Document:

Exhibit
10.3

GUARANTY AGREEMENT

THIS
GUARANTY AGREEMENT (this
“Guaranty”) is executed as of
February 2, 2007, by MORGANS GROUP LLC,
a Delaware limited liability company, having an address at 475 Tenth Avenue,
New York, New York 10018, Attention: Marc Gordon, Chief Investment Officer (“Morgans
Guarantor”), and by DLJ MB IV HRH, LLC,
a Delaware limited liability company, having an address c/o DLJ Merchant
Banking Partners, 11 Madison Avenue, New York, New York 10010, Attention: Ryan
Sprott (“DLJ Guarantor”; and collectively with
Morgans Guarantor, each, individually, a “Guarantor”,  and collectively, “Guarantors”), jointly and severally, for
the benefit of COLUMN FINANCIAL, INC.,
a Delaware corporation, having an address at 11 Madison Avenue, New York, New
York 10010 (together with its successors and assigns, “Lender”).

RECITALS:

A.            Pursuant
to that certain Promissory Note, dated of even date herewith, executed by HRHH HOTEL/CASINO, LLC, a Delaware
limited liability company (“Hotel/Casino
Borrower”), HRHH CAFE, LLC, a Delaware limited
liability company (“Café Borrower”), HRHH
DEVELOPMENT, LLC, a Delaware limited liability company (“Adjacent Borrower”),
HRHH IP, LLC, a Delaware limited
liability company (“IP Borrower”), and HRHH GAMING, LLC, a Nevada limited liability company
(“Gaming Borrower”; and each of
Hotel/Casino Borrower, Café Borrower, Adjacent Borrower, IP Borrower and Gaming
Borrower, individually, a “Borrower”,
and collectively, “Borrowers”),
and payable to the order of Lender in the original principal amount of up to
One Billion Three Hundred Sixty Million and 00/100 Dollars ($1,360,000,000.00)
(as the same may be amended, restated, replaced, supplemented, or otherwise
modified from time to time, the “Note”),
Borrowers have become indebted, and may from time to time be further indebted,
to Lender with respect to a loan (the “Loan”) made
pursuant to that certain Loan Agreement, dated as of the date hereof, among
Borrowers and Lender (as the same may be amended, restated, replaced,
supplemented, or otherwise modified from time to time, the “Loan
Agreement”), which Loan is secured by, among other things, that
certain Construction Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Financing Statement
(Fixture Filing), dated as of the date hereof (as the same may be
amended, restated, replaced, supplemented, or otherwise modified from time to
time, the “Security Instrument”),
and further evidenced, secured or governed by other instruments and documents
executed in connection with the Loan (together with the Note, the Loan
Agreement and the Security Instrument, collectively, the “Loan
Documents”).

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

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

D.            All
capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to such 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, 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 jointly
and severally, 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 Borrower, 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
Borrower, 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 Borrower, by any Person Controlled by any Borrower
(including, without limitation, any Affiliated Manager, Liquor Manager who is
an Affiliate of any Borrower or Gaming Operator who is an Affiliate of any
Borrower), by any agent of any Borrower, or by any other Person with whom any
Borrower 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 

 2
 

amounts
received by any Borrower 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 this 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 to pay
(or to deposit into the Reserve Funds amounts sufficient to pay) all Taxes and
all other costs giving rise to any Lien on any portion of 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 Borrower
fails to maintain its status as a Special Purpose Entity as required pursuant
to the terms of the Loan Agreement;

(vii)         if Borrowers fail to
obtain Lender’s consent to any subordinate financing, deed of trust, mortgage
or other voluntary lien encumbering 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 

 3
 

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), 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 Security Instrument 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 Borrower or any Affiliate thereof shall be the
Liquor Manager, if HRHI, Gaming Borrower, such other Borrower 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 Security
Instrument 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 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; and/or

(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 (i) to HRHH Gaming Junior
Mezz, LLC, and then (ii) to HRHH Gaming Senior Mezz, LLC, 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.

 4
 

(b)           the
entire amount of the Debt in the event of: 
(i) any Borrower, HRHI or both Guarantors filing a voluntary petition
under the Bankruptcy Code or any other Federal or state bankruptcy or
insolvency law; or (ii) the filing of an involuntary petition against any
Borrower, 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/or the Administrative Agent, and such petition is not dismissed
within ninety (90) days after filing, or any Borrower, or any Affiliate of any
of them who Controls any Borrower, or HRHI or both Guarantors, solicit or cause
to be solicited petitioning creditors for any involuntary petition against any
Borrower, HRHI or both Guarantors from any Person (other than if requested to
do so by or on behalf of Lender and/or the Administrative Agent); (iii) any
Borrower, HRHI or both Guarantors filing an answer consenting to, or any
Borrower, HRHI or both Guarantors, or any Affiliate of any of them who Controls
any Borrower, otherwise consenting to or acquiescing or joining in, any
involuntary petition filed against any Borrower, HRHI or both Guarantors, by
any other Person (other than if filed by or on behalf of Lender and/or the
Administrative Agent) under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; (iv) any Borrower, HRHI or both Guarantors, or
any Affiliate of any of them who Controls any Borrower, consenting to or
acquiescing or joining in an application for the appointment of a custodian,
receiver, trustee or examiner for any Borrower or any portion of any Property
or any portion of the IP (other than any such appointment at the request or
petition of Lender and/or the Administrative Agent); or (v) any Borrower, HRHI
or both Guarantors voluntarily making an assignment for the benefit of
creditors (other than Lender and/or the Administrative Agent), or admitting, in
writing or in any legal proceeding, its insolvency or inability to pay its
debts as they become due; unless, in the case of any of the foregoing clauses
(i), (ii), (iii), (iv) or (v) 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.

1.3          Nature
of Guaranty. 
This Guaranty is an irrevocable, absolute, joint and several, continuing
guaranty of payment and performance and not a guaranty of collection.  This Guaranty may not be revoked by any
Guarantor and shall continue to be effective with respect to any Guaranteed
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.

 5
 

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 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 Borrower 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 any Property, (e) the
occurrence of any breach by any Borrower or an Event of Default, (f) Lender’s
transfer or disposition of the Guaranteed 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 Borrower, and (i) any other action at any time taken or omitted
by Lender, and, generally, all demands and notices of every kind in connection
with this Guaranty, the Loan Documents, any documents or agreements evidencing,
securing or relating to 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 agree to pay
to Lender and shall promptly upon written demand by Lender, pay Lender all
reasonable costs and expenses (including court costs and attorneys’ fees)
incurred by Lender in the enforcement hereof or the preservation of Lender’s
rights hereunder.  Notwithstanding the
foregoing, in the event that (A) Lender employs counsel to enforce the
provisions of this Guaranty and (B) Lender has sold or transferred any
interests in the Note, then Guarantors shall only be responsible for the 

 6
 

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 Borrower 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 Security Instrument, the Loan Agreement, the other
Loan Documents, or any other document, instrument, contract or understanding
between any Borrower and Lender, or any other parties, pertaining to the
Guaranteed Obligations or any failure of Lender to notify any Guarantor of any
such action.

 7
 

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

2.3          Condition
of Borrowers or Guarantors.  The insolvency, bankruptcy, arrangement,
adjustment, composition, liquidation, disability, dissolution or lack of power
of any Borrower, any Guarantor or any other party at any time liable for the
payment of all or part of the Guaranteed 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
Security Instrument, the Loan Agreement or the other 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 Security Instrument, the Loan Agreement or any of the other Loan
Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that each Guarantor shall remain jointly and
severally liable hereon regardless of whether any Borrower, any other Guarantor
or any other Person be found not liable on the Guaranteed 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, 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 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.

 8
 

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

2.13        Other
Actions Taken or Omitted.  Any other action taken or omitted to be taken
with respect to the Loan Documents, the Guaranteed Obligations, or the security
and collateral therefor, whether or not such action or omission prejudices any
Guarantor or increases the likelihood that any Guarantor will be required to
pay the Guaranteed 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 

 9
 

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.

 10

ARTICLE 4

SUBORDINATION OF CERTAIN INDEBTEDNESS

4.1          Subordination
of All Guarantor Claims.  As used herein, the term “Guarantor Claims” shall mean all debts and
liabilities of any Borrower to any Guarantor, whether such debts and
liabilities now exist or are hereafter incurred or arise, or whether the
obligations of such Borrower(s) thereon be direct, contingent, primary,
secondary, several, joint and several, or otherwise, and irrespective of
whether such debts or liabilities be evidenced by note, contract, open account,
or otherwise, and irrespective of the Person or Persons in whose favor such
debts or liabilities may, at their inception, have been, or may hereafter be
created, or the manner in which they have been or may hereafter be acquired by
any Guarantor.  The Guarantor Claims
shall include without limitation all rights and claims of any Guarantor against
any Borrower (arising as a result of subrogation or otherwise) as a result of
any Guarantor’s payment of all or a 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 Borrower or any other party any amount upon
any Guarantor Claim.

4.2          Claims
in Bankruptcy. 
In the event of any receivership, bankruptcy, reorganization,
arrangement, debtor’s relief, or other insolvency proceedings involving any
Guarantor as debtor, Lender shall have the right to prove its claim in any such
proceeding so as to establish its rights hereunder and receive directly from
the receiver, trustee or other court custodian dividends and payments which
would otherwise be payable upon Guarantor Claims.  Each Guarantor hereby assigns such dividends
and payments to Lender.  Should Lender
receive, for application against the Guaranteed 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 

 11
 

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

  

 

 12
 

 

	
  

  	
  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 

 13
 

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

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

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

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

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

5.7          Fully Recourse.  The Guaranteed Obligations are joint and
several recourse obligations of Guarantors and not restricted by any limitation
on personal liability.  Notwithstanding
anything to the contrary in this Guaranty, in the Loan Agreement or in any
other Loan Document, no present or future Constituent Member other than (i) a
Guarantor, and (ii) with respect to the DLJ Guarantor, DLJ Merchant Banking Partners IV, L.P., MBP IV Plan Investors, L.P.,
DLJMB HRH Co-Investments, L.P., DLJ Offshore Partners IV, L.P., and DLJ
Merchant Banking Partners IV (Pacific), L.P. (such limited partnerships,
collectively, the “DLJMB Parties”)
as provided in that certain commitment letter of the DLJMB Parties of even date
herewith addressed to the DLJ Guarantor, nor any present or future shareholder,
officer, director, employee, trustee, beneficiary, advisor, member, partner,
principal, participant or agent of or in any Guarantor or of or in any Person
that is or becomes a Constituent Member, other than Guarantors and such DLJMB
Parties, shall have any personal liability, directly or indirectly, under or in
connection with this Guaranty, or any amendment or amendments hereto made at
any time or times, heretofore or hereafter, and Lender on behalf of itself and
its successors and assigns, hereby waives any and all such personal liability.

 14
 

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 SECURITY 

 15
 

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

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

 16
 

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]

 17

EXECUTED as of the day and year first above written.

	
  

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  MORGANS GROUP LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Morgans Hotel Group Co.,

  
	
   

  	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  	
  as Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Richard
  Szymanski

  
	
   

  	
   

  	
  Name:

  	
  Richard
  Szymanski

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DLJ MB
  IV HRH, LLC,

  
	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ryan Sprott

  
	
   

  	
  Name:  Ryan
  Sprott

  
	
   

  	
  Title:    Vice
  President

  
							

 

Exhibit A

FINANCIAL
REPRESENTATIONS,  WARRANTIES AND
COVENANTS

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

(b)           At all times throughout the term of
this Guaranty, the Guarantors shall maintain (i) Guarantors Net Worth in excess
of $400,000,000.00 in the aggregate, and (ii) a minimum amount of Guarantors
Effective Liquidity in excess of $200,000,000.00 in the aggregate. Within
one-hundred twenty (120) days following the end of each calendar year, and,
upon Lender’s written request, within forty-five (45) days following the end of
any calendar quarter, each Guarantor shall deliver or cause to be delivered to
Lender a complete copy of such Guarantor’s and, in the case of the DLJ
Guarantor, the DLJMB Parties’ annual, and, if requested, quarterly financial statements
audited by a “Big Four” accounting firm, BDO Seidman LLP, or other independent
certified public accountant reasonably acceptable to Lender prepared in
accordance with GAAP, including in each case statements of profit and loss and
a balance sheet for such Guarantor and the DLJMB Parties, as the case may be,
together with a certificate of each Guarantor (which certificate in the case of
the Morgans Guarantor shall pertain only to the Morgans Guarantor, and in the
case of the DLJ Guarantor shall pertain only to the DLJ Guarantor and the DLJMB
Parties) (i) setting forth in reasonable detail such Guarantor’s and each DLJMB
Parties’ Net Worth as of the end of the prior calendar year or quarter, as the
case may be, based thereon, and then Effective Liquidity, and (ii) certifying
that such financial statements are true, correct, accurate and complete in all
material respects and fairly present the financial condition and results of the
operations of such Guarantor, and, in the case of DLJ Guarantor, the DLJMB
Parties, provided, however, that in the event the DLJ Guarantor, any DLJMB
Party or the Morgans Guarantor is not otherwise required to, and does not,
cause to be prepared such audited financial statements in the ordinary course
of its business, it may deliver the unaudited statements which are delivered to
its investors or otherwise prepared in the ordinary course of its business,
accompanied by such certification.

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

the ordinary
course of  business, consistent with past
practice and for reasonably equivalent value, or (y) for reasonably equivalent
value.

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

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

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

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

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

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

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

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

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

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

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

3.             Confidentiality; Cooperation.  Lender agrees to treat all financial
statements and other financial information of any Guarantor and the DLJMB
Parties that are not publicly available, confidentially, provided that,
each Guarantor recognizes that Lender shall, and hereby authorizes Lender to,
include such financial information or extracts therefrom in any Disclosure
Documents or similar disclosure with respect to any syndication of the Loan, so
long as in each case the affected Guarantor shall have the right, prior to
their dissemination,  to review and
approve any such Disclosure Documents or similar documents (such approval not
to be unreasonably withheld, delayed or conditioned) and the recipients of any
such Disclosure Documents are subject to customary obligations to preserve the
confidentiality of such information, to the extent applicable to such
syndication.  In connection therewith and
with respect to all such financial information, each Guarantor shall cooperate
with and indemnify and hold harmless Lender to the same extent provided in
Section 9.2 of the Loan Agreement as if it were a party thereto and each
reference to “Borrowers” therein were instead a reference to such Guarantor.

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

Guarantor”), then (a) the requirements of the first
sentence of Section 1(b) above shall be modified such that, as to each
Person providing any Guaranty pursuant to the Loan Agreement, including any
Substitute Guarantor, at all times that such Guaranty shall be required to be
outstanding in accordance with the Loan Agreement, (x) such Person’s Net Worth
(or in the event that the Morgans Guarantor shall remain a guarantor hereunder
at such time, as to the Morgans Guarantor only, its Net Assets, and in the
event that the DLJ Guarantor shall remain a guarantor hereunder at such time,
the Net Worth of the DLJ Guarantor and the DLJMB Parties calculated in
accordance with clause (ii) of the definition of “Guarantors Net Worth” above)
shall equal not less than an amount equal to the lesser of (1) $200,000,000.00
or (2) the product of $400,000,000.00 and such Person’s then percentage
interest (directly or indirectly) in all profits and losses of HR Holdings, and
(y) such Person’s Effective Liquidity shall be in excess of an amount equal to
the lesser of (1) $100,000,000.00 or (2) the product of $200,000,000.00 and
such Person’s then percentage interest (directly or indirectly) in all profits
and losses of HR Holdings, and (b) the provisions of this Exhibit A with
respect to financial reporting, financial condition, transactions, dividends
and distributions, confidentiality and cooperation shall apply to all such
Persons, provided that, in all cases at least one of the Persons
providing any Guaranty is a Qualified Real Estate Guarantor.

5.             Conflicts.  Nothing in this Exhibit A shall be
read in any manner or construed or deemed to alter, modify, amend or waive any
term or condition of any Loan Document, except to the extent this Exhibit A
is expressly incorporated by reference therein, including by Section 3.4
of the Guaranty.  In the event of any
conflicts between the terms and conditions hereof and the terms and conditions
of any Loan Document, the terms and conditions of the other Loan Documents
shall control and be binding in all respects.Exhibit
10.4

CLOSING GUARANTY OF COMPLETION

This CLOSING GUARANTY OF
COMPLETION (this “Guaranty”) is executed as of
February 2, 2007, by MORGANS
GROUP LLC, a Delaware
limited liability company, having an address at 475 Tenth Avenue, New York, New
York 10018, Attention: Marc Gordon, Chief Investment Officer (“Morgans Guarantor”), and by DLJ MB IV
HRH, LLC, a Delaware limited liability company, having an address
c/o DLJ Merchant Banking Partners, 11 Madison Avenue, New York, New York 10010,
Attention: Ryan Sprott (“DLJ Guarantor”;
and collectively with Morgans Guarantor, each individually, a “Guarantor”,  and collectively, “Guarantors”),
jointly and severally, for the benefit of COLUMN FINANCIAL, INC., a Delaware corporation, having an
address at 11 Madison Avenue, New York, New York 10010 (together with its
successors and assigns, “Lender”).

RECITALS:

A.            Pursuant
to that certain Promissory Note, dated of even date herewith, executed by HRHH HOTEL/CASINO, LLC, a Delaware
limited liability company (“Hotel/Casino Borrower”), HRHH
CAFE, LLC, a Delaware limited liability company (“Café
Borrower”), HRHH DEVELOPMENT, LLC, a Delaware
limited liability company (“Adjacent Borrower”),
HRHH IP, LLC, a Delaware
limited liability company (“IP Borrower”),
and HRHH GAMING, LLC, a Nevada limited liability company (“Gaming Borrower”; and each of Hotel/Casino
Borrower, Café Borrower, Adjacent Borrower, IP Borrower and Gaming Borrower,
individually, a “Borrower”, and collectively, “Borrowers”), and payable to the order of Lender in the
original principal amount of up to One
Billion Three Hundred Sixty Million and 00/100 Dollars ($1,360,000,000.00) (as
the same may be amended, restated, replaced, supplemented, or otherwise
modified from time to time, the “Note”),
Borrowers have become indebted, and may from time to time be further indebted,
to Lender with respect to a loan (the “Loan”)
made pursuant to that certain Loan Agreement, dated as of the date hereof,
among Borrowers and Lender (as the same may be amended, restated, replaced, supplemented,
or otherwise modified from time to time, the “Loan
Agreement”), which Loan is secured by, among other things, that
certain Construction Deed of Trust, Assignment
of Leases and Rents, Security Agreement and Financing Statement (Fixture
Filing), dated as of the date hereof (as the same may be amended, restated,
replaced, supplemented, or otherwise modified from time to time, the “Security Instrument”), given by Borrowers, as grantees, for
the benefit of Lender, encumbering, among other properties, certain real
property and the improvements thereon located in Las Vegas, Nevada and more
particularly described on Exhibits A-1 (the “Hotel/Casino
Property”) and A-2 (the “Adjacent Property”;
and the Hotel/Casino Property and the Adjacent Property, individually, a “Property”, and collectively, the “Properties”
) attached hereto and made a part hereof, and further evidenced, secured or
governed by other instruments and documents executed in connection with the
Loan (together with the Note, the Loan Agreement and the Security Instrument,
collectively, the “Loan Documents”).

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

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

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

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

ARTICLE I

NATURE AND SCOPE OF GUARANTY

1.1          Guaranteed
Obligations.

(a)                   Each Guarantor hereby jointly and severally,
irrevocably, absolutely and unconditionally guarantees to Lender the full,
complete and punctual payment, performance and satisfaction of all of the
obligations, duties, covenants and agreements of Borrowers under the Loan
Agreement relating to each project contemplated by the Initial Renovations, as
shown on Schedule XIII to the Loan Agreement, as the same may be modified with
the reasonable consent of Lender, if and when Borrowers shall begin physical
construction thereof (each such project, as and when Borrowers have elected to
commence, and have commenced, physical construction thereof, an “Initial Renovations Project”),
substantially in compliance with the applicable plans and specifications, the
applicable portions of the Initial Renovations Loan Budget, the applicable
construction progress schedule and all applicable Legal Requirements,
including, without limitation:

(i)            to diligently
commence, perform and complete (or cause to be commenced, performed and
completed) the construction of each Initial Renovations Project in accordance
with the terms of the Loan Agreement;

(ii)           to pay all costs
associated with each Initial Renovations Project, including, without
limitation, all hard costs, soft costs and other obligations, liabilities, costs
and expenses incurred in connection with the completion of each Initial
Renovations Project, as the same may become due and payable;

(iii)          to keep the
Properties free and clear of all Liens or claims of Liens arising or incurred
in connection with the completion of each Initial Renovations Project, other
than Permitted Encumbrances and any such Liens being contested pursuant to, and
in accordance with, Section 3.6(b) of the Security Instrument, and if any Liens
should be filed, or should attach, with respect to any Property by reason of
the carrying out of each Initial Renovations Project, within fifteen (15)
Business Days after obtaining notice thereof (but in any event prior to the
date on which such Property or any part thereof or interest therein may be in
imminent danger of being sold, forfeited, foreclosed, 

 2
 

terminated, cancelled or lost), other than any such Liens being
contested pursuant to, and in accordance with, Section 3.6(b) of the Security
Instrument, to either (A) cause the removal of such Liens or (B) post security
against the consequences of their possible foreclosure and procure an
endorsement to the Title Insurance Policy insuring Lender against the
consequences of the foreclosure or enforcement of such Liens;

(iv)          to pay the premiums
for all policies of insurance required to be furnished by Borrowers pursuant to
the Loan Agreement during the performance of each Initial Renovations Project
if such premiums are not paid by Borrowers;

(v)           if Lender exercises
its rights to complete any Initial Renovations Project pursuant to this
Guaranty or any of the other Loan Documents, to pay or reimburse Lender for any
and all costs and expenses incurred by Lender in completing such Initial
Renovations Project;

(vi)          to pay all claims
relating to the foregoing before they become delinquent;

(vii)         to correct or cause
to be corrected any material defect in any Initial Renovations Project, as
reasonably determined by the applicable architect and the Construction
Consultant or, if the applicable architect and the Construction Consultant
cannot reasonably agree, then as determined pursuant to the most expedited form
of arbitration available for such disagreement under the rules of the American
Arbitration Association, such arbitration to be held in New York, New York; and

(viii)        to pay any and all
costs, expenses, liabilities, claims and amounts required to be paid by
Guarantors pursuant to Section 1.7 or any other provision hereof (the “Enforcement Costs”).

(b)                   Each Guarantor hereby jointly and severally,
irrevocably, absolutely and unconditionally guarantees to Lender the full,
complete and punctual payment, performance and satisfaction of all of the
obligations, duties, covenants and agreements of Borrowers under Section
3.18 of the Loan Agreement relating to restoration of the Properties in the
event that any of (i) the Qualification Conditions have not been satisfied on
or prior to the Construction Qualification Date, (ii) Borrowers have delivered
the Relinquishment Notice to Lender, or (iii) Borrowers have delivered a Stop
Notice to Lender, substantially in compliance with all applicable Legal
Requirements and to the reasonable satisfaction of the Construction Consultant,
including, without limitation:

(i)            to diligently
commence, perform and complete (or cause to be commenced, performed and
completed) the restoration of the Properties to the extent required under, and
in accordance with the terms of, the Loan Agreement;

(ii)           to pay all costs
associated with such restoration, including, without limitation, all hard
costs, soft costs and other obligations, liabilities, costs and expenses
incurred in connection with the completion of such restoration, as the same may
become due and payable;

 3
 

(iii)          to keep the
Properties free and clear of all Liens or claims of Liens arising or incurred
in connection with such restoration, other than Permitted Encumbrances and any
such Liens being contested pursuant to, and in accordance with, Section 3.6(b)
of the Security Instrument, and if any Liens should be filed, or should attach,
with respect to any Property by reason of the carrying out of such restoration,
within fifteen (15) Business Days after obtaining notice thereof (but in any
event prior to the date on which such Property or any part thereof or interest
therein may be in imminent danger of being sold, forfeited, foreclosed,
terminated, cancelled or lost), other than any such Liens being contested
pursuant to, and in accordance with, Section 3.6(b) of the Security Instrument,
to either (A) cause the removal of such Liens or (B) post security against the
consequences of their possible foreclosure and procure an endorsement to the
Title Insurance Policy insuring Lender against the consequences of the
foreclosure or enforcement of such Liens;

(iv)          to pay the premiums
for all policies of insurance required to be furnished by Borrowers pursuant to
the Loan Agreement during the performance of the restorations if such premiums
are not paid by Borrowers;

(v)           if Lender exercises
its rights to complete any of the restoration pursuant this Guaranty or any of
the other Loan Documents, to pay or reimburse Lender for any and all costs and
expenses incurred by Lender in completing the restoration; and

(vi)          to pay all claims
relating to the foregoing before they become delinquent.

The obligations and liabilities set forth in the foregoing Sections
1.1(a) and 1.1(b) are collectively referred to herein as the “Guaranteed Obligations”; and the completion obligations with
respect to completion of any Initial Renovations Project or restoration from
any Pre-Construction Work shall be referred herein as the “Guaranteed Work”.  Each Guarantor hereby acknowledges having
received, reviewed and approved a true and complete copy of the Loan
Agreement.  Each Guarantor hereby
irrevocably and unconditionally covenants and agrees that it is liable for the
Guaranteed Obligations as a primary obligor and not merely as a surety.

1.2          Payment
and Performance by Guarantors.

(a)                   If Borrowers shall fail to diligently proceed with
any Guaranteed Work and the completion thereof in accordance with the
provisions of the Loan Agreement, subject to Excusable Delay, or if Borrowers
shall otherwise fail to perform their obligations under the Loan Agreement
relating to any Guaranteed Work, or if any of the other Guaranteed Obligations
shall not be paid and performed when due, then Guarantors, within ten (10) days
after a written demand for payment or performance has been given to Guarantors
by Lender in accordance with the notice provisions hereof, shall pay or perform
the same, it being expressly acknowledged and agreed by Guarantors that Lender
shall have no obligation to, and shall not, continue to disburse any portion of
the Construction Loan or the Initial Renovations Reserve Fund for any such
purpose.  Guarantors’ obligations
hereunder shall continue in full force and effect, notwithstanding any default
by any Borrower under any other covenants, terms or conditions set forth in the
Loan Documents, commencement and/or completion of foreclosure proceedings or 

 4
 

acquisition by Lender of all or any portion
of any Property through foreclosure or deed in lieu of foreclosure and, in that
regard, all of the covenants, terms or conditions set forth in the Loan
Documents relating in any way to the Guaranteed Obligations shall survive any
such foreclosure or deed in lieu of foreclosure and remain binding obligations
of Borrowers guaranteed by each Guarantor hereunder until the complete payment
and performance of all of the Guaranteed Obligations.

(b)                   Intentionally Omitted.

(c)                   If any Guarantor shall, within fifteen (15) days
after written demand from Lender, fail to diligently undertake the performance
of the Guaranteed Obligations, then Lender shall have the right, at its option,
either before, during or after commencing foreclosure or sale proceedings
against all or any portion of the Property, as the case may be, and before,
during or after pursuing any other right or remedy against Borrower or
Guarantor, to perform any and all of the Guaranteed Work by or through any
agent, contractor or subcontractor of its selection, and pursuant to contracts
or subcontracts relating thereto, all as Lender in its sole discretion deems
proper.  Furthermore, Lender shall have
no obligation to protect or insure any collateral for the Loan, nor shall Lender
have any obligation to perfect its security interest in any collateral for the
Loan.  During the course of any of the
Guaranteed Work undertaken by Lender or any other party on behalf of Lender,
Guarantors shall pay on demand any amounts due to contractors, subcontractors
and material suppliers and for permits and licenses necessary or desirable in
connection therewith.  Guarantors’
obligations in connection with any of the Guaranteed Work undertaken by Lender
or any other party on behalf of Lender shall not be affected by any errors or
omissions of Borrowers’ general contractor or architect, Lender’s consulting
architect, or any subcontractor or agent or employee of any of the foregoing in
the design, supervision and/or performance of the work, it being understood
that such risk is assumed by Guarantors.

(d)                   Satisfaction by Guarantors of any liability
hereunder at any one time with respect to any default by any Borrower shall not
discharge Guarantors with respect to any other default by any Borrower at any
other time, it being the intent hereof that this Guaranty and the obligations
of Guarantors hereunder shall be continuing and may be enforced by Lender to
the end that the Guaranteed Work shall be timely completed, lien free, without
loss, cost, expense, injury or liability of any kind to Lender, subject to the
express terms hereof.  To the extent
permitted by applicable law, all of the remedies set forth herein and/or
provided for in any of the Loan Documents or at law or equity shall be equally
available to Lender, and the choice by Lender of one such alternative over
another shall not be subject to question or challenge by Guarantor or any other
Person, nor shall any such choice be asserted as a defense, setoff, or failure
to mitigate damages in any action, proceeding, or counteraction by Lender to
recover or seeking any other remedy under this Guaranty, nor shall such choice
preclude Lender from subsequently electing to exercise a different remedy.  The parties have agreed to the alternative
remedies provided herein in part because they recognize that the choice of
remedies in the event of a default hereunder will necessarily be and should
properly be a matter of good faith business judgment, which the passage of time
and events may or may not prove to have been the best choice to maximize
recovery by Lender at the lowest cost to Borrowers and/or Guarantors.  It is the intention of the parties that such
good faith choice by Lender be given conclusive effect regardless of such
subsequent developments.  No Guarantor
shall have any right of recourse 

 5
 

against Lender by reason of any action Lender
may take or omit to take under the provisions of this Guaranty or under the
provisions of any of the other Loan Documents, except to the extent of Lender’s
gross negligence, willful misconduct or fraud.

1.3          Nature of Guaranty.  This Guaranty is an irrevocable,
unconditional, absolute, continuing guaranty of payment and performance and not
a guaranty of collection.  This Guaranty
may not be revoked by Guarantors and shall continue to be effective with
respect to any Guaranteed Obligations arising or created after any attempted
revocation by any Guarantor and after (if any Guarantor is a natural person)
any Guarantor’s death (in which event this Guaranty shall be binding upon such
Guarantor’s estate and such Guarantor’s legal representatives and heirs).  The fact that at any time or from time to
time the Guaranteed Obligations may be increased or reduced shall not release
or discharge the obligation of Guarantors to Lender with respect to the
Guaranteed Obligations.  This Guaranty
may be enforced by Lender and any subsequent holder of the Note and shall not
be discharged by the assignment or negotiation of all or part of the Note.  This Guaranty shall terminate upon the earlier
to occur of (i) payment in full of the Debt, or (ii) complete payment and
performance of all of the Guaranteed Work, or (iii) Final Completion of the
Project; provided, however, that if, at the time any of the
events set forth in the foregoing clauses (i), (ii) or (iiiv),
as applicable, shall occur, Guarantors are then in the process of completing
any of the Guaranteed Work, Guarantors shall, at Lender’s reasonable expense,
reasonably cooperate to transition such completion to Lender or its designee,
including, without limitation, assigning to Lender or its designee any
construction-related contracts not previously assigned to Lender, making
Guarantors’ employees available to Lender or its designee for construction
status briefings and to answer questions regarding construction of such
Guaranteed Work, and turning over to Lender copies of Guarantors’ books,
records and files relating to the construction and completion of such
Guaranteed Work.

1.4          Guaranteed
Obligations Not Reduced by Offset.  The Guaranteed Obligations and the
liabilities and obligations of 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 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.

1.5          No
Duty To Pursue Others.  To the extent permitted by applicable law, it
shall not be necessary for Lender (and each Guarantor hereby waives any rights
which such Guarantor may have to require Lender), in order to enforce the obligations
of Guarantors hereunder, first to (a) institute suit or exhaust its remedies
against any Borrower 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 guarantor(s) of the Guaranteed Obligations,
(d) join any Borrower or any others liable on the Guaranteed Obligations
in any action seeking to enforce this Guaranty, or (e) 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.

 6
 

1.6          Waivers.  Each Guarantor agrees to the provisions of
the Loan Documents and, to the extent permitted by applicable law, hereby
waives notice of (a) any loans or advances made by Lender to Borrowers,
(b) acceptance of this Guaranty, (c) any amendment or extension of the
Note, the Loan Agreement, the Security Instrument or any other Loan Documents,
(d) the execution and delivery by any Borrower and Lender of any other loan or
credit agreement or of any Borrower’s execution and delivery of any promissory
notes or other documents arising under the Loan Documents or in connection with
any Property, (e) the occurrence of any breach by any Borrower or an Event
of Default, (f) Lender’s transfer or disposition of the Guaranteed
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 Borrower,
and (i) any other action at any time taken or omitted by Lender and, generally,
all demands and notices of every kind in connection with this Guaranty, the
Loan Documents, any documents or agreements evidencing, securing or relating to
any of the Guaranteed Obligations and the obligations hereby guaranteed.

1.7          Payment
of Expenses. 
In the event that any Guarantor should breach or fail to timely perform
any provisions of this Guaranty, Guarantors shall, immediately upon written
demand by Lender, pay Lender all reasonable costs and expenses (including,
without limitation, reasonable attorneys’ fees, court costs, filing fees,
recording costs, title insurance premiums, survey costs and expenses of
foreclosure) incurred by Lender in the enforcement hereof or the preservation
of Lender’s rights hereunder. 
Notwithstanding the foregoing, in the event that (i) Lender employs counsel
to enforce the provisions of this Guaranty and (ii) Lender has sold or
transferred any interests in the Note, then Guarantors shall only be
responsible for the attorneys’ fees and expenses of the counsel of only one
Lender.

1.8          Payment
by Guarantors. 
If any amount due on the Guaranteed Obligations is not paid to Lender
within ten (10) Business Days after written demand by Lender, the same shall
bear interest at the Default Rate from the date of demand until the date such
amount has been paid in full (which interest shall be included within the
meaning of 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 and the Guaranteed Obligations shall remain in full force and
effect.  It is the intention of Borrowers
and Guarantors that Guarantors’ obligations hereunder shall not 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 it may now or
hereafter have under any agreement, at law or in equity (including, without
limitation, any law subrogating any Guarantor to the rights of Lender), to
assert any claim against or seek 

 7
 

contribution, indemnification or any other
form of reimbursement from any Borrower or any other party liable for payment
of any or all of the Guaranteed Obligations for any payment made by any
Guarantor under or in connection with this Guaranty or otherwise until such
time as the Guaranteed Obligations have been paid and performed in full.

1.11        Borrower.  The term “Borrower” or “Borrowers” 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
II

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:

2.1          Modifications;
Sales.

(a)           Any renewal,
extension, increase, modification, alteration or rearrangement of all or any
part of the Guaranteed Obligations, the Note, the Loan Agreement, the Security
Instrument, the other Loan Documents or any other document, instrument,
contract or understanding between Borrowers (or any of them) and Lender or any
other parties pertaining to the Guaranteed Obligations, or any sale, assignment or
foreclosure of the Note, the Loan Agreement, the Security Instrument or any of
the other Loan Documents or any sale or transfer of all or any portion of any
Property, or any failure of Lender to notify any Guarantor of any such
action.

(b)           Any amendment,
modification or Change Order to the Plans and Specifications and/or the Loan
Budget made in accordance with the terms of the Loan Agreement.

2.2          Adjustment.  Any adjustment, indulgence, forbearance or
compromise that might be granted or given by Lender to any Borrower or any
Guarantor or any other party liable for payment of any or all of the Guaranteed
Obligations.

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 or performance 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 

 8
 

changes in the direct or indirect
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 Loan Agreement, the Security Instrument or the other 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 such 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 Loan Agreement, the Security
Instrument or any of the other Loan Documents have been forged or otherwise are
irregular or not genuine or authentic, it being agreed that each Guarantor
shall remain liable hereon regardless of whether any Borrower or any other
Person, including any other Guarantor, 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, 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 other parties will be liable to pay or perform the Guaranteed
Obligations, or that Lender will look to other parties 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 any collateral, property or
security, including, but not limited to, 

 9
 

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        Representations.  The accuracy or inaccuracy of the representations and warranties made by
any Guarantor herein or by any Borrower in any of the Loan Documents.

2.11        Offset.  The Note, the Loan
Agreement, the Guaranteed Obligations and the liabilities and obligations of
Guarantors to Lender hereunder shall not be reduced, discharged or released
because of or 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 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.

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

2.13        Preference.  Any payment by any Borrower to Lender is held
to constitute a preference under bankruptcy laws or for any reason Lender is required
to refund such payment or pay such amount to any Borrower or to any other
Person.

2.14        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 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.

 10

ARTICLE
III

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 Borrowers,
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 each Borrower and is familiar
with the value of any and all collateral intended to be created as security for
the payment of the Note or the Guaranteed Obligations; however, such Guarantor
is not relying on such financial condition or 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
said Guarantor to execute this Guaranty.

3.4          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.

3.5          Litigation.  There is no action, suit, proceeding or
investigation pending or, to such Guarantor’s knowledge, threatened in writing
against such Guarantor in any court or by or before any other Governmental
Authority, or labor controversy affecting such Guarantor or any of such
Guarantor’s properties, businesses, assets or revenues, which would reasonably
be expected to materially and adversely affect the performance of such
Guarantor’s obligations and duties under this Guaranty or impair such Guarantor’s
ability to fully fulfill and perform such Guarantor’s obligations under this
Guaranty and the other Loan Documents to which such Guarantor is a party.

3.6          Offset.
The Loan Documents are not subject to any right of rescission, set-off,
counterclaim or defense by such Guarantor, including the defense of usury, and
such Guarantor has not asserted any right of rescission, set-off,
counterclaim or defense with respect thereto.

3.7          Embargoed
Person.  At
all times throughout the term of the Loan, including after giving effect to any
Transfer permitted pursuant to the Loan Documents, (a) none of the 

 11
 

funds or other assets of such Guarantor shall
constitute property of, or shall be beneficially owned, directly or indirectly,
by any person, entity or government subject to trade restrictions under U.S.
law, including, but not limited to, the International Emergency Economic Powers
Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C.
App. 1 et seq., and any Executive Orders or regulations promulgated thereunder
(each an “Embargoed Person”) with
the result that the Loan made by Lender is or would be in violation of law;
(b) no Embargoed Person shall have any interest of any nature whatsoever
in such Guarantor, with the result that the Loan is or would be in violation of
law; and (c) none of the funds of such Guarantor shall be derived from any
unlawful activity with the result that the Loan is or would be in violation of
law.

3.8          Survival.  All representations and warranties made by
such Guarantor herein shall survive the execution hereof.

ARTICLE
IV

COVENANTS

4.1          Corporate
Existence. Each Guarantor shall maintain and
preserve such Guarantor’s corporate existence and qualification as a
corporation or limited liability company (as applicable) pursuant to the laws
of such Guarantor’s State of formation.

4.2          Dissolution.  Subject to Transfers permitted pursuant to
the Loan Agreement, no Guarantor shall liquidate, wind-up or dissolve (or
suffer any liquidation or dissolution).

4.3          Litigation.  Each Guarantor shall give prompt notice to
Lender of any litigation or governmental proceedings pending or threatened in
writing against such Guarantor of which such Guarantor has notice and which
would reasonably be expected to materially adversely affect such Guarantor’s
ability to perform its obligations hereunder.

4.4          Notice
of Default. 
Each Guarantor shall promptly advise Lender of any material adverse
change in such Guarantor’s condition, financial or otherwise, of which such
Guarantor has knowledge and which would reasonably be expected to materially
adversely affect such Guarantor’s ability to perform its obligations hereunder.

4.5          Certification.
Each Guarantor at any time and from time to time, within ten (10) Business Days
following the request by Lender, shall execute and deliver to Lender a
statement certifying that this Guaranty is unmodified and in full force and
effect (or if modified, that the same is in full force and effect as modified
and stating such modifications) or, if applicable, that this Guaranty is no
longer in full force and effect.

 12
 

ARTICLE V

SUBORDINATION OF CERTAIN INDEBTEDNESS

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

5.2          Claims
in Bankruptcy. 
In the event of 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 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 and performance 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.

5.3          Payments
Held in Trust. 
In the event that, notwithstanding anything to the contrary contained in
this Guaranty, 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 them promptly to Lender, and such Guarantor covenants
promptly to pay the same to Lender.

5.4          Liens
Subordinate. 
Each Guarantor agrees that any liens, security interests, judgment
liens, charges or other encumbrances upon any Borrower’s assets securing
payment of the Guarantor Claims 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 any Guarantor or Lender
presently exist or are hereafter created or attach.  Without the prior written consent of 

 13
 

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
VI

MISCELLANEOUS

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

6.2          Notices.  All notices,
consents, approvals and requests required or permitted hereunder (each, a “Notice”) shall be given in writing and
shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, return
receipt requested, (b) a reputable overnight courier for next Business Day
delivery, or (c) expedited prepaid delivery service, either commercial or
United States Postal Service, with proof of attempted delivery, and by
telecopier (with answer back acknowledged), addressed as follows (or at 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 6.2):

	
   

  	
  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

  

 

 14
 

 

	
  

  	
  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 Hotel Group Co.

  
	
   

  	
   

  	
  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 after
advice by telephone to recipient that a telecopy Notice is forthcoming.  

 15
 

provided, that
within three (3) Business Days thereafter, a hard copy of such Notice shall
have been delivered pursuant to the provisions of clause (a), (b) or (c) of
this Section 6.2.

6.3          Governing
Law; Submission to Jurisdiction.  This Guaranty shall be governed, enforced and
construed in accordance with the laws of the State of New York (without giving
effect to New York’s principles of conflicts of law).

6.4          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.

6.5          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.

6.6          Parties
Bound; Assignment; Joint and Several.  This Guaranty shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs 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.  The
obligations, liabilities, representations, covenants and agreements of
Guarantors hereunder are joint and several.

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

6.8          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.

6.9          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.

6.10        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, 

 16
 

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 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.

6.11        Entirety.  THIS GUARANTY EMBODIES THE FINAL, 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 THE GUARANTY, AND NO COURSE OF DEALING BETWEEN ANY
GUARANTOR AND/OR ANY BORROWER 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
AGREEMENT.  THERE ARE NO ORAL AGREEMENTS
BETWEEN ANY GUARANTOR AND LENDER.

6.12        Waiver
of Right To Trial By Jury.  EACH
GUARANTOR AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY JURY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WAIVE
ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE LOAN AGREEMENT, THE
SECURITY INSTRUMENT OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. 
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY
BY EACH GUARANTOR AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE.  LENDER IS HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY EACH GUARANTOR AND LENDER.

6.13        Cooperation.  Each Guarantor acknowledges that Lender and
its successors and assigns may (a) sell this Guaranty, the Note and the 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 the 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, at no cost to such
Guarantor other than for such Guarantor’s legal and accounting fees, reasonably
cooperate with Lender in effecting any such 

 17
 

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, at no cost to such Guarantor other than for such
Guarantor’s legal and accounting fees, provide such information and documents
relating to such Guarantor, any Borrower, any Property and any tenants thereof
or the Improvements, to the extent in such Guarantor’s possession or able to be
obtained by such Guarantor from any Borrower or otherwise using reasonable
efforts, 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 or information
previously provided by any Guarantor 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 thus
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 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 additional covenant, representation, warranty, indemnity or
certification or otherwise.

6.14        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 such Borrower or otherwise, the
Guarantors’ obligations hereunder with respect to such payment shall be
reinstated as though such payment has been due but not made at such time.

6.15        USA Patriot Act Notice. 
Lender hereby notifies Guarantors that pursuant to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)) (the “Patriot Act”),
it is required to obtain, verify and record information that identifies each
Guarantor, which information includes the name and address of each Guarantor
and other information that will allow Lender to identify each Guarantor in
accordance with the Patriot Act.

6.16        Fully Recourse.  The Guaranteed Obligations are joint and
several recourse obligations of Guarantors and not restricted by any limitation
on personal liability.  Notwithstanding
anything to the contrary in this Guaranty, in the Loan Agreement or in any 

 18
 

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

ARTICLE
VII

FINANCIAL
REPRESENTATION, WARRANTIES AND COVENANTS

7.1          Agreement
of Guarantors. 
Each Guarantor hereby makes the representations, warranties and
covenants set forth on Exhibit B 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.

[No Further Text on This Page]

 19

IN WITNESS WHEREOF, each Guarantor has executed and
delivered this Closing Guaranty of Completion as of the date first set forth
above.

	
  

  	
  MORGAN GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  MORGANS
  GROUP LLC,

  
	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Morgans Hotel Group Co.,

  
	
   

  	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  	
  as Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Richard
  Szymanski

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Richard
  Szymanski

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DLJ GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  DLJ MB
  IV HRH, LLC,

  
	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ryan Sprott

  
	
   

  	
   

  	
  Name:  Ryan
  Sprott

  
	
   

  	
   

  	
  Title:    Vice
  President

  
						

 

EXHIBIT
B

FINANCIAL
REPRESENTATIONS, WARRANTIES AND COVENANTS

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

(b)           At all times throughout the term of
this Guaranty, the Guarantors shall maintain (i) Guarantors Net Worth in excess
of $400,000,000.00 in the aggregate, and (ii) a minimum amount of Guarantors
Effective Liquidity in excess of $200,000,000.00 in the aggregate. Within one-hundred
twenty (120) days following the end of each calendar year, and, upon Lender’s
written request, within forty-five (45) days following the end of any calendar
quarter, each Guarantor shall deliver or cause to be delivered to Lender a
complete copy of such Guarantor’s and, in the case of the DLJ Guarantor, the
DLJMB Parties’ annual, and, if requested, quarterly financial statements
audited by a “Big Four” accounting firm, BDO Seidman LLP, or other independent
certified public accountant reasonably acceptable to Lender prepared in
accordance with GAAP, including in each case statements of profit and loss and
a balance sheet for such Guarantor and the DLJMB Parties, as the case may be,
together with a certificate of each Guarantor (which certificate in the case of
the Morgans Guarantor shall pertain only to the Morgans Guarantor, and in the
case of the DLJ Guarantor shall pertain only to the DLJ Guarantor and the DLJMB
Parties) (i) setting forth in reasonable detail such Guarantor’s and each DLJMB
Parties’ Net Worth as of the end of the prior calendar year or quarter, as the
case may be, based thereon, and then Effective Liquidity, and (ii) certifying
that such financial statements are true, correct, accurate and complete in all
material respects and fairly present the financial condition and results of the
operations of such Guarantor, and, in the case of DLJ Guarantor, the DLJMB
Parties, provided, however, that in the event the DLJ Guarantor, any DLJMB
Party or the Morgans Guarantor is not otherwise required to, and does not,
cause to be prepared such audited financial statements in the ordinary course
of its business, it may deliver the unaudited statements which are delivered to
its investors or otherwise prepared in the ordinary course of its business, accompanied
by such certification.

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

the ordinary
course of  business, consistent with past
practice and for reasonably equivalent value, or (y) for reasonably equivalent
value.

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

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

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

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

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

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

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

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

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

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

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

3.             Confidentiality;
Cooperation.  Lender agrees to treat
all financial statements and other financial information of any Guarantor and
the DLJMB Parties that are not publicly available, confidentially, provided
that, each Guarantor recognizes that Lender shall, and hereby authorizes Lender
to, include such financial information or extracts therefrom in any Disclosure
Documents or similar disclosure with respect to any syndication of the Loan, so
long as in each case the affected Guarantor shall have the right, prior to
their dissemination,  to review and
approve any such Disclosure Documents or similar documents (such approval not
to be unreasonably withheld, delayed or conditioned) and the recipients of any
such Disclosure Documents are subject to customary obligations to preserve the
confidentiality of such information, to the extent applicable to such
syndication.  In connection therewith and
with respect to all such financial information, each Guarantor shall cooperate
with and indemnify and hold harmless Lender to the same extent provided in
Section 9.2 of the Loan Agreement as if it were a party thereto and each
reference to “Borrowers” therein were instead a reference to such Guarantor.

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

Guarantor”),
then (a) the requirements of the first sentence of Section 1(b) above shall be
modified such that, as to each Person providing any Guaranty pursuant to
the Loan Agreement, including any Substitute Guarantor, at all times that such
Guaranty shall be required to be outstanding in accordance with the Loan
Agreement, (x) such Person’s Net Worth (or in the event that the Morgans
Guarantor shall remain a guarantor hereunder at such time, as to the Morgans
Guarantor only, its Net Assets, and in the event that the DLJ Guarantor shall
remain a guarantor hereunder at such time, the Net Worth of the DLJ Guarantor
and the DLJMB Parties calculated in accordance with clause (ii) of the definition
of “Guarantors Net Worth” above)
shall equal not less than an amount equal to the lesser of (1) $200,000,000.00
or (2) the product of $400,000,000.00 and such Person’s then percentage
interest (directly or indirectly) in all profits and losses of HR Holdings, and
(y) such Person’s Effective Liquidity shall be in excess of an amount equal to
the lesser of (1) $100,000,000.00 or (2) the product of $200,000,000.00 and
such Person’s then percentage interest (directly or indirectly) in all profits
and losses of HR Holdings, and (b) the provisions of this Exhibit B with
respect to financial reporting, financial condition, transactions, dividends
and distributions, confidentiality and cooperation shall apply to all such
Persons, provided that, in all cases at least one of the Persons
providing any Guaranty is a Qualified Real Estate Guarantor.

5.             Conflicts.  Nothing in this Exhibit B 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 B
is expressly incorporated by reference therein, including by Section 7.1
of the Guaranty.  In the event of any
conflicts between the terms and conditions hereof and the terms and conditions
of any Loan Document, the terms and conditions of the other Loan Documents
shall control and be binding in all respects.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]