Document:

EX-10.29

 

Exhibit 10.29

EXECUTION COPY

MODIFICATION AND RATIFICATION OF GUARANTIES

     THIS MODIFICATION AND RATIFICATION of GUARANTIES (this “Modification”) is made as of the 6th
day of November 2007, by and among MORGANS GROUP LLC, a Delaware limited liability company, having
an address at 475 Tenth Avenue, New York, New York 10018, Attention: Marc Gordon, Chief Investment
Officer (“Morgans Guarantor”), DLJ MB IV HRH, LLC, a Delaware limited liability company, having an
address c/o DLJ Merchant Banking Partners, 11 Madison Avenue, New York, New York 10010, Attention:
Ryan Sprott (“DLJ Guarantor”; and collectively with Morgans Guarantor, each, individually, a
“Guarantor”, and collectively, “Guarantors”), and COLUMN FINANCIAL, INC., a Delaware corporation,
having an address at 11 Madison Avenue, New York, New York 10010 (together with its successors and
assigns, “Lender”).

RECITALS:

     A. Pursuant to that certain Loan Agreement dated as of February 2, 2007 by and among HRHH
Hotel/Casino, LLC, HRHH Cafe, LLC, HRHH Development, LLC, HRHH IP, LLC and HRHH Gaming, LLC
(collectively, “Borrowers”) and Lender (the “Original Loan Agreement”), Lender made a loan (the
“Loan”) to Borrowers in the original principal sum of up to One Billion Three Hundred Sixty Million
and 00/100 Dollars ($1,360,000,000.00).

     B. The Loan is evidenced by that certain Promissory Note dated as of February 2, 2007 made by
Borrowers in favor of Lender (the “Original Note”), and is secured by, among other things (i) that
certain Construction Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Financing Statement (Fixture Filing) dated as of February 2, 2007 made by Borrowers, as grantors,
to First American Title Insurance Company, as trustee, for the benefit of Lender, as beneficiary
(the “Security Instrument”), encumbering the properties located in Clark County, Nevada more
particularly described therein (collectively, the “Properties”), and (ii) that certain Assignment
of Leases and Rents dated as of February 2, 2007 made by Borrowers in favor of Lender and
encumbering the Properties (the “Assignment of Leases”).

     C. In connection with the making of the Loan to Borrowers, Guarantors executed and delivered
to Lender the following documents: (i) that certain Closing Guaranty of Completion dated as of
February 2, 2007 made by Guarantors in favor of Lender (as the same is being amended hereby and as
the same hereafter may be amended, restated, replaced, supplemented or otherwise modified from time
to time, the “Completion Guaranty”), (ii) that certain Guaranty Agreement (Non-Qualified Mandatory
Prepayment) dated as of February 2, 2007 made by Guarantors in favor of Lender (as the same is
being amended hereby and as the same hereafter may be amended, restated, replaced, supplemented or
otherwise modified from time to time, the “Non-Qualified Prepayment Guaranty”), and (iii) that
certain Guaranty Agreement dated as of February 2, 2007 made by Guarantors in favor of Lender (as
the same is being amended hereby and as the same hereafter may be amended, restated, replaced,
supplemented or otherwise modified from time to time, the “Non-Recourse Guaranty”; and collectively
with the Completion Guaranty and the Non-Qualified Prepayment Guaranty, the “Guaranties”).

 

 

     D. On the date hereof, (i) Borrowers are prepaying $350,000,000.00 of the Loan with the
proceeds of three (3) mezzanine loans made to the direct and/or indirect owners of equity interests
in Borrowers (collectively, the “Mezzanine Prepayments”), and (ii) Lender is increasing the maximum
amount that may be funded in the future under the Construction Loan (as defined in the Original
Loan Agreement) by $20,000,000.00 (the “Construction Loan Increase”).

     E In connection with the Mezzanine Prepayments and the Construction Loan Increase, Borrowers
and Lender have agreed to modify certain terms of the Loan and, in connection therewith, are today
executing and delivering (i) that certain Amended and Restated Loan Agreement dated of even date
herewith (as the same may be further amended, restated, replaced, supplemented or otherwise
modified from time to time, the “Loan Agreement”), (ii) that certain Replacement Reduced
Acquisition Loan Promissory Note of even date herewith in the principal amount of Four Hundred Ten
Million and No/100 Dollars ($410,000,000.00) made by Borrowers in favor of Lender (as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to time, the “Reduced
Acquisition Loan Note”), (iii) that certain Replacement Construction Loan Promissory Note of even
date herewith in the principal amount of up to Six Hundred Twenty Million and No/100 Dollars
($620,000,000.00) made by Borrowers in favor of Lender (as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time, the “Construction Loan Note”; and
collectively with the Reduced Acquisition Loan Note, the “Notes”), and (iv) that certain
Modification of Construction Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Financing Statement (Fixture Filing) and Other Loan Documents between Borrowers and Lender (the
“Loan Document Modification Agreement”). Other than the $20,000,000.00 Construction Loan Increase,
which is created and evidenced as a part of the Construction Loan Note, the Notes do not create any
new or additional indebtedness, but merely each evidence a portion of the same indebtedness
evidenced by the Original Note.

     F. Capitalized terms used but not defined herein shall have the meanings ascribed to such
terms in the Loan Agreement.

     G. In connection with the modification of the Loan as hereinabove described, including,
without limitation, the Construction Loan Increase, (i) Lender and Guarantors desire to modify the
Guaranties, and (ii) Lender has requested that Guarantors ratify the terms and conditions of the
Guaranties as hereinafter set forth.

     NOW, THEREFORE, for good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, Borrowers and Lender hereby agree as follows:

1. Modifications to Definitions Generally. Guarantors and Lender hereby agree that all
references to the following defined terms contained in any of the Guaranties are hereby modified as
follows:

     (a) Note. All references to “the Note” shall be deemed to refer to the Notes as
defined herein; provided, however, that any such deemed reference to the Notes as
defined herein shall be deemed to refer to the Notes collectively or to either or both of the
Notes, as the context shall reasonably require.

 

 

     (b) Loan Agreement. All references to “the Loan Agreement” shall mean the Loan
Agreement as defined herein.

     (c) Cash Management Agreement. All references to “the Cash Management Agreement”
shall mean that certain Amended and Restated Cash Management Agreement of even date herewith by and
among Borrowers, HRHI and Lender and acknowledged and agreed to by Manager, as the same may
hereafter be amended, restated, replaced, supplemented or otherwise modified from time to time.

     (d) HRHI Loan Documents. All references to any Loan Document to which HRHI is a party
shall mean such Loan Document as modified by the Loan Document Modification Agreement and by that
certain Modification of HRHI Loan Documents and Ratification of HRHI Guaranty of even date herewith
by and between HRHI and Lender, and as the same may hereafter be amended, restated, replaced,
supplemented or otherwise modified from time to time.

     (e) Individual Loan Documents. All references to any other Loan Document not
specifically referred to above, shall mean such Loan Document as modified by the Loan Document
Modification Agreement, and as the same may hereafter be amended, restated, replaced, supplemented
or otherwise modified from time to time.

     (f) Loan Documents. All references to “the Loan Documents” shall mean the Loan
Documents as modified by the Loan Document Modification Agreement and, if applicable, as modified
by any other modification documents referred to in this Modification, and as the same may hereafter
be amended, restated, replaced, supplemented or otherwise modified from time to time.

2. Specific Modifications to Non-Qualified Prepayment Guaranty. Without limiting the
general modifications to the Loan Documents referred to above, Lender and Guarantors hereby agree
to the following additional modifications:

     (a) Section 1.1(i) of the Non-Qualified Prepayment Guaranty is hereby deleted in its entirety
and replaced with the following:

     “(i) Definition of Guaranteed Obligation. As used
herein, the term “Guaranteed Obligation” means the obligation of
Borrowers to pay to Lender the Non-Qualified Mandatory Prepayment;
provided, however, that in no event shall the
aggregate liability of Guarantors under this Guaranty and the
Mezzanine Non-Qualified Prepayment Guaranties exceed the
Non-Qualified Mandatory Prepayment, which shall be applied to the
Debt, the First Mezzanine Debt, the Second Mezzanine Debt and the
Third Mezzanine Debt in accordance with the provisions of Section
2.4.3(b) of the Loan Agreement.”

     (b) Exhibit A to the Non-Qualified Prepayment Guaranty is hereby deleted in its entirety and
replaced with Exhibit A attached hereto and made a part hereof.

 

 

3. Specific Modifications to Non-Recourse Guaranty. Without limiting the general
modifications to the Loan Documents referred to above, Lender and Guarantors hereby agree to the
following additional modifications:

     (a) The following new clause (xviii) is hereby added to Section 1.2(a) of the Non-Recourse
Guaranty:

     “(xviii) as a result of Adjacent Borrower selling or attempting
to sell any Partial Release Parcel or any Partial Adjacent Parcel in
accordance with the procedures set forth in Section 2.5.1(f) or
2.5.2(f) of the Loan Agreement, as applicable, rather than pursuant
to a customary direct deed transfer, including, without limitation,
(A) the imposition of any tax (including interest and penalties)
provided in NRS §§375.020 and 375.023, (B) in connection with any
Bankruptcy Action filed by or against any Subsidiary Transferee
prior to or following the consummation of such sale, and/or (C) in
connection with any delay in accomplishing any of the steps
identified in said Section 2.5.1(f) or 2.5.2(f) of the Loan
Agreement, as applicable.”

     (b) The following new Section 1.2(c) is hereby added to the Non-Recourse Guaranty:

     “(c) the payment of the following amounts as and when due under the Loan
Agreement if and to the extent that any of the same are not paid in full by
Borrowers as and when due under the Loan Agreement: (i) any Interest Shortfall
existing on any Payment Date (A) occurring after February 2, 2008, if on or after
February 2, 2008 the Gaming Operating Condition is not satisfied, and (B) ending
with (and including) the May 9, 2008 Payment Date; and (ii) all amounts necessary to
obtain and maintain the Gaming Letter of Credit in accordance with Section 12.3 of
the Loan Agreement, including, without limitation, the reimbursement obligation to
the counterparty issuing the Gaming Letter of Credit in the full principal amount
thereof in the event that Lender draws on the same in accordance with its rights
under the Loan Agreement; provided, however, that it is expressly
understood, agreed and acknowledged by Lender and Guarantors that, notwithstanding
anything to the contrary set forth in this Guaranty or in any other Loan Document,
the Guaranteed Obligations set forth in this Section 1.2(c) shall be and
remain the sole and exclusive liability of the DLJ Guarantor and, under no
circumstances, shall the Morgans Guarantor ever have any liability with respect
thereto.”

     (c) After each reference to the phrase “joint and several” or “jointly and severally” set
forth in the Non-Recourse Guaranty, there is hereby added the following: “(except as otherwise
expressly provided in the proviso at the end of Section 1.2(c) hereof)”.

     (d) Exhibit A to the Non-Recourse Guaranty is hereby deleted in its entirety and replaced with
Exhibit A attached hereto and made a part hereof.

 

 

4. Specific Modifications to Completion Guaranty. Without limiting the general
modifications to the Loan Documents referred to above, Lender and Guarantors hereby agree to the
following additional modifications:

     (a) The lead-in sentence of Section 1.1(b) of the Completion Guaranty is hereby deleted in its
entirety and replaced with the following:

	 	 	 	“Each Guarantor hereby jointly and severally, irrevocably,
absolutely and unconditionally guarantees to Lender the full,
complete and punctual payment, performance and satisfaction of all
of the obligations, duties, covenants and agreements of Borrowers
under (i) Section 3.17.6 of the Loan Agreement relating to
restoration of the Properties in the event that Borrowers have
delivered a Relinquishment Notice to Lender or a Deemed
Relinquishment has occurred, or (ii) Section 3.22 of the
Loan Agreement relating to restoration of the Properties in the
event that Borrowers have delivered a Stop Notice to Lender, in each
instance, substantially in compliance with all applicable Legal
Requirements and to the reasonable satisfaction of the Construction
Consultant, including, without limitation:”

     (b) The last paragraph of Section 1.1 of the Completion Guaranty is hereby deleted in its
entirety and replaced with the following:

	 	 	 	“The obligations and liabilities set forth in the foregoing
Sections 1.1(a) and 1.1(b) are collectively referred
to herein as the “Guaranteed Obligations”; provided,
however, that in no event shall the aggregate obligations
and liabilities of Guarantors under this Guaranty and the Mezzanine
Closing Completion Guaranties exceed the Guaranteed Obligations; and
the completion obligations with respect to completion of any Initial
Renovations Project or restoration from any Pre-Construction Work
shall be referred herein as the “Guaranteed Work”. Each Guarantor
hereby acknowledges having received, reviewed and approved a true
and complete copy of the Loan Agreement. Each Guarantor hereby
irrevocably and unconditionally covenants and agrees that it is
liable for the Guaranteed Obligations as a primary obligor and not
merely as a surety.”

     (c) Exhibits A-1 and A-2 to the Completion Guaranty are hereby deleted in their entirety and
replaced with Schedule 1 attached hereto and made a part hereof.

     (d) Exhibit B to the Completion Guaranty is hereby deleted in its entirety and replaced with
Exhibit B attached hereto and made a part hereof.

5. Ratification of Guaranties. Each Guarantor hereby (a) ratifies the terms and conditions
of each of the Guaranties, as modified by this Modification, and its obligations thereunder, and
(b)

 

 

represents, warrants and covenants to Lender that it has no offset, counterclaim or defense with
respect to its obligations under any of the Guaranties, as modified by this Modification.

6. Miscellaneous.

     (a) Recitals. The Recitals at the beginning of this Modification are hereby
incorporated into, and made a part of, the substantive provisions of this Modification.

     (b) Governing Law. This Modification, including all matters of construction, validity
and performance, shall in all respects be governed by, and construed in accordance with, the laws
of the State of New York applicable to contracts made in such State and to be performed entirely
within such State, without giving effect to principles relating to conflicts of law.

     (c) Successors and Assigns. The covenants, conditions and agreements contained in
this Modification shall be binding upon, and shall inure to the benefit of, Lender and Guarantors
and their respective successors and assigns; provided, however, that no Guarantor
shall assign this Modification except as expressly permitted under the Guaranties and the Loan
Agreement, and any assignment made otherwise shall be void.

     (d) Construction. Guarantors agree that they and their counsel have had ample
opportunity to review this Modification and that the normal rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be employed in the
interpretation of this Modification.

     (e) Severability. In the event that any one or more of the provisions of this
Modification shall be determined to be void or unenforceable by a court of competent jurisdiction
or by law, such determination will not render this Modification invalid or unenforceable, and the
remaining provisions hereof shall remain in full force and effect.

     (f) Section Headings. The section headings in this Modification are for the
convenience of the parties and in no way alter, modify, amend, limit, or restrict the contractual
obligations of the parties.

     (g) Amendments; Waivers. This Modification may not be amended or modified, and no
provision of this Modification may be waived, except, in each instance, pursuant to a written
instrument signed by Lender and Guarantors.

     (h) Full Force and Effect. Except as and to the extent modified by this Modification,
the Guaranties remain unmodified and in full force and effect.

[NO FURTHER TEXT ON THIS PAGE; SIGNATURE PAGE FOLLOWS]

 

 

     IN WITNESS WHEREOF, this Modification and Ratification of Guaranties has been executed by
Lender and Guarantors as of the date first above written.

	 	 	 	 	 	 	 
	 	 	MORGANS GUARANTOR:	 	 
	 
	 	 	 	 	 	 
	 	 	MORGANS GROUP LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard Szymanski	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Richard Szymanski	 	 
	 

	 	 	 	Title: Chief Financial Officer and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	DLJ GUARANTOR:	 	 
	 
	 	 	 	 	 	 
	 	 	DLJ MB IV HRH, LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kenneth J. Lohsen	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Kenneth J. Lohsen	 	 
	 

	 	 	 	Title: Authorized Signatory	 	 
	 
	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	COLUMN FINANCIAL, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By: 
	 	/s/ Priscilla Horning	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Priscilla Horning	 	 
	 	 	Title: Vice President	 	 

 

 

EXHIBIT A

 

 

EXHIBIT B

 

 

SCHEDULE 1

Hotel Parcel:

That portion of Lot 1 of the merger and resubdivision of final map of the Hard Rock Hotel/Casino,
as shown by Map thereof on file in Book 138 of Plats, Page 49 in the office of the County recorder
of Clark County, Nevada, being described as follows:

A parcel of land being a portion of the Northeast quarter (NE1/4) of Section 21 and a portion of
the Southwest quarter (SW1/4) of the Northwest quarter (NW1/4) of Section 22, township 21 South,
range 61 East M.D.M. Clark County, Nevada, described as follows:

Commencing at the Southeast corner of the Northeast quarter (NE1/4) of said Section 21; thence
along the East line thereof, North 00o05’49” East, 40.01 feet to the point of beginning and the
Northerly right of way North 89o59’40” West, 449.99 feet to the Southwest corner of Lot 1 as shown
in Book 138 if Plats, Page 49, in the Office of the County recorder, Clark County, Nevada; thence
departing said right of way, along the boundary of said Lot 1 North 00o06’00” East, 473.48 feet;
thence departing said Lot 1 North 45o35’41” East, 440.21 feet; thence North 04o54’29” East 98.89
feet; thence North 85o07’37” West, 31.65 feet; thence North 04o54’29” East, 137.63 feet; thence
South 85o07’27” East, 31.65 feet; thence North 04o54’29” East, 178.05 feet to the North line of the
Southeast quarter (SE1/4) of the Northeast quarter (NE1/4) of said Section 21; thence along said
North Line South 89o04’19” East, 101.23 feet to the North sixteenth common to Section 21 and 22,
also being a point on the North boundary of Lot 1 as shown in Book 138 of Plats, Page 49, in the
Office of the County recorder, Clark County, Nevada; thence along the boundary of said Lot 1 the
following twenty-one (21) courses:

1) South 88o56’51” East, 506.21 feet;

2) South 14o05’09” east, 49.76 feet;

3) South 07o35’35” East, 110.67 feet;

4) South 14o05’09” East, 137.26 feet;

5) South 89o14’55” East, 5.25 feet to the beginning of a curve, concave to the Southwest having a radius of 10.00 feet;

6) Southeasterly along said curve, through a central angle of 75o09’46”, an arc length of 13.12 feet;

7) South 14o05’09” East, 46.62 feet;

8) South 02o45’28” East, 61.06 feet;

9) South 14o04’51” East, 65.43 feet;

10) South 32o31’15” East, 37.95 feet;

11) South 14o05’09” East, 437.44 feet;

12) South 75o34’42” West, 195.01 feet;

13) South 14o05’18” East, 115.31 feet;

14) South 06o31’30” East, 110.02 feet;

15) North 88o57’40” West, 91.40 feet;

16) North 01o02’20” East 5.10 feet;

17) North 77o39’04” West, 60.69 feet;

18) North 88o57’40” West, 246.50 feet;

 

 

19) South 01o02’20” West, 7.00 feet to the beginning of a curve, concave to the Northwest, having a radius of 10.00 feet

20) Southwesterly along said curve, through a central angle of 90o00’00” , an arc length of 15.71 feet

21) North 88o57’40” West, 184.56 feet to the point of beginning.

Also being described as parcel 2 of that certain record of survey recorded October 23, 2007 in File
169 as Page 0015.

 

 

Development Parcel I:

That portion of Lot 1 of the merger and resubdivision of final Map of the Hard Rock Hotel/Casino,
as shown by map thereof on file in Book 138 of Plats, Page 49 in the Office of the County recorder
of Clark County, Nevada, being described as follows:

A parcel of land being a portion of the Northeast quarter (NE 1/4) of Section 21 Township 21 South,
range 61 East M.D.M., Clark County, Nevada, described as follows:

Commencing at the Southeast corner of the Northeast quarter (NE1/4) of said Section 21; thence along
the East line thereof, North 00o05’49” East, 40.01 feet to the Northerly right of way of Harmon
Avenue; thence along the said Northerly right of way, North 89o59’40” West, 449.99 feet to the
Southwest corner of Lot 1 as shown in Book 138 of Plats, Page 49, in the Office of the County
recorder, Clark County, Nevada; thence departing said right of way, along the boundary of said Lot
1 North 00o06’00” East, 473.48 feet to the point of beginning; thence continuing along the boundary
of said Lot 1 the following five (5) courses:

1) North
00o06’00” East, 726.73 feet

2) North 89o04’19” West, 444.02 feet to the beginning of a non-tangent curve, concave to the
Northeast, having a radius of 650.00 feet, from which beginning the radius bears North 48o20’31”
east;

3) Northerly, through a central angle of 40o36’38”, an arc length of 460.71 feet to which a radial
line bears North 88o57’09” West;

4) South 89o54’00” East, 1,058.87 feet;

5) South 00o05’49” West, 432.79 feet to the North sixteenth common to section 21 and 22, thence
along the North line of the Southeast quarter (SE1/4) of the Northeast quarter (NE1/4) of said
section 21, North 89o04’49” East, 101.23 feet; thence South 04o54’29” West, 178.05 feet; thence
North 85o07’27” West, 31.65 feet; thence South 04o54’29” West 137.63 feet; thence South 85o07’37”
East, 31.65 feet; thence South 04o54’29” West, 98.89 feet; thence South 45o35’41” West, 440.21 feet
to the point of beginning.

Also being described as parcel 1 of that certain record of Survey recorded October 23, 2007 in File
169 as Page 0015.

Development Parcel II:

That portion of the Northwest Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of Section 22
Township 21 South, Range 61 East, M.D.B. & M., Clark County, Nevada, described as follows:

Parcel One (1) as shown by Map thereof in file 52 of Parcel Maps, Page 41 in the Office of the
County Recorder, Clark County, Nevada, and amended by Certificate of Amendment recorded May 26,
1987 in Book 870526 as Document No. 00396.

Development Parcel III:

 

 

A perpetual non-exclusive easement for drainage and incidental purposes over, under, across and
upon the South 25 feet (measured at right angles to the South line) of Parcel Two (2) as delineated
on that certain Parcel Map on file in file 52 of Parcel maps, Page 41 in the Office of the County
Recorder of Clark County, Nevada. Said easement being recorded on July 9, 1987 in Book 870709 as
Document No. 00322.

Development Parcel IV:

A perpetual easement for the encroachment of a Masonry Wall as created by the certain document
entitled “Perpetual Easement” recorded February 2, 1992 on Book 920211 as Document No. 00134 of
Official Records, Clark County, Nevada.

 

 

Cafe Parcel One:

That portion of the Northwest Quarter (NW 1/4) of Section 22, Township 21 South, Range 61 East,
M.D.B. & M., More particularly described as follows:

Parcel Two (2) as shown by map thereof of file 61 of Parcel Maps, Page 52 in the Office of the
County Recorded, Clark County, Nevada.

Cafe Parcel Two:

A non-exclusive parking easement as granted to Red, White and Blue Pictures, Inc, recorded July 31,
1989 in Book 890731 as Instrument No. 00365 and as Instrument No. 00366 of Official Records.EX-10.30

 

Exhibit 10.30

EXECUTION COPY

FIRST MEZZANINE GUARANTY AGREEMENT

     THIS FIRST MEZZANINE GUARANTY AGREEMENT (this “Guaranty”) is executed as of November 6, 2007,
by MORGANS GROUP LLC, a Delaware limited liability company, having an address at 475 Tenth Avenue,
New York, New York 10018, Attention: Marc Gordon, Chief Investment Officer (“Morgans Guarantor”),
and by DLJ MB IV HRH, LLC, a Delaware limited liability company, having an address c/o DLJ Merchant
Banking Partners, 11 Madison Avenue, New York, New York 10010, Attention: Ryan Sprott (“DLJ
Guarantor”; and collectively with Morgans Guarantor, each, individually, a “Guarantor”, and
collectively, “Guarantors”), jointly and severally, for the benefit of COLUMN FINANCIAL, INC., a
Delaware corporation, having an address at 11 Madison Avenue, New York, New York 10010 (together
with its successors and assigns, “Lender”).

RECITALS:

     A. Pursuant to that certain Replacement Reduced Acquisition Loan Promissory Note and
Replacement Construction Loan Promissory Note, each dated of even date herewith and executed by
HRHH Hotel/Casino, LLC, HRHH Cafe, LLC, HRHH Development, LLC, HRHH IP, LLC, and HRHH Gaming, LLC
(collectively, the “Mortgage Borrowers”), and payable to the order of Column Financial, Inc., in
its capacity as mortgage lender (together with its successors and assigns, the “Mortgage Lender”),
in the original principal amount of One Billion Thirty Million and No/100 Dollars ($1,030,000,000)
(as the same may be further amended, restated, replaced, supplemented, or otherwise modified from
time to time, collectively, the “Mortgage Notes”), Mortgage Borrowers have become indebted, and may
from time to time be further indebted, to Mortgage Lender with respect to a loan (the “Mortgage
Loan”) made pursuant to that certain Amended and Restated Loan Agreement, dated as of the date
hereof, among Mortgage Borrowers and Mortgage Lender (as the same may be amended, restated,
replaced, supplemented, or otherwise modified from time to time, the “Mortgage Loan Agreement”),
which Mortgage Loan is secured by, among other things, (i) that certain Construction Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Financing Statement (Fixture Filing), dated
as of February 2, 2007 (as amended by that certain Modification of Construction Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Financing Statement (Fixture Filing) and
Other Loan Documents dated as of the date hereof, and as the same may be further amended, restated,
replaced, supplemented or otherwise modified from time to time, the “Mortgage”), made by Mortgage
Borrowers for the benefit of Mortgage Lender, encumbering, among other properties, certain real
property and the improvements thereon located in the City of Las Vegas, County of Clark, State of
Nevada, as more particularly described in the Mortgage (the “Property”); (ii) that certain Guaranty
Agreement dated as of February 2, 2007 (as amended by that certain Modification and Ratification of
Guaranties dated as of the date hereof, and as the same may be further amended, restated, replaced,
supplemented, or otherwise modified from time to time, the “Mortgage Non-Recourse Guaranty”), made
by Guarantors in favor of Mortgage Lender); and (iii) further evidenced, secured or governed by
other instruments and documents executed in connection with the Mortgage Loan (together with the
Mortgage Notes, the Mortgage Loan Agreement, the Mortgage and the Mortgage Non-Recourse Guaranty,
collectively, the “Mortgage Loan Documents”).

 

 

     B. Pursuant to that certain First Mezzanine Promissory Note, dated of even date herewith,
executed by HRHH JV SENIOR MEZZ, LLC, a Delaware limited liability company (“JV Borrower”) and HRHH
GAMING SENIOR MEZZ, LLC, a Delaware limited liability company (“Gaming Mezz Borrower”; and each of
JV Borrower and Gaming Mezz Borrower being referred to herein individually as a “Borrower” and
collectively as “Borrowers”), and payable to the order of Lender in the original principal amount
of Two Hundred Million and 00/100 Dollars ($200,000,000.00), as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time (the “Note”), Borrowers have become
indebted to Lender with respect to a loan (the “Loan”) made pursuant to that certain First
Mezzanine Loan Agreement, dated as of the date hereof, among Borrowers and Lender (as the same may
be amended, restated, replaced, supplemented, or otherwise modified from time to time, the “Loan
Agreement”), which Loan is secured by, among other things, that certain First Mezzanine Pledge and
Security Agreement, dated as of the date hereof, made by Borrowers, as pledgors, in favor of
Lender, as pledgee (as the same may be amended, restated, replaced, supplemented, or otherwise
modified from time to time, the “Pledge Agreement”), and further evidenced, secured or governed by
other instruments and documents executed in connection with the Loan (together with the Note, the
Loan Agreement and the Pledge Agreement, collectively, the “Loan Documents”).

     C. Pursuant to that certain Second Mezzanine Promissory Note, dated of even date herewith,
executed by HRHH Gaming Junior Mezz, LLC and HRHH JV Junior Mezz, LLC (collectively, the “Second
Mezzanine Borrowers”), and payable to the order of Column Financial, Inc., in its capacity as
second mezzanine lender (together with its successors and assigns, the “Second Mezzanine Lender”),
in the original principal amount of One Hundred Million and No/100 Dollars ($100,000,000), as the
same may be amended, restated, replaced, supplemented or otherwise modified from time to time (the
“Second Mezzanine Note”), Second Mezzanine Borrowers have become indebted to Second Mezzanine
Lender with respect to a loan (the “Second Mezzanine Loan”) made pursuant to that certain Second
Mezzanine Loan Agreement, dated as of the date hereof, among Second Mezzanine Borrowers and Second
Mezzanine Lender (as the same may be amended, restated, replaced, supplemented, or otherwise
modified from time to time, the “Second Mezzanine Loan Agreement”), which Second Mezzanine Loan is
secured by, among other things, (i) that certain Second Mezzanine Pledge and Security Agreement,
dated as of the date hereof, made by Second Mezzanine Borrowers, as pledgors, in favor of Second
Mezzanine Lender, as pledgee (as the same may be amended, restated, replaced, supplemented, or
otherwise modified from time to time, the “Second Mezzanine Pledge Agreement”); (ii) that certain
Second Mezzanine Guaranty Agreement, dated as of the date hereof, made by Guarantors in favor of
Second Mezzanine Lender (as the same may be amended, restated, replaced, supplemented, or otherwise
modified from time to time, the “Second Mezzanine Non-Recourse Guaranty”); and (iii) further
evidenced, secured or governed by other instruments and documents executed in connection with the
Second Mezzanine Loan (together with the Second Mezzanine Note, the Second Mezzanine Loan
Agreement, the Second Mezzanine Pledge Agreement and the Second Mezzanine Non-Recourse Guaranty,
collectively, the “Second Mezzanine Loan Documents”).

     D. Pursuant to that certain Third Mezzanine Promissory Note, dated of even date herewith,
executed by HRHH Gaming Junior Mezz Two, LLC and HRHH JV Junior Mezz Two, LLC (collectively, the
“Third Mezzanine Borrowers”), and payable to the order of Column

2

 

Financial, Inc., in its capacity as third mezzanine lender (together with its successors and
assigns, the “Third Mezzanine Lender”), in the original principal amount of Sixty Five Million and
No/100 Dollars ($65,000,000), as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time (the “Third Mezzanine Note”), Third Mezzanine Borrowers have
become indebted to Third Mezzanine Lender with respect to a loan (the “Third Mezzanine Loan”) made
pursuant to that certain Third Mezzanine Loan Agreement, dated as of the date hereof, among Third
Mezzanine Borrowers and Third Mezzanine Lender (as the same may be amended, restated, replaced,
supplemented, or otherwise modified from time to time, the “Third Mezzanine Loan Agreement”), which
Third Mezzanine Loan is secured by, among other things, (i) that certain Third Mezzanine Pledge and
Security Agreement, dated as of the date hereof, made by Third Mezzanine Borrowers, as pledgors, in
favor of Third Mezzanine Lender, as pledgee (as the same may be amended, restated, replaced,
supplemented, or otherwise modified from time to time, the “Third Mezzanine Pledge Agreement”);
(ii) that certain Third Mezzanine Guaranty Agreement, dated as of the date hereof, made by
Guarantors in favor of Third Mezzanine Lender (as the same may be amended, restated, replaced,
supplemented, or otherwise modified from time to time, the “Third Mezzanine Non-Recourse Guaranty”,
and together with the Mortgage Non-Recourse Guaranty and the Second Mezzanine Non-Recourse
Guaranty, collectively, the “Other Guarantees”); and (iii) further evidenced, secured or governed
by other instruments and documents executed in connection with the Third Mezzanine Loan (together
with the Third Mezzanine Note, the Third Mezzanine Loan Agreement, the Third Mezzanine Pledge
Agreement and the Third Mezzanine Non-Recourse Guaranty, collectively, the “Third Mezzanine Loan
Documents”).

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

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

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

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

ARTICLE 1

NATURE AND SCOPE OF GUARANTY

     1.1 Guaranty of Obligation. Each Guarantor hereby jointly and severally (except as
otherwise expressly provided in the proviso at the end of Section 1.2(c) hereof),
irrevocably and unconditionally guarantees to Lender and its successors and assigns the payment and
performance of the Guaranteed Obligations as and when the same shall be due and payable, whether by
lapse of time, by acceleration of maturity or otherwise. Each Guarantor hereby

3

 

jointly and severally (except as otherwise expressly provided in the proviso at the end of
Section 1.2(c) hereof), irrevocably and unconditionally covenants and agrees that it is
liable for the Guaranteed Obligations as a primary obligor.

     1.2 Definition of Guaranteed Obligations. As used herein, the term “Guaranteed
Obligations” means:

     (a) the obligations and liabilities of each Borrower to Lender for any actual loss, damage
(excluding any lost revenue, diminution of value and consequential damages), reasonable cost,
reasonable expense, liability, claim and any other obligation incurred by Lender (including
attorneys’ fees and costs reasonably incurred) arising out of or in connection with the following:

     (i) fraud or intentional misrepresentation by any Loan Party, HRHI, any
Guarantor or any of their respective principals, officers, agents or employees in
connection with the Loan;

     (ii) physical waste to any Property arising from the intentional misconduct or
gross negligence of any Loan Party, HRHI, any Guarantor or any of their respective
principals, officers, agents or employees and/or any removal of any asset forming a
part of any Property in violation of the Loan Agreement or the other Loan Documents;

     (iii) intentionally omitted;

     (iv) the misappropriation or conversion by any Loan Party, by any Person
Controlled by any Loan Party (including, without limitation, any Affiliated Manager,
Liquor Manager who is an Affiliate of any Loan Party or Gaming Operator who is an
Affiliate of any Loan Party), by any agent of any Loan Party, or by any other Person
with whom any Loan Party shall collude or cooperate, of (A) any Insurance Proceeds
paid by reason of any Casualty, to the extent so misappropriated or converted; (B)
any Awards received in connection with a Condemnation, to the extent so
misappropriated or converted; (C) any Rents or other Gross Income from Operations
not delivered to Lender following and during the continuance of an Event of Default
and not otherwise used to pay actual, customary Operating Expenses reflected on the
Approved Annual Budget then in effect, including, without limitation, (I) any
income, proceeds or other amounts received by any Loan Party under the Gaming
Sublease, and/or (II) without duplication of the foregoing clause (I), any
income, proceeds or revenue generated from gaming activities at any Property, in
each of the foregoing instances, to the extent so misappropriated or converted; (D)
any Rents paid more than one (1) month in advance in violation of the Loan Agreement
or the other Loan Documents, to the extent so misappropriated or converted; and/or
(E) any security deposits, to the extent so misappropriated or converted;

     (v) the failure of any Loan Party to pay (or to deposit into the Mortgage
Reserve Funds or the Reserve Funds, if applicable, amounts sufficient

4

 

to pay) all Taxes and all other costs giving rise to any Lien on any portion of
the Collateral or any Property or the IP with priority over or equal to the Lien of
the Loan Documents in violation of the Loan Agreement or the other Loan Documents,
to the extent that there is sufficient Gross Income from Operations to make such
payments (or deposits, as applicable);

     (vi) if any Loan Party fails to maintain its status as a Special Purpose Entity
as required pursuant to the terms of the Loan Agreement;

     (vii) if any Loan Party fails to obtain Lender’s consent to any subordinate
financing, deed of trust, mortgage or other voluntary lien encumbering the
Collateral, any Property or the IP other than Permitted Encumbrances and Permitted
IP Encumbrances;

     (viii) the failure to maintain insurance coverage under blanket insurance
policies to the extent permitted under the Loan Agreement;

     (ix) if any of the events set forth in clauses (a), (b) or (c) of Section
5.2.11 of the Loan Agreement shall occur without the prior approval of Lender;

     (x) if any of the restrictions to Transfer set forth in Section 5.2.10 of the
Loan Agreement or in any of the other Loan Documents are violated;

     (xi) if Lender or any Affiliate thereof shall succeed to the interest of HRHI
under the Gaming Sublease following a foreclosure, deed in lieu of foreclosure or
similar transfer, any actual loss, cost, damage or expense (including, without
limitation, reasonable attorneys’ fees expenses) suffered by Lender or such
Affiliate as a result of: (A) any act, omission, neglect or default of HRHI under
the Gaming Sublease, (B) any claim, defense, counterclaim or offset which the Gaming
Operator may have under the Gaming Sublease against HRHI, (C) any obligation to make
any payment to the Gaming Operator under the Gaming Sublease which was required to
be made by or on behalf of HRHI prior to the time Lender or such Affiliate succeeded
to HRHI’s interest under the Gaming Sublease, (D) any monies deposited with HRHI
under the Gaming Sublease, except to the extent such monies are actually received by
Lender or such Affiliate, (E) any obligation to complete or permit the construction
of any improvements under the Gaming Sublease arising while HRHI was the sublandlord
under the Gaming Sublease, and/or (F) any default by HRHI under the Gaming Lease
beyond applicable notice and cure periods;

     (xii) if HRHI or any Affiliate thereof shall send a notice to Gaming Operator
under Section 6(a), (c) or (d), as applicable, of the Gaming Recognition Agreement
which conflicts with any notice theretofore sent by Lender to Gaming Operator under
said Section 6(a), (c) or (d), as applicable, of the Gaming Recognition Agreement;
provided, however, that the liability under this clause
(xii) shall be limited to all fees and costs incurred by Gaming Operator in
bringing and pursuing any interpleader action contemplated by said Section 6(a), (c)
or (d),

5

 

as applicable, and only to the extent that Gaming Operator seeks to recover
and/or does recover such fees and expenses from Lender;

     (xiii) if HRHI shall fail to provide Gaming Employees for the operation of
gaming activities at the Hotel/Casino Property as and to the extent required
pursuant to Paragraph 7of the HRHI Gaming Agreement;

     (xiv) in the event that Gaming Borrower shall ever become the Gaming Operator
pursuant to Article XII of the Loan Agreement, if Gaming Borrower thereafter shall
fail to provide gaming operation services for the Hotel/Casino Property following an
Event of Default or a foreclosure of the Mortgage as and to the extent required
pursuant to Section 12.1(e) of the Loan Agreement;

     (xv) in the event that HRHI, Gaming Borrower, any other Loan Party or any
Affiliate thereof shall be the Liquor Manager, if HRHI, Gaming Borrower, such other
Loan Party or such Affiliate thereof shall fail to provide liquor management
services for the Hotel/Casino Property following an Event of Default or a
foreclosure of the Mortgage as and to the extent required (A) as to HRHI, pursuant
to Sections 5(a) or 5(b) of the Assignment of Liquor Management Agreement, as
applicable, and (B) as to Gaming Borrower, any other Mortgage Borrower or any
Affiliate thereof, pursuant to Section 5.1.23(c) of the Loan Agreement;

     (xvi) in connection with the $250,000 lease termination fee pursuant to Section
3.2(B) of that certain Lease by and between PM Realty, LLC and HRHI, as landlord,
and Mr. Chow of Las Vegas, LLC, as tenant, dated December 24, 2004;

     (xvii) as a result of the imposition of any tax provided in NRS §§375.020 and
375.023 with respect to the merger transaction contemplated under the Merger
Agreement and/or the subsequent conveyance of the Hotel/Casino Property (A) to HRHH
Gaming Junior Mezz, LLC, and then (B) to Gaming Mezz Borrower, and then (iii) to
Hotel/Casino Borrower, provided, however, that any liability under
this clause (xvii) shall terminate upon the payment in full of the Debt;
and/or

     (xviii) as a result of Adjacent Borrower selling or attempting to sell any
Partial Release Parcel or any Partial Adjacent Parcel in accordance with the
procedures set forth in Section 2.5.1(f) or 2.5.2(f) of the Mortgage Loan Agreement,
as applicable, rather than pursuant to a customary direct deed transfer, including,
without limitation, (A) the imposition of any tax (including interest and penalties)
provided in NRS §§375.020 and 375.023, (B) in connection with any Bankruptcy Action
filed by or against any Subsidiary Transferee prior to or following the consummation
of such sale, and/or (C) in connection with any delay in accomplishing any of the
steps identified in said Section 2.5.1(f) or 2.5.2(f) of the Mortgage Loan
Agreement, as applicable.

6

 

     (b) the entire amount of the Debt in the event of:

     (i) any Loan Party, HRHI or both Guarantors filing a voluntary petition under
the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law;

     (ii) the filing of an involuntary petition against any Loan Party, HRHI or both
Guarantors under the Bankruptcy Code or any other Federal or state bankruptcy or
insolvency law by or on behalf of any Person other than Lender, and such petition is
not dismissed within ninety (90) days after filing, or any Loan Party, or any
Affiliate of any of them who Controls any Loan Party, or HRHI or both Guarantors,
solicit or cause to be solicited petitioning creditors for any involuntary petition
against any Loan Party, HRHI or both Guarantors from any Person (other than if
requested to do so by or on behalf of Lender);

     (iii) any Loan Party, HRHI or both Guarantors filing an answer consenting to,
or any Loan Party, HRHI or both Guarantors, or any Affiliate of any of them who
Controls any Loan Party, otherwise consenting to or acquiescing or joining in, any
involuntary petition filed against any Loan Party, HRHI or both Guarantors, by any
other Person (other than if filed by or on behalf of Lender) under the Bankruptcy
Code or any other Federal or state bankruptcy or insolvency law;

     (iv) any Loan Party, HRHI or both Guarantors, or any Affiliate of any of them
who Controls any Loan Party, consenting to or acquiescing or joining in an
application for the appointment of a custodian, receiver, trustee or examiner for
any Loan Party or any portion of any Property or any portion of the IP or the
Collateral (other than any such appointment at the request or petition of Lender);

     (v) any Loan Party, HRHI or both Guarantors voluntarily making an assignment
for the benefit of creditors (other than Lender), or admitting, in writing or in any
legal proceeding, its insolvency or inability to pay its debts as they become due;
and/or

     (vi) Gaming Mezz Borrower failing to comply, or cause compliance by the
applicable Mortgage Borrower, with the requirements of the Gaming Laws to obtain the
approval of the Gaming Authorities of the pledge of the Gaming Securities pursuant
to Section 17(b) of the Pledge Agreement (it being understood and agreed that
Guarantors shall have no liability under this clause (vi) to the extent
arising from the failure of Lender to reasonably cooperate with the Gaming
Authorities in connection with such Gaming Law requirements to the extent
necessary);

unless, in the case of any of the foregoing clauses (i), (ii), (iii), (iv),
(v) or (vi) as it relates to or affects both Guarantors, one or more
guarantors acceptable to Lender in its sole discretion remains or becomes a
guarantor of the Loan.

7

 

     (c) the payment of the following amounts as and when due under the Loan Agreement if and to
the extent that any of the same are not paid in full by Borrowers as and when due under the Loan
Agreement:

     (i) any Interest Shortfall existing on any Payment Date (A) occurring after
February 2, 2008, if on or after February 2, 2008 the Gaming Operating Condition is
not satisfied, and (B) ending with (and including) the May 9, 2008 Payment Date; and

     (ii) all amounts necessary to obtain and maintain the Gaming Letter of Credit
in accordance with Section 12.3 of the Mortgage Loan Agreement, including, without
limitation, the reimbursement obligation to the counterparty issuing the Gaming
Letter of Credit in the full principal amount thereof in the event that Mortgage
Lender draws on the same in accordance with its rights under the Mortgage Loan
Agreement (provided, that in no event shall the aggregate obligations and
liabilities of Guarantors under this Section 1.2(c)(ii) and under Section
1.2(c)(ii) of the Other Guarantees exceed the amount of the Gaming Letter of
Credit);

provided, however, that it is expressly understood, agreed and
acknowledged by Lender and Guarantors that, notwithstanding anything to the contrary
set forth in this Guaranty or in any other Loan Document, the Guaranteed Obligations
set forth in this Section 1.2(c) shall be and remain the sole and exclusive
liability of the DLJ Guarantor and, under no circumstances, shall the Morgans
Guarantor ever have any liability with respect thereto.

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

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

8

 

     1.5 Payment By Guarantors. If all or any part of the Guaranteed Obligations shall not
be punctually paid when due, whether at demand, maturity, acceleration or otherwise, Guarantors
shall, immediately upon demand by Lender, and without presentment, protest, notice of protest,
notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of
the maturity, or any other notice whatsoever (except as otherwise provided herein), pay (and each
agrees jointly and severally (except as otherwise expressly provided in the proviso at the end of
Section 1.2(c) hereof) to pay) in lawful money of the United States of America, the amount
due on the Guaranteed Obligations to Lender at Lender’s address as set forth herein. Such
demand(s) may be made at any time coincident with or after the time for payment of all or part of
the Guaranteed Obligations, and may be made from time to time with respect to the same or different
items of Guaranteed Obligations. Such demand shall be deemed made, given and received in
accordance with the notice provisions hereof.

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

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

     1.8 Payment of Expenses. In the event that any Guarantor should breach or fail to
timely perform any provisions of this Guaranty, Guarantors jointly and severally (except as
otherwise expressly provided in the proviso at the end of Section 1.2(c) hereof) agree to
pay to Lender and shall promptly upon written demand by Lender, pay Lender all reasonable costs and
expenses (including court costs and attorneys’ fees) incurred by Lender in the enforcement hereof
or the preservation of Lender’s rights hereunder. Notwithstanding the foregoing, in the

9

 

event that (A) Lender employs counsel to enforce the provisions of this Guaranty and (B)
Lender has sold or transferred any interests in the Note, then Guarantors shall only be responsible
for the attorney’s fees and expenses of the counsel of only one Lender. The covenant contained in
this Section 1.8 shall survive the payment and performance of the Guaranteed Obligations.

     1.9 Effect of Bankruptcy. In the event that, pursuant to any insolvency, bankruptcy,
reorganization, receivership or other debtor relief law, or any judgment, order or decision
thereunder, Lender must rescind or restore any payment, or any part thereof, received by Lender in
satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or discharge
from the terms of this Guaranty given to any Guarantor by Lender shall be without effect, and this
Guaranty shall remain in full force and effect. It is the intention of each Borrower and each
Guarantor that none of Guarantors’ obligations hereunder shall be discharged except by Guarantors’
performance of such obligations and then only to the extent of such performance.

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

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

ARTICLE 2

EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING

GUARANTORS’ OBLIGATIONS

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

     2.1 Modifications. Any renewal, extension, increase, modification, alteration or
rearrangement of all or any part of the Guaranteed Obligations, the Note, the Pledge Agreement, the
Loan Agreement, the other Loan Documents, the Mortgage Loan Documents, or any other document,
instrument, contract or understanding between Borrowers (or any of them) and Lender, or between
Mortgage Borrowers (or any of them) and Mortgage Lender, or any other

10

 

parties, pertaining to the Guaranteed Obligations or any failure of Lender to notify any
Guarantor of any such action.

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

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

     2.4 Invalidity of Guaranteed Obligations. The invalidity, illegality or
unenforceability of all or any part of the Guaranteed Obligations, or any document or agreement
executed in connection with the Guaranteed Obligations, for any reason whatsoever, including,
without limitation, the fact that (a) the Guaranteed Obligations, or any part thereof, exceed the
amount permitted by law, (b) the act of creating the Guaranteed Obligations or any part thereof is
ultra vires, (c) the officers or representatives executing the Note, the Pledge Agreement, the Loan
Agreement or the other Loan Documents or the Mortgage Loan Documents or otherwise creating the
Guaranteed Obligations acted in excess of their authority, (d) the Guaranteed Obligations violate
applicable usury laws, (e) any Borrower has valid defenses (other than the payment of the
Guaranteed Obligations), claims or offsets (whether at law, in equity or by agreement) which render
the Guaranteed Obligations wholly or partially uncollectible from any Borrower, (f) the creation,
performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance
of any document or instrument representing part of the Guaranteed Obligations or executed in
connection with the Guaranteed Obligations, or given to secure the repayment of the Guaranteed
Obligations) is illegal, uncollectible or unenforceable, or (g) the Note, the Pledge Agreement, the
Loan Agreement, any of the other Loan Documents or the Mortgage Loan Documents have been forged or
otherwise are irregular or not genuine or authentic, it being agreed that each Guarantor shall
remain jointly and severally (except as otherwise expressly provided in the proviso at the end of
Section 1.2(c) hereof) liable hereon regardless of whether any Borrower, any other
Guarantor or any other Person be found not liable on the Guaranteed Obligations or any part thereof
for any reason.

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

11

 

to any other Person (including any other Guarantor) to pay or perform the Guaranteed
Obligations.

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

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

     2.8 Care and Diligence. The failure of Lender or any other party to exercise
diligence or reasonable care in the preservation, protection, enforcement, sale or other handling
or treatment of all or any part of such collateral, property or security, including, but not
limited to, any neglect, delay, omission, failure or refusal of Lender (a) to take or prosecute any
action for the collection of any of the Guaranteed Obligations or (b) to foreclose, or initiate any
action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any
security therefor, or (c) to take or prosecute any action in connection with any instrument or
agreement evidencing or securing all or any part of the Guaranteed Obligations.

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

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

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

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

     2.13 Other Actions Taken or Omitted. Any other action taken or omitted to be taken
with respect to the Loan Documents, the Guaranteed Obligations, or the security and collateral

12

 

therefor, whether or not such action or omission prejudices any Guarantor or increases the
likelihood that any Guarantor will be required to pay the Guaranteed Obligations pursuant to the
terms hereof, it being the unambiguous and unequivocal intention of each Guarantor that such
Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any
occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or
uncontemplated, and whether or not otherwise or particularly described herein, which obligation
shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed
Obligations.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

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

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

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

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

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

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

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

13

 

ARTICLE 4

SUBORDINATION OF CERTAIN INDEBTEDNESS

     4.1 Subordination of All Guarantor Claims. As used herein, the term “Guarantor
Claims” shall mean all debts and liabilities of any Loan Party to any Guarantor, whether such debts
and liabilities now exist or are hereafter incurred or arise, or whether the obligations of such
Loan Party thereon be direct, contingent, primary, secondary, several, joint and several, or
otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract,
open account, or otherwise, and irrespective of the Person or Persons in whose favor such debts or
liabilities may, at their inception, have been, or may hereafter be created, or the manner in which
they have been or may hereafter be acquired by any Guarantor. The Guarantor Claims shall include
without limitation all rights and claims of any Guarantor against any Loan Party (arising as a
result of subrogation or otherwise) as a result of any Guarantor’s payment of all or a portion of
the Guaranteed Obligations. Upon the occurrence and during the continuance of an Event of Default,
no Guarantor shall receive or collect, directly or indirectly, from any Loan Party or any other
party any amount upon any Guarantor Claim.

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

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

     4.4 Liens Subordinate. Each Guarantor agrees that any liens, security interests,
judgment liens, charges or other encumbrances upon any Borrower’s assets securing payment of any
Guarantor Claim shall be and remain inferior and subordinate to any liens, security interests,
judgment liens, charges or other encumbrances upon such Borrower’s assets securing payment of the
Guaranteed Obligations, regardless of whether such encumbrances in favor of such

14

 

Guarantor or Lender presently exist or are hereafter created or attach. Without the prior
written consent of Lender as long as the Debt is outstanding, no Guarantor shall (a) exercise or
enforce any creditor’s right it may have against any Borrower, or (b) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise,
including, without limitation, the commencement of, or joinder in, any liquidation, bankruptcy,
rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, mortgages, deeds of
trust, security interests, collateral rights, judgments or other encumbrances on assets of any
Borrower held by any Guarantor.

ARTICLE 5

MISCELLANEOUS

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

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

	 	 	 	 	 
	 

	 	Guarantor:
	 	DLJ MB IV HRH, LLC
	 

	 	 	 	c/o DLJ Merchant Banking Partners
	 

	 	 	 	11 Madison Avenue
	 

	 	 	 	New York, New York 10010 
	 

	 	 	 	Attention: Ryan Sprott
	 

	 	 	 	Facsimile No.: (212) 743-1667
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Latham & Watkins LLP
	 

	 	 	 	885 Third Avenue
	 

	 	 	 	Suite 1000
	 

	 	 	 	New York, New York 10022
	 

	 	 	 	Attention: Michelle Kelban, Esq.
	 

	 	 	 	Facsimile No.: (212) 751-4864

15

 

	 	 	 	 	 
	 

	 	with a copy to:
	 	Latham & Watkins LLP
	 

	 	 	 	633 West Fifth Street
	 

	 	 	 	Suite 4000
	 

	 	 	 	Los Angeles, California 90071
	 

	 	 	 	Attention: Paul Fuhrman, Esq.
	 

	 	 	 	Facsimile No.: (213) 891-8763
	 
	 	 	 	 
	 

	 	Guarantor:
	 	Morgans Group LLC
	 

	 	 	 	475 Tenth Avenue
	 

	 	 	 	New York, New York 10018
	 

	 	 	 	Attention:  Marc Gordon, Chief Investment Officer
	 

	 	 	 	Facsimile No.: (212) 277-4270
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Wachtell, Lipton, Rosen & Katz
	 

	 	 	 	51 West 52nd Street
	 

	 	 	 	29th Floor
	 

	 	 	 	New York, New York 10019
	 

	 	 	 	Attention: Stephen Gellman, Esq.
	 

	 	 	 	Facsimile No.: (212) 403-2000
	 
	 	 	 	 
	 

	 	Lender:
	 	Column Financial, Inc.
	 

	 	 	 	11 Madison Avenue
	 

	 	 	 	New York, New York 10010
	 

	 	 	 	Attention: Edmund Taylor
	 

	 	 	 	Facsimile No.: (212) 352-8106
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Column Financial, Inc.
	 

	 	 	 	One Madison Avenue
	 

	 	 	 	New York, New York 10019
	 

	 	 	 	Legal and Compliance Department
	 

	 	 	 	Attention: Casey McCutcheon, Esq.
	 

	 	 	 	Facsimile No.: (917) 326-8433
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Thelen Reid Brown Raysman & Steiner, LLP
	 

	 	 	 	875 Third Avenue
	 

	 	 	 	New York, New York 10022
	 

	 	 	 	Attention: Jeffrey B. Steiner, Esq.
	 

	 	 	 	Facsimile No.: (212) 603-2001
	 

	 	 	 	Hard Rock / Rand Peppas

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

16

 

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

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

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

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

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

     5.7 Fully Recourse. (a) The Guaranteed Obligations are joint and several (except as
otherwise expressly provided in the proviso at the end of Section 1.2(c) hereof) recourse
obligations of Guarantors and not restricted by any limitation on personal liability.

     (b) Notwithstanding anything to the contrary in this Guaranty, in the Loan Agreement or in any
other Loan Document, no present or future Constituent Member other than (i) a Guarantor, and (ii)
with respect to the DLJ Guarantor, DLJ Merchant Banking Partners IV, L.P., MBP IV Plan Investors,
L.P., DLJMB HRH Co-Investments, L.P., DLJ Offshore Partners IV, L.P., and DLJ Merchant Banking
Partners IV (Pacific), L.P. (such limited partnerships, collectively, the “DLJMB Parties”) as
provided in the DLJMB Commitment Letter, nor any present or future shareholder, officer, director,
employee, trustee, beneficiary, advisor, member, partner, principal, participant or agent of or in
any Guarantor or of or in any Person that is or becomes a Constituent Member, other than Guarantors
and such DLJMB Parties, shall have any personal liability, directly or indirectly, under or in
connection with this Guaranty, or any amendment or amendments hereto made at any time or times,
heretofore or hereafter, and Lender on behalf of itself and its successors and assigns, hereby
waives any and all such personal liability.

17

 

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

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

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

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

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

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

18

 

OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH
GUARANTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS SECTION 5.13 IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY EACH GUARANTOR.

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

19

 

marketing transaction; provided, however Guarantor shall remain liable under
Section 1.2 to the extent any material misstatements or omissions are contained in such
third party reports as a result of conduct by Borrower that is otherwise subject to the exclusions
from exculpation provided under Section 1.2.

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

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

[NO FURTHER TEXT ON THIS PAGE]

20

 

     EXECUTED as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	GUARANTORS:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	MORGANS GROUP LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Morgans Hotel Group Co.,	 	 
	 	 	 	 	a Delaware corporation	 	 
	 	 	 	 	as Managing Member	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ RICHARD SZYMANSKI
 

Name: Richard Szymanski
	 	 
	 

	 	 	 	 	 	Title: Chief Financial Officer
and Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	DLJ MB IV HRH, LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ KENNETH J. LOHSEN	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Name: Kenneth J. Lohsen	 	 
	 	 	 	 	Title: Authorized Signatory	 	 

First Mezzanine Guaranty  Agreement

 

 

Exhibit A

FINANCIAL REPRESENTATIONS, WARRANTIES AND COVENANTS

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

     (b) At all times throughout the term of this Guaranty, the Guarantors shall maintain (i)
Guarantors Net Worth in excess of $400,000,000.00 in the aggregate, and (ii) a minimum amount of
Guarantors Effective Liquidity in excess of $200,000,000.00 in the aggregate. Within one-hundred
twenty (120) days following the end of each calendar year, and, upon Lender’s written request,
within sixty (60) days following the end of any calendar quarter, each Guarantor shall deliver or
cause to be delivered to Lender a complete copy of such Guarantor’s and, in the case of the DLJ
Guarantor, the DLJMB Parties’ annual, and, if requested, quarterly financial statements audited by
a “Big Four” accounting firm, BDO Seidman LLP, or other independent certified public accountant
reasonably acceptable to Lender prepared in accordance with GAAP, including in each case statements
of profit and loss and a balance sheet for such Guarantor and the DLJMB Parties, as the case may
be, together with a certificate of each Guarantor (which certificate in the case of the Morgans
Guarantor shall pertain only to the Morgans Guarantor, and in the case of the DLJ Guarantor shall
pertain only to the DLJ Guarantor and the DLJMB Parties) (i) setting forth in reasonable detail
such Guarantor’s and each DLJMB Parties’ Net Worth as of the end of the prior calendar year or
quarter, as the case may be, based thereon, and then Effective Liquidity, and (ii) certifying that
such financial statements are true, correct, accurate and complete in all material respects and
fairly present the financial condition and results of the operations of such Guarantor, and, in the
case of the DLJ Guarantor, the DLJMB Parties, provided, however, that in the event
the DLJ Guarantor, any DLJMB Party or the Morgans Guarantor is not otherwise required to, and does
not, cause to be prepared such audited financial statements in the ordinary course of its business,
it may deliver the unaudited statements which are delivered to its investors or otherwise prepared
in the ordinary course of its business, accompanied by such certification.

     (c) Such Guarantors shall not, and the DLJ Guarantor shall not cause or permit and further
represents and covenants that the DLJMB Parties shall not, at any time while a default in the
payment of the Guaranteed Obligations has occurred and is continuing beyond any applicable grace
period or following any notice thereof, (i) enter into or effectuate any transaction with any
Affiliate of such Guarantors or any of the DLJMB Parties, as the case may be, which would reduce
such Guarantors’ or DLJMB Party’s then Net Worth or Effective Liquidity, or (ii) sell, pledge,
mortgage or otherwise Transfer to any other Person (including any of its Affiliates) any assets or
any interest therein, other than (in the case of either clauses (i) or (ii) of this
Section 1(c)) (x) if in the ordinary course of business, consistent with past practice and
for reasonably equivalent value, or (y) for reasonably equivalent value.

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

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

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

First Mezzanine Guaranty  Agreement

 

 

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

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

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

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

First Mezzanine Guaranty  Agreement

 

 

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

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

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

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

     3. Confidentiality; Cooperation. Lender agrees to treat all financial statements and
other financial information of any Guarantor and the DLJMB Parties that are not publicly available,
confidentially, provided that, each Guarantor recognizes that Lender shall, and hereby
authorizes Lender to, include such financial information or extracts therefrom in any Disclosure
Documents or similar disclosure with respect to any syndication of the Loan, so long as in each
case the affected Guarantor shall have the right, prior to their dissemination, to review and
approve any such Disclosure Documents or similar documents (such approval not to be unreasonably
withheld, delayed or conditioned) and the recipients of any such Disclosure Documents are subject
to customary obligations to preserve the confidentiality of such information, to the extent
applicable to such syndication. In connection therewith and with respect to all such financial
information, each Guarantor shall cooperate with and indemnify and hold harmless Lender to the same
extent provided in Section 9.3 of the Loan Agreement as if it were a party thereto and each
reference to “Borrowers” therein were instead a reference to such Guarantor.

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

First Mezzanine Guaranty  Agreement

 

 

Guarantors, as provided in the definition of “Guarantors Net Worth” above) of all Persons
providing this Guaranty, including any Substitute Guarantor, shall equal $400,000,000.00 or more,
and the aggregate Effective Liquidity (determined, in the case of Guarantors, as provided in the
definitions of “Effective Liquidity” and “Guarantors Effective Liquidity” above) of all such
Persons shall equal $200,000,000.00 or more, and (b) at least one of the Persons providing this
Guaranty is a Qualified Real Estate Guarantor, (i) the requirements of the first sentence of
Section 1(b) above shall be modified such that, as to each Person providing this Guaranty
pursuant to the Loan Agreement, including any Substitute Guarantor, at all times that such Guaranty
shall be required to be outstanding in accordance with the Loan Agreement, (x) such Person’s Net
Worth (or in the event that the Morgans Guarantor shall remain a guarantor hereunder at such time,
as to the Morgans Guarantor only, its Net Assets, and in the event that the DLJ Guarantor shall
remain a guarantor hereunder at such time, the Net Worth of the DLJ Guarantor and the DLJMB Parties
calculated in accordance with clause (ii) of the definition of “Guarantors Net Worth”
above) shall equal $200,000,000.00 or more (or in the event that the Morgans Guarantor or any
transferee, including an Affiliate of such transferee of the Morgan Guarantor’s interests in HR
Holdings (collectively, a “Morgans Transferee”) shall remain or become a guarantor of the Loan at
such time, as to the Morgans Guarantor and any Morgans Transferee only, the product of
$400,000,000.00 and such Person’s then percentage interest (directly or indirectly) in all profits
and losses of HR Holdings), and (y) such Person’s Effective Liquidity shall equal $100,000,000.00
or more (or in the event that the Morgans Guarantor or any Morgans Transferee shall remain or
become a guarantor of the Loan at such time, as to the Morgans Guarantor and any Morgan Transferee
only, the product of $200,000,000.00 and such Person’s then percentage interest (directly or
indirectly) in all profits and losses of HR Holdings), and (ii) the provisions of this Exhibit
A with respect to financial reporting, financial condition, transactions, dividends and
distributions, confidentiality and cooperation shall apply to all such Persons.

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

First Mezzanine Guaranty  Agreement

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