Exhibit 10.2
LIMITED GUARANTY OF LEASE
This LIMITED GUARANTY OF LEASE (the “Guaranty”) is dated the 17th day of
September, 2010, and is made by MORGANS GROUP LLC, a Delaware limited liability
company (“Guarantor”) to and for the benefit of HASINA, LLC, a California
limited liability company, TARSTONE HOTELS, LLC, a Delaware limited liability
company, KALPANA, LLC, a California limited liability company, RIGG HOTEL, LLC,
a California limited liability company, and JRIA, LLC, a Delaware limited
liability company (collectively, “Lessors”).
RECITALS
A. CLIFT HOLDINGS, LLC, a Delaware limited liability company (“Lessee”), 495
GEARY, LLC, a Delaware limited liability company (“495 Geary”), and MORGANS
HOTEL GROUP CO., a Delaware corporation (“Morgans”), on the one hand, and
Lessors and TARSADIA HOTELS, a California corporation (“Tarsadia”), on the other
hand, have concurrently herewith entered into that certain Settlement and
Release Agreement of even date herewith (the “Settlement Agreement”), a copy of
which is attached hereto as Exhibit “A,” with respect to the Lessors Action and
the Morgans Action (as defined therein).
B. Guarantor is the direct or indirect owner of Lessee and 495 Geary, and will
benefit directly from the terms and provisions of the Settlement Agreement.
C. In order to induce Lessors and Tarsadia to enter into the Settlement
Agreement, Guarantor has offered and agreed to guaranty the Guaranteed
Obligations (as hereinafter defined) (subject to the limitations set forth
herein) under that certain “Ground Lease” dated October 14, 2004, as amended
from time to time (the “Lease”) for the land and improvements (and certain
personal property thereon) located at and commonly known as 495 Geary Street,
San Francisco, California (the “Premises”).
D. Except as otherwise defined herein, all capitalized terms shall have the
means ascribed to them in the Lease.
AGREEMENT
NOW, THEREFORE, for valuable consideration, including the performance of the
promises, covenants, representations and warranties hereinafter set forth,
Guarantor, intending to be legally and equitably bound, covenants and agrees as
follows:
I.
GUARANTY
1.1. Guarantor hereby irrevocably and unconditionally guarantees and promises
to, and for the benefit of, Lessors and each of them, and their successors and
assigns, the full and complete payment and performance by Lessee of the
Guaranteed Obligations as and when such payment or performance shall become due.
As used herein, the term “Guaranteed Obligations”) shall mean any and all Losses
(as hereinafter defined) incurred or suffered by Lessors, or any of them, and
arising out of or in connection with the occurrence of any of the matters listed
below from and after the date hereof:
(a) Lessee (i) fails to pay any installment of Annual Base Rent or Defaulted
Rent Payment when due and thereafter within three (3) days after delivery of
written notice of such failure to the offices of Lessee (delivered pursuant to
the notice provisions of the Lease) and Guarantor (delivered pursuant to the
notice provisions set forth herein), and (ii) fails to vacate and surrender the
Premises in compliance with its obligations under Section 8.1 of the Lease
(subject to the obligations of Lessee to transition operations of the Hotel and
the Hotel Business to Lessors in accordance with the terms of Section 9.2 of the
Lease, upon the expiration of such three (3) day period; or

 

 

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(b) An Event of Default occurs as a result of (i) the failure by Lessee to pay
any sums (other than Annual Base Rent) under the Lease, or (ii) the breach by
Lessee of any non-monetary covenant or obligation of the “Lessee” under the
Lease, and in each case Lessee or Morgans disputes the occurrence of such Event
of Default, and it is thereafter determined by a final non-appealable judgment
that an Event of Default, in fact, occurred; or
(c) Lessee fails to comply with any of its transition and other obligations
under Section 9.2 of the Lease and such failure is not cured within two
(2) business days after delivery of written notice of such failure to the
offices of Lessee (delivered pursuant to the notice provisions of the Lease) and
Guarantor (delivered pursuant to the notice provisions set forth herein); or
(d) (i) Guarantor or any person who controls Guarantor files or colludes in or
consents to the filing of a petition against Lessee in any court, whether or not
under any statute of the United States of America or any State, in any
bankruptcy, reorganization, composition, extension, arrangement, insolvency or
other debtor-relief proceeding (other than if requested, in writing, to do so by
all of Lessors), or (ii) Guarantor or any person who controls Guarantor seeks or
consents to the appointment of a receiver, manager, trustee or liquidator for
all or substantially all of Lessee’s assets, or (iii) Lessee (A) admits in
writing its inability to pay its debts generally as they become due, or
(B) files a petition in bankruptcy, insolvency, reorganization, readjustment of
debt, dissolution or liquidation under any law or statute of any government or
any subdivision thereof, or (C) makes an assignment for the benefit of
creditors, or (D) consents to or acquiesces to the appointment of a receiver for
itself or the whole or any substantial part of the Premises (other than at the
request, in writing, of all of Lessors); or
(e) Guarantor, Morgans, Lessee, 495 Geary or any of their respective Affiliates,
in any material respect, upon the occurrence and during the continuation of an
Event of Default, interferes with or fails to cooperate with Lessors (i) in the
transfer, in accordance with the terms of the Lease, of (A) all sums under the
Escrow Accounts, the Capital Reserve Accounts, the FF&E Reserve Account, the
Capital Replacement Account, and the Hotel Operating Accounts, together with all
other accounts that are subject to the Account Control Agreements, and (B) the
FF&E and the Personal Property, or (ii) in the transfer, in accordance with the
terms of the Lease, of the liquor licenses, or the control or interest in the
Operating Agreement for the Liquor License Company; or

 

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(f) Subject to the provisions of Section 4.1 hereof, Lessee, 495 Geary or
Morgans breaches any of its respective representations or warranties as set
forth in the Settlement Agreement.
1.2. For the purposes of this Guaranty, the term “Losses” means: (a) any unpaid
Rent (including Annual Base Rent and Defaulted Rent Payments) with respect to
the period prior to the date Lessors obtain possession of the Premises and
Lessee has complied with its obligations under Section 8.1 of the Lease; and
(b) any other losses, damages, and expenses directly and proximately arising
from the foregoing matters described in this Section 1.1; and (c) any other
amounts payable under the Lease and reasonable attorneys’ fees and other
reasonable costs of defense, collection and enforcement arising from the
foregoing matters; provided, however, that aggregate Losses hereunder shall not
exceed an amount equal to Six Million Dollars ($6,000,000.00).
Subject to the provisions of Section 4.1 hereof, Guarantors obligations under
this Agreement shall survive the termination or expiration of the Term of the
Lease. Guarantor understands and agrees that its obligations under this Guaranty
are unconditional, irrevocable and continuing, and that this Guaranty is a
guaranty of payment and performance, and not of collection.
1.2 Notwithstanding any other provision of this Guaranty, (i) nothing in this
Guaranty shall be deemed to prevent Lessee or Guarantor from, or impose any
liability on Lessee or Guarantor as a result of, seeking, in good faith,
injunctive relief to contest any exercise by any of Lessors of any remedies on
the grounds that either (A) an Event of Default (except an Event of Default
arising from Lessee’s failure to pay any installment of Annual Base Rent or
Lessee’s failure to pay any portion of the Defaulted Rent Payments) has not
occurred or (B) Lessors have failed to comply in all material respects with the
requirements of the Lease relating to the exercise of such remedy thereunder.
II.
GUARANTOR’S DUTIES
2.1. Independent Obligations. The liability of Guarantor hereunder is exclusive
and independent of any security for or other guaranty of the Guaranteed
Obligations, whether executed by Guarantor or by any other party, and the
liability of Guarantor hereunder is not affected or impaired by (a) any
direction of application of payment by Lessors or by any other party, or (b) any
other guaranty, undertaking or maximum liability of Guarantor or of any other
party as to Lessee’s obligations, or (c) any payment on or in reduction of any
such other guaranty or undertaking, or (d) any revocation or release of any
obligations of any other guarantor of the Guaranteed Obligations, or (e) any
payment made to Lessors on the Guaranteed Obligations which Lessors repay to
Lessee pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and Guarantor waives any right to
the deferral or modification of Guarantor’s obligations hereunder by reason of
any such proceeding.

 

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III.
LESSORS’S RIGHTS
3.1. Enforcement. Lessors reserves the right to proceed against Lessee,
Guarantor and/or any other guarantor of the Guaranteed Obligations, or any of
them, or all of them, and to enforce against each of Lessee, Guarantor and/or
any or all other guarantors of the Guaranteed Obligations, or any or all of
them, any and all rights that Lessors may have to said Rent, property taxes,
insurance premiums and other sums or charges accrued pursuant to the terms of
the Lease. Guarantor understands and agrees that Guarantor’s liability under
this Guaranty shall be primary, and that in any right of action which may accrue
to Lessors under the Lease or this Guaranty, Lessors, at their option, may
proceed against Guarantor without having taken any action or obtained any
judgment against Lessee.
3.2. Guarantor’ Waivers. Guarantor hereby irrevocably and unconditionally
waives:
(a) All defenses by reason of any disability of Lessee;
(b) Any and all rights it may have now or in the future to require or demand
that Lessors pursue any right or remedy Lessors may have against Lessee or any
other third party;
(c) Any and all rights it may have to enforce any remedies available to Lessors,
now or in the future, against Lessee;
(d) Any and all rights to participate in any security held by Lessors now or in
the future;
(e) The right to require Lessors to (i) proceed against Lessee or any other
guarantor(s), (ii) proceed against or exhaust any security which Lessors now
holds or may hold in the future from Lessee, or (iii) pursue any other right or
remedy available to Lessors;
(f) All rights of subrogation, reimbursement, indemnity, and contribution (in
each case until such time as the Lease shall have terminated and all of Lessee’s
obligations thereunder, and Guarantor’s obligations under this Guaranty, shall
have been paid in full), all rights to enforce any remedy Lessors may have
against Lessee, and all rights to participate in any security held by Lessors
for the obligations of Lessee under the Lease, as well as any defense based upon
the impairment of any subrogation, reimbursement, indemnity, or contribution
rights, or of any of the other foregoing rights, that Guarantor might have
absent the foregoing waiver. Further, Guarantor agrees (a) not to seek to
enforce or to obtain any such right, or to accept any payment from any other
person, in violation of the foregoing waiver, and (b) that any agreement or
other understanding at any time entered into with any person granting any such
right to Guarantor shall be null and void; and
(g) Any and all other waivable defenses.

 

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In addition, Guarantor hereby expressly waives and relinquishes all rights,
remedies, and defenses accorded by applicable law to guarantors and agrees not
to assert or take advantage of any such rights, remedies, or defenses, including
but not limited to: (a) the defense of the statute of limitations in any action
hereunder or in any action for the collection of any indebtedness or the
performance of any obligation hereby guaranteed; (b) any defense that may arise
by reason of the incapacity, lack of authority, death or administration,
bankruptcy, or any other proceeding) of any other person or persons; (c) any
defense based upon the failure to give notice of the acceptance of this Guaranty
by any person; (d) any defense based upon the failure to make, give, or serve
demand, notice of default or nonpayment, presentment, protest and all other
notices of any kind to which Guarantor might otherwise be entitled in connection
with this Guaranty or the Lease (but not including any notice to Lessee referred
to in Section 1.1(a) or any notice to Lessee of an alleged default under the
Lease); (e) all rights and defenses arising out of an election of remedies by
Lessors; (f) any defense based upon any lack of diligence by Lessors in the
collection of any sums owing under the Lease; (g) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (h) any duty on the part of Lessors to disclose to Guarantor any
facts Lessors may now or hereafter know about Lessee, regardless of whether
Lessors has reason to believe that any such facts materially increase the risk
beyond that which Guarantor intends to assume or has reason to believe that such
facts are unknown to Guarantor or has a reasonable opportunity to communicate
such facts to Guarantor, it being understood and agreed that Guarantor is fully
responsible for being and keeping informed of the financial condition of Lessee
and of all circumstances bearing on the risk of nonpayment of any obligations
hereby guaranteed; and (i) any defense arising because of an election made by
Lessors under the Federal Bankruptcy Code.
IV.
ALTERATION, MODIFICATION OR ASSIGNMENT
4.1. Effect of Assignment, Extension, Modification or Termination of Lease.
Guarantor understands and agrees that the obligations of Guarantor under this
Guaranty shall in no way be affected by any assignment, subletting, extension,
modification, alteration or termination of the Lease or any interest therein,
including, but not limited to, Lessee entering into any sublease thereunder, or
any assignment of any of Lessee’s rights or obligations under the Lease, and any
such assignment, extension, modification, alteration or termination of the
Lease, shall in no way release or discharge Guarantor from any obligations
accruing under this Guaranty; provided, however, upon any assignment of all of
Lessee’s interest in and to the Lease, and the leasehold estate created thereby,
in compliance with the terms of the Lease, in a bona fide transaction, to a
Transferee in which none of Morgans, Lessee, 495 Geary or any of their direct or
indirect commonly controlled affiliates or controlling persons have any direct
or indirect ownership or control, and either (x) such Transferee has a net
worth, determined in accordance with generally accepted accounting principles of
at least Twenty-Five Million Dollars ($25,000,000.00), or (y) a Person with such
net worth enters into a guaranty in substantially the same form as, and in
replacement for, this Guaranty, then for occurrences and events first arising in
any periods thereafter Guarantor shall have no liability; and provided further
that except as otherwise set forth in this Guaranty, upon surrender of
possession of the Premises in accordance with the Lease, the obligations of
Guarantor under this Guaranty shall terminate. The term “Lease” shall include
all amendments, modifications, alterations and extensions of the Lease.

 

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4.2. Assignment. Guarantor understands and agrees that any transfer of the Lease
and/or the Premises by Lessors, or any of them, or any rights or obligations
accruing thereunder, shall in no way affect Guarantor’s obligations under this
Guaranty, and all such assignees and successors of Lessors (or any of them)
shall hold the benefits hereof and may enforce the provisions hereof.
4.3. Delay in Enforcement. Guarantor understands and agrees that any failure or
delay of Lessors to enforce any of its rights under the Lease or this Guaranty
shall in no way affect Guarantor’s obligations under this Guaranty.
V.
MISCELLANEOUS
5.1. Notices. Except as otherwise expressly provided in this Guaranty, all
notices, requests, demands and other communications hereunder (“Notices”) shall
be in writing and shall be deemed delivered by (i) hand delivery upon receipt,
(ii) registered mail or certified mail, return receipt requested, postage
prepaid, upon the third day after deposit into the United States mail, (iii) by
confirmed telecopy or facsimile transmission when sent, or (iv) overnight
courier (next business day delivery) on the next business day at 12:00 noon,
whichever shall occur first, as follows:

         
 
  To Guarantor:   Morgans Group LLC.
 
      475 Tenth Avenue
 
      New York, New York 10018
 
      Attention: General Counsel
 
      Telephone: (212) 277-4100
 
      Telecopier: (212) 277-4280
 
       
 
  With a copy to:   Hogan Lovells US LLP
 
      Columbia Square
 
      555 Thirteenth street, NW
 
      Washington, DC 20004
 
      Attn: Bruce Gilchrist, Esq.
 
      Telephone: (202) 637-5600
 
      Telecopier: (202) 637-5910

 

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  To Lessors:   TARSADIA HOTELS
 
      Attn: Renee Molloy
 
      620 Newport Center Drive
 
      Fourteenth Floor
 
      Newport Beach, CA 92660
 
      Telephone: (949) 610-8016
 
      Telecopier: (949) 610-8216
 
       
 
  With a Copy to:   TARSADIA HOTELS
 
      Attn: Edward G. Coss, Esq.
 
      620 Newport Center Drive
 
      Fourteenth Floor
 
      Newport Beach, CA 92660
 
      Telephone: (949) 610-8022
 
      Telecopier: (949) 610-8222

Any correctly addressed Notices that is refused, unclaimed or undelivered
because of an act or omission of the party to be notified shall be considered to
be effective as of the first (1st) day that the notice was refused, unclaimed or
considered undeliverable by the postal authorities, messenger or overnight
delivery service. The parties hereto shall have the right from time to time, and
at any time to change their respective addresses and each shall have the right
to specify as its address any other address within the United States of America,
by giving to the other party at least thirty (30) days prior written notice
thereof, in the manner prescribed herein; provided, however, that to be
effective, any such change of address must be actually received (as evidenced by
a return receipt).
5.2. Subrogation. Guarantor understands and agrees that Guarantor shall have no
right to subrogation against Lessee until such time as all of Lessee’s
obligations to Lessors have been fully paid and discharged.
5.3. Assignability. This Guaranty may be assigned in whole or in part by Lessors
upon written notice to Guarantor. Guarantor shall have no right of assignment or
delegation of this Guaranty or Guarantor’s obligations hereunder.
5.4. Successors and Assigns. The terms and provisions of this Guaranty shall be
binding upon and inure to the benefit of the successors and assigns of the
parties hereto.
5.5. Modification of Guaranty. This Guaranty constitutes the full and complete
agreement between the parties hereto, and it is understood and agreed that the
provisions hereof may only be modified by a writing executed by both parties
hereto.
5.6. Invalidity. If any term, provision, covenant or condition of this Guaranty
is held to be void, invalid or unenforceable, the remainder of the provisions
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.

 

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5.7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California. If any legal action is
necessary to enforce the terms and conditions of this Agreement, the parties
agree that the United States District Court for the Northern District of
California, located in the State of California, County of San Francisco, or if
such court determines, on its own motion, without petition or request of any
party hereto, that it lacks jurisdiction, the California State Superior Court in
and for the County of San Francisco shall be the sole venue and jurisdiction for
the bringing of such action.
5.8. Professional Fees and Costs. If a lawsuit, arbitration or other proceedings
are instituted by any party to enforce any of the terms or conditions of this
Guaranty against any other party hereto, the prevailing party in such
litigation, arbitration or proceedings shall be entitled, as an additional item
of damages, to such reasonable attorneys’ and other professional fees and costs
(including, but not limited to, witness fees), court costs, arbitrators’ fees,
arbitration administrative fees, travel expenses, and other out-of pocket
expenses or costs of such other proceedings, as may be fixed by any court of
competent jurisdiction, arbitrator or other judicial or quasi-judicial body
having jurisdiction thereof, whether or not such litigation or proceedings
proceed to a final judgment or award. For the purposes of this Section, any
party receiving an arbitration award or a judgment for damages or other amounts
shall be deemed to be the prevailing party, regardless of amount of the damage
awarded or whether the award or judgment was based on all or some of such
party’s claims or causes of action.
5.9. No Waiver. The failure or delay (without regard to the length of time of
such failure or delay) by Lessors to enforce or insist on the strict performance
of any covenant, term, obligation, provision, right, option or condition
hereunder, or to pursue any action, claim or right arising from any breach,
default, or non-performance of any term, obligation or provision of this
Guaranty, shall not constitute or be construed as a waiver or forgiveness of
such covenant, term, obligation, provision, right, option, condition, breach,
default or non-performance. To be binding upon and against Lessors, any waiver
must (a) be in writing and signed by all of Lessors, (b) be delivered to
Guarantor (in accordance with the provisions of Section 5.1 hereof), and
(c) identify and specify, in reasonable detail, the covenant, term, obligation,
provision, right, option, condition, breach, default or non-performance being
waived; any purported waiver not complying therewith shall not be effective or
binding on Lessors. In addition, any previous waiver for the benefit of
Guarantor may not be relied upon or be enforced by Guarantor’s successors and
assigns, and shall not be binding on Lessors. Under no circumstances shall a
waiver by Lessors complying with the provisions hereof constitute or be
construed as a continuing waiver of any subsequent failure, default, breach or
non-performance of any covenant, term, obligation, provision, right, option or
condition under this Guaranty.
5.10. Construction of Guaranty. The parties hereto have negotiated this Guaranty
at length, and have had the opportunity to consult with, and be represented by,
their own competent counsel. This Guaranty is therefore deemed to have been
jointly prepared. In determining the meaning of, or resolving any ambiguity with
respect to, any word, phrase or provision of this Guaranty, no uncertainty or
ambiguity shall be construed or resolved against any party under any rule of
construction, including the party primarily responsible for the drafting and
preparation of this Guaranty.

 

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The words “herein,” “hereof,” “hereunder” and words of similar reference shall
mean this Guaranty. The words “this Guaranty” include the exhibits, addenda and
any future written modifications, unless otherwise indicated by the context. All
words in this Guaranty shall be deemed to include any number or gender as the
context or sense of the Guaranty requires. The words “will,” “shall” and “must”
in this Guaranty indicate a mandatory obligation. The use of the words
“include,” “includes” and “including” followed by one or more examples is
intended to be illustrative and is not a limitation on the scope of the
description or term for which the examples are provided. All dollar amounts set
forth in this Guaranty are stated in United States dollars, unless otherwise
specified. The words “day” and “days” refer to calendar days unless otherwise
stated. The words “month” and “months” refer to calendar months unless otherwise
stated. The words “year” and “years” refer to calendar years unless otherwise
stated. When determining when a period begins to run, the day after receipt,
delivery, or occurrence shall be the first (1st) day after such date, unless the
context clearly indicates otherwise.
5.11. Waiver of Jury Trial. ALL DISPUTES WITH RESPECT TO THIS AGREEMENT, WHETHER
ARISING IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, OR
RELATED OR INCIDENTAL TO, THE TRANSACTION GIVING RISE TO THIS AGREEMENT, SHALL
BE TRIED BEFORE A JUDGE IN A COURT OF COMPETENT JURISDICTION AS PROVIDED HEREIN,
WITHOUT A JURY. THE JUDGE IN SUCH COURT OF COMPETENT JURISDICTION SHALL HAVE THE
POWER TO GRANT ALL LEGAL AND EQUITABLE REMEDIES. BY EXECUTING THIS AGREEMENT,
EACH PARTY HEREBY WAIVES AND COVENANTS NOT TO ASSERT THEIR CONSTITUTIONAL RIGHT
TO TRIAL BY JURY OF ANY DISPUTES RELATING TO THIS AGREEMENT AND/OR THE ACTS OR
OMISSIONS OF A PARTY HERETO THEREUNDER, WHETHER ARISING IN CONTRACT, TORT OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, OR RELATED OR INCIDENTAL TO, THE
TRANSACTION GIVING RISE TO THIS AGREEMENT. THIS MUTUAL WAIVER OF JURY TRIAL
SHALL BE BINDING UPON THE RESPECTIVE SUCCESSORS AND ASSIGNS OF SUCH PARTIES AND
UPON ALL PERSONS AND ENTITIES ASSERTING RIGHTS OR CLAIMS OR OTHERWISE ACTING ON
BEHALF OF A PARTY AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
VI.
EXECUTION
IN WITNESS WHEREOF, the undersigned has executed this Guaranty and made it
effective this 17th day of September 2010.

                      GUARANTOR:    
 
                    MORGANS GROUP LLC,
a Delaware limited liability company    
 
                    By:   Morgans Hotel Group Co.,
its managing member    
 
                    By:   /s/ Fred J. Kleisner                  
 
      Name:   Fred J. Kleisner    
 
      Title:   Chief Executive Officer    

 

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