Document:

EX-10.33

 

Exhibit 10.33

EXECUTION COPY

SECOND MEZZANINE GUARANTY AGREEMENT

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

RECITALS:

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

 

 

     B. Pursuant to that certain First Mezzanine Promissory Note, dated of even date herewith,
executed by HRHH JV Senior Mezz, LLC and HRHH Gaming Senior Mezz, LLC (collectively, the “First
Mezzanine Borrowers”), and payable to the order of Column Financial, Inc., in its capacity as First
mezzanine lender (together with its successors and assigns, the “First Mezzanine Lender”), in the
original principal amount of Two Hundred Million and 00/100 Dollars ($200,000,000.00), as the same
may be amended, restated, replaced, supplemented or otherwise modified from time to time (the
“First Mezzanine Note”), First Mezzanine Borrowers have become indebted to First Mezzanine Lender
with respect to a loan (the “First Mezzanine Loan”) made pursuant to that certain First Mezzanine
Loan Agreement, dated as of the date hereof, among First Mezzanine Borrowers and First Mezzanine
Lender (as the same may be amended, restated, replaced, supplemented, or otherwise modified from
time to time, the “First Mezzanine Loan Agreement”), which First Mezzanine Loan is secured by,
among other things, (i) that certain First Mezzanine Pledge and Security Agreement, dated as of the
date hereof, made by First Mezzanine Borrowers, as pledgors, in favor of First Mezzanine Lender, as
pledgee (as the same may be amended, restated, replaced, supplemented, or otherwise modified from
time to time, the “First Mezzanine Pledge Agreement”); (ii) that certain First Mezzanine Guaranty
Agreement, dated as of the date hereof, made by Guarantors in favor of First Mezzanine Lender (as
the same may be amended, restated, replaced, supplemented, or otherwise modified from time to time,
the “First Mezzanine Non-Recourse Guaranty”); and (iii) further evidenced, secured or governed by
other instruments and documents executed in connection with the First Mezzanine Loan (together with
the First Mezzanine Note, the First Mezzanine Loan Agreement, the First Mezzanine Pledge Agreement
and the First Mezzanine Non-Recourse Guaranty, collectively, the “First Mezzanine Loan Documents”).

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

     D. Pursuant to that certain Third Mezzanine Promissory Note, dated of even date herewith,
executed by HRHH Gaming Junior Mezz Two, LLC and HRHH JV Junior Mezz Two, LLC (collectively, the
“Third Mezzanine Borrowers”), and payable to the order of Column Financial, Inc., in its capacity
as third mezzanine lender (together with its successors and assigns,

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

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

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

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

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

ARTICLE 1

NATURE AND SCOPE OF GUARANTY

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

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1.2(c) hereof), irrevocably and unconditionally covenants and agrees that it is liable for the
Guaranteed Obligations as a primary obligor.

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

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

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

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

     (iii) intentionally omitted;

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

     (v) the failure of any Loan Party to pay (or to deposit into the Mortgage
Reserve Funds or the Reserve Funds, if applicable, amounts sufficient to pay) all
Taxes and all other costs giving rise to any Lien on any portion of the

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE 2

EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING

GUARANTORS’ OBLIGATIONS

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

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

10

 

them) and Mortgage Lender, or between
First Mezzanine Borrowers (or any of them) and First Mezzanine Lender or any other parties,
pertaining to the Guaranteed Obligations or any failure of any of Lender, Mortgage Lender or First
Mezzanine Lender to notify any Guarantor of any such action.

     2.2 Adjustment. Any adjustment, indulgence, forbearance or compromise that might be
granted or given by Lender to any Borrower or by Mortgage Lender to any Mortgage Borrower, or by
First Mezzanine Lender to any First Mezzanine 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 Loan Party,
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 Loan Party or any Guarantor, or any sale, lease
or transfer of any or all of the assets of any Loan Party or any Guarantor, or any changes in the
shareholders, partners or members of any Loan Party or any Guarantor; or any reorganization of any
Loan Party or any Guarantor.

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

     2.5 Release of Obligors. Any full or partial release of the liability of any Borrower
on the Guaranteed Obligations, or any part thereof, or of any co-guarantors, or any other Person
now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and
severally (except as otherwise expressly provided in the proviso at the end of Section
1.2(c) hereof), to pay, perform, guarantee or assure the payment of the Guaranteed Obligations,
or any part thereof, it being recognized, acknowledged and agreed by each Guarantor that such
Guarantor

11

 

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.

     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 of any Mortgage Borrower against Mortgage Lender or any other
Person, or of any First Mezzanine Borrower against First Mezzanine 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.

12

 

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

     2.13 Other Actions Taken or Omitted. Any other action taken or omitted to be taken
with respect to the Loan Documents, the Mortgage Loan Documents, the First Mezzanine 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.

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

13

 

would constitute a default) under, or result in the material breach of, any indenture, mortgage,
deed of trust, charge, lien, or any contract, agreement or other instrument to which such Guarantor
is a party or which may be applicable to such Guarantor. This Guaranty is a legal and binding
obligation of such Guarantor and is enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to the enforcement of
creditors’ rights.

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

ARTICLE 4

SUBORDINATION OF CERTAIN INDEBTEDNESS

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

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

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

14

 

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 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

15

 

	 	 	 	 	 
	 

	 	 	 	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
	 
	 	 	 	 
	 

	 	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

16

 

	 	 	 	 	 
	 

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

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

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

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

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

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

     (b) Notwithstanding anything to the contrary in this Guaranty, in the Loan Agreement or in any
other Loan Document, no present or future Constituent Member other than (i) a

17

 

Guarantor, and (ii) with respect to the DLJ Guarantor, DLJ Merchant Banking Partners IV, L.P., MBP IV Plan Investors,
L.P., DLJMB HRH Co-Investments, L.P., DLJ Offshore Partners IV, L.P., and DLJ Merchant Banking
Partners IV (Pacific), L.P. (such limited partnerships, collectively, the “DLJMB Parties”) as
provided in the DLJMB Commitment Letter, nor any present or future shareholder, officer, director,
employee, trustee, beneficiary, advisor, member, partner, principal, participant or agent of or in
any Guarantor or of or in any Person that is or becomes a Constituent Member, other than Guarantors
and such DLJMB Parties, shall have any personal liability, directly or indirectly, under or in
connection with this Guaranty, or any amendment or amendments hereto made at any time or times,
heretofore or hereafter, and Lender on behalf of itself and its successors and assigns, hereby
waives any and all such personal liability.

     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,

18

 

CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY. THERE
ARE NO ORAL AGREEMENTS BETWEEN ANY GUARANTOR AND LENDER.

     5.13 Waiver of Right To Trial By Jury. EACH GUARANTOR HEREBY AGREES NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW,
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE LOAN AGREEMENT, THE PLEDGE AGREEMENT, OR THE
OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH GUARANTOR, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION 5.13 IN
ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY EACH GUARANTOR.

     5.14 Cooperation. Each Guarantor acknowledges that Lender and its successors and
assigns may (a) sell this Guaranty, the Note and other Loan Documents to one or more investors as a
whole loan, (b) participate the Loan secured by this Guaranty to one or more investors, (c) deposit
this Guaranty, the Note and other Loan Documents with a trust, which trust may sell certificates to
investors evidencing an ownership interest in the trust assets, or (d) otherwise sell the Loan or
one or more interests therein to investors (the transactions referred to in clauses (a)
through (d) are hereinafter each referred to as “Secondary Market Transactions”). Each
Guarantor shall reasonably cooperate with Lender at Lender’s cost and expense in effecting any such
Secondary Market Transaction and shall reasonably cooperate to implement all requirements imposed
by any Rating Agency involved in any Secondary Market Transaction. Each Guarantor shall provide
such information and documents relating to such Guarantor, Borrowers, Mortgage Borrowers, First
Mezzanine 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

19

 

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

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

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

[NO FURTHER TEXT ON THIS PAGE]

20

 

     EXECUTED as of the day and year first above written.

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

	 	 	 	By:
	 	/s/ RICHARD SZYMANSKI
	 

	 	 	 	 	 	 
 Name:
Richard Szymanski
	 

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

Second Mezzanine Guaranty Agreement

 

 

Exhibit A

FINANCIAL REPRESENTATIONS, WARRANTIES AND COVENANTS

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

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

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

Second Mezzanine Guaranty Agreement

 

 

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

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

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

Second Mezzanine Guaranty Agreement

 

 

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

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

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

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

Second Mezzanine Guaranty Agreement

 

 

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

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

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

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

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

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

Second Mezzanine Guaranty Agreement

 

 

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

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

Second Mezzanine Guaranty AgreementEX-10.34

 

Exhibit 10.34

EXECUTION COPY

SECOND MEZZANINE CLOSING GUARANTY OF COMPLETION

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

RECITALS:

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

 

 

the Mortgage Notes, the Mortgage Loan Agreement, the Mortgage and the Mortgage Closing
Completion Guaranty, collectively, the “Mortgage Loan Documents”).

     B. Pursuant to that certain First Mezzanine Promissory Note, dated of even date herewith,
executed by HRHH Gaming Senior Mezz, LLC and HRHH JV Senior Mezz, LLC (collectively, the “First
Mezzanine Borrowers”), and payable to the order of Column Financial, Inc., in its capacity as first
mezzanine lender (together with its successors and assigns, the “First Mezzanine Lender”), in the
original principal amount of Two Hundred Million and No/100 Dollars ($200,000,000), as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to time (the “First
Mezzanine Note”), First Mezzanine Borrowers have become indebted to First Mezzanine Lender with
respect to a loan (the “First Mezzanine Loan”) made pursuant to that certain First Mezzanine Loan
Agreement, dated as of the date hereof, among First Mezzanine Borrowers and First Mezzanine Lender
(as the same may be amended, restated, replaced, supplemented, or otherwise modified from time to
time, the “First Mezzanine Loan Agreement”), which First Mezzanine Loan is secured by, among other
things, (i) that certain First Mezzanine Pledge and Security Agreement, dated as of the date
hereof, made by First Mezzanine Borrowers, as pledgors, in favor of First Mezzanine Lender, as
pledgee (as the same may be amended, restated, replaced, supplemented, or otherwise modified from
time to time, the “First Mezzanine Pledge Agreement”); (ii) that certain First Mezzanine Closing
Guaranty of Completion, dated as of the date hereof, made by Guarantors in favor of First Mezzanine
Lender (as the same may be amended, restated, replaced, supplemented, or otherwise modified from
time to time, the “First Mezzanine Closing Completion Guaranty”); and (iii) further evidenced,
secured or governed by other instruments and documents executed in connection with the First
Mezzanine Loan (together with the First Mezzanine Note, the First Mezzanine Loan Agreement, the
First Mezzanine Pledge Agreement and the First Mezzanine Closing Completion Guaranty, collectively,
the “First Mezzanine Loan Documents”).

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

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

-2-

 

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

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

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

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

     NOW, THEREFORE, as an inducement to Lender to make the Loan to Borrowers, and to extend such
additional credit as Lender may from time to time extend under the Loan Documents, and for $10.00
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 Mortgage

-3-

 

Borrowers under the Mortgage Loan Agreement relating to each project contemplated by the
Initial Renovations, as shown on Schedule XIII to the Mortgage Loan Agreement, as the same may be
modified with the reasonable consent of Mortgage Lender, if and when Mortgage 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 (as such term is defined in the Mortgage Loan Agreement), 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 Mortgage Loan Agreement and 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 Mortgage, 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, terminated, cancelled or lost), other
than any such Liens being contested pursuant to, and in accordance with, Section 3.6(b) of
the Mortgage, 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 (as such term is defined in the Mortgage Loan Agreement) insuring Mortgage 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, or Mortgage Borrowers pursuant to the Mortgage
Loan Agreement, during the performance of each Initial Renovations Project if such premiums
are not paid by Borrowers or Mortgage Borrowers;

          (v) if Lender (subject to the prior rights of Mortgage Lender under the Mortgage Loan
Documents) 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;

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          (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 (as such term is defined in the Mortgage Loan Agreement), 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 Mortgage Borrowers under Section
3.18 of the Mortgage 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) Mortgage Borrowers have delivered the Relinquishment Notice (as such term
is defined in the Mortgage Loan Agreement) to Mortgage Lender, or (iii) Mortgage Borrowers have
delivered a Stop Notice (as such term is defined in the Mortgage Loan Agreement) to Mortgage
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 Mortgage 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;

          (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 Mortgage,
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 Mortgage, 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

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insuring Mortgage 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, or Mortgage Borrowers pursuant to the Mortgage
Loan Agreement, during the performance of the restorations if such premiums are not paid by
Borrowers or Mortgage Borrowers;

          (v) if Lender (subject to the prior rights of Mortgage Lender under the Mortgage Loan
Documents) 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”;
provided, however, that in no event shall the aggregate obligations and liabilities
of Guarantors under this Guaranty and the Other Guarantees exceed the Guaranteed Obligations; and
the completion obligations with respect to completion of any Initial Renovations Project or
restoration from any Pre-Construction Work shall be referred herein as the “Guaranteed Work”. Each
Guarantor hereby acknowledges having received, reviewed and approved a true and complete copy of
the Loan Agreement and the Mortgage 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 Mortgage Borrowers shall fail to diligently proceed with any Guaranteed Work, and the
completion thereof in accordance with the provisions of the Mortgage Loan Agreement, subject to
Excusable Delay, or if Mortgage Borrowers shall otherwise fail to perform their obligations under
the Mortgage 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 Mortgage Lender shall have no obligation to, and shall not, continue to
disburse any portion of the Construction Loan (as such term is defined in the Mortgage Loan
Agreement) or the Initial Renovations Reserve Fund. Guarantors’ obligations hereunder shall
continue in full force and effect, notwithstanding any default by any Loan Party under any other
covenants, terms or conditions set forth in the Loan Documents and/or the Mortgage Loan Documents,
as applicable, commencement and/or completion of foreclosure proceedings or acquisition by Lender
or Mortgage Lender of all or any portion of any Property or the Collateral, as applicable, 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 and/or the Mortgage Loan Documents, as applicable,
relating in any way to the Guaranteed Obligations shall survive any such foreclosure or deed in

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lieu of foreclosure and remain binding obligations of Borrowers and/or Mortgage Borrowers, as
applicable, 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 Collateral, as the case may be, and before, during or after
pursuing any other right or remedy against Borrowers 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
subject to the terms of the Mortgage Loan Documents. 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 Mortgage 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 Loan Party shall not discharge Guarantors with respect to any other default by any
Loan Party 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 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.

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     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 any of 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 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 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 (as such
term is defined in the Mortgage Loan Agreement) of the Project; provided, however,
that if, at the time any of the events set forth in the foregoing clauses (i), (ii)
or (iii), as applicable, shall occur, Guarantors are then in the process of completing any
of the Guaranteed Work, Guarantors shall (subject to the prior rights of Mortgage Lender under the
Mortgage Loan Documents), 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 Loan Party
(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 Loan Party or others liable on the Loan or the
Guaranteed Obligations or any other Person, (b) enforce Lender’s rights against any collateral
which shall ever have been given to secure the Loan, (c) enforce Lender’s rights against any other
guarantor(s) of the Guaranteed Obligations, (d) join any Loan Party 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.

     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

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of the Note, the Loan Agreement, the Pledge Agreement, 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 the Collateral, (e) the occurrence of any breach by any Loan Party
or an Event of Default, (f) Lender’s transfer or disposition of the Guaranteed Obligations, or any
part thereof, (g) sale or foreclosure (or posting or advertising for sale or foreclosure) of any
collateral for the Guaranteed Obligations, (h) protest, proof of non-payment or default by any Loan
Party, and (i) any other action at any time taken or omitted by Lender and, generally, all demands
and notices of every kind in connection with this Guaranty, the Loan Documents, any documents or
agreements evidencing, securing or relating to any of the Guaranteed Obligations and 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 with respect to the Loan.

     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 contribution, indemnification or any other form of
reimbursement from any Loan Party or any other party liable for payment of any or all of the
Guaranteed Obligations for any payment made

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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 Pledge Agreement, the other
Loan Documents, the Mortgage Loan Documents, the First Mezzanine Loan Documents, or any other
document, instrument, contract or understanding between Borrowers (or any of them) and Lender, or
between Mortgage Borrowers (or any of them) and Mortgage Lender, or between First Mezzanine
Borrowers (or any of them) and First Mezzanine Lender or any other parties, pertaining to the
Guaranteed Obligations, or any sale, assignment or foreclosure of the Note, the Loan Agreement, the
Pledge Agreement, any of the other Loan Documents, the Mortgage Loan Documents or the First
Mezzanine Loan Documents, or any sale or transfer of all or any portion of any Property or the
Collateral, or any failure of Lender, Mortgage Lender or First Mezzanine Lender to notify any
Guarantor of any such action.

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

     2.2 Adjustment. Any adjustment, indulgence, forbearance or compromise that might be
granted or given by Lender to any Borrower, or by Mortgage Lender to any Mortgage Borrower, or by
First Mezzanine Lender to any First Mezzanine Borrower, as applicable, 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 Loan Party,
any Guarantor or any other party at any time liable for the payment or performance

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of all or part of the Guaranteed Obligations; or any dissolution of any Loan Party or any
Guarantor or any sale, lease or transfer of any or all of the assets of any Loan Party or any
Guarantor or any changes in the direct or indirect shareholders, partners or members of any Loan
Party or any Guarantor; or any reorganization of any Loan Party 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 Pledge
Agreement, the other Loan Documents, the Mortgage Loan Documents, the First Mezzanine Loan
Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (d)
the Guaranteed Obligations violate applicable usury laws, (e) any Loan Party 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 Loan Party, (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 Pledge Agreement, any of the other Loan Documents, the Mortgage Loan
Documents or the First Mezzanine 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 Loan Party 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 Loan
Party 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.

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     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, any neglect, delay, omission, failure or refusal of Lender or any other party (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 Loan Party in any of the Loan Documents and/or
the Mortgage Loan Documents and/or the First Mezzanine Loan Documents, as applicable.

     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, or of any Mortgage Borrower against Mortgage Lender, or any other
Person, or of any First Mezzanine Borrower against First Mezzanine Lender or any other Person,
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 Loan Party into or
with any other Person.

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

     2.14 Other Actions Taken or Omitted. Any other action taken or omitted to be taken
with respect to the Loan Documents, the Mortgage Loan Documents, the First Mezzanine 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

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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.

     2.15 Satisfaction of Mortgage Loan and/or First Mezzanine Loan. Any satisfaction in
full of the Mortgage Loan and/or the First Mezzanine Loan unless (i) the Loan is also satisfied in
full, or (ii) the Guaranteed Obligations have been fully and finally paid and performed at the time
of such satisfaction.

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 Loan Party 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

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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, the Mortgage Loan Documents and the First Mezzanine
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 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

-14-

 

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.

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 Loan Party to any Guarantor, whether such debts
and liabilities now exist or are hereafter incurred or arise, or whether the obligations of such
Loan Party thereon be direct, contingent, primary, secondary, several, joint and several, or
otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract,
open account, or otherwise, and irrespective of the Person or Persons in whose favor such debts or
liabilities may, at their inception, have been, or may hereafter be created, or the manner in which
they have been or may hereafter be acquired by any Guarantor. The Guarantor Claims shall include,
without limitation, all rights and claims of any Guarantor against any Loan Party (arising as a
result of subrogation or otherwise) as a result of 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
Loan Party 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 such 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,

-15-

 

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 Loan Party’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 Loan Party’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 Lender as
long as the Debt is outstanding, no Guarantor shall (a) exercise or enforce any creditor’s right it
may have against any Loan Party, 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 Loan Party 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

-16-

 

	 	 	 	 	 
	 

	 	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
	 
	 	 	 	 
	 

	 	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

-17-

 

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. 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

-18-

 

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, 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 AND/OR ANY MORTGAGE BORROWER AND MORTGAGE LENDER, AND/OR
ANY FIRST MEZZANINE BORROWER AND FIRST MEZZANINE 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 PLEDGE AGREEMENT
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 SECTION 6.12 IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY EACH GUARANTOR
AND LENDER.

-19-

 

     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 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 Mortgage Borrower, any First Mezzanine
Borrower, the Collateral, 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.

-20-

 

     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. (a) The Guaranteed Obligations are joint and several recourse
obligations of Guarantors and not restricted by any limitation on personal liability.

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

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]

-21-

 

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

	 	 	 	 	 
	 	MORGAN GUARANTOR:

MORGANS GROUP LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ RICHARD SZYMANSKI
 	 
	 	 	Name:  	Richard Szymanski 	 
	 	 	Title:  	Chief Financial Officer

and Secretary 	 
	 

	 	 	 	 	 
	 	DLJ GUARANTOR:

DLJ MB IV HRH, LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ KENNETH J. LOHSEN
 	 
	 	 	Name:  	Kenneth J. Lohsen 	 
	 	 	Title:  	Authorized Signatory 	 
	 

 

	 	 	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 	 	 	)	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	 	 	ss:
	COUNTY OF

	 	 	 	 	)	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 

     On
the ___ day of
                    ,
in the year 2007, before me, the undersigned, a notary
public in and for said state, personally appeared
                    , personally known to me or proved
to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.

	 	 	 
	 
	 

	 	 
	 

	 	Notary Public

	 	 	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 	 	 	)	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	 	 	ss:
	COUNTY OF

	 	 	 	 	)	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 

     On
the ___ day of                     , in the year 2007, before me, the undersigned, a notary
public in and for said state, personally appeared
                    , personally known to me or proved
to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.

	 	 	 
	 
	 

	 	 
	 

	 	Notary Public

 

EXHIBIT A-1

LEGAL DESCRIPTION OF HOTEL/CASINO PROPERTY

Hotel Parcel:

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

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

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

1) South 88o56’51” East, 506.21 feet;

2) South 14o05’09” east, 49.76 feet;

3) South 07o35’35” East, 110.67 feet;

4) South 14o05’09” East, 137.26 feet;

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

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

7) South 14o05’09” East, 46.62 feet;

8) South 02o45’28” East, 61.06 feet;

9) South 14o04’51” East, 65.43 feet;

10) South 32o31’15” East, 37.95 feet;

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

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

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

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

15) North 88o57’40” West, 91.40 feet;

16) North 01o02’20” East 5.10 feet;

 

17) North 77o39’04” West, 60.69 feet;

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

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

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

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

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

-25-

 

EXHIBIT A-2

LEGAL DESCRIPTION OF ADJACENT PROPERTY

Development Parcel I:

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

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

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

1) North 00o06’00” East, 726.73 feet

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

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

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

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

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

Development Parcel II:

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

Parcel One (1) as shown by Map thereof in file 52 of Parcel Maps, Page 41 in the Office of the
County Recorder, Clark County, Nevada, and amended by Certificate of Amendment recorded

 

 

May 26, 1987 in Book 870526 as Document No. 00396.

Development Parcel III:

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

Development Parcel IV:

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

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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 they relate to the DLJ Guarantor, and throughout the term of the Loan, such
Guarantor is and will be solvent and has and will have (i) assets which, fairly valued, exceed its
obligations, liabilities (including contingent liabilities as determined in accordance with GAAP)
and debts, and (ii) property and assets sufficient to satisfy and repay its obligations and
liabilities.

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     5. Conflicts. Nothing in this Exhibit 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 this Guaranty. In the event of any conflicts between the terms
and conditions hereof and the terms and conditions of any other Loan Document, the terms and
conditions of the other Loan Documents shall control and be binding in all respects.

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