  of this
               nature or reasonably  required by Lender for this  transaction in
               particular,  and that are  reasonably  acceptable  to  Borrowers,
               including  but  not  limited  to,  those   specified   under  the
               Commitment  Letter,

                                   Exhibit A-12

<PAGE>

               with such changes as are appropriate in connection with any Loan,
               as well as a representation and warranty that the Acquisition and
               the  Other  Transaction   Closings  (as  defined  in  the  Merger
               Agreement)  were  consummated  in  accordance  with the terms and
               conditions  of the  Merger  Agreement  and the Other  Transaction
               Documents  (as defined in the Merger  Agreement),  with only such
               amendments,  supplements and modifications  thereto,  and waivers
               and  extensions  thereunder,  as Lender  shall have  approved  in
               advance.  The terms and provisions of any Loan are not limited to
               those  set  forth in this Term  Sheet or the  Commitment  Letter.
               Those  matters  that are not  covered by or made clear under this
               Term  Sheet or the  Commitment  Letter  shall be set forth in the
               Loan Documents.

AFFIRMATIVE
COVENANTS:     All affirmative covenants customary for transactions of this type
               and others to be reasonably specified by Lender (to be applicable
               to  the  Guarantors,   the  Borrowers  and  their  subsidiaries),
               including, without limitation,  delivery of financial statements,
               reports,    accountants'    letters,    projections,    officers'
               certificates  and  other  information   reasonably  requested  by
               Lender;  payment of other  obligations;  continuation of business
               and maintenance of existence;  maintenance of material rights and
               privileges;  compliance  with  applicable  laws and all rules and
               regulations;  compliance with material  contractual  obligations;
               maintenance of property and  insurance;  maintenance of books and
               records;  right of  Lender  to  inspect  property  and  books and
               records;  notices  of  defaults,  litigation  and other  material
               events;  compliance with environmental laws; continued perfection
               of security  interests  in  existing  and  subsequently  acquired
               collateral; maintenance of Intellectual Property and separateness
               and single purpose entities; further assurances.

NEGATIVE
COVENANTS:     All negative  covenants  customary for  transactions of this type
               and others to be reasonably specified by Lender (to be applicable
               to  the  Guarantors,   the  Borrowers  and  their  subsidiaries),
               including, without limitation, limitations on (with exceptions to
               be   agreed):   indebtedness   (including   preferred   stock  of
               subsidiaries);    liens;    guarantee    obligations;    mergers,
               consolidations,  liquidations and dissolutions;  sales of assets;
               dividends and other payments in respect of capital stock; capital
               and development  expenditures;  investments,  loans and advances;
               optional  payments and  modifications  of subordinated  and other
               debt instruments; transactions with affiliates; changes in fiscal
               year; negative pledge clauses;  changes in lines of business; and
               changes in passive  holding  company  status.  The Loan Documents
               shall  also  include  a  negative  covenant  to the  effect  that
               Borrowers  will not  exercise  any rights or  remedies  under the
               Morton Indemnification  Agreement or the PWR/RWB Escrow Agreement
               without the prior written  consent of Lender and that in no event
               shall  the  PWR/RWB   Escrow  Fund  (as  defined  in  the  Merger
               Agreement)  be used to satisfy any  indemnification  claims other
               than  pursuant  to the  Morton  Indemnification  Agreement  until
               expiration of the term thereof.

SUBORDINATE
FINANCING
(SECURED/
UNSECURED):    None permitted,  other than (i) Mezzanine  Loans  contemplated by
               the Credit  Facility,  (ii) unsecured trade and operational  debt
               incurred in the ordinary  course of business and not  outstanding
               for more than 60 days with trade  creditors and in amounts as are
               normal and reasonable under the circumstances,  but not exceeding
               2.0% of the  applicable  Loan,  and not evidenced by a note or as
               otherwise   approved   by  Lender,   and  (iii)   capital   lease
               obligations.

                                  Exhibit A-13

<PAGE>

INTEREST
RESERVE:       Borrowers  shall  deposit on the Closing  Date an amount equal to
               the difference between  underwritten  projected net cash flow and
               projected  interest  expense,  as  determined  by  Lender  in its
               reasonable  discretion,  to cover the payment of interest  due on
               the Loans for a period of 24 months.  Any  extension  of any Loan
               shall  require a  replenishment  of the  Interest  Reserve  in an
               amount equal to the difference between underwritten projected net
               cash flow and projected interest expense, as determined by Lender
               in its reasonable discretion.  Amounts on deposit in the Interest
               Reserve shall be applied,  on a monthly basis,  to the payment of
               debt  service  on  the  Loans.   The  Interest  Reserve  will  be
               terminated,  and amounts on deposit  therein  will be released to
               Borrowers,  if at any time DSCR meets or exceeds a target DSCR to
               be agreed  between  Lender and  Borrowers.  "DSCR" shall mean the
               ratio of the net cash  flow (as  determined  in  accordance  with
               Lender's   then  current   underwriting   standards  for  similar
               transactions)  of the  remaining  Properties  for the trailing 12
               month period,  divided by the debt service for such period. At no
               time during the term of the Loans,  prior to  satisfaction of the
               conditions in the preceding sentence,  will amounts on deposit in
               the Interest  Reserve be less than an amount equal to six month's
               debt service on the Loans.

               Lender's  determination  of (i)  underwritten  projected net cash
               flow for purposes of calculating the Interest  Reserve under this
               Section as of the Closing  Date shall be  calculated  in a manner
               consistent with Lender's standard underwriting criteria in effect
               as of the date hereof (as reflected in a preliminary  Sources and
               Uses attached  hereto as SCHEDULE A, which is attached solely for
               purposes of illustrating  Lender's current standard  underwriting
               methodology and is not intended to be dispositive or binding upon
               the  parties  hereto  for any  purpose),  with  such  changes  to
               Lender's standard  underwriting criteria as Lender may reasonably
               apply based upon market factors in effect as of the Closing Date,
               and any new or revised  standard  underwriting  criteria that, in
               each case, have become applicable to the Properties subsequent to
               the date hereof as a result of changes in circumstances  relating
               to or  affecting  the  Properties,  and (ii)  projected  interest
               expense shall be calculated as the actual interest expense on the
               Loans funded on the Closing  Date (based upon the  Interest  Rate
               Spread over LIBOR at the strike price referred to herein).

TAX &
INSURANCE
RESERVE:       Borrowers  shall  deposit  monthly  1/12 of the annual  taxes and
               insurance  premiums  as  estimated  by Lender.  At  closing,  the
               reserve  will be  funded in an amount  which,  when the  required
               monthly  payments are added  thereto,  will be  sufficient to pay
               such  charges  when due.  Borrowers  shall not be entitled to any
               interest on any amounts deposited in such reserve, which interest
               shall be for the  account  of Lender.  If,  after  reviewing  the
               blanket insurance policy of Purchaser and its affiliates,  Lender
               determines, in its sole discretion,  that no insurance reserve is
               required,  Lender  shall  waive  such  requirement  prior  to the
               occurrence  of any event of default  under the Loan  Documents or
               following any cure of any such event of default.

FF&E RESERVE:  Borrowers  shall deposit  monthly 3% of the gross revenues of the
               Properties for FF&E,  which, for purposes of the Credit Facility,
               shall  include  customary  FF&E items,  as well as casino  gaming
               equipment and rock and roll memorabilia unique to the Resort. Any
               interest  earned on such  amounts  shall be  accumulated  for the
               benefit of Borrowers to be used in accordance with the purpose of
               such reserve.

                                  Exhibit A-14

<PAGE>

REPAIR
RESERVE:       Borrowers shall deposit on the Closing Date 115% of the estimated
               cost of (i) any  immediately  needed  maintenance and repairs (as
               determined by the engineering  report) and (ii) any environmental
               remediation or other work related to  environmental  matters that
               Lender  determines is necessary  with respect to the  Properties.
               Any interest  earned on such amounts shall be accumulated for the
               benefit of Borrowers to be used in accordance with the purpose of
               such reserve.  After  completion of all repairs and  remediation,
               all  remaining  funds  in  such  reserve  shall  be  released  to
               Borrowers.

CAPITAL
EXPENDITURES
RESERVE:       Borrowers  shall  deposit  on the  Closing  Date an  amount to be
               determined by Lender and  reasonably  acceptable to Borrowers but
               not  less   than   $10,000,000.00,   to  fund   ongoing   capital
               expenditures at the Properties, as approved by Lender in its sole
               discretion.  Any  interest  earned on  amounts  on deposit in the
               capital expenditures reserve account shall be accumulated for the
               benefit of Borrowers to be used in accordance with the purpose of
               such reserve.

GENERAL
RESERVE:       Borrowers  shall deposit  $12,000,000.00  into a general  reserve
               account on the Closing Date to be used for such uses and purposes
               as Lender  shall  determine  in its sole  discretion,  including,
               without  limitation,  application to the Interest  Reserve or any
               other  reserve  established  hereunder.  Any  interest  earned on
               amounts  on  deposit  in the  general  reserve  account  shall be
               accumulated for the benefit of Borrowers to be used in accordance
               with the purpose of such reserve.

MANAGEMENT:    Management  of the  Properties  shall be  conducted  by an entity
               approved by Lender in its  reasonable  good faith  judgment.  Any
               management  agreements  shall be submitted to, and be approved by
               Lender. The management fees payable by Borrowers thereunder shall
               not exceed the base  management  fees set forth in the management
               agreements  delivered  to and  approved  by  Lender  prior to the
               Closing Date and no incentive fees or other fees shall be payable
               thereunder  until the DSCR as of three (3)  consecutive  calendar
               quarters  is  equal to or  greater  than a DSCR  threshold  to be
               determined by Lender in accordance with its standard underwriting
               practices in which event an incentive fee not to exceed an amount
               determined by Lender in accordance with its standard underwriting
               procedures may be paid to manager. The management  agreements and
               any agreement  with the Gaming  Licensee and the fees  thereunder
               shall be subordinate to the Loan Documents  (including payment of
               debt  service),  and shall  provide that such  agreements  may be
               terminated  by Lender,  without  penalty or fee,  during the term
               upon (i) a change in control of the  manager or Gaming  Licensee,
               as the  case  may be,  (iii) a  continuing  default  (beyond  any
               applicable grace or cure period) under the Loan Documents,  (iii)
               the  manager  or Gaming  Licensee,  as the case may be,  becoming
               insolvent or a debtor in any bankruptcy or insolvency proceeding,
               or (iv)  the  manager  or  Gaming  Licensee,  as the case may be,
               committing any fraud,  gross  negligence,  willful  misconduct or
               misappropriation of funds. Borrowers shall also provide copies of
               all other  contracts  relating to the  Properties  (certified  by
               Borrowers to be complete and correct).

               If at any time revenue of the Target (or the surviving  entity in
               the  merger   contemplated  by  the  Merger  Agreement)  and  its
               subsidiaries  that arises from,  or is  attributable  to,  gaming
               operations at the Properties  decreases below a revenue threshold
               amount determined by Lender in its sole but reasonable

                                  Exhibit A-15

<PAGE>

               discretion  (expressed as a percentage  of the projected  revenue
               for gaming operations as set forth in the Projections supplied to
               Lender as of the Closing  Date),  then Lender or Purchaser  shall
               have the right to terminate the Gaming Licensee and appoint a new
               person or entity to oversee and manage the gaming  operations  at
               the  Properties   that  is  acceptable  to  Lender  in  its  sole
               discretion.

REPORTING
REQUIREMENTS:  Borrowers  and  Guarantors  shall  provide  unaudited   quarterly
               statements  within  45 days of the end of each  calendar  quarter
               during the term and audited financial  statements certified by an
               officer of the applicable entity (acceptable to Lender) within 60
               days of the end of the calendar  year during the term.  Borrowers
               shall  provide  monthly  financial  statements  within 30 days of
               month-end for the first 12 months following the Closing Date, and
               as reasonably  requested by Lender  thereafter.  Borrowers  shall
               provide annual budgets for the Properties  which shall be subject
               to Lender's  approval,  which approval shall not be  unreasonably
               withheld.

CASH
MANAGEMENT:    Borrowers  agree that all credit card receipts and rents from the
               Properties  and all licensing  fees or other receipts from the IP
               Collateral will be deposited  directly into an account controlled
               by Lender at a financial  institution  reasonably  acceptable  to
               Lender (the "LOCKBOX ACCOUNT").  Borrowers will cause the manager
               of the  Properties  to deposit all other  revenues in the Lockbox
               Account within one business day after  receipt.  All funds in the
               Lockbox  Account will be swept on each business day to an account
               designated  and  controlled  by Lender or Lender's  servicer (the
               "CASH  MANAGEMENT  ACCOUNT").  On each business day, Lender shall
               withdraw all funds from the Cash Management  Account and allocate
               them in the following  order (i) first, to pay Lender the monthly
               installment  of interest  due under the Loans on the next Payment
               Date and to fund all monthly  reserves  required  pursuant to the
               Loan  Documents on such Payment  Date,  (ii) second,  to pay CMBS
               Borrowers  amounts set forth in the  approved  annual  budget for
               operating  expenses  for such  month and any other  extraordinary
               expenses  approved  by Lender for such month,  and (iii)  amounts
               remaining in the Cash  Management  Account  after  payment of all
               such amounts shall be disbursed to the CMBS  Borrowers.  The Lock
               Box  Account  and  Cash  Management  Account  shall  be  held  as
               additional security for the Loans.

NO FRANCHISE
AGREEMENTS:    Borrowers shall represent and warrant in the Loan Documents that,
               other than as  approved  by  Lender,  none of the  Properties  is
               subject to any franchise agreement.

GROUND
LEASES:        Any  ground  leases  with  respect  to the  Properties  shall  be
               reasonably  acceptable  to  Lender.  Borrowers  shall  cause each
               ground  lessor  under a ground  lease to  deliver  to  Lender  an
               estoppel agreement reasonably satisfactory to Lender prior to the
               Closing  Date.  Lender  may  require a ground  lease  reserve  be
               established  with Lender to pay all  amounts  due from  Borrowers
               under the ground leases.

INSURANCE:     Borrowers  shall provide  insurance  coverage for each  Property,
               including  foreign and  domestic  terrorism  insurance,  business
               interruption  insurance,  and  such  other  insurance  reasonably
               required by Lender (including,  flood, earthquake and windstorm),
               in all  events in an amount  sufficient  to  satisfy  in full the
               entire  principal  amount  of  any  Loans  secured,  directly  or
               indirectly,  by

                                  Exhibit A-16

<PAGE>

               the  applicable  Property,  together  with all  interest  accrued
               thereon and all other  amounts due and  payable  thereunder.  The
               provider  of all such  insurance  must be  rated at least  "A" by
               Standard & Poor's Rating Services and Moody's  Investor  Service,
               Inc. Lender will permit the Properties to be covered by a blanket
               insurance policy covering  Purchaser's  affiliates so long as (i)
               no event of default under the Loan Documents  shall have occurred
               and be continuing and (ii) such blanket  policy's  aggregates and
               deductibles  on a per  occurrence  basis  otherwise  satisfy  the
               foregoing requirements.

SECURITIZATION: Borrowers understand that Lender may securitize and/or syndicate
               any Loan in a public  or  private  securities  offering  which is
               rated by one or more rating agencies (the  "SECURITIZATION").  In
               this  connection,  the Loan  Documents will require the Borrowers
               to, among other things,  provide Lender with all  information and
               materials  reasonably  required  by Lender in the  Securitization
               process (including updated financial and operating statements, as
               applicable, of the Guarantors),  and use commercially reasonable,
               good faith efforts to help  facilitate  the  consummation  of the
               Securitization.  Certain  of  the  nationally  recognized  rating
               agencies  (the  "RATING  AGENCIES")  will rate some or all of the
               securities  or  the  Loans.  Borrowers  agree  to  cooperate,  at
               Lender's  expense,  with  Lender to effect  this  Securitization,
               including  providing  the Rating  Agencies  with such  additional
               information  as they may  reasonably  request  after the closing,
               amending  the Loan  Documents  and  organizational  documents  of
               Borrowers  as may be required by the Rating  Agencies.  Borrowers
               shall  indemnify  Lender  for  any  losses  that  relate  to  any
               misleading or incorrect  information  provided by or on behalf of
               Borrowers  and included in the offering  document.  Any necessary
               amendment of the Loan Documents or the  organizational  documents
               to facilitate any  Securitization  will not materially  adversely
               alter  the  economic  and  any  other  terms  thereof,  including
               recourse carve-outs.

TITLE/SURVEY:  CMBS  Borrowers  shall  deliver  to Lender at the  closing of any
               Mortgage  Loan (and at CMBS  Borrower's  sole  cost and  expense)
               title policies issued by First American Title  Insurance  Company
               of New York and/or Fidelity  National Title Insurance  Company in
               respect of the  Properties  in form and  substance  acceptable to
               Lender, with such endorsement, co-insurance and reinsurance as is
               approved by Lender,  insuring Lender, in an amount at least equal
               to the  principal  amount of the Loans,  that  Lender's  security
               instrument constitutes a first lien or charge upon the Properties
               subject only to such items as shall have been approved in writing
               by  Lender  and its  attorneys.  Such  title  policies  shall  be
               obtained  through the services of an agent  determined by Lender.
               In  addition,  Borrowers  shall  deliver  Eagle 9 policies  and a
               mezzanine endorsement to the owner's title policy with respect to
               the Bridge Loan,  any  Mezzanine  Loans and the Holdco  Mezzanine
               Loan, all in form and substance acceptable to Lender.

COST
AND YIELD
PROTECTION:    The definitive Loan Documents shall contain customary  provisions
               (i) protecting  Lender,  and any of its assignees or participants
               against  increased  costs or loss of yield resulting from changes
               in reserve,  tax, capital adequacy and other  requirements of law
               and from the  imposition  of or changes in  withholding  or other
               taxes and (ii) indemnifying  Lender for "breakage costs" incurred
               in connection with, among other things, any prepayment on a LIBOR
               loan on a day other than the last day of an interest  period with
               respect thereto.

                                  Exhibit A-17

<PAGE>

EXPENSES:      Borrowers   shall   reimburse   Lender  for  all  of  its  actual
               out-of-pocket expenses, including, but not limited to, reasonable
               and  documented   fees  and  expenses  of  counsel   incurred  in
               connection  with  this  transaction  whether  or not it  actually
               closes, third party reports, title policies,  surveys,  recording
               and filing fees,  mortgage recording taxes and other taxes, costs
               of environmental reports and any remediation required thereunder,
               physical  condition reports and any structural  repairs indicated
               therein  or any  property  improvement  program,  and  appraisals
               (collectively,  the "LENDER EXPENSES").  Lender Expenses, and, if
               requested by any Borrower, other third party expenses which shall
               be paid by such  Borrower,  including,  but not  limited  to, any
               prepayment  premiums or penalties with respect to other financing
               to be  satisfied  by such  Borrower  or other  costs or  expenses
               incurred in  connection  with granting a mortgage to Lender shall
               be netted from the Loans at closing.

               To the extent  sufficient  funds remain  available  from the Good
               Faith Deposit paid to Lender pursuant to the  Commitment,  Lender
               shall  apply  such   remaining   Good  Faith  Deposit  to  actual
               out-of-pocket  expenses  incurred  in  connection  with the third
               party reports and other Lender Expenses.  Borrowers shall, within
               5 business  days,  deposit with Lender such  additional  funds as
               Lender shall  reasonably  request to  supplement  such Good Faith
               Deposit to the extent the costs of third party  reports and other
               Lender Expenses exceed any such unapplied Good Faith Deposit.

               The balance of any Good Faith  Deposit,  including any additional
               funds  deposited  pursuant to this section of the Term Sheet,  to
               the  extent  not used to pay for third  party  reports  and other
               Lender Expenses,  will be applied against the Origination Fee (as
               defined  in the  fee  letter  accompanying  the  Commitment)  due
               pursuant to the Commitment at the time of any final closing under
               this Term Sheet, and any excess thereof will be refunded promptly
               to the Company at such time.

BROKERAGE
FEES:          Purchaser,  Borrowers  and  Guarantors  represent  and warrant to
               Lender  that  they have not  dealt  with any  finder or broker in
               connection  with this Term  Sheet.  Purchaser,  Borrowers  and/or
               Guarantors  shall  pay any and all  commissions  and  fees of any
               broker or finder retained by them and hereby agree to jointly and
               severally  indemnify and hold Lender  harmless from any claim for
               such  commissions  or fees.  Lender  represents  and  warrants to
               Purchaser  that Lender has not dealt with any finder or broker in
               connection  with this Term  Sheet.  Lender  shall pay any and all
               commissions  and fees of any broker or finder  retained by Lender
               and hereby agree to indemnify  and hold  Purchaser  harmless from
               any claim for such  commissions  or fees.  Such  indemnity  shall
               survive the  expiration or  termination of this Term Sheet and/or
               the Credit Facility.

CONDITIONS
PRECEDENT:     BRIDGE  LOAN:  In addition  to the  conditions  precedent  to the
               Credit Facility  described in the Commitment  Letter,  the Bridge
               Loan shall be subject to the following conditions precedent as of
               the Closing Date: (i) Purchaser's counsel shall obtain, at Bridge
               Borrower's expense,  Uniform Commercial  Code/litigation/tax lien
               searches  against such  parties as Lender may require,  with such
               searches to be updated as of the Closing Date;  (ii) Lender shall

                                  Exhibit A-18

<PAGE>

               have received  customary legal opinions  (including  opinions (A)
               from  counsel  to  Borrowers  and  Guarantors  and (B) from  such
               special and local  counsel as may be  required by Lender);  (iii)
               Lender shall have received proof of customary  insurance coverage
               reasonably  satisfactory  to Lender,  and (iv) Lender  shall have
               received,  at least five business days prior to the Closing Date,
               all documentation  and other  information  required by regulatory
               authorities  under applicable "know your customer" and anti-money
               laundering rules and regulations,  including  without  limitation
               the PATRIOT Act.

               LONG-TERM  LOANS: In addition to the conditions  precedent to the
               Credit  Facility  described in the Commitment  Letter,  Long-Term
               Loans shall be subject to the following  conditions  precedent as
               of  the  Closing  Date:  (i)  Lender  shall  have  satisfactorily
               completed  its  due  diligence  with  respect  to the  Properties
               (including the review and approval of third party reports, zoning
               compliance and building code  compliance)  and the IP Collateral,
               the  Long-Term  Borrowers  and  the  Guarantors;  (ii)  Long-Term
               Borrowers  shall provide  Lender an as-built,  ALTA survey of the
               Properties certified to Lender and the issuer of the title policy
               by a  registered  land  surveyor,  dated not more than sixty (60)
               days prior to the closing  date,  and  otherwise  complying  with
               Lender's  survey  requirements;  (iii)  Borrowers'  counsel shall
               obtain,    at    Borrowers'    expense,     Uniform    Commercial
               Code/litigation/tax  lien searches against such parties as Lender
               may require  showing that all  personal  property is owned by the
               CMBS  Borrowers and is free from all liens and  encumbrances  and
               that none of the CMBS Borrowers,  their general partners/managing
               members  and  principals  or the  Properties  is  subject  to any
               pending  litigation (other than litigation in the ordinary course
               of  business  and  which  is  not  reasonably  likely  to  have a
               Collateral   Adverse   Effect   with   respect  to  the   related
               Collateral),  bankruptcy  or tax liens,  with such searches to be
               updated as of the closing  date;  (iv) Lender shall have received
               such  legal  opinions  (including  opinions  (A) from  counsel to
               Borrowers  and  Guarantors  and (B) from such  special  and local
               counsel as may be required by Lender), documents,  appraisals and
               other  instruments as are customary for transactions of this type
               or as Lender  may  reasonably  request;  (v)  Lender  shall  have
               received proof of insurance coverage satisfactory to Lender, (vi)
               Lender shall have received an Engineering  Report for each of the
               Properties showing that all material improvements are in good and
               workable  condition  and  comply  with  all  applicable  material
               regulations including ADA or, if not, an estimate of the cost and
               description of any deferred maintenance and repairs; (vii) Lender
               shall  have  received  an  Environmental  Report  for each of the
               Properties  showing that there is no material violation of law in
               respect  of any toxic  substance  or  hazardous  waste  contained
               within the  Properties;  (viii)  Lender shall have  received such
               reports and other  information  as Lender  shall have  reasonably
               requested  from the United States Patent and Trademark  Office or
               otherwise  relating  to the IP  Collateral  showing  that  the IP
               Borrower has good and  marketable  title to, or licensing  rights
               with respect to, the IP Collateral,  free and clear of all liens,
               security  interests  or  encumbrances;  (ix)  Lender  shall  have
               received,  at least five business days prior to the Closing Date,
               all documentation  and other  information  required by regulatory
               authorities  under applicable "know your customer" and anti-money
               laundering rules and regulations,  including  without  limitation
               the  PATRIOT  Act,  and (x) Lender  shall have  received,  to its
               satisfaction,  such other  documents  and  instruments  as Lender
               shall reasonably request.

GOVERNING LAW: All Loan Documents will be governed by New York law.

COUNSEL
TO LENDER:     Brown Raysman Millstein Felder & Steiner LLP.

                                  Exhibit A-19PATRICK INDUSTRIES, INC.

1987 STOCK OPTION PROGRAM

AS AMENDED AND RESTATED

(through 5/11/06)

1.            Purpose.  The purpose of Patrick Industries, Inc. 1987 Stock Option Program (the “Program”) is to attract and retain outstanding individuals as officers and key employees of Patrick Industries, Inc. (the “Company”) and its subsidiaries, and to furnish incentives to such persons by providing such persons opportunities to acquire Common Stock of the Company, or monetary payments based on the value of such stock, or both, on advantageous terms as herein provided.  The Program will also enable the Company to attract and keep non-employee directors.

2.            Administration.  The Program will be administered by a committee (the “Committee”) consisting of not less than three (3) members of the Board of Directors who shall not be eligible to participate in the Program at the time of Committee action or at any time within one (1) year prior thereto.  The Committee shall interpret the Program, prescribe, amend and rescind rules and regulations relating hereto and make all other determinations necessary or advisable for the administration of the Program.  A majority of the members of the Committee shall constitute a quorum and all determinations of the Committee shall be made by a majority of its members.  Any determination of the Committee under the Program may be made without notice or meeting of
the Committee by a writing signed by a majority of the Committee members.

3.            Participants.  (a)  Participants in the Program will consist of such officers or other key employees of the Company and its subsidiaries as the Committee in its sole discretion may designate from time to time to receive benefits (“Benefits”) under the Program.  The Committee’s designation of a participant in any year shall not require the Committee to designate such person to receive a Benefit in any other year.  The Committee shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of their respective Benefits, including without limitation (i) the financial condition of the Company; (ii) anticipated profits for the current or future years; (iii) contributions of participants
to the profitability and development of the Company; and (iv) other compensation provided to participants.

(b)          In addition, each non-employee director of the Company shall automatically be granted restricted stock awards for 3,000 shares of Common Stock on May 14, 2004 (the date of the Company’s 2004 Annual Meeting of Shareholders) and thereafter annually on the date of the Company’s Annual Meeting of Shareholders.  These awards will vest after one  year of continued service on the Board or earlier if such director dies, becomes disabled or retires from the Board at any time at or after age 80, or if there is a “Change in Control” as hereinafter defined.  “Disability” shall have the meaning ascribed to such term in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended, or any successor provision.  A “Change in Control” shall have the meaning set
forth in Exhibit A attached hereto.  As new non-employee directors are elected to the Board they will also automatically be granted restricted stock awards for 3,000 shares of Common Stock on the terms set forth above.

 

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4.            Types of Benefits.  Benefits under the Program may be granted to participants other than non-employee directors in any one or a combination of (a) Incentive Stock Options, (b) Non qualified Stock Options, (c) Stock Appreciation Rights, and (d) Stock Awards, all as described below in paragraphs 6 through 9 hereof.

5.            Shares Reserved under the Program.  There is hereby reserved for issuance under the Program 721,345 shares of Common Stock.  The shares reserved for issuance may be newly issued or treasury shares.  All of such shares may, but need not, be issued pursuant to the exercise of Incentive Stock Options.  The maximum number of shares of Common Stock which shall be available for the award of Benefits to any participant in any fiscal year of the Company shall not exceed 50,000 shares.

If there is a lapse, expiration, termination or cancellation of any Benefit granted hereunder without the issuance of shares or payment of cash thereunder, or if shares are issued under any Benefit and thereafter are acquired by the Company pursuant to rights reserved upon the issuance thereof, the shares subject to or reserved for such Benefit may again be used for new Benefits under this Program; provided, however, that in no event may the number of shares of Common Stock issued under this Program exceed the total number of shares reserved for issuance hereunder.

6.            Incentive Stock Options.  Incentive Stock Options will consist of options to purchase Common Stock at purchase prices not less than one hundred percent (100%) of the fair market value of such stock on the date of grant.  Incentive Stock Options will be exercisable over not more than ten (10) years after date of grant and shall terminate not later than three (3) months after termination of employment for any reason other than disability, retirement or death.  In the event of termination of employment by reason of disability or retirement, the right of the optionee to exercise an Incentive Stock Option shall terminate not later than twelve (12) months after such termination of employment.  If the optionee should die while employed, within twelve (12)
months after termination of employment by reason of disability or retirement, or within three (3) months after any other termination of employment, the right of the optionee or his or her successor in interest to exercise an Incentive Stock Option shall terminate not later than twelve (12) months after the date of death.  The aggregate fair market value (determined at the time the option is granted) of shares of Common Stock with respect to which Incentive Stock Options granted under the Program are exercisable for the first time by a participant during any calendar year (under all option plans of the Company and its subsidiary corporations) shall not exceed $100,000.

7.            Non qualified Stock Options.  Non qualified Stock Options will consist of options to purchase Common Stock at purchase prices not less than one hundred percent (100%) of the fair market value of such stock on the date of grant.  Non qualified Stock Options will be exercisable over not more than twelve (12) years after the date of grant and shall terminate not later than six (6) months after termination of employment for any reason other than, disability, retirement or death.  In the event of termination of employment by reason of disability or retirement, the right of the optionee to exercise a Non qualified Stock Option shall terminate not later than twelve (12) months after such termination of employment.  If the optionee should die while
employed, within twelve (12) months after termination of employment by reason of disability or retirement, or within six (6) months after any other termination of employment, the 

 

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right of the optionee or his or her successor in interest to exercise a Non qualified Stock Option shall terminate not later than twelve (12) months after the date of death.

8.            Stock Appreciation Rights.  The Committee may, in its discretion, grant a Stock Appreciation Right to the holder of any stock option granted hereunder.  Such Stock Appreciation Rights shall be subject to such terms and conditions consistent with the Program as the Committee shall impose from time to time, including the following:

(a)          A Stock Appreciation Right may be granted with respect to a stock option at the time of its grant or at any time thereafter up to six (6) months prior to its expiration.

(b)          Stock Appreciation Rights will permit the holder to surrender any related stock option or portion thereof which is then exercisable and to elect to receive in exchange therefor cash in an amount equal to:

(i)           The excess of the fair market value on the date of such election of one share of Common Stock over the option price multiplied by

(ii)          The number of shares covered by such option or portion thereof which is so surrendered.

(c)          The Committee shall have the discretion to satisfy a participant’s right to receive the amount of cash determined under subparagraph (b) hereof, in whole or in part, by the delivery of Common Stock valued as of the date of the participant’s election.

(d)          Each Stock Appreciation Right will be exercisable at the time and to the extent the option to which it relates is exercisable.

(e)          In the event of the exercise of a Stock Appreciation Right, the number of shares reserved for issuance hereunder shall be reduced by the number of shares covered by the stock option or portion thereof surrendered.

9.            Stock Awards.  Stock Awards will consist of Common Stock transferred to participants without other payment therefor as additional compensation for services to the Company and its subsidiaries.  Stock Awards shall be subject to such terms and conditions as the Committee determines appropriate, including, without limitation, restrictions on the sale or other disposition of such shares and rights of the Company to reacquire such shares upon termination of the participant’s employment within specified periods.

10.          Nontransferability.  Each Benefit granted under this Program shall not be transferable other than by will or the laws of descent and distribution, and shall be exercisable, during the participant’s lifetime, only by the participant or the participant’s guardian or legal representative.  Notwithstanding the foregoing, at the discretion of the Committee, an award of a Benefit may permit the transferability of a Benefit by a participant solely to members of the participant’s immediate family or trusts or family partnerships for the benefit of such persons, subject to any restriction included in the award of the Benefit.

 

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11.          Other Provisions.  The award of any Benefit under the Program may also be subject to other provisions (whether or not applicable to the Benefit awarded to any other participant) as the Committee determines appropriate, including, without limitation, provisions for the purchase of Common Stock under stock options in installments, provisions for the payment of the purchase price of shares under stock options by delivery of other shares of Common Stock of the Company having a then fair market value equal to the purchase price of such shares, provisions for the acceleration of exercisability of Benefits in the event of change of control of the Company, such provisions as may be appropriate to comply with federal or state securities laws and stock exchange
requirements and understandings or conditions as to the participant’s employment in addition to those specifically provided for under the Program.

12.          Term of Program and Amendment, Modification or Cancellation of Benefits.  No Benefit shall be granted after May 17, 2014; provided, however, that the terms and conditions applicable to any Benefits granted prior to such date may at any time be amended, modified or cancelled by mutual agreement between the Committee and the participant or such other persons as may then have an interest therein, so long as any amendment or modification does not increase the number of shares of Common Stock issuable under this Program.

13.          Taxes.  The Company shall be entitled to withhold the amount of any tax attributable to any amount payable or shares deliverable under the Program after giving the person entitled to receive such amount or shares notice as far in advance as practicable, and the Company may defer making payment or delivery if any such tax may be pending unless and until indemnified to its satisfaction.  When a person is required to pay to the Company an amount required to be withheld under applicable tax laws in connection with exercises of Non qualified Stock Options or other Benefits under the Plan, the Committee may, in its discretion and subject to such rules as it may adopt, permit such person to satisfy the obligation, in whole or in part, by electing to have the Company
withhold shares of Common Stock having a fair market value equal to the amount required to be withheld.  The election must be made on or before the date that the amount of tax to be withheld is determined.

14.          Fair Market Value.  The fair market value of the Company’s Common Stock at any time shall be determined in such manner as the Committee may deem equitable or required by applicable laws or regulations.

	
             
 	
            15.
 	
            Adjustment Provisions.
 

(a)          If the Company shall at any time change the number of issued shares of Common Stock without new consideration to the Company (such as by stock dividends or stock splits), the total number of shares reserved for issuance under this Program and the number of shares covered by each outstanding Benefit shall be adjusted so that the aggregate consideration payable to the Company and the value of each such Benefit shall not be changed.  The Committee may also provide for the continuation of Benefits or for other equitable adjustments after changes in the Common Stock resulting from reorganization, sale, merger, consolidation or similar occurrence.

(b)          Notwithstanding any other provision of this Program, and without affecting the number of shares otherwise reserved or available hereunder, the Committee may 

 

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authorize the issuance or assumption of Benefits in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate.

(c)          In the case of any merger, consolidation or combination of the Company with or into another corporation, other than a merger, consolidation or combination in which the Company is the continuing corporation and which does not result in the outstanding Common Stock being converted into or exchanged for different securities, cash or other property, or any combination thereof (an “Acquisition”):

(i)           any participant to whom a stock option has been granted under the Program shall have the right (subject to the provisions of the Program and any limitation applicable to such option) thereafter and during the term of such option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon such Acquisition by a holder of the number of shares of Common Stock which might have been obtained upon exercise of such option or portion thereof, as the case may be, immediately prior to such Acquisition;

(ii)          any participant to whom a Stock Appreciation Right has been granted under the Program shall have the right (subject to the provisions of the Program and any limitation applicable to such right) thereafter and during the term of such right to receive upon exercise thereof the difference between the aggregate Fair Market Value on the applicable date (as set forth in such right) of the Acquisition Consideration receivable upon such Acquisition by a holder of the number of shares of Common Stock which might have been obtained upon exercise of the option related thereto or any portion thereof, as the case may be, immediately prior to such Acquisition and the aggregate option price of such option.

The term “Acquisition Consideration” shall mean the kind and amount of shares of the surviving or new corporation, cash, securities, evidence of indebtedness, other property or any combination thereof receivable in respect of one share of Common Stock of the Company upon consummation of an Acquisition.

16.          Amendment and Termination of Program.  The Board of Directors of the Company may amend the Program from time to time or terminate the Program at any time, but no such action shall reduce the then existing amount of any participant’s Benefit or adversely change the terms and conditions thereof without the participant’s consent.  However, except for adjustments expressly provided for herein, no amendment may (i) materially increase the Benefits accruing to participants, (ii) materially increase the number of shares which may be issued, or (iii) materially modify the requirements as to eligibility for participation in the Program.

17.          Shareholder Approval.  The Program as amended was restated by the Board of Directors of the Company on February 10, 1994 and approved by the shareholders at the 1994 Annual Meeting.  The Program as amended and restated was further amended in 2004 and approved by the shareholders at the 2004 Annual Meeting.  The Program as currently amended and restated and any Benefits relating to the amendments granted hereunder shall be null and 

 

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void if shareholder approval is not obtained within twelve (12) months of the 2006 restatement of the Program by the Board of Directors.

 

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EXHIBIT A

 

A “Change in Control” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company or an employee benefit plan sponsored by the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more (or if a person is permitted to own a higher percentage under the Company’s Rights Agreement, dated March 31, 2006, as the same may be amended from time to time, such higher percentage as to such person) of the combined voting power of the Company’s then outstanding securities ordinarily having the right to vote at elections of directors (excluding an acquisition of such
securities directly from the Company), (ii) during any period of two consecutive years individuals who at the beginning of the two-year period were members of the Board cease for any reason to constitute at least a majority of the Board (individuals with such two years of service being the “Continuing Directors”), (iii) there shall be consummated (A) any consolidation, merger or reorganization of the Company in which the Company is not converted into or exchanged for cash, securities or other property, other than a consolidation, merger, or reorganization of the Company in which the holders of capital stock of all classes of the Company (including Common Stock) immediately prior to the transaction have, directly or indirectly, an ownership interest in securities representing a majority of the combined voting power of the outstanding voting securities of the surviving entity immediately after the transaction, or (B) any sale,
lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, other than any such transaction with entities in which the holders of the Company’s then outstanding capital stock of all classes, directly or indirectly, have an ownership interest in securities representing a majority of the combined voting power of the outstanding voting securities of such entities immediately after the transaction, (iv) a change occurs of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A, promulgated under the Exchange Act or any successor disclosure item, or (v) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; provided, however, that any occurrence described in (i) through (iv) approved by the affirmative vote of a majority of the Continuing Directors, shall not constitute a Change in Control
to the extent so provided by the affirmative vote of a majority of those Continuing Directors.

 

 

 

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