EXHIBIT 10.7
FIFTH AMENDMENT TO CREDIT AGREEMENT;
AND WAIVER AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT; AND WAIVER AGREEMENT (this
“Agreement”) dated as of August 5, 2009 is entered into by and among MORGANS
GROUP LLC, a limited liability company formed under the laws of the State of
Delaware (the “Borrower”), BEACH HOTEL ASSOCIATES LLC, a limited liability
company formed under the laws of the State of Delaware (the “Florida Borrower”),
MORGANS HOLDINGS LLC, a limited liability company formed under the laws of the
State of Delaware (the “NY Morgans Borrower”), ROYALTON LLC, a limited liability
company formed under the laws of the State of Delaware (the “NY Royalton
Borrower”, and together with the Borrower, the Florida Borrower and the NY
Morgans Borrower, the “Borrowers”), and MORGANS HOTEL GROUP CO., a corporation
formed under the laws of the State of Delaware (“Holdings”, and together with
the Borrowers and the Guarantors that are parties hereto, the “Loan Parties” and
individually a “Loan Party”); each of the Lenders party hereto; and WACHOVIA
BANK, NATIONAL ASSOCIATION, as Agent (the “Agent”).
W I T N E S S E T H:
WHEREAS, the Borrower, the Florida Borrower, Holdings, the Lenders, the Agent
and certain other parties have entered into that certain Credit Agreement dated
as of October 6, 2006, as amended by that certain First Amendment to Credit
Agreement dated November 10, 2006, that certain Second Amendment to Credit
Agreement dated January 8, 2007, that certain Third Amendment to Credit
Agreement dated October 10, 2007 and that certain Fourth Amendment to Credit
Agreement dated January 16, 2008 (as previously amended, as hereby amended and
as from time to time further amended, modified, supplemented, restated, or
amended and restated, the “Existing Credit Agreement”), pursuant to which the
Lenders have made available to the Borrowers a revolving credit facility,
including a letter of credit facility and a swing line facility;
WHEREAS, the Borrower has requested (a) that the Agent and the Lenders amend the
Existing Credit Agreement in such a manner that, upon giving effect to such
amendments, the Existing Credit Agreement would contain the terms, covenants,
conditions and other provisions as contained in the form of credit agreement set
forth as Exhibit A to this Agreement (the “Consolidated Form Credit Agreement”);
and (b) that the Agent and the Lenders agree to the waivers set forth in
Section 3 hereof; and
WHEREAS, capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings given thereto in the Existing Credit
Agreement as amended by this Agreement (as so amended, the “Credit Agreement”).
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

 

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Section 1. Conditions Precedent. As express conditions to the consummation of
this Agreement, the following shall have occurred, all in a form and manner and
in substance satisfactory to the Agent:

  (a)  
The Agent shall have received each of the following, in form and substance
satisfactory to the Agent:

  (i)  
counterparts of this Agreement duly executed by the Loan Parties, the Agent and
Lenders which constitute Requisite Lenders;

  (ii)  
for each Lender, a promissory note in the principal amount equal to such
Lender’s Commitment Percentage of the Tranche A Commitment, executed by the
Borrower and complying with the applicable requirements of Section 2.11. of the
Credit Agreement, which note, together with the Tranche B Note in favor of such
Lender shall amend and restate the promissory note of the Borrower delivered in
connection with the Existing Credit Agreement;

  (iii)  
for each Lender, a promissory note in the principal amount equal to such
Lender’s Commitment Percentage of the Tranche A Commitment, executed by the
Florida Borrower and complying with the applicable requirements of Section 2.11.
of the Credit Agreement, which note shall amend and restate the promissory note
of the Florida Borrower delivered in connection with the Existing Credit
Agreement;

  (iv)  
for each Lender, a promissory note in the principal amount of such Lender’s
Commitment Percentage of the Tranche B Commitment, executed by the Tranche B
Borrowers and complying with the applicable provisions of Section 2.11. of the
Credit Agreement, which note, together with the Tranche A Borrower Note in favor
of such Lender, shall amend and restate the promissory note of the Borrower
delivered in connection with the Existing Credit Agreement;

  (v)  
the Reaffirmation of Guaranty executed by the Loan Parties as of the Effective
Date, which shall reaffirm and restate the guaranty delivered in connection with
the Existing Credit Agreement;

  (vi)  
an opinion or opinions of counsel to the Loan Parties, addressed to the Agent
and the Lenders, addressing such matters as the Agent may reasonably require;

  (vii)  
the articles of incorporation, articles of organization, certificate of limited
partnership or other comparable organizational instrument (if any) of each Loan
Party certified as of a recent date by the Secretary of State of the state of
formation of such Loan Party;

 

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  (viii)  
a certificate of good standing or certificate of similar meaning with respect to
each Loan Party issued as of a recent date by the Secretary of State of the
state of formation of each such Loan Party and certificates of qualification to
transact business or other comparable certificates issued by each Secretary of
State (or any state department of taxation, as applicable) of each state in
which such Loan Party is required to be so qualified and where the failure to be
so qualified could reasonably be expected to have a Material Adverse Effect;

  (ix)  
a certificate of incumbency signed by the Secretary or Assistant Secretary (or
other individual performing similar functions) of each Loan Party with respect
to each of the officers of such Loan Party authorized to execute and deliver
this Agreement and the Loan Documents to which such Loan Party is a party, and
in the case of the Borrower, the officers of the Borrower then authorized to
deliver Notices of Revolving Borrowings, Notices of Borrowings, Notices of
Continuation and Notices of Conversion and to request the issuance of Letters of
Credit;

  (x)  
copies certified by the Secretary or Assistant Secretary (or other individual
performing similar functions) of each Loan Party of (i) the by-laws of such Loan
Party, if a corporation, the operating agreement of such Loan Party, if a
limited liability company, the partnership agreement of such Loan Party, if a
limited or general partnership, or other comparable document in the case of any
other form of legal entity and (ii) all corporate, partnership, member or other
necessary action taken by such Loan Party to authorize the execution, delivery
and performance of this Agreement and the Loan Documents to which it is a party
that are executed in connection herewith;

  (xi)  
a Borrowing Base Certificate calculated as of the Fifth Amendment Effective
Date;

  (xii)  
a Compliance Certificate calculated as of June 30, 2009 (giving pro forma effect
to the financing contemplated by this Agreement and the use of the proceeds of
the Loans to be funded on the Fifth Amendment Effective Date as if the reduction
of Commitments and the repayment and restructuring of outstanding Loans on the
Fifth Amendment Effective Date pursuant to this Agreement had occurred on
June 30, 2009);

  (xiii)  
a capital budget for each Property as required by Section 10.11.(b) of the
Credit Agreement;

  (xiv)  
the NY Mortgage duly executed by the NY Borrowers and recorded in the applicable
land records, securing only the Obligations (including principal, interest and
Reimbursement Obligations) with respect to the Tranche B Loans and Tranche B
Letter of Credit Liabilities, together with evidence that all applicable
mortgage recording taxes, stamp taxes, intangible taxes and other applicable
taxes required for the recordation and/or enforcement of the NY Mortgage and the
Obligations secured thereby have been paid;

 

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  (xv)  
a standard ALTA lender’s policy of title insurance in the amount of Tranche B
Commitment, insuring that the lien of the NY Mortgage constitutes a first lien
on the NY Properties subject only to (A) the existing $1.4 million mortgages on
the respective NY Properties (each, an “Existing Mortgage”), which Existing
Mortgage and related note has previously been assigned to the Agent, and (B) the
matters of record as of the date of the recordation of the Existing Mortgage (to
the extent the Agent previously approved such matters), together with a pending
disbursements endorsement and such other endorsements as the Agent may require;

  (xvi)  
appraisals for the NY Properties complying with the standards for Appraisals
provided in the Credit Agreement, setting forth Appraised Values acceptable to
the Agent, and otherwise in form and substance acceptable to the Agent, in the
Agent’s sole discretion;

  (xvii)  
an amendment to the mortgage encumbering the Florida Property, which currently
secures the “Florida Sublimit” under the Existing Credit Agreement, amending
such mortgage to provide that it secures the Tranche A Loans as well as the
obligations of the Florida Borrower under the Guaranty, executed by the Florida
Borrower and recorded in the applicable land records, together with evidence
that all applicable mortgage recording taxes, stamp taxes, intangible taxes and
other applicable taxes required for the recordation and/or enforcement of such
mortgage as so amended have been paid;

  (xviii)  
such other Security Documents and amendments to Security Documents as the Agent
may reasonably request to perfect or continue the perfection of the Agent’s
security interest in all Collateral in connection with the transactions
contemplated by this Agreement.

  (b)  
The Agent and Wells Fargo Securities, LLC (“Wells Fargo Securities”) shall have
received all fees as required by the letter agreement (the “Fee Letter”) dated
July 14, 2009 between the Borrower and Wells Fargo Securities;

  (c)  
The Agent and its Affiliates shall have received reimbursement from the Borrower
of all reasonable expenses of the Agent and its Affiliates, as required by this
Agreement and the Credit Agreement;

  (d)  
The Agent shall have received, for the benefit of each Lender that has executed
and delivered this Agreement, an amendment fee equal to 0.50% of such Lender’s
Commitments, after giving effect to the reduction of the Commitments on the
effective date hereof, as contemplated by this Agreement;

  (e)  
All fees, charges and disbursements of counsel to the Agent (including any local
counsel) incurred in connection with the Loan Documents or the execution and
delivery of this Agreement, to the extent invoiced prior to or on the date
hereof, plus such additional amounts of such fees, charges and disbursements as
shall constitute such counsel’s reasonable estimate of such fees, charges and
disbursements incurred or to be incurred by it through the closing of this
Agreement (provided that such estimate shall not thereafter preclude a final
settling of such fees, charges and disbursements) shall have been paid in full;

 

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  (f)  
The Borrower shall have made, or caused to be made, a principal payment on the
Revolving Credit Facility in such amount as may be required so that the
aggregate principal amount of all outstanding Loans converted into Tranche A
Loans and Tranche B Loans plus the aggregate amount of all Letter of Credit
Liabilities converted into Tranche A Letter of Credit Liabilities on the date
hereof shall not exceed $35,000,000;

  (g)  
No Default or Event of Default shall be existing, and all representations and
warranties provided in this Agreement shall be true and correct in all material
respects;

  (h)  
All outstanding Swing Line Loans (as defined in the Existing Credit Agreement)
shall have been indefeasibly repaid in full; and

  (i)  
The Agent shall have received such other documents, instruments or certificates,
and the Loan Parties shall have performed such other undertakings and provided
such further assurances, as the Agent may deem necessary or desirable to
consummate the transactions contemplated by this Agreement.

2.  
Acknowledgment of Existing Obligations under the Loan Documents. Each of the
Loan Parties hereby confirms, ratifies and acknowledges the enforceability of
the Loan Documents to which it is a party and its liability for all Obligations
arising under each of the Loan Documents executed by such Loan Party (including
without limitation the continuation of such Loan Party’s payment and performance
obligations thereunder and grants of security interests or liens provided
therein, in each case upon and after the effectiveness of this Agreement and the
amendments contemplated hereby).
  3.  
Waiver of Certain Defaults under Existing Credit Agreement.

  (a)  
To the extent that a Default or Event of Default existed for failure to comply,
as of June 30, 2009, with Section 10.11.(a) (the maximum leverage ratio
covenant) as in effect prior to this Agreement, the Lenders party to this
Agreement hereby waive such Default and Event of Default.

  (b)  
To the extent that a Default or Event of Default existed for failure to comply,
for the period of four fiscal quarters ended June 30, 2009, with Section
10.11.(b) (the minimum fixed charge coverage ratio covenant) as in effect prior
to this Agreement, the Lenders party to this Agreement hereby waive such Default
and Event of Default. (The waivers set forth in clauses (a) and (b) of this
Section 3 are referred to collectively as the “Waiver.”)

 

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The Waiver is granted only for the specific instances described herein and in no
manner creates a course of dealing or otherwise impairs the future ability of
the Agent or the Lenders to declare a Default or Event of Default under, or
otherwise enforce the terms of, the Credit Agreement with respect to any other
matters or with respect to any violation of Section 10.11. occurring at any time
after the date hereof or with respect to any fiscal period ended after June 30,
2009.
  4.  
Amendments to Existing Credit Agreement. Subject to the terms and conditions set
forth herein, the Existing Credit Agreement is hereby amended so that, as
amended, it shall read as set forth in, and shall have the terms, covenants,
conditions and other provisions of, the Consolidated Form Credit Agreement, the
terms, covenants, conditions and other provisions of which Consolidated
Form Credit Agreement are hereby incorporated by reference into this Agreement
as if fully set forth herein. The parties hereto acknowledge and agree that each
amendment to the Existing Credit Agreement reflected in the Consolidated
Form Credit Agreement is and shall be effective as if individually specified in
this Agreement (the parties further acknowledging that amending the Existing
Credit Agreement by reference to the Consolidated Form Credit Agreement provides
a convenience to the parties to permit the amended terms to be read in the
context of the full Existing Credit Agreement), and that this Agreement is not a
novation of the Existing Credit Agreement or of any credit facility provided
thereunder or in respect thereof. The signature pages contained in the
Consolidated Form Credit Agreement and the Schedules and Exhibits may be left
off; provided that, (i) Exhibit B, Exhibit C, Exhibit D, Exhibit E, Exhibit F-1,
Exhibit F-2, Exhibit G, Exhibit H, Exhibit I, Exhibit R, Exhibit S and Exhibit T
which are attached to the Consolidated Form Credit Agreement, shall constitute
an amendment and restatement of each such exhibit as is attached to the Existing
Credit Agreement, (ii) Schedule 1.1.(B), Schedule 7.1.(b), Schedule 7.1.(d),
Schedule 7.1.(f), Schedule 7.1.(g), Schedule 7.1.(h) and Schedule 7.1.(i) which
are attached to the Consolidated Form Credit Agreement, shall be amended and
restated as set forth therein as of the Fifth Amendment Effective Date, and
(iii) Schedule 2.1., Schedule 2.3. Schedule 7.1.(y), Schedule 10.1.(a),
Schedule 10.2.(xiii), Schedule 10.4.(n) and Schedule 10.11.(b) which are
attached to the Consolidated Form Credit Agreement, shall be added to the
Existing Credit Agreement as set forth therein as of the Fifth Amendment
Effective Date. Notwithstanding that the cover page of the Consolidated
Form Credit Agreement is dated “as of October 6, 2006”, the changes to the
Existing Credit Agreement affected by this Agreement shall be effective as of
the satisfaction to the conditions to effectiveness of this Agreement set forth
in Section 1 hereof.
  5.  
Consent to Amendments to Certain Operating Agreements. The Agent and the Lenders
signatory to this Agreement hereby consent to the amendment of the Operating
Agreement of each of the New York Borrowers, the Florida Borrower,
Morgans/Delano Pledgor LLC, Madison Bar Company LLC, Royalton Pledgor LLC and
43rd Restaurant LLC, so that after giving effect to such amendment, each such
Operating Agreement shall be in the respective forms attached hereto as
Exhibit B-1, B-2, B-3, B-4, B-5, B-6 or B-7, as applicable.

 

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6.  
Representations and Warranties. In order to induce the Agent and the Lenders
signatory hereto to enter into this Agreement, each Loan Party represents and
warrants to the Agent and the Lenders as follows:

  (a)  
Authorization. Each of the Borrowers, Holdings and each other Loan Party has the
right and power, and has taken all necessary action to authorize it, to execute
and deliver this Agreement and the other documents and amendments to Loan
Documents executed in connection herewith (collectively with this Agreement, the
“Amendment and Waiver Documents”) and to perform its obligations under the
Amendment and Waiver Documents, in accordance with their respective terms. This
Agreement and the other Amendment and Waiver Documents have been duly executed
and delivered by a duly authorized officer of each of the Loan Parties that is a
party thereto, and each of the Amendment and Waiver Documents is a legal, valid
and binding obligation of each of the Loan Parties that is a party thereto,
enforceable against each such Person in accordance with its respective terms
except as the same may be limited by bankruptcy, insolvency, and other similar
laws affecting the rights of creditors generally and the availability of
equitable remedies for the enforcement of certain obligations (other than the
payment of principal) contained herein or therein and as may be limited by
equitable principles generally.

  (b)  
Compliance with Laws, etc. The execution and delivery by each of the Loan
Parties of the Amendment and Waiver Documents to which it is a party and the
performance by each such Loan Party of such Amendment and Waiver Documents, in
accordance with their respective terms, do not and will not, by the passage of
time, the giving of notice or otherwise: (i) require any Government Approvals or
violate any Applicable Laws relating to such Loan Party; (ii) conflict with,
result in a breach of or constitute a default under such Loan Party’s
organizational documents or any indenture, agreement or other instrument to
which such Loan Party is a party or by which it or any of its properties may be
bound; or (iii) result in or require the creation or imposition of any Lien upon
or with respect to any property now owned or hereafter acquired by such Loan
Party other than Permitted Liens.

  (c)  
Guarantors. The Persons appearing as Guarantors on the signature pages to this
Agreement constitute all Persons who are required to be Guarantors pursuant to
the terms of the Credit Agreement and the other Loan Documents, including
without limitation all Persons who became Subsidiaries or were otherwise
required to become Guarantors after the Closing Date, and each of such Persons
has become and remains a party to a Guaranty as a Guarantor;

  (d)  
No Default. No Default or Event of Default has occurred and is continuing as of
the date hereof nor will exist immediately after giving effect to this
Agreement.

  (e)  
Claims and Defenses. No Loan Party has any claims, counterclaims, rights of
setoff or defenses with respect to this Agreement or the Loan Documents, to any
of its Obligations, or to the Agent’s exercise of any right or remedy available
to it under the terms of the Loan Documents, this Agreement or applicable law.

 

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  (f)  
Representations and Warranties in Loan Documents. All of the representations and
warranties of the Loan Parties set forth in the Credit Agreement and the other
Loan Documents are true and correct as of the date hereof in all material
respects with the same force and effect as if such representations and
warranties were set forth in this Agreement in full, except to the extent that
such representations and warranties expressly relate solely to an earlier
specified date (in which case such representations and warranties are true and
correct in all material respects on and as of such earlier date).

7.  
Post-Closing Covenants. The Loan Parties hereby agree that from and after the
Fifth Amendment Effective Date, they shall use commercially reasonable efforts
to deliver, or cause to be delivered to the Agent, on or before September 4,
2009, (a) a fully-executed subordination and attornment agreement in
substantially the same form as set forth on Exhibit C attached hereto between
Base USA, Inc. as tenant and the Florida Borrower as landlord, (b)
fully-executed subordination, non-disturbance and attornment agreements in
substantially the same form as set forth on Exhibit D attached hereto between
each of (i) SC Collins LLC as tenant and the Florida Borrower as landlord and
(ii) SC Madison LLC as tenant and Morgans Holdings LLC as landlord and
(c) executed tenant estoppel certificates in substantially the same form as set
forth on Exhibit E attached hereto for each of (i) Base USA, Inc. as tenant
under a lease with the Florida Borrower as landlord, (ii) SC Collins LLC as
tenant under a lease with the Florida Borrower as landlord and (iii) SC Madison
LLC as tenant under a lease with Morgans Holdings LLC as landlord.
  8.  
Acknowledgements and Agreements. In order to induce the Agent and the Lenders
signatory hereto to enter into this Agreement, each Loan Party acknowledges and
agrees with the Agent and the Lenders as follows:

  (a)  
No Waiver of Defaults. Neither the Agent nor any Lender has waived any Defaults
which may occur in the future, or any of its rights to payment of the Loans or
any Loan Party’s performance of the Obligations as set forth in any Loan
Document, as amended by this Agreement, or otherwise with respect to any Loan,
Letter of Credit, Treasury Management Services Agreement or Swap Agreement; and
nothing herein shall be construed as any such waiver.

  (b)  
Reliance by Agent and Lenders. All of the Loan Parties’ agreements,
acknowledgments, warranties and representations contained in this Agreement are
material to willingness of the Agent and each Lender signatory hereto to enter
into this Agreement.

9.  
Full Force and Effect of Credit Agreement. Except as hereby specifically
amended, modified or supplemented, each party hereto hereby acknowledges and
agrees that the Existing Credit Agreement and all of the other Loan Documents
are hereby confirmed and ratified in all respects and shall remain in full force
and effect according to their respective terms.

 

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10.  
Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument. Delivery of an executed counterpart of a signature
page of this Agreement by telecopy or electronic format (including .pdf) shall
be effective as delivery of a manually executed original counterpart of this
Agreement.

11.  
Entire Agreement. This Agreement, together with all other Amendment and Waiver
Documents, the Fee Letter and all the Loan Documents (collectively, the
“Relevant Documents”), sets forth the entire understanding and agreement of the
parties hereto in relation to the subject matter hereof and supersedes any prior
negotiations and agreements among the parties relating to such subject matter.
No promise, condition, representation or warranty, express or implied, not set
forth in the Relevant Documents shall bind any party hereto, and no such party
has relied on any such promise, condition, representation or warranty. Each of
the parties hereto acknowledges that, except as otherwise expressly stated in
the Relevant Documents, no representations, warranties or commitments, express
or implied, have been made by any party to the other in relation to the subject
matter hereof or thereof. None of the terms or conditions of this Agreement may
be changed, modified, waived or canceled orally or otherwise, except in writing
in accordance with Section 13.6. of the Credit Agreement.

12.  
Governing Law. This Agreement shall in all respects be governed by, and
construed in accordance with, the laws of the State of New York, and shall be
further subject to the provisions of Sections 13.4. of the Credit Agreement.

13.  
Enforceability. Should any one or more of the provisions of this Agreement be
determined to be illegal or unenforceable as to one or more of the parties
hereto, all other provisions nevertheless shall remain effective and binding on
the parties hereto.

14.  
Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Agent, each of the Lenders, and each of the Borrowers and Loan
Parties and their respective successors, legal representatives, and assignees to
the extent such assignees are permitted assignees as provided in Section 13.5.
of the Credit Agreement.

15.  
Expenses. Without limiting the provisions of Section 13.2. of the Credit
Agreement, the Company and each Borrower agree to pay all reasonable out of
pocket costs and expenses (including without limitation reasonable legal fees
and expenses) incurred before, on or after the date hereof by the Agent and its
Affiliates in connection with the preparation, negotiation, execution, delivery
and administration of this Agreement.

 

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16.  
Waiver of Defenses. As an inducement to the Agent or any Lender to enter into
this Agreement, each Loan Party waives and affirmatively agrees not to allege,
assert or otherwise pursue any claim, defense, affirmative defense,
counterclaim, cause of action, setoff or other right that they may have, as of
the date hereof, against the Agent, any sub-agent thereof, Wells Fargo
Securities, Citigroup Global Markets, any Lender, whether known or unknown,
including but not limited to any contest of (i) the enforceability,
applicability or validity of any provisions of the Loan Documents, or the
enforcement or validity of the terms and provisions set forth herein, (ii) the
Agent’s security interest and lien (for the benefit of the Lenders) in all
Collateral and all rents, issues, profits, products and proceeds from the
Collateral, (iii) the existence, validity, enforceability or perfection of
security interests and liens granted to the Agent (for the benefit of the
Lenders) in the Loan Documents in any of the Collateral, whether tangible or
intangible property, or any right or other interest, now or hereafter arising,
(iv) the conduct of the Agent or any Lender, in administering the financial
arrangements between any Borrower or any other Loan Party and any Lender or
(v) any legal fees and expenses incurred by the Agent or any Lender and charged
to any Borrower or any other Loan Party under this Agreement or any Loan
Document in connection with enforcing the Agent’s or any Lender’s rights
hereunder or under any Loan Document.
  17.  
General Release. As an inducement to the Agent and the Lenders signatory hereto
to enter into this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each of the
undersigned Loan Parties (collectively, the “Releasors”) for: (i) themselves,
(ii) any parent, affiliate or subsidiary thereof, (iii) any partnership or joint
venture of which any person or entity comprising any of the Releasors (or any
parent, affiliate or subsidiary thereof) is a partner, (iv) any person or entity
owning the beneficial interest in the trust, any parent, affiliate or subsidiary
thereof or any partnership or joint venture of which such person or entity (or
any parent, affiliate or subsidiary thereof), is a partner, and (v) the
respective partners, officers, directors, shareholders, heirs, legal
representatives, legatees, successors and assigns of all of the foregoing
persons and entities, hereby release and forever discharge the Agent, any
sub-agent, Wells Fargo Securities, Citigroup Global Markets, and each Lender
(whether or not signatory hereto), and each of their respective past, present
and future shareholders, successors, assigns, officers, directors, agents,
attorneys, advisors and employees, together with the respective heirs, legal
representatives, legatees, successors, and assigns of any of the foregoing
Persons, of and from all actions, claims, demands, damages, debts, losses,
liabilities, indebtedness, causes of action either at law or in equity and
obligations of whatever kind or nature, whether known or unknown, direct or
indirect, new or existing, by reason of any matter, cause or thing whatsoever
from the beginning of the world to the date of this Agreement, including without
limitation any such action, claim, demand, damage, debt, loss, liability,
indebtedness, cause of action or obligation arising out of or relating to
(a) any Loan Document, or (b) any transaction contemplated by, or any action of
any Person pursuant to, in connection with or relating to any Loan Document,
including without limitation, any claims asserted or which could have been
asserted as of the date hereof by the Releasors in connection with any Loan to
or Letter of Credit for the account of any Borrower or any of its Subsidiaries.

It is acknowledged that Releasors have read the release set forth in this
Section (the “General Release”) and consulted counsel before executing same;
that Releasors have relied upon their own judgment and that of their counsel in
executing this General Release and have not relied on or been induced by any
representation, statement or act by any other Person referenced to herein which
is not referred to in this instrument; that the Releasors enter into this
General Release voluntarily, with full knowledge of its significance; and that
this General Release is in all respects complete and final.

 

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If any term or provision of this General Release or the application thereof to
any Person or circumstance shall, to any extent, be held invalid and/or
unenforceable by a court of competent jurisdiction, the remainder of this
General Release, or the application of such term of provisions to Persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby, and each term and provision of the General
Release shall be valid and be enforced to the fullest extent permitted by law.
[Signatures on Next Page]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to
Credit Agreement; and Waiver Agreement to be executed as of the date first above
written.

                          MORGANS GROUP LLC    
 
                        By: Morgans Hotel Group Co., its Managing Member    
 
                   
 
          By:   /s/ Richard Szymanski
 
Name: Richard Szymanski    
 
              Title: Chief Financial Officer and Secretary    
 
                        BEACH HOTEL ASSOCIATES LLC    
 
                        By: Morgans Group LLC, its Managing Member            
By: Morgans Hotel Group Co., its Managing Member    
 
                   
 
          By:   /s/ Richard Szymanski
 
Name: Richard Szymanski    
 
              Title: Chief Financial Officer and Secretary    
 
                        ROYALTON LLC    
 
                        By: Morgans Group LLC, its Managing Member            
By: Morgans Hotel Group Co., its Managing Member    
 
                   
 
          By:   /s/ Richard Szymanski
 
Name: Richard Szymanski    
 
              Title: Chief Financial Officer and Secretary    
 
                        MORGANS HOLDINGS LLC    
 
                        By: Morgans Group LLC, its Managing Member            
By: Morgans Hotel Group Co., its Managing Member    
 
                   
 
          By:   /s/ Richard Szymanski
 
Name: Richard Szymanski    
 
              Title: Chief Financial Officer and Secretary    
 
                        MORGANS HOTEL GROUP CO.    
 
                        By:   /s/ Richard Szymanski                          
Name: Richard Szymanski             Title: Chief Financial Officer and Secretary
   

Morgans Group LLC
Fifth Amendment to Credit Agreement and Waiver Agreement
Signature Page

 

 

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                  THE GUARANTORS:
 
                MORGANS HOTEL GROUP CO.
 
                MORGANS HOTEL GROUP MANAGEMENT LLC            By: Morgans Group
LLC, its Managing Member              By: Morgans Hotel Group Co., its Managing
Member
 
                BEACH HOTEL ASSOCIATES LLC            By: Morgans Group LLC, its
Managing Member              By: Morgans Hotel Group Co., its Managing Member
 
                MORGANS HOLDINGS LLC            By: Morgans Group LLC, its
Managing Member              By: Morgans Hotel Group Co., its Managing Member
 
                ROYALTON, LLC            By: Morgans Group LLC, its Managing
Member              By: Morgans Hotel Group Co., its Managing Member
 
                MORGANS/DELANO PLEDGOR LLC            By: Morgans Group LLC, its
Managing Member              By: Morgans Hotel Group Co., its Managing Member
 
                ROYALTON PLEDGOR LLC            By: Morgans Group LLC, its
Managing Member              By: Morgans Hotel Group Co., its Managing Member
 
                43rd RESTAURANT LLC            By: Royalton Pledgor LLC, its
Managing Member              By: Morgans Group, LLC, its Managing Member        
        By: Morgans Hotel Group Co., its Managing Member
 
                MADISON BAR COMPANY LLC            By: Morgans/Delano Pledgor
LLC, its Managing Member              By: Morgans Group LLC, its Managing Member
                By: Morgans Hotel Group Co., its Managing Member
 
           
 
  By:
  /s/ Richard Szymanski
 
Name: Richard Szymanski    
 
      Title: Chief Financial Officer and Secretary    

Morgans Group LLC
Fifth Amendment to Credit Agreement and Waiver Agreement
Signature Page

 

 

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            WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent and as a Lender
      By:   /s/ Mark Cagley         Name:   Mark Cagley        Title:   Managing
Director     

Morgans Group LLC
Fifth Amendment to Credit Agreement and Waiver Agreement
Signature Page

 

 

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            CITICORP NORTH AMERICA, INC.
      By:   /s/ Daniel Gouger         Name:   Daniel Gouger        Title:   Vice
President     

Morgans Group LLC
Fifth Amendment to Credit Agreement and Waiver Agreement
Signature Page

 

 

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            AAREAL CAPITAL CORPORATION
      By:   /s/ Dagmar Knoper         Name:   Dagmar Knoper        Title:  
Senior Managing Director              By:   /s/ Daniel de Roo         Name:  
Daniel de Roo        Title:   Director     

Morgans Group LLC
Fifth Amendment to Credit Agreement and Waiver Agreement
Signature Page

 

 

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            MERRILL LYNCH CAPITAL CORPORATION
      By:   /s/ Christopher DiBiase         Name:   Christopher DiBiase       
Title:   Vice President     

Morgans Group LLC
Fifth Amendment to Credit Agreement and Waiver Agreement
Signature Page

 

 

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            ALLIED IRISH BANKS, P.L.C.
      By:           Name:           Title:                 By:           Name:  
        Title:        

Morgans Group LLC
Fifth Amendment to Credit Agreement and Waiver Agreement
Signature Page

 

 

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            KBC BANK, NV
      By:   /s/ Nicholas A. Philippides         Name:   Nicholas A. Philippides 
      Title:   Assistant Vice President              By:   /s/ Sandra T. Johnson
        Name:   Sandra T. Johnson        Title:   Managing Director     

Morgans Group LLC
Fifth Amendment to Credit Agreement and Waiver Agreement
Signature Page

 

 

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            MIDFIRST BANK
      By:   /s/ Darrin Rigler         Name:   Darrin Rigler        Title:   Vice
President     

Morgans Group LLC
Fifth Amendment to Credit Agreement and Waiver Agreement
Signature Page

 

 

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EXHIBIT A

Consolidated Form Credit Agreement
See Exhibit 10.6 to the Company’s
Form 10-Q for the quarter ended
September 30, 2010.

 

 

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EXHIBIT B-1
Operating Agreement for Morgans Holdings LLC
See attached.

 

 

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THE TRANSFER OF THE LIMITED LIABILITY COMPANY INTERESTS DESCRIBED IN THIS
AGREEMENT IS RESTRICTED AS DESCRIBED HEREIN.
FIFTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
MORGANS HOLDINGS LLC
This Fifth Amended and Restated Limited Liability Company Agreement (this
“Agreement”) of MORGANS HOLDINGS LLC, a Delaware limited liability company (the
“Company”), is adopted and entered into as of August __, 2009, by (i) Morgans
Group LLC, a Delaware limited liability company, as managing member (the
“Managing Member” or “Member”, and in the event an additional person or persons
shall become members, the term “Members” shall include such other persons who
shall become members of the Company in accordance with the terms of this
Agreement, provided, however, the term “Member” shall not include the “Special
Members” as hereinafter defined), and (ii) Kenneth J. Uva and Victor A. Duva, as
the Independent Directors, pursuant to and in accordance with the Delaware
Limited Liability Company Act, 6 Del. C. § 18-101 et seq. as amended from time
to lime (the “Act”). Terms used in this Agreement which are not otherwise
defined shall have the respective meanings given those terms in the Act or in
Section 23 hereof.
WHEREAS, the Company was formed on July 23, 1998 pursuant to a Certificate of
Formation filed with the Secretary of State of the State of Delaware (as amended
or amended and restated from time to time, the “Certificate of Formation”) and
at the time of the Company’s formation its sole member was Ian Schrager Hotels
LLC, New York limited liability company, which entity subsequently was converted
into Morgans Hotel Group LLC (“MHG”) a Delaware limited liability company; and
WHEREAS, MHG assigned its limited liability company interest in the Company to
the Managing Member pursuant to that certain Assignment and Assumption of
Limited Liability Company Interests, dated as of August 13, 2004, between MHG
and the Member; and
WHEREAS, the Member continued the Company pursuant to that certain Second
Amended and Restated Limited Liability Company Agreement on August 13, 2004, as
amended, restated or modified through the date hereof, including October 6, 2006
(as so amended and restated, the “Original Agreement”); and
WHEREAS, the Member and the Independent Directors desire to amend and restate
the terms of the Original Agreement in the manner provided herein.
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The parties hereto hereby agree as follows:
1. Name; Formation. The name of the limited liability company is MORGANS
HOLDINGS LLC. The Certificate of Formation of the Company was filed for record
in the office of the Secretary of State of the State of Delaware on July 23,
1998 in accordance with the Act, by Vered Rabia, an authorized person within the
meaning of the Act. Upon the filing of the Certificate of Formation with the
Secretary of State of the State of Delaware, her powers as an “authorized
person” ceased. The Member is hereby designated as an “authorized person” and
shall continue as the designated “authorized person” within the meaning of the
Act. The Member, as an authorized person, within the meaning of the Act, shall
execute, deliver and file, or cause the execution, delivery and filing of, all
certificates (and any amendments and/or restatements thereof) required or
permitted by the Act to be filed with the Secretary of State of the State of
Delaware. The Member shall execute, deliver and file, or cause the execution,
delivery and filing of any certificates (and any amendments and/or restatements
thereof) necessary for the Company to qualify to do business in any other
jurisdiction in which the Company may wish to conduct business. The terms and
provisions of the Original Agreement are hereby amended and restated in their
entirety as set forth herein.
2. Term. The Company shall dissolve on December 31, 2048 unless dissolved before
such date in accordance with this Agreement. The existence of the Company as a
separate legal entity shall continue until cancellation of the Certificate of
Formation as provided in the Act.
3. Management; Board of Directors. Except as otherwise specifically provided in
this Agreement, the management of the Company shall be vested in the Managing
Member who shall manage the Company in accordance with the Act.
(a) Until “Full Payment” of the “Obligations” (as such terms are defined in the
Credit Agreement hereinafter defined), the Company shall have a board of
managers which shall be designated as the Company’s “Board of Directors” and
each member of the Board of Directors shall be designated as a “Director.” The
Board of Directors shall only have the authority expressly set forth in this
Agreement. The Directors are “managers” within the meaning of the Act with only
such duties and rights as are expressly set forth in this Agreement. The initial
members of the Board of Directors shall be set forth on Schedule A attached
hereto. Members of the Board of Directors may be appointed and removed from time
to time by the Managing Member, in its sole discretion, provided, however, that
until Full Payment of the Obligations, the Company shall have at least two
Independent Directors on the Board of Directors. The Board of Directors shall
hold meetings, at such times and places to be designated by the Managing Member.
(b) Intentionally omitted.
(c) Until Full Payment of the Obligations, the Company may take the following
actions only with approval of the Managing Member and unanimous approvals of all
members of the Board of Directors, including, without limitation, all of the
Independent Directors.
(i) make any assignment for the benefit of the Company’s creditors;
(ii) file, or consent to or acquiesce in the filing of or a petition in, a
bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under laws relating to the
relief from debts or the protection of debtors generally;
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(iii) seek or consent to or acquiesce in the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Company or for all or any portion of the Company’s properties;
(iv) admit in writing its inability to pay its debts generally as they become
due;
(v) take any action that might cause the Company to become insolvent;
(vi) except as permitted by Section 20, amend this Agreement;
(vii) to the fullest extent permitted by law, voluntarily dissolve and wind up,
or consolidate or merge the Company or sell all or substantially all of the
assets of the Company;
(viii) engage in any business activity not set forth in Section 5 of this
Agreement.
To the fullest extent permitted by applicable law, no member of the Board of
Directors shall be guilty of breaching any fiduciary duty to any Member by
refusing to consent to any of the above listed actions.
(d) Notwithstanding anything in this Agreement, to the fullest extent permitted
by law, until Full Payment of the Obligations, the Company may not take any of
the actions set forth in Subsection (vii) of Subparagraph (c) of this Section 3.
(e) To the fullest extent permitted by law, including Section 18-1101(c) of the
Act, the Independent Directors shall consider only the interests of the Company,
including its respective creditors, in acting or otherwise voting on the matters
referred to in Section 3(c). No resignation or removal of an Independent
Director, and no appointment of a successor Independent Director, shall be
effective until such successor (i) shall have accepted his or her appointment as
an Independent Director by a written instrument, which may be a counterpart
signature page to the Management Agreement, and (ii) shall have executed a
counterpart to this Agreement as required by Section 8(a). In the event of a
vacancy in the position of Independent Director, the Managing Member shall, as
soon as practicable, appoint a successor Independent Director. All right, power
and authority of the Independent Directors shall be limited to the extent
necessary to exercise those rights and perform those duties specifically set
forth in this Agreement. Except as provided in the first sentence of this
Section 3(e), in exercising their rights and performing their duties under this
Agreement, any Independent Director shall have a fiduciary duty of loyalty and
care similar to that of a director of a business corporation organized
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under the General Corporation Law of the State of Delaware. No Independent
Director shall at any time serve as trustee in bankruptcy for any Affiliate of
the Company. Each Independent Director shall execute and deliver the Management
Agreement. The Independent Directors designated by the Managing Member shall
continue to be Kenneth J. Uva and Victor A. Duva. Unless otherwise restricted by
law, any Independent Director may be removed or expelled, with or without cause,
at any time by the Managing Member, and, subject to this Section 3, any vacancy
caused by any such removal or expulsion may be filled by action of the Managing
Member provided that any replacement Independent Director fulfills the
requirements of being an Independent Director hereunder.
4. Authority. Except as otherwise provided herein and subject to Section 3, the
management of the Company shall be vested solely in the Member, who shall have
all powers to control and manage the business and affairs of the Company and may
exercise all powers of the Company. Subject to Sections 3, 5 and 7, the Managing
Member is authorized to (i) execute any and all documents and agreements on
behalf of the Company, and to engage in all activities related thereto; and (ii)
execute any and all agreements, affidavits and indemnities necessary or
appropriate to effectuate any and all transactions of the Company. The Company,
by or through the Managing Member on behalf of the Company, may enter into and
perform the Loan Documents (as defined herein) and all documents, agreements,
certificates, or financing statements contemplated thereby or related thereto,
all without any further act, vote or approval of any other Person
notwithstanding any other provision of this Agreement, the Act or applicable
law, rule or regulation. The foregoing authorization shall not be deemed a
restriction on the powers of the Managing Member to enter into other agreements
on behalf of the Company, subject to Section 5 and Section 6.
5. Purpose. The purpose of the Company is solely to:
(a) acquire, own, hold, maintain, manage, operate, improve, develop, finance,
pledge, encumber, mortgage, sell, exchange, lease, dispose of and otherwise deal
with the property located at 237 Madison Ave New York, New York 10016 and
commonly known as Morgans Hotel and the related improvements thereon (the
“Property”), together with such other activities as may be necessary or
advisable in connection with the ownership of the Property in accordance with
the Loan Documents;
(b) borrow funds under and give security for and guarantee the loans and other
credit facilities provided pursuant to the Credit Agreement dated as of
October 6, 2006 among Morgans Group LLC (“Borrower”). Beach Hotel Associates,
LLC, Morgans Holdings LLC, Royalton, LLC, Morgans Hotel Group Co., Wachovia
Bank, National Association, as Administrative Agent (the “Agent”). Citigroup
Global Markets, Inc., as Syndication Agent, and certain other financial
institutions party thereto, as amended by First Amendment to Credit Agreement
dated as of November 10, 2006, Second Amendment to Credit Agreement dated as of
January 8, 2007, Third Amendment to Credit Agreement dated as of October 10,
2007, Fourth Amendment to Credit Agreement dated as of January 16, 2008, and
Fifth Amendment to Credit Agreement; and Waiver Agreement dated as of August __,
2009, and as the same may be further amended, restated, supplemented or
otherwise modified from time to time (collectively, the “Credit Agreement”), and
the other “Loan Documents” as defined in the Credit Agreement;
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(c) give security for the Obligations under the Loan Documents or for any other
indebtedness to the extent not prohibited by the Loan Documents; and
(d) refinance the Obligations and grant security interests to secure same, to
the extent same is not a violation of the Loan Documents.
6. Company Business. The Company shall not engage in any business unrelated to
the ownership of the Property and shall not own any assets other than those
related to the Property or otherwise in furtherance of the purposes of the
Company. The Company shall not incur any indebtedness other than the
indebtedness under the Loan Documents, related to the Property or otherwise
provided herein or permitted under the Loan Documents.
7. Separateness Covenants. Notwithstanding anything to the contrary contained
herein (except the penultimate sentence of Section 4), for so long as any
portion of the Obligations is outstanding, the Company shall conduct its affairs
in accordance with the following provisions:
(a) It shall be a limited liability company organized solely for the purpose of
owning the Property.
(b) It shall not own any assets other than those related to the Property.
(c) To the fullest extent permitted by law, (i) it shall not engage in, seek or
consent to any dissolution, winding up, or liquidation, (ii) it shall not engage
in any consolidation, merger, or asset sale (except as permitted in the Loan
Documents or if there is Full Payment of the Obligations), (iii) it shall not
transfer any limited liability company interests in the Company (except as
expressly provided in the Loan Documents or with the written consent of the
Agent) and (iv) it shall not further amend this Agreement or the Certificate of
Formation (except as required by law).
(d) It shall remain solvent and maintain adequate capital in light of its
contemplated business operations, - provided, however, the foregoing shall not
require the Member to make any additional capital contributions to the Company.
(e) It shall not fail to correct any known misunderstanding regarding the
separate identity of such entity.
(f) It shall maintain its accounts, books and records separate from any other
Person other than the Loan Parties (as defined in the Credit Agreement) and
shall file its own tax returns.
(g) It shall maintain its books, records, resolutions and agreements as official
records.
(h) It shall not commingle its funds or assets with those of any other Person
other than the Loan Parties.
(i) It shall hold its assets in its own name.
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(j) Intentionally omitted.
(k) It shall maintain its financial statements, accounting records and other
entity documents separate from any other Person, except that its financial
statements may be consolidated with those of Morgans Hotel Group Co. (the
“Parent”), other Loan Parties or their consolidated Subsidiaries.
(l) It shall pay its own liabilities, including the salaries of its own
employees, out of funds and assets of its own or of any Loan Party, provided,
however, the foregoing shall not require the Member to make any additional
capital contributions to the Company.
(m) It shall observe all limited liability company formalities.
(n) It shall maintain an arm’s-length relationship with its Affiliates to the
extent required by the Loan Documents.
(o) It shall have no indebtedness other than the Obligations and indebtedness
permitted under the Loan Documents, related to the Property or otherwise
provided herein.
(p) It shall not assume or guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person except for the obligations of the Loan Parties
or obligations under the Loan Documents.
(q) It shall not acquire obligations or securities of its members.
(r) It shall allocate fairly and reasonably shared expenses, including shared
office space.
(s) It shall not pledge its assets to secure obligations, other than in its
capacity as a co-borrower or guarantor under the Loan Documents or in connection
with providing security therefor.
(t) Intentionally omitted.
(u) It shall maintain its assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any other Person;
(v) It shall not make loans to any Person other than to any affiliate that is a
Loan Party to the extent permitted by the Credit Agreement.
(w) Intentionally omitted.
(x) It shall not enter into or be a party to, any transaction with its members
or Affiliates except as permitted pursuant to the Loan Documents.
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(y) Except as set forth in this Agreement, it shall have no obligation to
indemnify its partners, officers, directors or members, as the case may be,
unless such obligation is fully subordinated to the Obligations and will not
constitute a claim against it if cash flow in excess of the amount required to
pay the Debt is insufficient to pay such obligation.
(z) To the fullest extent permitted by law, it shall consider the interests of
its creditors in connection with all limited liability company actions.
(aa) It shall not engage in any business unrelated to the ownership of the
Property.
Failure to comply with any of the foregoing covenants shall not affect the
status of the Company as a separate legal entity.
This Section 7 is being adopted in order to comply with certain provisions
required in order to qualify the Company as a “special purpose” entity.
8. Members. The name and the business, residence or mailing address of the
Member is as follows:

                Name             Address
 
   
MORGANS GROUP LLC
  475 Tenth Avenue
 
  New York, New York 10018

(a) Notwithstanding any provision in this Agreement to the contrary, upon the
occurrence of any event that causes the Member to cease to be a member of the
Company (other than (x) upon an assignment by the Member of all of its limited
liability company interest in the Company and the admission of the transferee,
if permitted pursuant to the Loan Documents or (y) the resignation of the Member
and the admission of an additional member of the Company pursuant to this
Agreement, if permitted by the Loan Documents), each Person acting as an
Independent Director shall, without any action of any Person and simultaneously
with the Member ceasing to be a member of the Company, automatically be admitted
to the Company as a member of the Company (the “Special Member”) and shall
preserve and continue the Company without dissolution. No Special Member may
resign from the Company or transfer its rights as Special Member unless (i) a
successor Special Member has been admitted to the Company as Special Member by
executing a counterpart to this Agreement, and (ii) such successor has also
accepted its appointment as Independent Director by executing a counterpart to
the Agreement and the Management Agreement; provided, however, the Special
Members shall automatically cease to be members of the Company upon the
admission to the Company of a substitute Member but shall not thereby cease to
be Independent Directors. Each Special Member shall be a member of the Company
that has no interest in the profits, losses and capital of the Company and has
no right to receive any distributions of Company assets. Pursuant to
Section 18-301 of the Act, a Special Member shall not be required to make any
capital contributions to the Company and shall not receive a limited liability
company interest in the Company. A Special Member, in its capacity as Special
Member, may not bind the Company. Except as required by any mandatory provision
of the Act, each Special Member, in its capacity as Special Member, shall have
no right to vote on, approve or otherwise consent to any action by, or matter
relating to, the Company, including, without limitation, the merger,
consolidation or conversion of the Company. In order to implement the future,
contingent admission to the Company of each Special Member, each Person acting
as an Independent Director shall execute a counterpart to this Agreement. Prior
to its admission to the Company as Special Member, each Person acting as an
Independent Director shall not be a member of the Company.
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9. Membership Interests. The Managing Member shall have and own 100% of the
Membership Interests.
10. Capital Contributions. Any Member may make one or more capital contributions
to the Company provided, however, any capital contribution will only be made
with the consent of the Member making such contribution.
11. Capital Accounts. The capital accounts of each Member shall be allocated in
accordance with their capital contributions and shall be maintained in
accordance with Section 704(b) of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder.
12. Admission of Additional Members by the Company. One or more additional
Members of the Company may be admitted to the Company with the unanimous vote or
written consent of all of the Members; provided, however, no additional Member
may be admitted to the Company as a Member of the Company, other than pursuant
to Sections 8(a) or 21 (a), unless the Agent consents in writing.
13. Resignation of the Member. No Member may resign from the Company as a Member
of the Company unless a substitute Member or a transferee of such Member’s
interest is admitted as a Member of the Company in accordance with the terms
herein.
14. Assignments; Rights of Assignee To Become a Member. Until such time as Full
Payment of the Obligations has occurred, the Managing Member shall not, except
as expressly permitted by the Loan Documents, take any action to sell, transfer,
exchange, convey, encumber or dispose of any of its Membership Interest. Subject
to the foregoing sentence, if the Member transfers all of its limited liability
company interest in the Company pursuant to this Section 14, the transferee’s
admission shall be deemed effective immediately prior to the transfer and,
immediately following such admission, the transferor Member shall cease to be a
member of the Company. Any successor to the Member by merger or consolidation in
compliance with the Loan Documents shall, without further act, be the Member
hereunder, and such merger or consolidation shall not constitute an assignment
for purposes of this Agreement and the Company shall continue without
dissolution. Notwithstanding anything to the contrary contained herein, the
Member shall not, without the prior written consent of the Agent, issue and
shall not permit the issuance of any additional limited liability company
interests of the Company other than its initial issuance of limited liability
company interests issued on or prior to the date of this Agreement.
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15. Liability of Members. Except as otherwise expressly provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be the debts, obligations and liabilities solely of the
Company, and neither the Member nor the Special Members nor any Director shall
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Special Member or Director of the
Company.
16. Exculpation of Members. Neither the Member nor the Special Members nor any
officer, Director, employee or agent of the Company nor any employee,
representative, agent or Affiliate of the Member or the Special Members
(collectively, the “Covered Persons”) shall be liable to the Company or any
other Person who has an interest in or claim against the Company for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of the authority conferred on such
Covered Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered Persons
gross negligence or willful misconduct.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, all rights and remedies
being governed by said laws, without regard to principles of conflict of laws.
18. Indemnification. To the fullest extent permitted by applicable law and to
the extent permitted under this Agreement, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such
Covered Person by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered
Person by this Agreement, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person’s gross negligence or willful misconduct
with respect to such acts or omissions; provided, however, that any indemnity
under this Section 18 by the Company shall be provided out of and to the extent
of Company assets only, and the Member and the Special Members shall not have
personal liability on account thereof; and provided further, that so long as any
obligation imposed by the Loan Documents is outstanding, no indemnity payment
from funds of the Company (as distinct from funds from other sources, such as
insurance) of any indemnity under Section 18 shall be payable from amounts
allocable to any other Person pursuant to the Loan Documents.
19. Tax Characterization and Returns. It is the intention of the Member that the
Company be disregarded for federal and all relevant state tax purposes and that
the activities of the Company be deemed to be activities of the Member for such
purposes. All provisions of this Agreement are to be construed so as to preserve
that tax status. The Member is hereby authorized to file any necessary
elections, and shall be required to file any necessary tax returns, on behalf of
the Company with any such tax authorities.
20. Amendments.
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(a) Subject to Sections 7 and 20(b) below, Sections 3, 5, 6, 7, 8(a) and 20 of
this Agreement may only be amended with approval of the Managing Member and all
members of the Board of Directors, including, without limitation, the
Independent Directors.
(b) Notwithstanding Section 20(a), this Agreement shall not be amended except in
compliance with the Loan Documents until Full Payment of the Obligations.
21. Dissolution; Liquidation; Termination. (a) The Company shall be dissolved,
and its affairs shall be wound up upon the first to occur of the following:
(i) the termination of the legal existence of the last remaining member of the
Company or the occurrence of any other event which terminates the continued
membership of the last remaining member of the Company in the Company unless the
Company is continued without dissolution in a manner permitted by this Agreement
or the Act or (ii) the entry of a decree of judicial dissolution under
Section 18-802 of the Act. Upon the occurrence of any event that causes the last
remaining member of the Company to cease to be a member of the Company or that
causes the Member to cease to be a member of the Company (other than (x) upon an
assignment by Member of all of its limited liability company interest in the
Company and the admission of the transferee, if permitted pursuant to the Loan
Documents, or (y) the resignation of Member and the admission of an additional
member of the Company pursuant to this Agreement, if permitted pursuant to the
Loan Documents), to the fullest extent permitted by law, the personal
representative of such member is hereby authorized to, and shall, within 90 days
after the occurrence of the event that terminated the continued membership of
such member in the Company, agree in writing (i) to continue the Company and
(ii) to the admission of the personal representative or its nominee or designee,
as the case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership of such member
in the Company.
(b) Notwithstanding any other provision of this Agreement, the Member or a
Special Member becoming a Bankrupt Member shall not cause the Member or Special
Member, respectively, to cease to be a member of the Company and upon the
occurrence of such an event, the Company shall continue without dissolution.
(c) Notwithstanding any other provision of this Agreement, each of the Member
and the Special Members waives any right it might have to agree in writing to
dissolve the Company upon the Member or a Special Member becoming a Bankrupt
Member or the occurrence of an event that causes the Member or a Special Member
to cease to be a member of the Company.
(d) In the event of dissolution, the Company shall conduct only such activities
as are necessary to wind up its affairs (including the sale of the assets of the
Company in an orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-804 of the
Act.
(e) The Company shall terminate when (i) all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company shall have been distributed to the Member in the manner provided for in
this Agreement and (ii) the Certificate of Formation shall have been canceled in
the manner required by the Act.
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(f) To the fullest extent permitted by law, each of the Member and the Special
Members shall irrevocably waive any right or power that they might have to cause
the Company or any of its assets to be partitioned, to cause the appointment of
a receiver for all or any portion of the assets of the Company, to compel any
sale of all or any portion of the assets of the Company pursuant to any
applicable law or to file a complaint or to institute any proceeding at law or
in equity to cause the dissolution, liquidation, winding up or termination of
the Company.
22. Entire Agreement. This Agreement contains the entire understanding between
the parties and supersedes any prior understandings or agreements between them
respecting the within subject matter. There are no representations, agreements,
arrangements or understandings, oral or written, between the parties hereto
relating to the subject matter of this Agreement which are not fully expressed
herein.
23. Definitions. Whenever used in this Agreement the following terms shall have
the meanings respectively assigned to them in this Section 23 unless otherwise
expressly provided herein or unless the context otherwise requires:
Affiliate: shall mean any other Person that, directly or indirectly, is in
Control of, is Controlled by or is under common Control with such Person or is a
director or officer of such Person or of an Affiliate of such Person.
Agreement: shall mean this Fifth Amended and Restated Limited Liability Company
Agreement of the Company as the same may be amended or restated from time to
time in accordance with its terms.
Bankrupt Member: shall mean any member (a) that (i) makes an assignment for the
benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is
adjudged a bankrupt or insolvent, or has entered against such member an order
for relief, in any bankruptcy or insolvency proceeding; (iv) files a petition or
answer seeking for the member any reorganization, arrangement, composition,
readjustment, liquidation, or similar relief under any statute, law or
regulation; (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the member in any
proceeding of the type described in subclauses (i) through (iv) of this clause
(a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the member or of all or any substantial part of the
member’s properties; or (b) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
statute, law or regulation has been commenced and one hundred twenty (120) days
have expired without dismissal thereof or with respect to which, without the
member’s consent or acquiescence, a trustee, receiver or liquidator of the
member or of all or any substantial part of the member’s properties has been
appointed and ninety (90) days have expired without the appointment having been
vacated or stayed, or ninety (90) days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated. The foregoing is
intended to and shall supersede and replace the events of bankruptcy described
in Sections 18-304(a) and (b) of the Act.
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Company: shall mean Morgans Holdings LLC, the Delaware limited liability company
continued pursuant to the Act and this Agreement.
Control: shall mean with respect to any Person, either (i) ownership directly or
indirectly of forty-nine percent (49%) or more of all equity interests in such
Person or (ii) the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, by contract or otherwise.
Independent Director: shall mean a natural person selected by the Company and
reasonably satisfactory to Agent who shall not have been at the time of such
individual’s appointment as an Independent Director, and shall not have been at
any time during the preceding five years (i) a shareholder/partner/member of, or
an officer or employee of, the Company or any of its shareholders, subsidiaries
or Affiliates, (ii) a director (other than as an Independent Director) of any
shareholder, subsidiary or Affiliate of the Company, (iii) a customer of, or
supplier to, the Company or any of its shareholders, subsidiaries or Affiliates
(other than an individual provided by a business that provides independent
directors and corporate services in the ordinary course), (iv) a Person who
Controls any such shareholder, supplier or customer, or (v) a member of the
immediate family of any such shareholder/director/partner/member, officer,
employee, supplier or customer or of any director of the Company (other than as
an Independent Director), Notwithstanding the foregoing, an Independent Director
may serve in similar capacities for other “special purpose” corporations formed
by the Member or any affiliate thereof. The initial Independent Directors of the
Company shall be Kenneth J. Uva and Victor A. Duva.
Management Agreement: shall mean the agreement of the Independent Directors in
the form attached hereto as Schedule B. The Management Agreement shall be deemed
incorporated into, and a part of, this Agreement.
Managing Member: shall mean the Member and any successor Managing Member
appointed pursuant to this Agreement, each in its capacity as a managing member
of the Company.
Member: shall mean Morgans Group LLC and any Person hereafter admitted to the
Company as a member as provided in this Agreement, each in its capacity as a
member of the Company; provided, however, the term “Member” shall not include
the Special Members.
Membership Interest: shall mean the limited liability company interest of the
Member in the Company, including, without limitation, rights in the capital of
the Company, rights to receive distributions (liquidating or otherwise) and
allocations of profits and losses. The Member’s Membership Interest shall be
expressed as a percentage which shall equal the ratio that the value of the
Capital Contributions made by such Member bears to the Capital Contributions of
all members. The Member’s initial Membership Interest shall be one hundred
percent (100%).
Person: means any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unincorporated association, any other
person or entity, and any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
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24. Distributions. Distributions shall be made to the Members at the times and
in the aggregate amounts determined by the Managing Member. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not be
permitted to make a distribution to a member on account of its interest in the
Company if such distribution would violate Section 18-607 of the Act or any
other applicable law or the Loan Documents.
25. Uniform Commercial Code. (a) Each limited liability company interest in the
Company shall constitute a “security” within the meaning of, and governed by,
(i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15)
thereof) as in effect from time to time in the State of Delaware, and
(ii) Article 8 of the Uniform Commercial Code of any other applicable
jurisdiction that now or hereafter substantially includes the 1994 revisions to
Article 8 thereof as adopted by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws and approved by the American
Bar Association on February 14, 1995.
(b) The limited liability company interests in the Company shall be evidenced by
certificates. The Company may issue a new certificate of limited liability
company interest in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed.
(c) Notwithstanding any provision of this Agreement to the contrary, to the
extent that any provision of this Agreement is inconsistent with any
non-waivable provision of Article 8 of the Uniform Commercial Code as in effect
in the State of Delaware (6 Del. C. § 8-101, et seq.) (the “UCC”), such
provision of Article 8 of the UCC shall control.
26. Benefits of Agreement; No Third Party Rights. (a) None of the provisions of
this Agreement shall be for the benefit of or enforceable by any creditor of the
Company or by any creditor of the Member or a Special Member and (b) nothing in
this Agreement shall be deemed to create any right in any Person (other than
Covered Persons) not a party hereto, and this Agreement shall not be construed
in any respect to be a contract in whole or in part for the benefit of any third
Person.
27. Binding Agreement. Notwithstanding any other provision of this Agreement,
the Member agrees that this Agreement constitutes a legal, valid and binding
agreement of the Member, and is enforceable against the Member by the
Independent Directors, in accordance with its terms.
28. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Member has executed this Agreement effective as of the
date first above written.

                  MORGANS GROUP LLC
 
                By: Morgans Hotel Group Co.
 
           
 
  By:        
 
  Name:  
 
Richard Szymanski    
 
  Title:   Chief Financial Officer and Secretary    

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S-1

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Kenneth J. Uva    
 
      Independent Director    

Morgans Holdings LLC — Fifth Amended & Restated Operating Agreement

 

S-2

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Victor A. Duva    
 
      Independent Director    

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S-3

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Schedule A
Board of Directors
Morgans Group LLC
Kenneth J. Uva
Victor A. Duva
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Schedule B
Management Agreement
October 6, 2006
Morgans Holdings LLC
C/o Morgans Hotel Group LLC
475 Tenth Avenue
New York, New York 10018

  Re:   Management Agreement — Morgans Holdings LLC (the “Company”)

Ladies and Gentlemen:
For good and valuable consideration, each of the undersigned Persons, who have
been designated as Independent Directors of the Company, in accordance with the
Fourth Amended and Restated Limited Liability Company Agreement of the Company,
dated as of the date hereof, as it may be amended or restated from time to time
(the “LLC Agreement”), hereby agree as follows:
1. Each of the undersigned accepts such Person’s rights and authority as an
Independent Director under the LLC Agreement and agrees to perform and discharge
such Person’s duties and obligations as an Independent Director under the LLC
Agreement, and further agrees that such rights, authorities, duties and
obligations under the LLC Agreement shall continue until such Person’s successor
as an Independent Director is designated or until such Person’s resignation or
removal as an Independent Director in accordance with the LLC Agreement. Each of
the undersigned agrees and acknowledges that it has been designated as a
“manager” of the Company within the meaning of the Delaware Limited Liability
Company Act.
2. So long as any Obligation is outstanding, each of the undersigned agrees,
solely in its capacity as a creditor of the Company on account of any
indemnification or other payment owing to the undersigned by the Company, not to
acquiesce, petition or otherwise invoke or cause the Company to invoke the
process of any court or governmental authority for the purpose of commencing or
sustaining a case against the Company under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Company or any
substantial part of the property of the Company, or ordering the winding up or
liquidation of the affairs of the Company.
3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE
GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
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Initially capitalized terms used and not otherwise defined herein have the
meanings set forth in the LLC Agreement.
This Management Agreement may be executed in any number of counterparts, each of
which shall be deemed an original of this Management Agreement and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as
of the day and years first above written.

     
 
Victor A. Duva
   

[Signature Page to Management Agreement — 1]
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Kenneth J. Uva
   

[Signature Page to Management Agreement — 2]
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EXHIBIT B-2
Operating Agreement for Royalton, LLC
See attached.

 

 

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THE TRANSFER OF THE LIMITED LIABILITY COMPANY INTERESTS DESCRIBED IN
THIS AGREEMENT IS RESTRICTED AS DESCRIBED HEREIN.
FOURTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROYALTON, LLC
This Fourth Amended and Restated Limited Liability Company Agreement (this
“Agreement”) of ROYALTON, LLC, a Delaware limited liability company (the
“Company”), is adopted and entered into as of August     , 2009, by (i) Morgans
Group LLC, a Delaware limited liability company, as managing member (the
“Managing Member” or “Member”, and in the event an additional person or persons
shall become members, the term “Members” shall include such other persons who
shall become members of the Company in accordance with the terms of this
Agreement, provided, however, the term “Member” shall not include the “Special
Members” as hereinafter defined), and (ii) Kenneth J. Uva and Victor A. Duva, as
the Independent Directors, pursuant to and in accordance with the Delaware
Limited Liability Company Act, 6 Del. C. § 18-101 et seq. as amended from time
to time (the “Act”). Terms used in this Agreement which are not otherwise
defined shall have the respective meanings given those terms in the Act or in
Section 23 hereof.
WHEREAS, the Company was formed on March 20, 1996 pursuant to a Certificate of
Formation filed with the Secretary of State of the State of Delaware (as amended
or amended and restated from time to time, the “Certificate of Formation”); and
WHEREAS, the Member was admitted as the sole member of the Company when Morgans
Hotel Group LLC, a Delaware limited liability company (“MHG”), assigned its
limited liability company interest in the Company to Member pursuant to that
certain Assignment and Assumption of Limited Liability Company Interests, dated
as of August 13, 2004, between and MHG and the Member; and
WHEREAS, the Member continued the Company pursuant to that certain Amended and
Restated Limited Liability Company Agreement on August 13, 2004, as amended,
restated or modified through the date hereof, including on October 6, 2006 (as
so amended and restated, the “Original Agreement”); and
WHEREAS, the Member and the Independent Directors desire to amend and restate
the terms of the Original Agreement in the manner provided herein.
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The parties hereto hereby agree as follows:
1. Name; Formation. The name of the limited liability company is ROYALTON, LLC.
Susan E. Todd, as an authorized person within the meaning of the Act, executed,
delivered and filed the Certificate of Formation of the Company and the
Certificate of Amendment to the Certificate of Formation of the Company and such
filings are hereby ratified and approved. The Amended and Restated Certificate
of Formation of the Company was filed for record in the office of the Secretary
of State of the State of Delaware on May 20, 2004 in accordance with the Act, by
Marc Gordon and Mark Femicci, authorized persons within the meaning of the Act.
Upon the filing of the Amended and Restated Certificate of Formation with the
Secretary of State of the State of Delaware, their powers as “authorized
persons” ceased, and the Member thereupon became the designated “authorized
person” and shall continue as the designated “authorized person” within the
meaning of the Act. The Member, as an “authorized person”, within the meaning of
the Act, shall execute, deliver and file, or cause the execution, delivery and
filing of, all certificates (and any amendments and/or restatements thereof)
required or permitted by the Act to be filed with the Secretary of State of the
State of Delaware. The Member shall execute, deliver and file, or cause the
execution, delivery and filing of any certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in any
other jurisdiction in which the Company may wish to conduct business. The terms
and provisions of the Original Agreement are hereby amended and restated in
their entirety as set forth herein.
2. Term. The Company shall dissolve on December 31, 2048 unless dissolved before
such date in accordance with this Agreement. The existence of the Company as a
separate legal entity shall continue until cancellation of the Certificate of
Formation as provided in the Act.
3. Management; Board of Directors. Except as otherwise specifically provided in
this Agreement, the management of the Company shall be vested in the Managing
Member who shall manage the Company in accordance with the Act.
(a) Until “Full Payment” of the “Obligations” (as such terms are defined in the
Credit Agreement hereinafter defined), the Company shall have a board of
managers which shall be designated as the Company’s “Board of Directors” and
each member of the Board of Directors shall be designated as a “Director.” The
Board of Directors shall only have the authority expressly set forth in this
Agreement. The Directors are “managers” within the meaning of the Act with only
such duties and rights as are expressly set forth in this Agreement. The initial
members of the Board of Directors shall be set forth on Schedule A attached
hereto. Members of the Board of Directors may be appointed and removed from time
to time by the Managing Member, in its sole discretion, provided, however, that
until Full Payment of the Obligations, the Company shall have at least two
Independent Directors on the Board of Directors. The Board of Directors shall
hold meetings, at such times and places to be designated by the Managing Member.
(b) Intentionally omitted.
(c) Until Full Payment of the Obligations, the Company may take the following
actions only with approval of the Managing Member and unanimous approvals of all
members of the Board of Directors, including, without limitation, all of the
Independent Directors.
(i) make any assignment for the benefit of the Company’s creditors;
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(ii) file, or consent to or acquiesce in the filing of or a petition in, a
bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under laws relating to the
relief from debts or the protection of debtors generally;
(iii) seek or consent to or acquiesce in the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Company or for all or any portion of the Company’s properties;
(iv) admit in writing its inability to pay its debts generally as they become
due;
(v) take any action that might cause the Company to become insolvent;
(vi) except as permitted by Section 20, amend this Agreement;
(vii) to the fullest extent permitted by law, voluntarily dissolve and wind up,
or consolidate or merge the Company or sell all or substantially all of the
assets of the Company;
(viii) engage in any business activity not set forth in Section 5 of this
Agreement.
To the fullest extent permitted by applicable law, no member of the Board of
Directors shall be guilty of breaching any fiduciary duty to any Member by
refusing to consent to any of the above listed actions.
(d) Notwithstanding anything in this Agreement, to the fullest extent permitted
by law, until Full Payment of the Obligations, the Company may not take any of
the actions set forth in Subsection (vii) of Subparagraph (c) of this Section 3.
(e) To the fullest extent permitted by law, including Section 18-1101 (c) of the
Act, the Independent Directors shall consider only the interests of the Company,
including its respective creditors, in acting or otherwise voting on the matters
referred to in Section 3(c). No resignation or removal of an Independent
Director, and no appointment of a successor Independent Director, shall be
effective until such successor (i) shall have accepted his or her appointment as
an Independent Director by a written instrument, which may be a counterpart
signature page to the Management Agreement, and (ii) shall have executed a
counterpart to this Agreement as required by Section 8(a). In the event of a
vacancy in the position of Independent Director, the Managing Member shall, as
soon as practicable, appoint a successor Independent Director. All right, power
and authority of the Independent Directors shall be limited to the extent
necessary to exercise those rights and perform those duties specifically set
forth in this Agreement. Except as provided in the first sentence of this
Section 3(e), in exercising their rights and performing their duties under this
Agreement, any Independent Director shall have a fiduciary duty of loyalty and
care similar to that of a director of a business corporation organized under the
General Corporation Law of the State of Delaware. No Independent Director shall
at any time serve as trustee in bankruptcy for any Affiliate of the Company.
Each Independent Director shall execute and deliver the Management Agreement.
The Independent Directors designated by the Managing Member shall continue to be
Kenneth J. Uva and Victor A. Duva. Unless otherwise restricted by law, any
Independent Director may be removed or expelled, with or without cause, at any
time by the Managing Member, and, subject to this Section 3, any vacancy caused
by any such removal or expulsion may be filled by action of the Managing Member
provided that any replacement Independent Director fulfills the requirements of
being an Independent Director hereunder.
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4. Authority. Except as otherwise provided herein and subject to Section 3, the
management of the Company shall be vested solely in the Member, who shall have
all powers to control and manage the business and affairs of the Company and may
exercise all powers of the Company. Subject to Sections 3, 5 and 7, the Managing
Member is authorized to (i) execute any and all documents and agreements on
behalf of the Company, and to engage in all activities related thereto; and
(ii) execute any and all agreements, affidavits and indemnities necessary or
appropriate to effectuate any and all transactions of the Company. The Company,
by or through the Managing Member on behalf of the Company, may enter into and
perform the Loan Documents (as defined herein) and all documents, agreements,
certificates, or financing statements contemplated thereby or related thereto,
all without any further act, vote or approval of any other Person
notwithstanding any other provision of this Agreement, the Act or applicable
law, rule or regulation. The foregoing authorization shall not be deemed a
restriction on the powers of the Managing Member to enter into other agreements
on behalf of the Company, subject to Section 5 and Section 6.
5. Purpose. The purpose of the Company is solely to:
(a) acquire, own, hold, maintain, manage, operate, improve, develop, finance,
pledge, encumber, mortgage, sell, exchange, lease, dispose of and otherwise deal
with the property located at 44 West 44 Street, New York, New York and commonly
known as the Royalton Hotel and the related improvements thereon (the
“Property”), together with such other activities as may be necessary or
advisable in connection with the ownership of the Property in accordance with
the Loan Documents;
(b) borrow funds under and give security for and guarantee the loans and other
credit facilities provided pursuant to the Credit Agreement dated as of
October 6, 2006 among Morgans Group LLC (“Borrower”), Beach Hotel Associates,
LLC, Morgans Holdings LLC, Royalton, LLC, Morgans Hotel Group Co., Wachovia
Bank, National Association, as Administrative Agent (the “Agent”), Citigroup
Global Markets, Inc., as Syndication Agent, and certain other financial
institutions party thereto, as amended by First Amendment to Credit Agreement
dated as of November 10, 2006, Second Amendment to Credit Agreement dated as of
January 8, 2007, Third Amendment to Credit Agreement dated as of October 10,
2007, Fourth Amendment to Credit Agreement dated as of January 16, 2008, and
Fifth Amendment to Credit Agreement; and Waiver Agreement dated as of
August      , 2009, and as the same may be further amended, restated,
supplemented or otherwise modified from time to time (collectively, the “Credit
Agreement”), and the other “Loan Documents” as defined in the Credit Agreement;
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(c) give security for the Obligations under the Loan Documents or for any other
indebtedness to the extent not prohibited by the Loan Documents; and
(d) refinance the Obligations and grant security interests to secure same, to
the extent same is not a violation of the Loan Documents.
6. Company Business. The Company shall not engage in any business unrelated to
the ownership of the Property and shall not own any assets other than those
related to the Property or otherwise in furtherance of the purposes of the
Company. The Company shall not incur any indebtedness other than the
indebtedness under the Loan Documents, related to the Property or otherwise
provided herein or permitted under the Loan Documents.
7. Separateness Covenants. Notwithstanding anything to the contrary contained
herein (except the penultimate sentence of Section 4), for so long as any
portion of the Obligations is outstanding, the Company shall conduct its affairs
in accordance with the following provisions:
(a) It shall be a limited liability company organized solely for the purpose of
owning the Property.
(b) It shall not own any assets other than those related to the Property.
(c) To the fullest extent permitted by law, (i) it shall not engage in, seek or
consent to any dissolution, winding up, or liquidation, (ii) it shall not engage
in any consolidation, merger, or asset sale (except as permitted in the Loan
Documents or if there is Full Payment of the Obligations), (iii) it shall not
transfer any limited liability company interests in the Company (except as
expressly provided in the Loan Documents or with the written consent of the
Agent) and (iv) it shall not further amend this Agreement or the Certificate of
Formation (except as required by law).
(d) It shall remain solvent and maintain adequate capital in light of its
contemplated business operations, provided, however, the foregoing shall not
require the Member to make any additional capital contributions to the Company.
(e) It shall not fail to correct any known misunderstanding regarding the
separate identity of such entity.
(f) It shall maintain its accounts, books and records separate from any other
Person other than the Loan Parties (as defined in the Credit Agreement) and
shall file its own tax returns.
(g) It shall maintain its books, records, resolutions and agreements as official
records.
(h) It shall not commingle its funds or assets with those of any other Person
other than the Loan Parties.
(i) It shall hold its assets in its own name.
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(j) Intentionally omitted.
(k) It shall maintain its financial statements, accounting records and other
entity documents separate from any other Person, except that its financial
statements may be consolidated with those of Morgans Hotel Group Co. (the
“Parent”), other Loan Parties or their consolidated Subsidiaries.
(l) It shall pay its own liabilities, including the salaries of its own
employees, out of funds and assets of its own or of any Loan Party, provided,
however, the foregoing shall not require the Member to make any additional
capital contributions to the Company.
(m) It shall observe all limited liability company formalities.
(n) It shall maintain an arm’s-length relationship with its Affiliates to the
extent required by the Loan Documents.
(o) It shall have no indebtedness other than the Obligations and indebtedness
permitted under the Loan Documents, related to the Property or otherwise
provided herein.
(p) It shall not assume or guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person except for the obligations of the Loan Parties
or obligations under the Loan Documents.
(q) It shall not acquire obligations or securities of its members.
(r) It shall allocate fairly and reasonably shared expenses, including shared
office space.
(s) It shall not pledge its assets to secure obligations, other than in its
capacity as a co-borrower or guarantor under the Loan Documents or in connection
with providing security therefor.
(t) Intentionally omitted.
(u) It shall maintain its assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any other Person;
(v) It shall not make loans to any Person other than to any affiliate that is a
Loan Party to the extent permitted by the Credit Agreement.
(w) Intentionally omitted.
(x) It shall not enter into or be a party to, any transaction with its members
or Affiliates except as permitted pursuant to the Loan Documents.
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(y) Except as set forth in this Agreement, it shall have no obligation to
indemnify its partners, officers, directors or members, as the case may be,
unless such obligation is fully subordinated to the Obligations and will not
constitute a claim against it if cash flow in excess of the amount required to
pay the Debt is insufficient to pay such obligation.
(z) To the fullest extent permitted by law, it shall consider the interests of
its creditors in connection with all limited liability company actions.
(aa) It shall not engage in any business unrelated to the ownership of the
Property.
Failure to comply with any of the foregoing covenants shall not affect the
status of the Company as a separate legal entity.
This Section 7 is being adopted in order to comply with certain provisions
required in order to qualify the Company as a “special purpose” entity.
8. Members. The name and the business, residence or mailing address of the
Member is as follows:

      Name   Address
 
 
MORGANS GROUP LLC
  475 Tenth Avenue
 
  New York, New York 10018

(a) Notwithstanding any provision in this Agreement to the contrary, upon the
occurrence of any event that causes the Member to cease to be a member of the
Company (other than (x) upon an assignment by the Member of all of its limited
liability company interest in the Company and the admission of the transferee,
if permitted pursuant to Loan Documents or (y) the resignation of the Member and
the admission of an additional member of the Company pursuant to this Agreement,
if permitted by the Loan Documents), each Person acting as an Independent
Director shall, without any action of any Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the
Company as a member of the Company (the “Special Member”) and shall preserve and
continue the Company without dissolution. No Special Member may resign from the
Company or transfer its rights as Special Member unless (i) a successor Special
Member has been admitted to the Company as Special Member by executing a
counterpart to this Agreement, and (ii) such successor has also accepted its
appointment as Independent Director by executing a counterpart to the Agreement
and the Management Agreement; provided, however, the Special Members shall
automatically cease to be members of the Company upon the admission to the
Company of a substitute Member but shall not thereby cease to be Independent
Directors. Each Special Member shall be a member of the Company that has no
interest in the profits, losses and capital of the Company and has no right to
receive any distributions of Company assets. Pursuant to Section 18-301 of the
Act, a Special Member shall not be required to make any capital contributions to
the Company and shall not receive a limited liability company interest in the
Company. A Special Member, in its capacity as Special Member, may not bind the
Company. Except as required by any mandatory provision of the Act, each Special
Member, in its capacity as Special Member, shall have no right to vote on,
approve or otherwise consent to any action by, or matter relating to, the
Company, including, without limitation, the merger, consolidation or conversion
of the Company. In order to implement the future, contingent admission to the
Company of each Special Member, each Person acting as an Independent Director
shall execute a counterpart to this Agreement. Prior to its admission to the
Company as Special Member, each Person acting as an Independent Director shall
not be a member of the Company.
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9. Membership Interests. The Managing Member shall have and own 100% of the
Membership Interests.
10. Capital Contributions. Any Member may make one or more capital contributions
to the Company provided, however, any capital contribution will only be made
with the consent of the Member making such contribution.
11. Capital Accounts. The capital accounts of each Member shall be allocated in
accordance with their capital contributions and shall be maintained in
accordance with Section 704(b) of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder.
12. Admission of Additional Members by the Company. One or more additional
Members of the Company may be admitted to the Company with the unanimous vote or
written consent of all of the Members; provided, however, no additional Member
may be admitted to the Company as a Member of the Company, other than pursuant
to Sections 8(a) or 21(a), unless the Agent consents in writing.
13. Resignation of the Member. No Member may resign from the Company as a Member
of the Company unless a substitute Member or a transferee of such Member’s
interest is admitted as a Member of the Company in accordance with the terms
herein.
14. Assignments; Rights of Assignee To Become a Member. Until such time as Full
Payment of the Obligations has occurred, the Managing Member shall not, except
as expressly permitted by the Loan Documents, take any action to sell, transfer,
exchange, convey, encumber or dispose of any of its Membership Interest. Subject
to the foregoing sentence, if the Member transfers all of its limited liability
company interest in the Company pursuant to this Section 14, the transferee’s
admission shall be deemed effective immediately prior to the transfer and,
immediately following such admission, the transferor Member shall cease to be a
member of the Company. Any successor to the Member by merger or consolidation in
compliance with the Loan Documents shall, without further act, be the Member
hereunder, and such merger or consolidation shall not constitute an assignment
for purposes of this Agreement and the Company shall continue without
dissolution. Notwithstanding anything to the contrary contained herein, the
Member shall not, without the prior written consent of the Agent, issue and
shall not permit the issuance of any additional limited liability company
interests of the Company other than its initial issuance of limited liability
company interests issued on or prior to the date of this Agreement.
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15. Liability of Members. Except as otherwise expressly provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be the debts, obligations and liabilities solely of the
Company, and neither the Member nor the Special Members nor any Director shall
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Special Member or Director of the
Company.
16. Exculpation of Members. Neither the Member nor the Special Members nor any
officer, Director, employee or agent of the Company nor any employee,
representative, agent or Affiliate of the Member or the Special Members
(collectively, the “Covered Persons”) shall be liable to the Company or any
other Person who has an interest in or claim against the Company for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of the authority conferred on such
Covered Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered Persons
gross negligence or willful misconduct.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, all rights and remedies
being governed by said laws, without regard to principles of conflict of laws.
18. Indemnification. To the fullest extent permitted by applicable law and to
the extent permitted under this Agreement, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such
Covered Person by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered
Person by this Agreement, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person’s gross negligence or willful misconduct
with respect to such acts or omissions; provided, however, that any indemnity
under this Section 18 by the Company shall be provided out of and to the extent
of Company assets only, and the Member and the Special Members shall not have
personal liability on account thereof; and provided further, that so long as any
obligation imposed by the Loan Documents is outstanding, no indemnity payment
from funds of the Company (as distinct from funds from other sources, such as
insurance) of any indemnity under Section 18 shall be payable from amounts
allocable to any other Person pursuant to the Loan Documents.
19. Tax Characterization and Returns. It is the intention of the Member that the
Company be disregarded for federal and all relevant state tax purposes and that
the activities of the Company be deemed to be activities of the Member for such
purposes. All provisions of this Agreement are to be construed so as to preserve
that tax status. The Member is hereby authorized to file any necessary
elections, and shall be required to file any necessary tax returns, on behalf of
the Company with any such tax authorities.
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20. Amendments.
(a) Subject to Sections 7 and 20(b) below, Sections 3, 5, 6, 7, 8(a) and 20 of
this Agreement may only be amended with approval of the Managing Member and all
members of the Board of Directors, including, without limitation, the
Independent Directors.
(b) Notwithstanding Section 20(a), this Agreement shall not be amended except in
compliance with the Loan Documents until Full Payment of the Obligations.
21. Dissolution; Liquidation; Termination. (a) The Company shall be dissolved,
and its affairs shall be wound up upon the first to occur of the following:
(i) the termination of the legal existence of the last remaining member of the
Company or the occurrence of any other event which terminates the continued
membership of the last remaining member of the Company in the Company unless the
Company is continued without dissolution in a manner permitted by this Agreement
or the Act or (ii) the entry of a decree of judicial dissolution under
Section 18-802 of the Act. Upon the occurrence of any event that causes the last
remaining member of the Company to cease to be a member of the Company or that
causes the Member to cease to be a member of the Company (other than (x) upon an
assignment by Member of all of its limited liability company interest in the
Company and the admission of the transferee, if permitted pursuant to the Loan
Documents, or (y) the resignation of Member and the admission of an additional
member of the Company pursuant to this Agreement, if permitted pursuant to the
Loan Documents), to the fullest extent permitted by law, the personal
representative of such member is hereby authorized to, and shall, within 90 days
after the occurrence of the event that terminated the continued membership of
such member in the Company, agree in writing (i) to continue the Company and
(ii) to the admission of the personal representative or its nominee or designee,
as the case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership of such member
in the Company.
(b) Notwithstanding any other provision of this Agreement, the Member or a
Special Member becoming a Bankrupt Member shall not cause the Member or Special
Member, respectively, to cease to be a member of the Company and upon the
occurrence of such an event, the Company shall continue without dissolution.
(c) Notwithstanding any other provision of this Agreement, each of the Member
and the Special Members waives any right it might have to agree in writing to
dissolve the Company upon the Member or a Special Member becoming a Bankrupt
Member or the occurrence of an event that causes the Member or a Special Member
to cease to be a member of the Company,
(d) In the event of dissolution, the Company shall conduct only such activities
as are necessary to wind up its affairs (including the sale of the assets of the
Company in an orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-804 of the
Act.
(e) The Company shall terminate when (i) all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company shall have been distributed to the Member in the manner provided for in
this Agreement and (ii) the Certificate of Formation shall have been canceled in
the manner required by the Act.
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(f) To the fullest extent permitted by law, each of the Member and the Special
Members shall irrevocably waive any right or power that they might have to cause
the Company or any of its assets to be partitioned, to cause the appointment of
a receiver for all or any portion of the assets of the Company, to compel any
sale of all or any portion of the assets of the Company pursuant to any
applicable law or to file a complaint or to institute any proceeding at law or
in equity to cause the dissolution, liquidation, winding up or termination of
the Company.
22. Entire Agreement. This Agreement contains the entire understanding between
the parties and supersedes any prior understandings or agreements between them
respecting the within subject matter. There are no representations, agreements,
arrangements or understandings, oral or written, between the parties hereto
relating to the subject matter of this Agreement which are not fully expressed
herein.
23. Definitions: Whenever used in this Agreement the following terms shall have
the meanings respectively assigned to them in this Section 23 unless otherwise
expressly provided herein or unless the context otherwise requires:
Affiliate: shall mean any other Person that, directly or indirectly, is in
Control of, is Controlled by or is under common Control with such Person or is a
director or officer of such Person or of an Affiliate of such Person.
Agreement: shall mean this Fourth Amended and Restated Limited Liability Company
Agreement of the Company as the same may be amended or restated from time to
time in accordance with its terms.
Bankrupt Member: shall mean any member (a) that (i) makes an assignment for the
benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is
adjudged a bankrupt or insolvent, or has entered against such member an order
for relief, in any insolvency proceeding; (iv) files a petition or answer
seeking for the member any reorganization, arrangement, composition,
readjustment, liquidation, or similar relief under any statute, law or
regulation; (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the member in any
proceeding of the type described in subclauses (i) through (iv) of this clause
(a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the member or of all or any substantial part of the
member’s properties; or (b) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
statute, law or regulation has been commenced and one hundred twenty (120) days
have expired without dismissal thereof or with respect to which, without the
member’s consent or acquiescence, a trustee, receiver or liquidator of the
member or of all or any substantial part of the member’s properties has been
appointed and ninety (90) days have expired without the appointment having been
vacated or stayed, or ninety (90) days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated. The foregoing is
intended to and shall supersede and replace the events of bankruptcy described
in Sections 18-304(a) and (b) of the Act.
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Company: shall mean Royalton, LLC, the Delaware limited liability company
continued pursuant to the Act and this Agreement.
Control: shall mean with respect to any Person, either (i) ownership directly or
indirectly of forty-nine percent (49%) or more of all equity interests in such
Person or (ii) the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, by contract or otherwise.
Independent Director: shall mean a natural person selected by the Company and
reasonably satisfactory to Agent who shall not have been at the time of such
individual’s appointment as an Independent Director, and shall not have been at
any time during the preceding five years (i) a shareholder/partner/member of, or
an officer or employee of, the Company or any of its shareholders, subsidiaries
or Affiliates, (ii) a director (other than as an Independent Director) of any
shareholder, subsidiary or Affiliate of the Company, (iii) a customer of, or
supplier to, the Company or any of its shareholders, subsidiaries or Affiliates
(other than an individual provided by a business that provides independent
directors and corporate services in the ordinary course), (iv) a Person who
Controls any such shareholder, supplier or customer, or (v) a member of the
immediate family of any such shareholder/director/partner/member, officer,
employee, supplier or customer or of any director of the Company (other than as
an Independent Director). Notwithstanding the foregoing, an Independent Director
may serve in similar capacities for other “special purpose” corporations formed
by the Member or any affiliate thereof. The initial Independent Directors of the
Company shall be Kenneth J. Uva and Victor A. Duva.
Management Agreement: shall mean the agreement of the Independent Directors in
the form attached hereto as Schedule B. The Management Agreement shall be deemed
incorporated into, and a part of, this Agreement.
Managing Member: shall mean the Member and any successor Managing Member
appointed pursuant to this Agreement, each in its capacity as a managing member
of the Company.
Member: shall mean Morgans Group LLC and any Person hereafter admitted to the
Company as a member as provided in this Agreement, each in its capacity as a
member of the Company; provided, however, the term “Member” shall not include
the Special Members.
Membership Interest: shall mean the limited liability company interest of the
Member in the Company, including, without limitation, rights in the capital of
the Company, rights to receive distributions (liquidating or otherwise) and
allocations of profits and losses. The Member’s Membership Interest shall be
expressed as a percentage which shall equal the ratio that the value of the
Capital Contributions made by such Member bears to the Capital Contributions of
all members. The Member’s initial Membership Interest shall be one hundred
percent (100%).
Person: means any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unincorporated association, any other
person or entity, and any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
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24. Distributions. Distributions shall be made to the Members at the times and
in the aggregate amounts determined by the Managing Member. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not be
permitted to make a distribution to a member on account of its interest in the
Company if such distribution would violate Section 18-607 of the Act or any
other applicable law or the Loan Documents.
25. Uniform Commercial Code. (a) Each limited liability company interest in the
Company shall constitute a “security” within the meaning of, and governed by,
(i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15)
thereof) as in effect from time to time in the State of Delaware, and
(ii) Article 8 of the Uniform Commercial Code of any other applicable
jurisdiction that now or hereafter substantially includes the 1994 revisions to
Article 8 thereof as adopted by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws and approved by the American
Bar Association on February 14, 1995.
(b) The limited liability company interests in the Company shall be evidenced by
certificates. The Company may issue a new certificate of limited liability
company interest in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed.
(c) Notwithstanding any provision of this Agreement to the contrary, to the
extent that any provision of this Agreement is inconsistent with any
non-waivable provision of Article 8 of the Uniform Commercial Code as in effect
in the State of Delaware (6 Del. C. § 8-101, et seq.) (the “UCC”), such
provision of Article 8 of the UCC shall control.
26. Benefits of Agreement; No Third Party Rights. (a) None of the provisions of
this Agreement shall be for the benefit of or enforceable by any creditor of the
Company or by any creditor of the Member or a Special Member and (b) nothing in
this Agreement shall be deemed to create any right in any Person (other than
Covered Persons) not a party hereto, and this Agreement shall not be construed
in any respect to be a contract in whole or in part for the benefit of any third
Person.
27. Binding Agreement. Notwithstanding any other provision of this Agreement,
the Member agrees that this Agreement constitutes a legal, valid and binding
agreement of the Member, and is enforceable against the Member by the
Independent Directors, in accordance with its terms.
28. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Member has executed this Agreement effective as of the
date first above written.

                      MORGANS GROUP LLC    
 
                    By:   Morgans Hotel Group Co.    
 
               
 
  By:                          
 
      Name:   Richard Szymanski    
 
      Title:   Chief Financial Officer and Secretary    

Royalton, LLC — Fourth Amended & Restated Operating Agreement

 

S-1

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Kenneth J. Uva
Independent Director    

Royalton, LLC — Fourth Amended & Restated Operating Agreement

 

S-2

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Victor A. Duva
Independent Director    

Royalton, LLC — Fourth Amended & Restated Operating Agreement

 

S-3

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Schedule A
Board of Directors
Morgans Group LLC
Kenneth J. Uva
Victor A. Duva
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Schedule B
Management Agreement
October 6, 2006
Royalton, LLC
c/o Morgans Hotel Group LLC
475 Tenth Avenue
New York, New York 10018

  Re:   Management Agreement — Royalton, LLC (the “Company”)

Ladies and Gentlemen:
For good and valuable consideration, each of the undersigned Persons, who have
been designated as Independent Directors of the Company, in accordance with the
Third Amended and Restated Limited Liability Company Agreement of the Company,
dated as of the date hereof, as it may be amended or restated from time to time
(the “LLC Agreement”), hereby agree as follows:
1. Each of the undersigned accepts such Person’s rights and authority as an
Independent Director under the LLC Agreement and agrees to perform and discharge
such Person’s duties and obligations as an Independent Director under the LLC
Agreement, and further agrees that such rights, authorities, duties and
obligations under the LLC Agreement shall continue until such Person’s successor
as an Independent Director is designated or until such Person’s resignation or
removal as an Independent Director in accordance with the LLC Agreement. Each of
the undersigned agrees and acknowledges that it has been designated as a
“manager” of the Company within the meaning of the Delaware Limited Liability
Company Act.
2. So long as any Obligation is outstanding, each of the undersigned agrees,
solely in its capacity as a creditor of the Company on account of any
indemnification or other payment owing to the undersigned by the Company, not to
acquiesce, petition or otherwise invoke or cause the Company to invoke the
process of any court or governmental authority for the purpose of commencing or
sustaining a case against the Company under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Company or any
substantial part of the property of the Company, or ordering the winding up or
liquidation of the affairs of the Company.
3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE
GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

 

 

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Initially capitalized terms used and not otherwise defined herein have the
meanings set forth in the LLC Agreement.
This Management Agreement may be executed in any number of counterparts, each of
which shall be deemed an original of this Management Agreement and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as
of the day and year first above written.

     
 
Victor A. Duva
   

[Signature to Management Agreement — 1 ]
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Kenneth J. Uva
   

[Signature Page to Management Agreement — 2]
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EXHIBIT B-3
Operating Agreement for Beach Hotel Associates LLC
See attached.

 

 

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THE TRANSFER OF THE LIMITED LIABILITY COMPANY INTERESTS DESCRIBED IN THIS
AGREEMENT IS RESTRICTED AS DESCRIBED HEREIN.
FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY

AGREEMENT
OF
BEACH HOTEL ASSOCIATES LLC
This Fourth Amended and Restated Limited Liability Company Agreement (this
“Agreement’”) of BEACH HOTEL ASSOCIATES LLC, a Delaware limited liability
company (the “Company”), is adopted and entered into as of August ________,
2009, by (i) Morgans Group LLC, a Delaware limited liability company, as
managing member (the “Managing Member” or “Member”, and in the event an
additional person or persons shall become members, the term “Members” shall
include such other persons who shall become members of the Company in accordance
with the terms of this Agreement, provided, however, the term “Member” shall not
include the “Special Members” as hereinafter defined), and (ii) Kenneth J. Uva
and Victor A. Duva, as the Independent Directors, pursuant to and in accordance
with the Delaware Limited Liability Company Act, 6 Del, C. § 18-101 et seq, as
amended from time to time (the “Act”). Terms used in this Agreement which are
not otherwise defined shall have the respective meanings given those terms in
the Act or in Section 23 hereof.
WHEREAS, the Company was formed on August 13, 2004 pursuant to a Certificate of
Formation filed with the Secretary of State of the State of Delaware (as amended
or amended and restated from time to time, the “Certificate of Formation”) and
at the time of the Company’s formation its sole member was Morgans Hotel Group
LLC (“MHG”) a Delaware limited liability company; and
WHEREAS, MHG assigned its limited liability company interest in the Company to
Managing Member pursuant to that certain Assignment and Assumption of Limited
Liability Company Interests, dated as of August 13, 2004, between MHG and the
Member, and
WHEREAS, the Member continued the Company pursuant to that certain Amended and
Restated Limited Liability Company Agreement on August 13, 2004, as amended,
restated or otherwise modified through the date hereof, including on October 6,
2006 (as so amended and restated, the “Original Agreement”); and
WHEREAS, the Member and the Independent Directors desire to amend and restate
the terms of the Original Agreement in the manner provided herein.
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The parties hereto hereby agree as follows:
1. Name; Formation. The name of the limited liability company is BEACH HOTEL
ASSOCIATES LLC. The Certificate of Formation of the Company was filed for record
in the office of the Secretary of State of the State of Delaware on August 13,
2004, in accordance with the Act, by Deborah Reusch, an authorized person within
the meaning of the Act. Upon the filing of the Certificate of Formation with the
Secretary of State of the State of Delaware, her powers as an “authorized
person” ceased, and the Member thereupon became the designated “authorized
person” and shall continue as the designated “authorized person” within the
meaning of the Act. The Member, as an authorized person, within the meaning of
the Act, shall execute, deliver and file, or cause the execution, delivery and
filing of, all certificates (and any amendments and/or restatements thereof)
required or permitted by the Act to be filed with the Secretary of State of the
State of Delaware. The Member shall execute, deliver and file, or cause the
execution, delivery and filing of any certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in any
other jurisdiction in which the Company may wish to conduct business. The terms
and provisions of the Original Agreement are hereby amended and restated in
their entirety as set forth herein.
2. Term. The Company shall dissolve on December 31, 2048 unless dissolved before
such date in accordance with this Agreement. The existence of the Company as a
separate legal entity shall continue until cancellation of the Certificate of
Formation as provided in the Act.
3. Management; Board of Directors. Except as otherwise specifically provided in
this Agreement, the management of the Company shall be vested in the Managing
Member who shall manage the Company in accordance with the Act.
(a) Until “Full Payment” of the “Obligations” (as such terms are defined in the
Credit Agreement hereinafter defined), the Company shall have a board of
managers which shall be designated as the Company’s “Board of Directors” and
each member of the Board of Directors shall be designated as a “Director.” The
Board of Directors shall only have the authority expressly set forth in this
Agreement. The Directors are “managers” within the meaning of the Act with only
such duties and rights as are expressly set forth in this Agreement. The initial
members of the Board of Directors shall be set forth on Schedule A attached
hereto. Members of the Board of Directors may be appointed and removed from time
to time by the Managing Member, in its sole discretion, provided, however, that
until Full Payment of the Obligations, the Company shall have at least two
Independent Directors on the Board of Directors. The Board of Directors shall
hold meetings, at such times and places to be designated by the Managing Member.
(b) Intentionally omitted.
(c) Until Full Payment of the Obligations, the Company may take the following
actions only with approval of the Managing Member and unanimous approvals of all
members of the Board of Directors, including, without limitation, all of the
Independent Directors.
(i) make any assignment for the benefit of the Company’s creditors;
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(ii) file, or consent to or acquiesce in the filing of or a petition in, a
bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under laws relating to the
relief from debts or the protection of debtors generally;
(iii) seek or consent to or acquiesce in the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Company or for all or any portion of the Company’s properties;
(iv) admit in writing its inability to pay its debts generally as they become
due;
(v) take any action that might cause the Company to become insolvent;
(vi) except as permitted by Section 20, amend this Agreement;
(vii) to the fullest extent permitted by law, voluntarily dissolve and wind up,
or consolidate or merge the Company or sell all or substantially all of the
assets of the Company;
(viii) engage in any business activity not set forth in Section 5 of this
Agreement.
To the fullest extent permitted by applicable law, no member of the Board of
Directors shall be guilty of breaching any fiduciary duty to any Member by
refusing to consent to any of the above listed actions.
(d) Notwithstanding anything in this Agreement, to the fullest extent permitted
by law, until Full Payment of the Obligations, the Company may not take any of
the actions set forth in Subsection (vii) of Subparagraph (c) of this Section 3.
(e) To the fullest extent permitted by law, including Section 18-1101(c) of the
Act, the Independent Directors shall consider only the interests of the Company,
including its respective creditors, in acting or otherwise voting on the matters
referred to in Section 3(c). No resignation or removal of an Independent
Director, and no appointment of a successor Independent Director, shall be
effective until such successor (i) shall have accepted his or her appointment as
an Independent Director by a written instrument, which may be a counterpart
signature page to the Management Agreement, and (ii) shall have executed a
counterpart to this Agreement as required by Section 8(a). In the event of a
vacancy in the position of Independent Director, the Managing Member shall, as
soon as practicable, appoint a successor Independent Director. All right, power
and authority of the Independent Directors shall be limited to the extent
necessary to exercise those rights and perform those duties specifically set
forth in this Agreement. Except as provided in the first sentence of this
Section 3(e), in exercising their rights and performing their duties under this
Agreement, any Independent Director shall have a fiduciary duty of loyalty and
care similar to that of a director of a business corporation organized under the
General Corporation Law of the State of Delaware. No Independent Director shall
at any time serve as trustee in bankruptcy for any Affiliate of the Company.
Each Independent Director shall execute and deliver the Management Agreement.
The Independent Directors designated by the Managing Member shall continue to be
Kenneth J. Uva and Victor A. Duva. Unless otherwise restricted by law, any
Independent Director may be removed or expelled, with or without cause, at any
time by the Managing Member, and, subject to this Section 3, any vacancy caused
by any such removal or expulsion may be filled by action of the Managing Member
provided that any replacement Independent Director fulfills the requirements of
being an Independent Director hereunder.
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4. Authority. Except as otherwise provided herein and subject to Section 3, the
management of the Company shall be vested solely in the Member, who shall have
all powers to control and manage the business and affairs of the Company and may
exercise all powers of the Company. Subject to Sections 3, 5 and 7, the Managing
Member is authorized to (i) execute any and all documents and agreements on
behalf of the Company, and to engage in all activities related thereto; and
(ii) execute any and all agreements, affidavits and indemnities necessary or
appropriate to effectuate any and all transactions of the Company. The Company,
by or through the Managing Member on behalf of the Company, may enter into and
perform the Loan Documents (as defined herein) and all documents, agreements,
certificates, or financing statements contemplated thereby or related thereto,
all without any further act, vote or approval of any other Person
notwithstanding any other provision of this Agreement, the Act or applicable
law, rule or regulation. The foregoing authorization shall not be deemed a
restriction on the powers of the Managing Member to enter into other agreements
on behalf of the Company, subject to Section 5 and Section 6.
5. Purpose. The purpose of the Company is solely to:
(a) acquire, own, hold, maintain, manage, operate, improve, develop, finance,
pledge, encumber, mortgage, sell, exchange, lease, dispose of and otherwise deal
with the property located at 1685 Collins Avenue, Miami Beach, Florida and
commonly known as The Delano Hotel and the related improvements thereon (the
“Property”), together with such other activities as may be necessary or
advisable in connection with the ownership of the Property in accordance with
the Loan Documents;
(b) borrow funds under and give security for and guarantee the loans and other
credit facilities provided pursuant to the Credit Agreement dated as of
October 6, 2006 among Morgans Group LLC (“Borrower”). Beach Hotel Associates,
LLC, Morgans Holdings LLC, Royalton LLC, Morgans Hotel Group Co., Wachovia Bank,
National Association, as Administrative Agent (the “Agent”). Citigroup Global
Markets, Inc., as Syndication Agent, and certain other financial institutions
party thereto, as amended by First Amendment to Credit Agreement dated as of
November 10, 2006, Second Amendment to Credit Agreement dated as of January 8,
2007, Third Amendment to Credit Agreement dated as of October 10, 2007, Fourth
Amendment to Credit Agreement dated as of January 16, 2008, and Fifth Amendment
to Credit Agreement; and Waiver Agreement dated as of August     , 2009, and as
the same may be further amended, restated, supplemented, or otherwise modified
from time to time (collectively, the “Credit Agreement”), and the other “Loan
Documents” as defined in the Credit Agreement;
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(c) give security for the Obligations under the Loan Documents or for any other
indebtedness to the extent not prohibited by the Loan Documents; and
(d) refinance the Obligations and grant security interests to secure same, to
the extent same is not a violation of the Loan Documents.
6. Company Business. The Company shall not engage in any business unrelated to
the ownership of the Property and shall not own any assets other than those
related to the Property or otherwise in furtherance of the purposes of the
Company. The Company shall not incur any indebtedness other than the
indebtedness under the Loan Documents, related to the Property or otherwise
provided herein or permitted under the Loan Documents.
7. Separateness Covenants. Notwithstanding anything to the contrary contained
herein (except the penultimate sentence of Section 4), for so long as any
portion of the Obligations is outstanding, the Company shall conduct its affairs
in accordance with the
following provisions:
(a) It shall be a limited liability company organized solely for the purpose of
owning the Property.
(b) It shall not own any assets other than those related to the Property.
(c) To the fullest extent permitted by law, (i) it shall not engage in, seek or
consent to any dissolution, winding up, or liquidation, (ii) it shall not engage
in any consolidation, merger, or asset sale (except as permitted in the Loan
Documents or if there is Full Payment of the Obligations), (iii) it shall not
transfer any limited liability company interests in the Company (except as
expressly provided in the Loan Documents or with the written consent of the
Agent) and (iv) it shall not further amend this Agreement or the Certificate of
Formation (except as required by law).
(d) It shall remain solvent and maintain adequate capital in light of its
contemplated business operations, provided, however, the foregoing shall not
require the Member to make any additional capital contributions to the Company.
(e) It shall not fail to correct any known misunderstanding regarding the
separate identity of such entity.
(f) It shall maintain its accounts, books and records separate from any other
Person other than the Loan Parties (as defined in the Credit Agreement) and
shall file its own tax returns.
(g) It shall maintain its books, records, resolutions and agreements as official
records.
(h) It shall not commingle its funds or assets with those of any other Person
other than the Loan Parties.
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(i) It shall hold its assets in its own name.
(j) Intentionally omitted.
(k) It shall maintain its financial statements, accounting records and other
entity documents separate from any other Person, except that its financial
statements may be consolidated with those of Morgans Hotel Group Co. (the
“Parent”), other Loan Parties or their consolidated Subsidiaries.
(l) It shall pay its own liabilities, including the salaries of its own
employees, out of funds and assets of its own or of any Loan Party, provided,
however, the foregoing shall not require the Member to make any additional
capital contributions to the Company.
(m) It shall observe all limited liability company formalities.
(n) It shall maintain an arm’s-length relationship with its Affiliates to the
extent required by the Loan Documents.
(o) It shall have no indebtedness other than the Obligations and indebtedness
permitted under the Loan Documents, related to the Property or otherwise
provided herein.
(p) It shall not assume or guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person except for the obligations of the Loan Parties
or obligations under the Loan Documents.
(q) It shall not acquire obligations or securities of its members.
(r) It shall allocate fairly and reasonably shared expenses, including shared
office space.
(s) It shall not pledge its assets to secure obligations, other than in its
capacity as a co-borrower or guarantor under the Loan Documents or in connection
with providing security therefor.
(t) Intentionally omitted.
(u) It shall maintain its assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any other Person;
(v) It shall not make loans to any Person other than to any affiliate that is a
Loan Party to the extent permitted by the Credit Agreement.
(w) Intentionally omitted.
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(x) It shall not enter into or be a party to, any transaction with its members
or Affiliates except as permitted pursuant to the Loan Documents.
(y) Except as set forth in this Agreement, it shall have no obligation to
indemnify its partners, officers, directors or members, as the case may be,
unless such obligation is fully subordinated to the Obligations and will not
constitute a claim against it if cash flow in excess of the amount required to
pay the Debt is insufficient to pay such obligation.
(z) To the fullest extent permitted by law, it shall consider the interests of
its creditors in connection with all limited liability company actions.
(aa) It shall not engage in any business unrelated to the ownership of the
Property.
Failure to comply with any of the foregoing covenants shall not affect the
status of the Company as a separate legal entity.
This Section 7 is being adopted in order to comply with certain provisions
required in order to qualify the Company as a “special purpose” entity.
8. Members. The name and the business, residence or mailing address of the
Member is as follows:

      Name   Address       MORGANS GROUP LLC   475 Tenth Avenue
New York, New York 10018

(a) Notwithstanding any provision in this Agreement to the contrary, upon the
occurrence of any event that causes the Member to cease to be a member of the
Company (other than (x) upon an assignment by the Member of all of its limited
liability company interest in the Company and the admission of the transferee,
if permitted pursuant to Loan Documents or (y) the resignation of the Member and
the admission of an additional member of the Company pursuant to this Agreement,
if permitted by the Loan Documents), each Person acting as an Independent
Director shall, without any action of any Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the
Company as a member of the Company (the “Special Member”) and shall preserve and
continue the Company without dissolution. No Special Member may resign from the
Company or transfer its rights as Special Member unless (i) a successor Special
Member has been admitted to the Company as Special Member by executing a
counterpart to this Agreement, and (ii) such successor has also accepted its
appointment as Independent Director by executing a counterpart to the Agreement
and the Management Agreement; provided, however, the Special Members shall
automatically cease to be members of the Company upon the admission to the
Company of a substitute Member but shall not thereby cease to be Independent
Directors. Each Special Member shall be a member of the Company that has no
interest in the profits, losses and capital of the Company and has no right to
receive any distributions of Company assets.
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Pursuant to Section 18-301 of the Act, a Special Member shall not be required to
make any capital contributions to the Company and shall not receive a limited
liability company interest in the Company. A Special Member, in its capacity as
Special Member, may not bind the Company. Except as required by any mandatory
provision of the Act, each Special Member, in its capacity as Special Member,
shall have no right to vote on, approve or otherwise consent to any action by,
or matter relating to, the Company, including, without limitation, the merger,
consolidation or conversion of the Company. In order to implement the future,
contingent admission to the Company of each Special Member, each Person acting
as an Independent Director shall execute a counterpart to this Agreement. Prior
to its admission to the Company as Special Member, each Person acting as an
Independent Director shall not be a member of the Company.
9. Membership Interests. The Managing Member shall have and own 100% of the
Membership Interests.
10. Capital Contributions. Any Member may make one or more capital contributions
to the Company provided, however, any capital contribution will only be made
with the consent of the Member making such contribution.
11. Capital Accounts. The capital accounts of each Member shall be allocated in
accordance with their capital contributions and shall be maintained in
accordance with Section 704(b) of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder.
12. Admission of Additional Members by the Company. One or more additional
Members of the Company may be admitted to the Company with the unanimous vote or
written consent of all of the Members; provided, however, no additional Member
may be admitted to the Company as a Member of the Company, other than pursuant
to Sections 8(a) or 21(a), unless the Agent consents in writing.
13. Resignation of the Member. No Member may resign from the Company as a Member
of the Company unless a substitute Member or a transferee of such Member’s
interest is admitted as a Member of the Company in accordance with the terms
herein.
14. Assignments; Rights of Assignee To Become a Member. Until such time as Full
Payment of the Obligations has occurred, the Managing Member shall not, except
as expressly permitted by the Loan Documents, take any action to sell, transfer,
exchange, convey, encumber or dispose of any of its Membership Interest. Subject
to the foregoing sentence, if the Member transfers all of its limited liability
company interest in the Company pursuant to this Section 14, the transferee’s
admission shall be deemed effective immediately prior to the transfer and,
immediately following such admission, the transferor Member shall cease to be a
member of the Company. Any successor to the Member by merger or consolidation in
compliance with the Loan Documents shall, without further act, be the Member
hereunder, and such merger or consolidation shall not constitute an assignment
for purposes of this Agreement and the Company shall continue without
dissolution. Notwithstanding anything to the contrary contained herein, the
Member shall not, without the prior written consent of the Agent, issue and
shall not permit the issuance of any additional limited liability company
interests of the Company other than its initial issuance of limited liability
company interests issued on or prior to the date of this Agreement.
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15. Liability of Members. Except as otherwise expressly provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be the debts, obligations and liabilities solely of the
Company, and neither the Member nor the Special Members nor any Director shall
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Special Member or Director of the
Company.
16. Exculpation of Members. Neither the Member nor the Special Members nor any
officer, Director, employee or agent of the Company nor any employee,
representative, agent or Affiliate of the Member or the Special Members
(collectively, the “Covered Persons”) shall be liable to the Company or any
other Person who has an interest in or claim against the Company for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of the authority conferred on such
Covered Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered Persons
gross negligence or willful misconduct.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, all rights and remedies
being governed by said laws, without regard to principles of conflict of laws.
18. Indemnification. To the fullest extent permitted by applicable law and to
the extent permitted under this Agreement, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such
Covered Person by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered
Person by this Agreement, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person’s gross negligence or willful misconduct
with respect to such acts or omissions; provided, however, that any indemnity
under this Section 18 by the Company shall be provided out of and to the extent
of Company assets only, and the Member and the Special Members shall not have
personal liability on account thereof; and provided further, that so long as any
obligation imposed by the Loan Documents is outstanding, no indemnity payment
from funds of the Company (as distinct from funds from other sources, such as
insurance) of any indemnity under Section 18 shall be payable from amounts
allocable to any other Person pursuant to the Loan Documents.
19. Tax Characterization and Returns. It is the intention of the Member that the
Company be disregarded for federal and all relevant state tax purposes and that
the activities of the Company be deemed to be activities of the Member for such
purposes. All provisions of this Agreement are to be construed so as to preserve
that tax status. The Member is hereby authorized to file any necessary
elections, and shall be required to file any necessary tax returns, on behalf of
the Company with any such tax authorities.
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20. Amendments.
(a) Subject to Sections 7 and 20(b) below, Sections 3, 5, 6, 7, 8(a) and 20 of
this Agreement may only be amended with approval of the Managing Member and all
members of the Board of Directors, including, without limitation, the
Independent Directors.
(b) Notwithstanding Section 20(a), this Agreement shall not be amended except in
compliance with the Loan Documents until Full Payment of the Obligations.
21. Dissolution; Liquidation; Termination. (a) The Company shall be dissolved,
and its affairs shall be wound up upon the first to occur of the following: (i)
the termination of the legal existence of the last remaining member of the
Company or the occurrence of any other event which terminates the continued
membership of the last remaining member of the Company in the Company unless the
Company is continued without dissolution in a manner permitted by this Agreement
or the Act or (ii) the entry of a decree of judicial dissolution under
Section 18-802 of the Act. Upon the occurrence of any event that causes the last
remaining member of the Company to cease to be a member of the Company or that
causes the Member to cease to be a member of the Company (other than (x) upon an
assignment by Member of all of its limited liability company interest in the
Company and the admission of the transferee, if permitted pursuant to the Loan
Documents, or (y) the resignation of Member and the admission of an additional
member of the Company pursuant to this Agreement, if permitted pursuant to the
Loan Documents), to the fullest extent permitted by law, the personal
representative of such member is hereby authorized to, and shall, within 90 days
after the occurrence of the event that terminated the continued membership of
such member in the Company, agree in writing (i) to continue the Company and
(ii) to the admission of the personal representative or its nominee or designee,
as the case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership of such member
in the Company.
(b) Notwithstanding any other provision of this Agreement, the Member or a
Special Member becoming a Bankrupt Member shall not cause the Member or Special
Member, respectively, to cease to be a member of the Company and upon the
occurrence of such an event, the Company shall continue without dissolution.
(c) Notwithstanding any other provision of this Agreement, each of the Member
and Special Members waives any right it might have to agree in writing to
dissolve the Company upon the Member or a Special Member becoming a Bankrupt
Member or the occurrence of an event that causes the Member or a Special Member
to cease to be a member of the Company.
(d) In the event of dissolution, the Company shall conduct only such activities
as are necessary to wind up its affairs (including the sale of the assets of the
Company in an orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-804 of the
Act.
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(e) The Company shall terminate when (i) all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company shall have been distributed to the Member in the manner provided for in
this Agreement and (ii) the Certificate of Formation shall have been canceled in
the manner required by the Act.
(f) To the fullest extent permitted by law, each of the Member and the Special
Members shall irrevocably waive any right or power that they might have to cause
the Company or any of its assets to be partitioned, to cause the appointment of
a receiver for all or any portion of the assets of the Company, to compel any
sale of all or any portion of the assets of the Company pursuant to any
applicable law or to file a complaint or to institute any proceeding at law or
in equity to cause the dissolution, liquidation, winding up or termination of
the Company,
22. Entire Agreement. This Agreement contains the entire understanding between
the parties and supersedes any prior understandings or agreements between them
respecting the within subject matter. There are no representations, agreements,
arrangements or understandings, oral or written, between the parties hereto
relating to the subject matter of this Agreement which are not fully expressed
herein.
23. Definitions. Whenever used in this Agreement the following terms shall have
the meanings respectively assigned to them in this Section 23 unless otherwise
expressly provided herein or unless the context otherwise requires:
Affiliate: shall mean any other Person that, directly or indirectly, is in
Control of, is Controlled by or is under common Control with such Person or is a
director or officer of such Person or of an Affiliate of such Person.
Agreement: shall mean this Fourth Amended and Restated Limited Liability Company
Agreement of the Company as the same may be amended or restated from time to
time in accordance with its terms.
Control: shall mean with respect to any Person, either (i) ownership directly or
indirectly of forty-nine percent (49%) or more of all equity interests in such
Person or (ii) the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, by contract or otherwise.
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Bankrupt Member: shall mean any member (a) that (i) makes an assignment for the
benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is
adjudged a bankrupt or insolvent, or has entered against such member an order
for relief, in any bankruptcy or insolvency proceeding; (iv) files a petition or
answer seeking for the member any reorganization, arrangement, composition,
readjustment, liquidation, or similar relief under any statute, law or
regulation; (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the member in any
proceeding of the type described in subclauses (i) through (iv) of this clause
(a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the member or of all or any substantial part of the
member’s properties; or (b) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
statute, law or regulation has been commenced and one hundred twenty (120) days
have expired without dismissal thereof or with respect to which, without the
member’s consent or acquiescence, a trustee, receiver or liquidator of the
member or of all or any substantial part of the member’s properties has been
appointed and ninety (90) days have expired without the appointment having been
vacated or stayed, or ninety (90) days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated. The foregoing is
intended to and shall supersede and replace the events of bankruptcy described
in Sections 18-304(a) and (b) of the Act.
Company: shall mean Beach Hotel Associates LLC, the Delaware limited liability
company continued pursuant to the Act and this Agreement.
Independent Director: shall mean a natural person selected by the Company and
reasonably satisfactory to Agent who shall not have been at the time of such
individual’s appointment as an Independent Director, and shall not have been at
any time during the preceding five years (i) a shareholder/partner/member of, or
an officer or employee of, the Company or any of its shareholders, subsidiaries
or Affiliates, (ii) a director (other than as an Independent Director) of any
shareholder, subsidiary or Affiliate of the Company, (iii) a customer of, or
supplier to, the Company or any of its shareholders, subsidiaries or Affiliates
(other than an individual provided by a business that provides independent
directors and corporate services in the ordinary course), (iv) a Person who
Controls any such shareholder, supplier or customer, or (v) a member of the
immediate family of any such shareholder) director/partner/member, officer,
employee, supplier or customer or of any director of the Company (other than as
an Independent Director). Notwithstanding the foregoing, an Independent Director
may serve in similar capacities for other “special purpose” corporations formed
by the Member or any affiliate thereof. The initial Independent Directors of the
Company shall be Kenneth J. Uva and Victor A. Duva.
Management Agreement: shall mean the agreement of the Independent Directors in
the form attached hereto as Schedule B. The Management Agreement shall be deemed
incorporated into, and a part of, this Agreement.
Managing Member: shall mean the Member and any successor Managing Member
appointed pursuant to this Agreement, each in its capacity as a managing member
of the Company.
Member: shall mean Morgans Group LLC and any Person hereafter admitted to the
Company as a member as provided in this Agreement, each in its capacity as a
member of the Company; provided, however, the term “Member” shall not include
the Special Members.
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Membership Interest: shall mean the limited liability company interest of the
Member in the Company, including, without limitation, rights in the capital of
the Company, rights to receive distributions (liquidating or otherwise) and
allocations of profits and losses. The Member’s Membership Interest shall be
expressed as a percentage which shall equal the ratio that the value of the
Capital Contributions made by such Member bears to the Capital Contributions of
all members. The Member’s initial Membership Interest shall be one hundred
percent (100%).
Person: means any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unincorporated association, any other
person or entity, and any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
24. Distributions. Distributions shall be made to the Members at the times and
in the aggregate amounts determined by the Managing Member. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not be
permitted to make a distribution to a member on account of its interest in the
Company if such distribution would violate Section 18-607 of the Act or any
other applicable law or the Loan Documents.
25. Uniform Commercial Code. The limited liability company interests in the
Company shall not be evidenced by certificates. The Company shall maintain books
for the purpose of registering the transfer of limited liability company
interests, and, upon any transfer of limited liability company interests in the
Company, the Company shall notify the registered owner of any applicable
restrictions on the transfer of limited liability company interests.
26. Benefits of Agreement; No Third Party Rights. (a) None of the provisions of
this Agreement shall be for the benefit of or enforceable by any creditor of the
Company or by any creditor of the Member or a Special Member and (b) nothing in
this Agreement shall be deemed to create any right in any Person (other than
Covered Persons) not a party hereto, and this Agreement shall not be construed
in any respect to be a contract in whole or in part for the benefit of any third
Person.
27. Binding Agreement. Notwithstanding any other provision of this Agreement,
the Member agrees that this Agreement constitutes a legal, valid and binding
agreement of the Member, and is enforceable against the Member by the
Independent Directors, in accordance with its terms.
28. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Member has executed this Agreement effective as of the
date first above written.

            MORGANS GROUP LLC

By: Morgans Hotel Group Co.
      By:           Name:   Richard Szymanski         Title:   Chief Financial
Officer and Secretary     

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Kenneth J. Uva    
 
  Independent Director    

Beach Hotel Associates LLC — Fourth Amended & Restated Operating Agreement

 

S-2

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Victor A. Duva    
 
  Independent Director    

Beach Hotel Associates LLC — Fourth Amended & Restated Operating Agreement

 

S-3

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Schedule A
Board of Directors
Morgans Group LLC
Kenneth J. Uva
Victor A. Duva
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Schedule B
Management Agreement
October 6, 2006
Beach Hotel Associates LLC
c/o Morgans Hotel Group LLC
475 Tenth Avenue
New York, New York 10018

         
 
  Re:   Management Agreement — Beach Hotel Associates LLC (the “Company”)

Ladies and Gentlemen:
For good and valuable consideration, each of the undersigned Persons, who have
been designated as Independent Directors of the Company, in accordance with the
Fourth Amended and Restated Limited Liability Company Agreement of the Company,
dated as of the date hereof, as it may be amended or restated from time to time
(the “LLC Agreement”), hereby agree as follows:
1. Each of the undersigned accepts such Person’s rights and authority as an
Independent Director under the LLC Agreement and agrees to perform and discharge
such Person’s duties and obligations as an Independent Director under the LLC
Agreement, and further agrees that such rights, authorities, duties and
obligations under the LLC Agreement shall continue until such Person’s successor
as an Independent Director is designated or until such Person’s resignation or
removal as an Independent Director in accordance with the LLC Agreement. Each of
the undersigned agrees and acknowledges that it has been designated as a
“manager” of the Company within the meaning of the Delaware Limited Liability
Company Act.
2. So long as any Obligation is outstanding, each of the undersigned agrees,
solely in its capacity as a creditor of the Company on account of any
indemnification or other payment owing to the undersigned by the Company, not to
acquiesce, petition or otherwise invoke or cause the Company to invoke the
process of any court or governmental authority for the purpose of commencing or
sustaining a case against the Company under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Company or any
substantial part of the property of the Company, or ordering the winding up or
liquidation of the affairs of the Company.
3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE
GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
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Initially capitalized terms used and not otherwise defined herein have the
meanings set forth in the LLC Agreement.
This Management Agreement may be executed in any number of counterparts, each of
which shall be deemed an original of this Management Agreement and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as
of the day and year first above written.

     
 
Victor A. Duva
   

[Signature Page to Management Agreement — 1]
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Kenneth J. Uva
   

[Signature Page to Management Agreement — 2]
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EXHIBIT B-4

Operating Agreement for Morgans/Delano Pledgor LLC
See attached.

 

 

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THE TRANSFER OF THE LIMITED LIABILITY COMPANY INTERESTS DESCRIBED IN
THIS AGREEMENT IS RESTRICTED AS DESCRIBED HEREIN,
THIRD AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
MORGANS/DELANO PLEDGOR LLC
This Third Amended and Restated Limited Liability Company Agreement (this
“Agreement”) of MORGANS/DELANO PLEDGOR LLC, a Delaware limited liability company
(the “Company”), is adopted and entered into as of August     , 2009, by
(i) Morgans Group LLC, a Delaware limited liability company, as managing member
(the “Managing Member” or “Member”, and in the event an additional person or
persons shall become members, the term “Members” shall include such other
persons who shall become members of the Company in accordance with the terms of
this Agreement, provided, however, the term “Member” shall not include the
“Special Members” as hereinafter defined), and (ii) Kenneth J. Uva, as the
Independent Director, pursuant to and in accordance with the Delaware Limited
Liability Company Act, 6 Del. C. § 18-101 et seq., as amended from time to time
(the “Act”), Terms used in this Agreement which are not otherwise defined shall
have the respective meanings given those terms in the Act or in Section 23
hereof.
WHEREAS, the Company was formed on August 10, 2004 pursuant to a Certificate of
Formation filed with the Secretary of State of the State of Delaware (as amended
or amended and restated from time to time, the “Certificate of Formation”); and
WHEREAS, the Member continued the Company pursuant to that certain Limited
Liability Company Agreement on August 13, 2004, as amended, restated or modified
through the date hereof, including on October 6, 2006 (as so amended and
restated, the “Original Agreement”); and
WHEREAS, the Member is the sole member of the Company; and
WHEREAS, the Member and the Independent Director desire to amend and restate the
terms of the Original Agreement in the manner provided herein.
The parties hereto hereby agree as follows:
1. Name; Formation. The name of the limited liability company is MORGANS/DELANO
PLEDGOR LLC. The Certificate of Formation of the Company was filed for record in
the office of the Secretary of State of the State of Delaware on August 10,
2004, in accordance with the Act, by Deborah Reusch, an authorized person within
the meaning of the Act. Upon the filing of the Certificate of Formation with the
Secretary of State of the State of Delaware, her powers as an “authorized
person” ceased, and the Member thereupon became the designated “authorized
person” and shall continue as the designated “authorized person” within the
meaning of the Act. The Member, as an authorized person, within the meaning of
the Act, shall execute, deliver and file, or cause the execution, delivery and
filing of, all certificates (and any amendments and/or restatements thereof)
required or permitted by the Act to be filed with the Secretary of State of the
State of Delaware. The Member shall execute, deliver and file, or cause the
execution, delivery and filing of any certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in any
other jurisdiction in which the Company may wish to conduct business, The terms
and provisions of the Original Agreement are hereby amended and restated in
their entirety as set forth herein.
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2. Term. The Company shall dissolve on December 31, 2048 unless dissolved before
such date in accordance with this Agreement, The existence of the Company as a
separate legal entity shall continue until cancellation of the Certificate of
Formation as provided in the Act.
3. Management; Board of Directors. Except as otherwise specifically provided in
this Agreement, the management of the Company shall be vested in the Managing
Member who shall manage the Company in accordance with the Act.
(a) Until “Full Payment” of the “Obligations” (as such terms are defined in the
Credit Agreement hereinafter defined), the Company shall have a board of
managers which shall be designated as the Company’s “Board of Directors” and
each member of the Board of Directors shall be designated as a “Director,” The
Board of Directors shall only have the authority expressly set forth in this
Agreement. The Directors are “managers” within the meaning of the Act with only
such duties and rights as are expressly set forth in this Agreement, The initial
members of the Board of Directors shall be set forth on Schedule A attached
hereto. Members of the Board of Directors may be appointed and removed from time
to time by the Managing Member, in its sole discretion, provided, however, that
until Full Payment of the Obligations, the Company shall have at least one
Independent Director on the Board of Directors, The Board of Directors shall
hold meetings, at such times and places to be designated by the Managing Member.
(b) Intentionally omitted.
(c) Until Full Payment of the Obligations, the Company may take the following
actions only with approval of the Managing Member and unanimous approvals of all
members of the Board of Directors, including, without limitation, the
Independent Director.
(i) make any assignment for the benefit of the Company’s creditors;
(ii) file, or consent to or acquiesce in the filing of or a petition in, a
bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under laws relating to the
relief from debts or the protection of debtors generally;
(iii) seek or consent to or acquiesce in the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Company or for all or any portion of the Company’s properties;
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(iv) admit in writing its inability to pay its debts generally as they become
due;
(v) take any action that might cause the Company to become insolvent;
(vi) except as permitted by Section 20, amend this Agreement;
(vii) to the fullest extent permitted by law, voluntarily dissolve and wind up,
or consolidate or merge the Company or sell all or substantially all of the
assets of the Company;
(viii) engage in any business activity not set forth in Section 5 of this
Agreement.
To the fullest extent permitted by applicable law, no member of the Board of
Directors shall be guilty of breaching any fiduciary duty to any Member by
refusing to consent to any of the above listed actions.
(d) Notwithstanding anything in this Agreement, to the fullest extent permitted
by law, until Full Payment of the Obligations, the Company may not take any of
the actions set forth in Subsection (vii) of Subparagraph (c) of this Section 3.
(e) To the fullest extent permitted by law, including Section 18-1101(c) of 3
the Act, the Independent Director shall consider only the interests of the
Company, including its respective creditors, in acting or otherwise voting on
the matters referred to in Section 3(c). No resignation or removal of the
Independent Director, and no appointment of a successor Independent Director,
shall be effective until such successor (i) shall have accepted his or her
appointment as an Independent Director by a written instrument, which may be a
counterpart signature page to the Management Agreement, and (ii) shall have
executed a counterpart to this Agreement as required by Section 8(a). In the
event of a vacancy in the position of Independent Director, the Managing Member
shall, as soon as practicable, appoint a successor Independent Director. All
right, power and authority of the Independent Director shall be limited to the
extent necessary to exercise those rights and perform those duties specifically
set forth in this Agreement. Except as provided in the first sentence of this
Section 3(e), in exercising his rights and performing his duties under this
Agreement,-the Independent Director shall have a fiduciary duty of loyalty and
care similar to that of a director of a business corporation organized under the
General Corporation Law of the State of Delaware. The Independent Director shall
at any time serve as trustee in bankruptcy for any Affiliate of the Company. The
Independent Director shall execute and deliver the Management Agreement. The
Independent Director designated by the Managing Member shall continue to be
Kenneth J. Uva. Unless otherwise restricted by law, the Independent Director may
be removed or expelled, with or without cause, at any time by the Managing
Member, and, subject to this Section 3, any vacancy caused by any such removal
or expulsion may be filled by action of the Managing Member provided that any
replacement Independent Director fulfills the requirements of being an
Independent Director hereunder.
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4. Authority. Except as otherwise provided herein and subject to Section 3, the
management of the Company shall be vested solely in the Member, who shall have
all powers to control and manage the business and affairs of the Company and may
exercise all powers of the Company, Subject to Sections 3, 5 and 7, the Managing
Member is authorized to (i) execute any and all documents and agreements on
behalf of the Company, and to engage in all activities related thereto; and
(ii) execute any and all agreements, affidavits and indemnities necessary or
appropriate to effectuate any and all transactions of the Company. The Company,
by or through the Managing Member on behalf of the Company, may enter into and
perform the Loan Documents (as defined herein) and all documents, agreements,
certificates, or financing statements contemplated thereby or related thereto,
all without any further act, vote or approval of any other Person
notwithstanding any other provision of this Agreement, the Act or applicable
law, rule or regulation. The foregoing authorization shall not be deemed a
restriction on the powers of the Managing Member to enter into other agreements
on behalf of the Company, subject to Section 5 and Section 6.
5. Purpose. The purpose of the Company is solely to:
(a) own, hold and maintain 100% of the limited liability company interests in
Madison Bar Company LLC and 50% of the limited liability company interest in SC
Morgans/Delano LLC (collectively, the “LLC Interests”), together with such other
activities as may be necessary or advisable in connection with the LLC Interests
in accordance with the Loan Documents;
(b) give security for and guarantee the loans and other credit facilities
provided pursuant to the Credit Agreement dated as of October 6,2006 among
Morgans Group LLC (“Borrower”), Beach Hotel Associates, LLC, Morgans Holdings
LLC, Royalton, LLC, Morgans Hotel Group Co., Wachovia Bank, National
Association, as Administrative Agent (the “Agent”), Citigroup Global Markets,
Inc., as Syndication Agent, and certain other financial institutions party
thereto, as amended by First Amendment to Credit Agreement dated as of
November 10, 2006, Second Amendment to Credit Agreement dated as of January 8,
2007, Third Amendment to Credit Agreement dated as of October 10, 2007, Fourth
Amendment to Credit Agreement dated as of January 16, 2008, and Fifth Amendment
to Credit Agreement; and Waiver Agreement dated as of August      , 2009, and as
the same may be further amended, restated, supplemented or otherwise modified
from time to time (collectively, the “Credit Agreement”), and the other “Loan
Documents” as defined in the Credit Agreement;
(c) give security for the Obligations under the Loan Documents or for any other
indebtedness to the extent not prohibited by the Loan Documents; and
(d) refinance the Obligations and grant security interests to secure same, to
the extent same is not a violation of the Loan Documents,
6. Company Business. The Company shall not engage in any business unrelated to
the ownership of the LLC Interests and shall not own any assets other than those
related to the LLC Interests or otherwise in furtherance of the purposes of the
Company. The Company shall not incur any indebtedness other than the
indebtedness under the Loan Documents, related to the LLC Interests or otherwise
provided herein or permitted under the Loan Documents.
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7. Separateness Covenants. Notwithstanding anything to the contrary contained
herein (except the penultimate sentence of Section 4), for so long as any
portion of the Obligations is outstanding, the Company shall conduct its affairs
in accordance with the following provisions:
(a) It shall be a limited liability company organized solely for the purpose of
owning the LLC Interests.
(b) It shall not own any assets other than those related to the LLC Interests.
(c) To the fullest extent permitted by law, (i) it shall not engage in, seek or
consent to any dissolution, winding up, or liquidation, (ii) it shall not engage
in any consolidation, merger, or asset sale (except as permitted in the Loan
Documents or if there is Full Payment of the Obligations), (iii) it shall not
transfer any limited liability company interests in the Company (except as
expressly provided in the Loan Documents or with the written consent of the
Agent) and (iv) it shall not further amend this Agreement or the Certificate of
Formation (except as required by law).
(d) It shall remain solvent and maintain adequate capita] in light of its
contemplated business operations, provided, however, the foregoing shall not
require the Member to make any additional capital contributions to the Company.
(e) It shall not fail to correct any known misunderstanding regarding the
separate identity of such entity.
(f) It shall maintain its accounts, books and records separate from any other
Person other than the Loan Parties (as defined in the Credit Agreement) and
shall file its own tax returns.
(g) It shall maintain its books, records, resolutions and agreements as official
records.
(h) It shall not commingle its funds or assets with those of any other Person
other than the Loan Parties.
(i) It shall hold its assets in its own name.
(j) Intentionally omitted.
(k) It shall maintain its financial statements, accounting records and other
entity documents separate from any other Person, except that its financial
statements may be consolidated with those of Morgans Hotel Group Co. (the
“Parent”), other Loan Parties or their consolidated Subsidiaries.
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(l) It shall pay its own liabilities, including the salaries of its own
employees, out of funds and assets of its own or of any Loan Party, provided,
however, the foregoing shall not require the Member to make any additional
capital contributions to the Company.
(m) It shall observe all limited liability company formalities.
(n) It shall maintain an arm’s-length relationship with its Affiliates to the
extent required by the Loan Documents.
(o) It shall have no indebtedness other than the Obligations and indebtedness
permitted under the Loan Documents, related to the LLC Interests or otherwise
provided herein.
(p) It shall not assume or guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person except for the obligations of the Loan Parties,
obligations under the Loan Documents or obligations of SC Morgans/Delano LLC to
the extent permitted by the Loan Documents.
(q) It shall not acquire obligations or securities of its members.
(r) It shall allocate fairly and reasonably shared expenses, including shared
office space.
(s) It shall not pledge its assets to secure obligations, other than in its
capacity as a pledgor, grantor, or guarantor under the Loan Documents or in
connection with providing security therefor.
(t) Intentionally omitted.
(u) It shall maintain its assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any other Person;
(v) It shall not make loans to any Person other than to any affiliate that is a
Loan Party or SC Morgans/Delano LLC, in each case to the extent permitted by the
Credit Agreement.
(w) Intentionally omitted.
(x) It shall not enter into or be a party to, any transaction with its members
or Affiliates except as permitted pursuant to the Loan Documents.
(y) Except as set forth in this Agreement, it shall have no obligation to
indemnify its partners, officers, directors or members, as the case may be,
unless such obligation is fully subordinated to the Obligations and will not
constitute a claim against it if cash flow in excess of the amount required to
pay the Debt is insufficient to pay such obligation.
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(z) To the fullest extent permitted by law, it shall consider the interests of
its creditors in connection with all limited liability company actions.
(aa) It shall not engage in any business unrelated to the ownership of the LLC
Interests.
Failure to comply with any of the foregoing covenants shall not affect the
status of the Company as a separate legal entity.
This Section 7 is being adopted in order to comply with certain provisions
required in order to qualify the Company as a “special purpose” entity.
8. Members. The name and the business, residence or mailing address of the
Member is as follows:

      Name   Address       MORGANS GROUP LLC   475 Tenth Avenue
New York, New York 10018

(a) Notwithstanding any provision in this Agreement to the contrary, upon the
occurrence of any event that causes the Member to cease to be a member of the
Company (other than (x) upon an assignment by the Member of all of its limited
liability company interest in the Company and the admission of the transferee,
if permitted pursuant to Loan Documents or (y) the resignation of the Member and
the admission of an additional member of the Company pursuant to this Agreement,
if permitted by the Loan Documents), each Person acting as an Independent
Director shall, without any action of any Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the
Company as a member of the Company (the “Special Member”) and shall preserve and
continue the Company without dissolution. No Special Member may resign from the
Company or transfer its rights as Special Member unless (i) a successor Special
Member has been admitted to the Company as Special Member by executing a
counterpart to this Agreement, and (ii) such successor has also accepted its
appointment as Independent Director by executing a counterpart to the Agreement
and the Management Agreement; provided, however, the Special Members shall
automatically cease to be members of the Company upon the admission to the
Company of a substitute Member but shall not thereby cease to be Independent
Directors. Each Special Member shall be a member of the Company that has no
interest in the profits, losses and capital of the Company and has no right to
receive any distributions of Company assets. Pursuant to Section 18-301 of the
Act, a Special Member shall not be required to make any capital contributions to
the Company and shall not receive a limited liability company interest in the
Company. A Special Member, in its capacity as Special Member, may not bind the
Company. Except as required by any mandatory provision of the Act, each Special
Member, in its capacity as Special Member, shall have no right to vote on,
approve or otherwise consent to any action by, or matter relating to, the
Company, including, without limitation, the merger, consolidation or conversion
of the Company. In order to implement the future, contingent admission to the
Company of each Special Member, each Person acting as an Independent Director
shall execute a counterpart to this Agreement, Prior to its admission to the
Company as Special Member, each Person acting as an Independent Director shall
not be a member of the Company.
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9. Membership Interests. The Managing Member shall have and own 100% of the
Membership Interests.
10. Capital Contributions. Any Member may make one or more capital contributions
to the Company provided, however, any capital contribution will only be made
with the consent of the Member making such contribution.
11. Capital Accounts. The capital accounts of each Member shall be allocated in
accordance with their capital contributions and shall be maintained in
accordance with Section 704(b) of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder.
12. Admission of Additional Members by the Company. One or more additional
Members of the Company may be admitted to the Company with the unanimous vote or
written consent of all of the Members; provided, however, no additional Member
may be admitted to the Company as a Member of the Company, other than pursuant
to Sections 8(a) or 21(a), unless the Agent consents in writing.
13. Resignation of the Member. No Member may resign from the Company as a Member
of the Company unless a substitute Member or a transferee of such Member’s
interest is admitted as a Member of the Company in accordance with the terms
herein.
14. Assignments; Rights of Assignee To Become a Member. Until such time as Full
Payment of the Obligations has occurred, the Managing Member shall not, except
as expressly permitted by the Loan Documents, take any action to sell, transfer,
exchange, convey, encumber or dispose of any of its Membership Interest, Subject
to the foregoing sentence, if the Member transfers all of its limited liability
company interest in the Company pursuant to this Section 14, the transferee’s
admission shall be deemed effective immediately prior to the transfer and,
immediately following such admission, the transferor Member shall cease to be a
member of the Company, Any successor to the Member by merger or consolidation in
compliance with the Loan Documents shall, without further act, be the Member
hereunder, and such merger or consolidation shall not constitute an assignment
for purposes of this Agreement and the Company shall continue without
dissolution. Notwithstanding anything to the contrary contained herein, the
Member shall not, without the prior written consent of the Agent, issue and
shall not permit the issuance of any additional limited liability company
interests of the Company other than its initial issuance of limited liability
company interests issued on or prior to the date of this Agreement.
15. Liability of Members. Except as otherwise expressly provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be the debts, obligations and liabilities solely of the
Company, and neither the Member nor the Special Members nor any Director shall
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Special Member or Director of the
Company.
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16. Exculpation of Members. Neither the Member nor the Special Member nor any
officer, Director, employee or agent of the Company nor any employee,
representative, agent or Affiliate of the Member or the Special Member
(collectively, the “Covered Persons”) shall be liable to the Company or any
other Person who has an interest in or claim against the Company for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of the authority conferred on such
Covered Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered Persons
gross negligence or willful misconduct.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, all rights and remedies
being governed by said laws, without regard to principles of conflict of laws.
18. Indemnification. To the fullest extent permitted by applicable law and to
the extent permitted under this Agreement, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such
Covered Person by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered
Person by this Agreement, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person’s gross negligence or willful misconduct
with respect to such acts or omissions; provided, however, that any indemnity
under this Section 18 by the Company shall be provided out of and to the extent
of Company assets only, and the Member and the Special Members shall not have
personal liability on account thereof; and provided further, that so long as any
obligation imposed by the Loan Documents is outstanding, no indemnity payment
from funds of the Company (as distinct from funds from other sources, such as
insurance) of any indemnity under Section 18 shall be payable from amounts
allocable to any other Person pursuant to the Loan Documents.
19. Tax Characterization and Returns. It is the intention of the Member that the
Company be disregarded for federal and all relevant state tax purposes and that
the activities of the Company be deemed to be activities of the Member for such
purposes. All provisions of this Agreement are to be construed so as to preserve
that tax status. The Member is hereby authorized to file any necessary
elections, and shall be required to file any necessary tax returns, on behalf of
the Company with any such tax authorities.
20. Amendments.
(a) Subject to Sections 7 and 20(b) below, Sections 3, 5, 6, 7, 8(a) and 20 of
this Agreement may only be amended with approval of the Managing Member and all
members of the Board of Directors, including, without limitation, the
Independent Directors.
(b) Notwithstanding Section 20(a) this Agreement shall not be amended except in
compliance with the Loan Documents until Full Payment of the Obligations.
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21. Dissolution; Liquidation; Termination.
(a) The Company shall be dissolved, and its affairs shall be wound up upon the
first to occur of the following: (i) the termination of the legal existence of
the last remaining member of the Company or the occurrence of any other event
which terminates the continued membership of the last remaining member of the
Company in the Company unless the Company is continued without dissolution in a
manner permitted by this Agreement or the Act or (ii) the entry of a decree of
judicial dissolution under Section 18-802 of the Act. Upon the occurrence of any
event that causes the last remaining member of the Company to cease to be a
member of the Company or that causes the Member to cease to be a member of the
Company (other than (x) upon an assignment by Member of all of its limited
liability company interest in the Company and the admission of the transferee,
if permitted pursuant to the Loan Documents, or (y) the resignation of Member
and the admission of an additional member of the Company pursuant to this
Agreement, if permitted pursuant to the Loan Documents), to the fullest extent
permitted by law, the personal representative of such member is hereby
authorized to, and shall, within 90 days after the occurrence of the event that
terminated the continued membership of such member in the Company, agree in
writing (i) to continue the Company and (ii) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute
member of the Company, effective as of the occurrence of the event that
terminated the continued membership of such member in the Company.
(b) Notwithstanding any other provision of this Agreement, the Member or a
Special Member becoming a Bankrupt Member shall not cause the Member or Special
Member, respectively, to cease to be a member of the Company and upon the
occurrence of such an event, the Company shall continue without dissolution.
(c) Notwithstanding any other provision of this Agreement, each of the Member
and the Special Members waives any right it might have to agree in writing to
dissolve the Company upon the Member or a Special Member becoming a Bankrupt
Member or the occurrence of an event that causes the Member or a Special Member
to cease to be a member of the Company.
(d) In the event of dissolution, the Company shall conduct only such activities
as are necessary to wind up its affairs (including the sale of the assets of the
Company in an orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-804 of the
Act.
(e) The Company shall terminate when (i) all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company shall have been distributed to the Member in the manner provided for in
this Agreement and (ii) the Certificate of Formation shall have been canceled in
the manner required by the Act.
(f) To the fullest extent permitted by law, each of the Member and the Special
Members shall irrevocably waive any right or power that they might have to cause
the Company or any of its assets to be partitioned, to cause the appointment of
a receiver for all or any portion of the assets of the Company, to compel any
sale of all or any portion of the assets of the Company pursuant to any
applicable law or to file a complaint or to institute any proceeding at law or
in equity to cause the dissolution, liquidation, winding up or termination of
the Company.
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22. Entire Agreement. This Agreement contains the entire understanding between
the parties and supersedes any prior understandings or agreements between them
respecting the within subject matter. There are no representations, agreements,
arrangements or understandings, oral or written, between the parties hereto
relating to the subject matter of this Agreement which are not fully expressed
herein.
23. Definitions. Whenever used in this Agreement the following terms shall have
the meanings respectively assigned to them in this Section 23 unless otherwise
expressly provided herein or unless the context otherwise requires:
Affiliate: shall mean any other Person that, directly or indirectly, is in
Control of, is Controlled by or is under common Control with such Person or is a
director or officer of such Person or of an Affiliate of such Person.
Agreement: shall mean this Third Amended and Restated Limited Liability Company
Agreement of the Company as the same may be amended or restated from time to
time in accordance with its terms.
Bankrupt Member: shall mean any member (a) that (i) makes an assignment for the
benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is
adjudged a bankrupt or insolvent, or has entered against such member an order
for relief, in any bankruptcy or insolvency proceeding; (iv) files a petition or
answer seeking for the member any reorganization, arrangement, composition,
readjustment, liquidation, or similar relief under any statute, law or
regulation; (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the member in any
proceeding of the type described in subclauses (i) through (iv) of this clause
(a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the member or of all or any substantial part of the
member’s properties; or (b) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
statute, law or regulation has been commenced and one hundred twenty (120) days
have expired without dismissal thereof or with respect to which, without the
member’s consent or acquiescence, a trustee, receiver or liquidator of the
member or of all or any substantial part of the member’s properties has been
appointed and ninety (90) days have expired without the appointment having been
vacated or stayed, or ninety (90) days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated. The foregoing is
intended to and shall supersede and replace the events of bankruptcy described
in Sections 18-304(a) and (b) of the Act.
Company: shall mean Morgans/Delano Pledgor LLC, the Delaware limited liability
company continued pursuant to the Act and this Agreement.
Control: shall mean with respect to any Person, either (i) ownership directly or
indirectly of forty-nine percent (49%) or more of all equity interests in such
Person or (ii) the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, by contract or otherwise.
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Independent Director: shall mean a natural person selected by the Company and
reasonably satisfactory to Agent who shall not have been at the time of such
individual’s appointment as an Independent Director, and shall not have been at
any time during the preceding five years (i) a shareholder/partner/member of, or
an officer or employee of, the Company or any of its shareholders, subsidiaries
or Affiliates, (ii) a director (other than as an Independent Director) of any
shareholder, subsidiary or Affiliate of the Company, (iii) a customer of, or
supplier to, the Company or any of its shareholders, subsidiaries or Affiliates
(other than an individual provided by a business that provides independent
directors and corporate services in the ordinary course), (iv) a Person who
Controls any such shareholder, supplier or customer, or (v) a member of the
immediate family of any such shareholder/ director/partner/member, officer,
employee, supplier or customer or of any director of the Company (other than as
an Independent Director). Notwithstanding the foregoing, an Independent Director
may serve in similar capacities for other “special purpose” corporations formed
by the Member or any affiliate thereof. The initial Independent Director of the
Company shall be Kenneth J. Uva.
Management Agreement: shall mean the agreement of the Independent Directors in
the form attached hereto as Schedule B, The Management Agreement shall be deemed
incorporated into, and a part of, this Agreement.
Managing Member: shall mean the Member and any successor Managing Member
appointed pursuant to this Agreement, each in its capacity as a managing member
of the Company.
Member: shall mean Morgans Group LLC and any Person hereafter admitted to the
Company as a member as provided in this Agreement, each in its capacity as a
member of the Company; provided, however, the term “Member” shall not include
the Special Members.
Membership Interest: shall mean the limited liability company interest of the
Member in the Company, including, without limitation, rights in the capital of
the Company, rights to receive distributions (liquidating or otherwise) and
allocations of profits and losses. The Member’s Membership Interest shall be
expressed as a percentage which shall equal the ratio that the value of the
Capital Contributions made by such Member bears to the Capital Contributions of
all members. The Member’s initial Membership Interest shall be one hundred
percent (100%).
Person: means any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unincorporated association, any other
person or entity, and any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
24. Distributions. Distributions shall be made to the Members at the times and
in the aggregate amounts determined by the Managing Member. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not be
permitted to make a distribution to a member on account of its interest in the
Company if such distribution would violate Section 18-607 of the Act or any
other applicable law or the Loan Documents.
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25. Uncertificated Interests. The limited liability company interests in the
Company shall not be evidenced by certificates. The Company shall maintain books
for the purpose of registering the transfer of limited liability company
interests, and, upon any transfer of limited liability company interests in the
Company, the Company shall notify the registered owner of any applicable
restrictions on the transfer of limited liability company interests.
26. Benefits of Agreement; No Third Party Rights. (a) None of the provisions of
this Agreement shall be for the benefit of or enforceable by any creditor of the
Company or by any creditor of the Member or a Special Member and (b) nothing in
this Agreement shall be deemed to create any right in any Person (other than
Covered Persons) not a party hereto, and this Agreement shall not be construed
in any respect to be a contract in whole or in part for the benefit of any third
Person.
27. Binding Agreement. Notwithstanding any other provision of this Agreement,
the Member agrees that this Agreement constitutes a legal, valid and binding
agreement of the Member, and is enforceable against the Member by the
Independent Directors, in accordance with its terms,
28. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Member has executed this Agreement effective as of the
date first above written.

            MORGANS GROUP LLC

By: Morgans Hotel Group Co.
      By:           Name:   Richard Szymanski        Title:   Chief Financial
Officer and Secretary     

Morgans/Delano Pledgor — Third Amended & Restated LLC Agreement

 

S-1

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Kenneth J. Uva    
 
  Independent Director    

Morgans/Delano Pledgor — Third Amended & Restated LLC Agreement

 

S-2

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Schedule A
Board of Directors
Morgans Group LLC
Kenneth J. Uva
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Schedule B
Management Agreement
October  6, 2006
Morgans/Delano Pledgor LLC
C/o Morgans Hotel Group LLC
475 Tenth Avenue
New York, New York 10018
Re:      Management Agreement — Morgans/Delano Pledgor LLC (the “Company”)
Ladies and Gentlemen:
For good and valuable consideration, the undersigned, who has been designated as
an Independent Director of the Company, in accordance with the Second Amended
and Restated Limited Liability Company Agreement of the Company, dated as of the
date hereof, as it may be amended or restated from time to time (the “LLC
Agreement”), hereby agrees as follows:
1. The undersigned accepts his rights and authority as an Independent Director
under the LLC Agreement and agrees to perform and discharge his duties and
obligations as an Independent Director under the LLC Agreement, and further
agrees that such rights, authorities, duties and obligations under the LLC
Agreement shall continue until his successor as an Independent Director is
designated or until his resignation or removal as an Independent Director in
accordance with the LLC Agreement, The undersigned agrees and acknowledges that
it has been designated as a “manager” of the Company within the meaning of the
Delaware Limited Liability Company Act.
2. So long as any Obligation is outstanding, the undersigned agrees, solely in
its capacity as a creditor of the Company on account of any indemnification or
other payment owing to the undersigned by the Company, not to acquiesce,
petition or otherwise invoke or cause the Company to invoke the process of any
court or governmental authority for the purpose of commencing or sustaining a
case against the Company under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Company or any substantial part of
the property of the Company, or ordering the winding up or liquidation of the
affairs of the Company.
3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE
GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Initially capitalized terms used and not otherwise defined herein have the
meanings set forth in the LLC Agreement.
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IN WITNESS WHEREOF, the undersigned has executed this Management Agreement as of
the day and year first above written.

     
 
Kenneth J. Uva
   

[Signature to Management Agreement]
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EXHIBIT B-5
Operating Agreement for Madison Bar Company LLC
See attached.

 

 

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THE TRANSFER OF THE LIMITED LIABILITY COMPANY INTERESTS DESCRIBED IN THIS
AGREEMENT IS RESTRICTED AS DESCRIBED HEREIN.
THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT
OF
MADISON BAR COMPANY LLC
This Third Amended and Restated Limited Liability Company Agreement (this
“Agreement”) of MADISON BAR COMPANY LLC, a Delaware limited liability company
(the “Company”), is adopted and entered into as of October 6, 2006, by
(i) Morgans/Delano Pledgor LLC, a Delaware limited liability company, as
managing member (the “Managing Member” or “Member”, and in the event an
additional person or persons shall become members, the term “Members” shall
include such other persons who shall become members of the Company in accordance
with the terms of this Agreement, provided, however, the term “Member” shall not
include the “Special Members” as hereinafter defined), and (ii) Kenneth J. Uva,
as the Independent Director, pursuant to and in accordance with the Delaware
Limited Liability Company Act, 6 Del, C. § 18-101 et seq. as amended from time
to time (the “Act”). Terms used in this Agreement which are not otherwise
defined shall have the respective meanings given those terms in the Act or in
Section 23 hereof.
WHEREAS, the Company was formed on April 20,1999 pursuant to a Certificate of
Formation filed with the Secretary of State of the State of Delaware (as amended
or amended and restated from time to time, the “Certificate of Formation”) and
WHEREAS, the Member continued the Company pursuant to that certain Amended and
Restated Limited Liability Company Agreement on August 13, 2004 (the “Original
Agreement”); and
WHEREAS, the Member desires to amend and restate the terms of the Original
Agreement in the manner provided herein.
The parties hereto hereby agree as follows:
1. Name; Formation. The name of the limited liability company is MADISON BAR
COMPANY LLC. The Certificate of Formation of the Company was filed for record in
the office of the Secretary of State of the State of Delaware on April 20,1999,
in accordance with the Act, by Allison M. Weiner, an authorized person within
the meaning of the Act. Upon the filing of the Certificate of Formation with the
Secretary of State of the State of Delaware, her powers as an “authorized
person” ceased, and the Member thereupon became the designated “authorized
person” and shall continue as the designated “authorized person” within the
meaning of the Act. The Member, as an authorized person, within the meaning of
the Act, shall execute, deliver and file, or cause the execution, delivery and
filing of, all certificates (and any amendments and/or restatements thereof)
required or permitted by the Act to be filed with the Secretary of State of the
State of Delaware. The Member shall execute, deliver and file, or cause the
execution, delivery and filing of any certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in any
other jurisdiction in which the Company may wish to conduct business. The terms
and provisions of the Original Agreement are hereby amended and restated in
their entirety as set forth herein.

 

 

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2. Term. The Company shall dissolve on December 31, 2048 unless dissolved before
such date in accordance with this Agreement. The existence of the Company as a
separate legal entity shall continue until cancellation of the Certificate of
Formation as provided in the Act.
3. Management; Board of Directors. Except as otherwise specifically provided in
this Agreement, the management of the Company shall be vested in the Managing
Member who shall manage the Company in accordance with the Act.
(a) Until the Loan (as defined herein) is paid and satisfied in full, the
Company shall have a board of managers which shall be designated as the
Company’s “Board of Directors” and each member of the Board of Directors shall
be designated as a “Director,’. The Board of Directors shall have the authority
set forth in this Agreement. The Directors are “managers” within the meaning of
the Act with only such duties and rights as are expressly set forth in this
Agreement. The initial members of the Board of Directors shall be set forth on
Schedule A attached hereto. Members of the Board of Directors may be appointed
and removed from time to time by the Managing Member, in its sole discretion,
provided, however, that as long as the Loan is outstanding, the Company shall
have at least one Independent Director on the Board of Directors. The Board of
Directors shall hold meetings, at such times and places to be designated by the
Managing Member.
(b) Except as set forth in Subsection (c) of this Section, any action required
by this Agreement to be taken by the Directors shall require the agreement of
not less than a majority of the Directors.
(c) Until the Loan is paid and satisfied in full, the Company may take the
following actions only with, approval of the Member and unanimous approvals of
all members of the Board of Directors, including, without limitation, the
Independent Director.
(i) make any assignment for the benefit of the Company’s creditors;
(ii) file, or consent to or acquiesce in the filing of or a petition in, a
bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under laws relating to the
relief from debts or the protection of debtors generally;
(iii) seek or consent to or acquiesce in the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Company or for all or any portion of the Company’s properties;
(iv) admit in writing its inability to pay its debts generally as they become
due;

 

2

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(v) take any action that might cause the Company to become insolvent;
(vi) amend this Agreement;
(vii) to the fullest extent permitted by law, voluntarily dissolve and wind up,
or consolidate or merge the Company or sell all or substantially all of the
assets of the Company;
(viii) engage in any business activity not set forth in Section 5 of this
Agreement.
To the fullest extent permitted by applicable law, no member of the Board of
Directors shall be guilty of breaching any fiduciary duty to any Member by
refusing to consent to any of the above listed actions.
(d) Notwithstanding anything in this Agreement, to the fullest extent permitted
by law, until the Loan is paid and satisfied in full, the Company may not take
any of the actions set forth in Subsection (vii) of Subparagraph (c) of this
Section 3.
(e) To the fullest extent permitted by law, including Section 18-1101(c) of the
Act, the Independent Director shall consider only the interests of the Company,
including its respective creditors, in acting or otherwise voting on the matters
referred to in Section 3(c), No resignation or removal of the Independent
Director, and no appointment of a successor Independent Director, shall be
effective until such successor (i) shall have accepted his or her appointment as
an Independent Director by a written instrument, which may be a counterpart
signature page to the Management Agreement, and (ii) shall have executed a
counterpart to this Agreement as required by Section 8(a). In the event of a
vacancy in the position of Independent Director, the Managing Member shall, as
soon as practicable, appoint a successor Independent Director, All right, power
and authority of the Independent Director shall be limited to the extent
necessary to exercise those rights and perform those duties specifically set
form in this Agreement. Except as provided in the first sentence of this
Section 3(e), in exercising his rights and performing his duties under this
Agreement, the Independent Director shall have a fiduciary duty of loyalty and
care similar to that of a director of a business corporation organized under the
General Corporation Law of the State of Delaware. The Independent Director shall
at any time serve as trustee in bankruptcy for any Affiliate of the Company. The
Independent Director shall execute and deliver the Management Agreement. The
Independent Director designated by the Managing Member shall be Kenneth J. Uva.
Unless otherwise restricted by law, the Independent Director may be removed or
expelled, with or without cause, at any time by the Managing Member, and,
subject to this Section 3, any vacancy caused by any such removal or expulsion
may be filled by action of the Managing Member provided that any replacement
Independent Director fulfills the requirements of being an Independent Director
hereunder.

 

3

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4. Authority. Except as otherwise provided herein and subject to Section 3, the
management of the Company shall be vested solely in the Member, who shall have
all powers to control and manage the business and affairs of the Company and may
exercise all powers of the Company. Subject to Sections 3, 5 and 7, the Managing
Member is authorized to (i) execute any and all documents and agreements on
behalf of the Company, and to engage in all activities related thereto; and
(ii) execute any and all agreements, affidavits and indemnities necessary or
appropriate to effectuate any and all transactions of the Company. The Company
by or through the Managing Member on behalf of the Company, may enter into and
perform the Loan Documents (as defined herein) and all documents, agreements,
certificates, or financing statements contemplated thereby or related thereto,
all without any further act, vote or approval of any other Person
notwithstanding any other provision of this Agreement, the Act or applicable
law, rule or regulation. The foregoing authorization shall not be deemed a
restriction on the powers of the Managing Member to enter into other agreements
on behalf of the Company, subject to Section 5 and Section 6.
5. Purpose. The purpose of the Company is solely to:
(a) establish, own, operate and manage the Morgans Bar located in Morgans Hotel,
237-39 Madison Avenue, New York, New York (the “Bar”), together with such other
activities as may be necessary or advisable in connection with the ownership of
the Bar in accordance with the Loan Documents;
(b) give security for or guarantee the loans from Wachovia Bank, National
Association (together with its successors and assigns, “Lender”) in the
approximate principal amount of $225,000,000 (collectively, the “Loan”),
pursuant to that certain Credit Agreement, dated as of October 6,2006 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), and the notes and other loan documents entered into in connection
with the Credit Agreement to be entered into between Lender, the Company and
certain affiliates of the Company (collectively, the “Loan Documents”); and
(c) give security any other indebtedness to the extent not prohibited by the
Security Agreement.
6. Company Business. The Company shall not engage in any business unrelated to
the ownership of the Bar and shall not own any assets other than those related
to the Bar or otherwise in furtherance of the purposes of the Company. The
Company shall not incur any indebtedness other than the indebtedness related to
the Bar and otherwise provided herein.
7. Separateness Covenants. Notwithstanding anything to the contrary contained
herein (except the penultimate sentence of Section 4), for so long as any
portion of the Loan is outstanding the Company shall conduct its affairs in
accordance with the following provisions:
(a) It shall be a limited liability company organized solely for the purpose of
owning the Bar.
(b) It shall not own any assets other than those related to the Bar.
(c) To the fullest extent permitted by law, (i) it shall not engage in, seek or
consent to any dissolution, winding up, or liquidation, (ii) it shall not engage
in any consolidation, merger, or asset sale (except as permitted in the Loan
Documents), (iii) it shall not transfer any limited liability company interests
in the Company (except as expressly provided in the Loan Documents or with the
written consent of the Lender) and (iv) it shall not further amend this
Agreement or the Certificate of Formation (except as required by law).

 

4

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(d) It shall remain solvent and maintain adequate capital in light of its
contemplated business operations, provided, however, the foregoing shall not
require the Member to make any additional capital contributions to the Company.
(e) It shall not fail to correct any known misunderstanding regarding the
separate identity of such entity.
(f) It shall maintain its accounts, books and records separate from any other
Person and shall file its own tax returns,
(g) It shall maintain its books, records, resolutions and agreements as official
records.
(h) It shall not commingle its funds or assets with those of any other Person.
(i) It shall hold its assets in its own name.
(j) It shall conduct its business in its name.
(k) It shall maintain its financial statements, accounting records and other
entity documents separate from any other Person.
(l) It shall pay its own liabilities, including the salaries of its own
employees, out of its own funds and assets, provided, however, the foregoing
shall not require the Member to make any additional capital contributions to the
Company.
(m) It shall observe all limited liability company formalities.
(n) It shall maintain an arm’s-length relationship with its Affiliates.
(o) It shall have no indebtedness other than the indebtedness permitted under
the Loan Documents.
(p) It shall not assume or guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person except for the Loan.
(q) It shall not acquire obligations or securities of its members.
(r) It shall allocate fairly and reasonably shared expenses, including shared
office space, and shall use separate stationery, invoices and checks.
(s) It shall not pledge its assets to secure obligations, other than its
capacity as a pledgor under the Loan or in connection with providing security
for the Loan.

 

5

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(t) It shall hold itself out and identify itself as a separate and distinct
entity under its own name and not as a division or part of any other Person.
(u) It shall maintain its assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any other Person.
(v) It shall not make loans to any Person.
(w) It shall not identify its partners, members or shareholders, or any.
Affiliate of any of them, as a division or part of it.
(x) It shall not enter into or be a party to, any transaction with its members
or Affiliates except in the ordinary course of its business and on terms which
are intrinsically fair and are no less favorable to it than would be obtained in
a comparable arm’s-length transaction with an unrelated third party.
(y) It shall have no obligation to indemnify its partners, officers, directors
or members, as the case may be, or have such an obligation that is fully
subordinated to the Debt (as defined in the Loan Documents) and will not
constitute a claim against it if cash flow in excess of the amount required to
pay the Debt is insufficient to pay such obligation.
(z) To the fullest extent permitted by law, it shall consider the interests of
its creditors in connection with all limited liability company actions.
(aa) It shall not engage in any business unrelated to the ownership of the Bar.
(bb) It shall not incur any indebtedness other than the indebtedness related to
the Bar and otherwise provided herein.
Failure to comply with any of the foregoing covenants shall not affect the
status of the Company as a separate legal entity.
Notwithstanding anything contained in this Agreement to the contrary, the Member
and the Company shall each take all actions necessary to cause the Company to
conduct its operations in accordance with and otherwise comply with, and will
refrain from taking any actions in violation of, the defined term “Single
Purpose Entity” contained in the Loan Documents.
This Section 7 is being adopted in order to comply with certain provisions
required in order to qualify the Company as a “special purpose” entity.

 

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8. Members. The name and the business, residence or mailing address of the
Member is as follows:

     
Name
  Address
 
   
MORGANS/DELANO PLEDGOR LLC
  c/o Morgans Hotel Group LLC
 
  475 Tenth Avenue
 
  New York, New York 10018

(a) Notwithstanding any provision in this Agreement to the contrary, upon the
occurrence of any event that causes the Member to cease to be a member of the
Company (other than (x) upon an assignment by the Member of all of its limited
liability company interest in the Company and the admission of the transferee,
if permitted pursuant to Loan Documents or (y) the resignation of the Member and
the admission of an additional member of the Company pursuant to this Agreement,
if permitted by the Loan Documents), each Person acting as an Independent
Director shall, without any action of any Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the
Company as a member of the Company (the “Special Member”) and shall preserve and
continue the Company without dissolution. No Special Member may resign from the
Company or transfer its rights as Special Member unless (i) a successor Special
Member has been admitted to the Company as Special Member by executing a
counterpart to miss Agreement, and (ii) such successor has also accepted its
appointment as Independent Director by executing a counterpart to the Agreement
and the Management Agreement; provided, however, the Special’ Members shall
automatically cease to be members of the Company upon the admission to the
Company of a substitute Member but shall not thereby cease to be Independent
Directors. Each Special Member shall be a member of the Company that has no
interest in the profits, losses and capital of the Company and has no right to
receive any distributions of Company assets. Pursuant to Section 18-301 of the
Act, a Special Member shall not be required to make any capital contributions to
the Company and shall not receive a limited liability company interest in the
Company. A Special Member, in its capacity as Special Member, may not bind the
Company. Except as required by any mandatory provision of the Act, each Special
Member, in its capacity as Special Member, shall have no right to vote on,
approve or otherwise consent to any action by, or matter relating to, the
Company, including, without limitation, the merger, consolidation or conversion
of the Company. In order to implement the future, contingent admission to the
Company of each Special Member, each Person acting as an Independent Director
shall execute a counterpart to this Agreement. Prior to its admission to the
Company as Special Member, each Person acting as an Independent Director shall
not be a member of the Company.
9. Membership Interests. The Managing Member shall have and own 100% of the
Membership Interests.
10. Capital Contributions. Any Member may make one or more capital contributions
to the Company provided, however, any capita] contribution will only be made
with the consent of the Member making such contribution.
11. Capital Accounts. The capital accounts of each Member shall be allocated in
accordance with their capital contributions and shall be maintained in
accordance with Section 704(b) of the Internal Revenue Code and the Treasury
Regulations promulgated hereunder.

 

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12. Admission of Additional Members by the Company. One or more additional
Members of the Company may be admitted to the Company with the unanimous vote or
written consent of all of the Members; provided, however, no additional Member
may be admitted to the Company as a Member of the Company, other than pursuant
to Sections 8(a) or 21 (a), unless the Lender consents in writing.
13. Resignation of the Member. No Member may resign from the Company as a Member
of the Company unless a substitute Member or a transferee of such Member’s
interest is admitted as a Member of the Company in accordance with the terms
herein.
14. Assignments; Rights of Assignee To Become a Member. Until such time as the
Loan shall be repaid in full in accordance with its terms or the Loan Documents,
the Managing Member shall not, except as expressly permitted by the Loan
Documents, take any action to sell, transfer, exchange, convey, encumber or
dispose of any of its Membership Interest. Subject to the foregoing sentence, if
the Member transfers all of its limited liability company interest in the
Company pursuant to this Section 14, the transferee’s admission shall be deemed
effective immediately, prior to the transfer and, immediately following such
admission, the transferor Member shall cease to be a member of the Company. Any
successor to the Member by merger or consolidation in compliance with the Loan
Documents shall, without further act, be the Member hereunder, and such merger
or consolidation shall not constitute an assignment for purposes of this
Agreement and the Company shall continue without dissolution. Notwithstanding
anything to the contrary contained herein, the Member shall not, without the
prior written consent of the Lender, issue and shall not permit the issuance of
any additional limited liability company interests of the Company other than its
initial issuance of limited liability company interests issued on or prior to
the date of this Agreement.
15. Liability of Members. Except as otherwise expressly provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be the debts, obligations and liabilities solely of the
Company, and neither the Member nor the Special Members nor any Director shall
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Special Member or Director of the
Company.
16. Exculpation of Members. Neither the Member nor the Special Members nor any
officer, Director, employee or agent of the Company nor any employee,
representative, agent or Affiliate of the Member or the Special Members
(collectively, the “Covered Persons”) shall be liable to the Company or any
other Person who has an interest in or claim against the Company for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of the authority conferred on such
Covered Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered Persons
gross negligence or willful misconduct.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, all rights and remedies
being governed by said laws, without regard to principles of conflict of laws.

 

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18. Indemnification. To the fullest extent permitted by application law and to
the extent permitted under this Agreement, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such
Covered Person by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered
Person by this Agreement, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person’s gross negligence or willful misconduct
with respect to such acts or omissions; provided, however, that any indemnity
under this Section 18 by the Company shall be provided out of and to the extent
of Company assets only, and the Member and the Special Members shall not have
personal liability on account thereof and provided further, that so long as any
obligation imposed by the Loan Documents is outstanding, no indemnity payment
from funds of the Company (as distinct from funds from other sources, such as
Insurance) of any indemnity under Section 18 shall be payable from amounts
allocable to any other Person pursuant to the Loan Documents.
19. Tax Characterization and Returns. It is the intention of the Member that the
Company be disregarded for federal and all relevant state tax purposes and that
the activities of the Company be deemed to be activities of the Member for such
purposes. All provisions of this Agreement are to be construed so as to preserve
that tax status. The Member is hereby authorized to file any necessary
elections, and shall be required to file any necessary tax returns, on behalf of
the Company with any such tax authorities.
20. Amendments.
(a) Subject to Sections 7 and 20(b) below, this Agreement may only be amended
with approval of all members of the Board of Directors, including, without
limitation, the Independent Directors.
(b) Notwithstanding Section 20(a), this Agreement shall not be amended except in
compliance with the terms of the Loan Documents until the Loan is paid in full.
21. Dissolution; Liquidation; Termination. (a) The Company shall be dissolved,
and its affairs shall be wound up upon the first to occur of the following:
(i) the termination of the legal existence of the last remaining member of the
Company or the occurrence of any other event which terminates the continued
membership of the last remaining member of the Company in the Company unless the
Company is continued without dissolution in a manner permitted by this Agreement
or the Act or (ii) the entry of a decree of judicial dissolution under
Section 18-802 of the Act. Upon the occurrence of any event that causes the last
remaining member of the Company to cease to be a member of the Company or that
causes the Member to cease to be a member of the Company (other than (x) upon an
assignment by Member of all of its limited liability company interest in the
Company and the admission of the transferee, if permitted pursuant to the Loan
Documents, or (y) the resignation of Member and the admission of an additional
member of the Company pursuant to this Agreement, if permitted pursuant to the
Loan Documents), to the fullest extent permitted by law, the personal
representative of such member is hereby authorized to, and shall, within 90 days
after the occurrence of the event that terminated the continued membership of
such member in the Company, agree in writing (i) to continue the Company and
(ii) to the admission of the personal representative or its nominee or designee,
as the case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership of such member
in the Company.

 

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(b) Notwithstanding any other provision of this Agreement, the Member or a
Special Member becoming a Bankrupt Member shall not cause the Member or Special
Member, respectively, to cease to be a member of the Company and upon the
occurrence of such an event, the Company shall continue without dissolution.
(c) Notwithstanding any other provision of this Agreement, each of the Member
and the Special Members waives any right it might have to agree in writing to
dissolve the Company upon the Member or a Special Member becoming a Bankrupt
Member or the occurrence of an event that causes the Member or a Special Member
to cease to be a member of the Company.
(d) In the event of dissolution, the Company shall conduct only such activities
as are necessary to wind up its affairs (including the sale of the assets of the
Company in an orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-804 of the
Act.
(e) The Company shall terminate when (i) all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company shall have been distributed to the Member in the manner provided for in
this Agreement and (ii) the Certificate of Formation shall have been canceled in
the manner required by the Act.
22. To the fullest extent permitted by law, each of the Member and the Special
Members shall irrevocably waive any right or power that they might have to cause
the Company or any of its assets to be partitioned, to cause the appointment of
a receiver for all or any portion of the assets of the Company, to compel any
sale of all or any portion of die assets of the Company pursuant to any
applicable law or to file a complaint or to institute any proceeding at law or
in equity to cause the dissolution, liquidation, winding up or termination of
the Company.
23. Definitions. Whenever used in this Agreement the following terms shall have
the meanings respectively assigned to them in this Section 23 unless otherwise
expressly provided herein or unless the context otherwise requires:
Affiliate: shall mean any other Person that, directly or indirectly, is in
Control of, is Controlled by or is under common Control with such Person or is a
director or officer of such Person or of an Affiliate of such Person.
Agreement: shall mean this Third Amended and Restated Limited Liability Company
Agreement of the Company as the same may be amended or restated from time to
time in accordance with its terms.

 

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Company: shall mean Madison Bar Company LLC, the Delaware limited liability
company continued pursuant to the Act and this Agreement
Control : shall mean with respect to any Person, either (i) ownership directly
or indirectly of forty-nine percent (49%) or more of all equity interests in
such Person or (ii) the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, by contract or otherwise.;
Bankrupt Member: shall mean any member (a) that (i) makes an assignment for the
benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is
adjudged a bankrupt or insolvent or has entered against such member an order for
relief, in any bankruptcy or insolvency proceeding; (iv) files a petition or
answer seeking for the member any reorganization, arrangement composition,
readjustment liquidation, or similar relief under any statute, law or
regulation;, (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the member in any
proceeding of the type described in subclauses (i) through (iv) of this clause
(a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the member or of all or any substantial part of the
member’s properties; or (b) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
statute, law or regulation has been commenced and one hundred twenty (120) days
have expired without dismissal thereof or with respect to which, without the
member’s consent or acquiescence, a trustee, receiver or liquidator of the
member or of all or any substantial part of the member’s properties has been
appointed and ninety (90) days have expired without the appointment having been
vacated or stayed, or ninety (90) days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated. The foregoing is
intended to and shall supersede and replace the events of bankruptcy described
in Sections 18-304(a) and (b) of the Act.
Independent Interest: shall mean a natural person selected by the Company and
reasonably satisfactory to Lender who shall not have been at the time of such
individual’s appointment as an Independent Director, and shall not have been at
any time during the preceding five years (i) a shareholder/partner/member of, or
an officer or employee of, the Company or any of its shareholders, subsidiaries
or Affiliates, (ii) a director (other than as an Independent Director) of any
shareholder, subsidiary or Affiliate of the Company, (iii) a customer of, or
supplier to, the Company or any of its shareholders, subsidiaries or Affiliates
(other than an individual provided by a business that provides independent
directors and corporate services in the ordinary course), (iv) a Person who
Controls any such shareholder, supplier or customer, or (v) a member of the
immediate family of any such shareholder/ director/partner/member, officer,
employee, supplier or customer or of any director of the Company (other than as
an Independent Director). Notwithstanding the foregoing, an Independent Director
may serve in similar capacities for other “special purpose” corporations formed
by the Member or any affiliate thereof. The initial Independent Director of the
Company shall be Kenneth J. Uva.
Management Agreement: shall mean the agreement of the Independent Directors in
the form attached hereto as Schedule B. The Management Agreement shall be deemed
incorporated into, and a part of, this Agreement.

 

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Managing Member: shall mean the Member and any successor Managing Member
appointed pursuant to this Agreement, each in its capacity as a managing member
of the Company.
Member: shall mean Morgans/Delano Pledgor LLC and any Person hereafter admitted
to the Company as a member as provided in this Agreement, each in its capacity
as a member of the Company.
Membership Interest: shall mean the limited liability company interest of the
Member in the Company, including, without limitation, rights in the capital of
the Company, rights to receive distributions (liquidating or otherwise) and
allocations of profits and losses. The Member’s Membership Interest shall be
expressed as a percentage which shall equal the ratio that the value of the
Capital Contributions made by such Member bears to the Capital Contributions of
all members. The Member’s initial Membership Interest shall be one hundred
percent (100%).
Person: means any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unmcorporated association, any other
person or entity, and any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
24. Distributions. Distributions shall be made to the Members at the times and
in the aggregate amounts determined by the Managing Member. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not be
permitted to make a distribution to a member on account of its interest in the
Company if such distribution would violate Section 18-607 of the Act or any
other applicable law or the Loan Documents.
25. Uncertificated Interests. The limited liability company interests in the
Company shall not be evidenced by certificates. The Company shall maintain books
for the purpose of registering the transfer of limited liability company
interests, and, upon any transfer of limited liability company interests in the
Company, the Company shall notify the registered owner of any applicable
restrictions on the transfer of limited liability company interests.
26. Benefits of Agreement; No Third Party Rights. (a) None of the provisions of
this Agreement shall be for the benefit of or enforceable by any creditor of the
Company or by any creditor of the Member or a Special Member and (b) nothing in
this Agreement shall be deemed to create any right in any Person (other than
Covered Persons) not a party hereto, and this Agreement shall not be construed
in any respect to be a contract in whole or in part for the benefit of any third
Person.
27. Binding Agreement. Notwithstanding any other provision of this Agreement,
the Member agrees that this Agreement constitutes a legal, valid and binding
agreement of the Member, and is enforceable against the Member by the
Independent Directors, in accordance with its terms.
28. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and all of which
together shall constitute one and the same instrument.

 

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IN WITNESS WHEREOF, the Member has executed this Agreement effective as of the
date first above written.

            MORGAN/DELANO PLEDGOR LLC
      By:   /s/ Marc S. Gordon         Name:   Marc S. Gordon        Title:  
Authorized Signatory   

          /s/ Kenneth J. Uva
Kenneth J. Uva
Independent Director
   

 

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Schedule A
Board of Directors
Morgans/Delano Pledgor LLC
Kenneth J. Uva

 

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Schedule B
Management Agreement
October 6, 2006
Madison Bar LLC
C/o Morgans Hotel Group LLC
475 Tenth Avenue
New York, New York 10018
Re:      Management Agreement—Madison Bar LLC (the “Company”)
Ladies and Gentlemen;
For good and valuable consideration, the undersigned, who has been designated as
an Independent Director of the Company, in accordance with the Third Amended and
Restated Limited Liability Company Agreement of the Company, dated as of the
date hereof, as it may be amended or restated from time to time (the “LLC
Agreement’’), hereby agrees as follows:
1. The undersigned accepts his rights and authority as an Independent Director
under the LLC Agreement and agrees to perform and discharge his duties and
obligations as an Independent Director under the LLC Agreement, and further
agrees that such rights, authorities, duties and obligations under the LLC
Agreement shall continue until his successor as an Independent Director is
designated or until his resignation or removal as an Independent Director in
accordance with the LLC Agreement. The undersigned agrees and acknowledges that
it has been designated as a “manager” of the Company within the meaning of the
Delaware Limited Liability Company Act.
2. So long as any Obligation is outstanding, the undersigned agrees, solely in
its capacity as a creditor of the Company on account of any indemnification or
other payment owing to the undersigned by the Company, not to acquiesce,
petition or otherwise invoke or cause the Company to invoke the process of any
court or governmental authority for the purpose of commencing or sustaining a
case against the Company under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Company or any substantial part of
the property of the Company, or ordering the winding up or liquidation of the
affairs of the Company.
3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE
GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Initially capitalized terms used and not otherwise defined herein have the
meanings set forth in the LLC Agreement.

 

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IN WITNESS WHEREOF, the undersigned has executed this management Agreement as of
the day and year first above written.

     
/s/ Kenneth J. Uva
 
Kenneth J. Uva
   

 

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EXHIBIT B-6
Operating Agreement for Royalton Pledgor LLC
See attached.

 

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THE TRANSFER OF THE LIMITED LIABILITY COMPANY INTERESTS DESCRIBED IN THIS
AGREEMENT IS RESTRICTED AS DESCRIBED HEREIN.
THIRD AMENDED AND RESTATED LIMITED
LIABILITY COMPANY AGREEMENT
OF
ROYALTON PLEDGOR LLC
This Third Amended and Restated Limited Liability Company Agreement (this
“Agreement”) of ROYALTON PLEDGOR LLC, a Delaware limited liability company (the
“Company”), is adopted and entered into as of August _________, 2009, by
(i) Morgans Group LLC, a Delaware limited liability company, as managing member
(the “Managing Member” or “Member”, and in the event an additional person or
persons shall become members, the term “Members” shall include such other
persons who shall become members of the Company in accordance with the terms of
this Agreement, provided, however, the term “Member” shall not include the
“Special Members” as hereinafter defined), and (ii) Kenneth J. Uva, as the
Independent Director, pursuant to and in accordance with the Delaware Limited
Liability Company Act, 6 Del. C. §§18-101 et seq, as amended from time to time
(the “Act”). Terms used in this Agreement which are not otherwise defined shall
have the respective meanings given those terms in the Act or in Section 23
hereof.
WHEREAS, the Company was formed on August 10, 2004 pursuant to a Certificate of
Formation filed with the Secretary of State of the State of Delaware (as amended
or amended and restated from time to time, the “Certificate of Formation”); and
WHEREAS, the Member entered into that certain Limited Liability Company
Agreement of the Company on August 13,2004, as amended, restated or modified
through the date hereof, including on October 6, 2006 (as so amended and
restated the “Original Agreement”); and
WHEREAS, the Member is the sole member of the Company; and
WHEREAS, the Member and the Independent Director desire to amend and restate the
terms of the Original Agreement in the manner provided herein.
The parties hereto hereby agree as follows:
1. Name; Formation. The name of the limited liability company is ROYALTON
PLEDGOR LLC. The Certificate of Formation of the Company was filed for record in
the office of the Secretary of State of the State of Delaware on August 10,
2004, in accordance with the Act, by Deborah Reusch, an authorized person within
the meaning of the Act. Upon the filing of the Certificate of Formation with the
Secretary of State of the State of Delaware, her powers as an “authorized
person” ceased, and the Member thereupon became the designated “authorized
person” and shall continue as the designated “authorized person” within the
meaning of the Act. The Member, as an authorized person, within the meaning of
the Act, shall execute, deliver and file, or cause the execution, delivery and
filing of, all certificates (and any amendments and/or restatements thereof)
required or permitted by the Act to be filed with the Secretary of State of the
State of Delaware. The Member shall execute, deliver and file, or cause the
execution, delivery and filing of any certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in any
other jurisdiction in which the Company may wish to conduct business. The terms
and provisions of the Original Agreement are hereby amended and restated in
their entirety as set forth herein.
Royalton Pledgor LLC — Third Amended & Restated Operating Agreement

 

 

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2. Term. The Company shall dissolve on December 31, 2048 unless dissolved before
such date in accordance with this Agreement. The existence of the Company as a
separate legal entity shall continue until cancellation of the Certificate of
Formation as provided in the Act.
3. Management; Board of Directors. Except as otherwise specifically provided in
this Agreement, the management of the Company shall be vested in the Managing
Member who shall manage the Company in accordance with the Act.
(a) Until “Full Payment” of the “Obligations” (as such terms are defined in the
Credit Agreement hereinafter defined), the Company shall have a board of
managers which shall be designated as the Company’s “Board of Directors” and
each member of the Board of Directors shall be designated as a “Director.” The
Board of Directors shall only have the authority expressly set forth in this
Agreement. The Directors are “managers” within the meaning of the Act with only
such duties and rights as are expressly set forth in this Agreement. The initial
members of the Board of Directors shall be set forth on Schedule A attached
hereto. Members of the Board of Directors may be appointed and removed from time
to time by the Managing Member, in its sole discretion, provided, however, that
until Full Payment of the Obligations, the Company shall have at least one
Independent Director on the Board of Directors. The Board of Directors shall
hold meetings, at such times and places to be designated by the Managing Member.
(b) Intentionally omitted.
(c) Until Full Payment of the Obligations, the Company may take the following
actions only with approval of the Managing Member and unanimous approvals of all
members of the Board of Directors, including, without limitation, the
Independent Director.
(i) make any assignment for the benefit of the Company’s creditors;
(ii) file, or consent to or acquiesce in the filing of or a petition in, a
bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under laws relating to the
relief from debts or the protection of debtors generally;
(iii) seek or consent to or acquiesce in the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Company or for all or any portion of the Company’s properties;
Royalton Pledgor LLC — Third Amended & Restated Operating Agreement

 

 

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(iv) admit in writing its inability to pay its debts generally as they become
due;
(v) take any action that might cause the Company to become insolvent;
(vi) except as permitted by Section 20, amend this Agreement;
(vii) to the fullest extent permitted by law, voluntarily dissolve and wind up,
or consolidate or merge the Company or sell all or substantially all of the
assets of the Company;
(viii) engage in any business activity not set forth in Section 5 of this
Agreement.
To the fullest extent permitted by applicable law, no member of the Board of
Directors shall be guilty of breaching any fiduciary duty to any Member by
refusing to consent to any of the above listed actions.
(d) Notwithstanding anything in this Agreement, to the fullest extent permitted
by law, until Full Payment of the Obligations, the Company may not take any of
the actions set forth in Subsection (vii) of Subparagraph (c) of this Section 3.
(e) To the fullest extent permitted by law, including Section 18-1101(c) of the
Act, the Independent Director shall consider only the interests of the Company,
including its respective creditors, in acting or otherwise voting on the matters
referred to in Section 3(c). No resignation or removal of the Independent
Director, and no appointment of a successor Independent Director, shall be
effective until such successor (i) shall have accepted his or her appointment as
an Independent Director by a written instrument, which may be a counterpart
signature page to the Management Agreement, and (ii) shall have executed a
counterpart to this Agreement as required by Section 8(a). In the event of a
vacancy in the position of Independent Director, the Managing Member shall, as
soon as practicable, appoint a successor Independent Director. All right, power
and authority of the Independent Director shall be limited to the extent
necessary to exercise those rights and perform those duties specifically set
forth in this Agreement. Except as provided in the first sentence of this
Section 3(e), in exercising his rights and performing his duties under this
Agreement, the Independent Director shall have a fiduciary duty of loyalty and
care similar to that of a director of a business corporation organized under the
General Corporation Law of the State of Delaware. The Independent Director shall
at any time serve as trustee in bankruptcy for any Affiliate of the Company. The
Independent Director shall execute and deliver the Management Agreement. The
Independent Director designated by the Managing Member shall continue to be
Kenneth J. Uva. Unless otherwise restricted by law, the Independent Director may
be removed or expelled, with or without cause, at any time by the Managing
Member, and, subject to this Section 3, any vacancy caused by any such removal
or expulsion may be filled by action of the Managing Member provided that any
replacement Independent Director fulfills the requirements of being an
Independent Director hereunder.
Royalton Pledgor LLC — Third Amended & Restated Operating Agreement

 

 

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4. Authority. Except as otherwise provided herein and subject to Section 3, the
management of the Company shall be vested solely in the Member, who shall have
all powers to control and manage the business and affairs of the Company and may
exercise all powers of the Company. Subject to Sections 3, 5 and 7, the Managing
Member is authorized to (i) execute any and all documents and agreements on
behalf of the Company, and to engage in all activities related thereto; and
(ii) execute any and all agreements, affidavits and indemnities necessary or
appropriate to effectuate any and all transactions of the Company. The Company,
by or through the Managing Member on behalf of the Company, may enter into and
perform the Loan Documents (as defined herein) and all documents, agreements,
certificates, or financing statements contemplated thereby or related thereto,
all without any further act, vote or approval of any other Person
notwithstanding any other provision of this Agreement, the Act or applicable
law, rule or regulation. The foregoing authorization shall not be deemed a
restriction on the powers of the Managing Member to enter into other agreements
on behalf of the Company, subject to Section 5 and Section 6.
5. Purpose. The purpose of the Company is solely to:
(a) own, hold and maintain 100% of the limited liability company interests in 43
Restaurant LLC (the “LLC Interests”), together with such other activities as may
be necessary or advisable in connection with the LLC Interests in accordance
with the Loan Documents;
(b) give security for and guarantee the loans and other credit facilities
provided pursuant to the Credit Agreement dated as of October 6, 2006 among
Morgans Group LLC (“Borrower”), Beach Hotel Associates, LLC, Morgans Holdings
LLC, Royalton, LLC, Morgans Hotel Group Co., Wachovia Bank, National
Association, as Administrative Agent (the “Agent”). Citigroup Global Markets,
Inc., as Syndication Agent, and certain other financial institutions party
thereto, as amended by First Amendment to Credit Agreement dated as of
November 10, 2006, Second Amendment to Credit Agreement dated as of January 8,
2007, Third Amendment to Credit Agreement dated as of October 10, 2007, Fourth
Amendment to Credit Agreement dated as of January 16, 2008, and Fifth Amendment
to Credit Agreement; and Waiver Agreement dated as of August ________, 2009, and
as the same may be further amended, restated, supplemented or otherwise modified
from time to time (collectively, the “Credit Agreement”), and the other “Loan
Documents” as defined in the Credit Agreement;
(c) give security for the Obligations under the Loan Documents or for any other
indebtedness to the extent not prohibited by the Loan Documents; and
(d) refinance the Obligations and grant security interests to secure same, to
the extent same is not a violation of the Loan Documents.
6. Company Business. The Company shall not engage in any business unrelated to
the ownership of the LLC Interests and shall not own any assets other than those
related to the LLC Interests or otherwise in furtherance of the purposes of the
Company. The Company shall not incur any indebtedness other than the
indebtedness under the Loan Documents, related to the LLC Interests or otherwise
provided herein or permitted under the Loan Documents.
Royalton Pledgor LLC — Third Amended & Restated Operating Agreement

 

 

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7. Separateness Covenants. Notwithstanding anything to the contrary contained
herein (except the penultimate sentence of Section 4), for so long as any
portion of the Obligations is outstanding, the Company shall conduct its affairs
in accordance with the following provisions:
(a) It shall be a limited liability company organized solely for the purpose of
owning the LLC Interests
(b) It shall not own any assets other than those related to the LLC Interests.
(c) To the fullest extent permitted by law, (i) it shall not engage in, seek or
consent to any dissolution, winding up, or liquidation, (ii) it shall not engage
in any consolidation, merger, or asset sale (except as permitted in the Loan
Documents or if there is Full Payment of the Obligations), (iii) it shall not
transfer any limited liability company interests in the Company (except as
expressly provided in the Loan Documents or with the written consent of the
Agent) and (iv) it shall not further amend this Agreement or the Certificate of
Formation (except as required by law).
(d) It shall remain solvent and maintain adequate capital in light of its
contemplated business operations, provided, however, the foregoing shall not
require the Member to make any additional capital contributions to the Company.
(e) It shall not fail to correct any known misunderstanding regarding the
separate identity of such entity.
(f) It shall maintain its accounts, books and records separate from any other
Person other than the Loan Parties (as defined in the Credit Agreement) and
shall file its own tax returns.
(g) It shall maintain its books, records, resolutions and agreements as official
records.
(h) It shall not commingle its funds or assets with those of any other Person
other than the Loan Parties.
(i) It shall hold its assets in its own name.
(j) Intentionally omitted.
(k) It shall maintain its financial statements, accounting records and other
entity documents separate from any other Person, except that its financial
statements may be consolidated with those of Morgans Hotel Group Co. (the
“Parent”), other Loan Parties or their consolidated Subsidiaries.
(l) It shall pay its own liabilities, including the salaries of its own
employees, out of funds and assets of its own or of any Loan Party, provided,
however, the foregoing shall not require the Member to make any additional
capital contributions to the Company.
Royalton Pledgor LLC — Third Amended & Restated Operating Agreement

 

 

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(m) It shall observe all limited liability company formalities.
(n) It shall maintain an arm’s-length relationship with its Affiliates to the
extent required by the Loan Documents.
(o) It shall have no indebtedness other than the Obligations and indebtedness
permitted under the Loan Documents, related to the LLC Interests or otherwise
provided herein.
(p) It shall not assume or guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person except for the obligations of the Loan Parties
or obligations under the Loan Documents.
(q) It shall not acquire obligations or securities of its members.
(r) It shall allocate fairly and reasonably shared expenses, including
shared office space.
(s) It shall not pledge its assets to secure obligations, other than in its
capacity as a pledgor, grantor, or guarantor under the Loan Documents or in
connection with providing security therefor.
(t) Intentionally omitted.
(u) It shall maintain its assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any other Person;
(v) It shall not make loans to any Person other than to any affiliate that is a
Loan Party to the extent permitted by the Credit Agreement.
(w) Intentionally omitted.
(x) It shall not enter into or be a party to, any transaction with its members
or Affiliates except as permitted pursuant to the Loan Documents.
(y) Except as set forth in this Agreement, it shall have no obligation to
indemnify its partners, officers, directors or members, as the case may be,
unless such obligation is fully subordinated to the Obligations and will not
constitute a claim against it if cash flow in excess of the amount required to
pay the Debt is insufficient to pay such obligation.
(z) To the fullest extent permitted by law, it shall consider the interests of
its creditors in connection with all limited liability company actions.
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(aa) It shall not engage in any business unrelated to the ownership of the LLC
Interests.
Failure to comply with any of the foregoing covenants shall not affect the
status of the Company as a separate legal entity.
This Section 7 is being adopted in order to comply with certain provisions
required in order to qualify the Company as a “special purpose” entity.
8. Members. The name and the business, residence or mailing address of the
Member is as follows:

        Name   Address    
MORGANS GROUP LLC 
  475 Tenth Avenue  
 
  New York, New York 10018  

(a) Notwithstanding any provision in this Agreement to the contrary, upon the
occurrence of any event that causes the Member to cease to be a member of the
Company (other than (x) upon an assignment by the Member of all of its limited
liability company interest in the Company and the admission of the transferee,
if permitted pursuant to Loan Documents or (y) the resignation of the Member and
the admission of an additional member of the Company pursuant to this Agreement,
if permitted by the Loan Documents), each Person acting as an Independent
Director shall, without any action of any Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the
Company as a member of the Company (the “Special Member”) and shall preserve and
continue the Company without dissolution. No Special Member may resign from the
Company or transfer its rights as Special Member unless (i) a successor Special
Member has been admitted to the Company as Special Member by executing a
counterpart to this Agreement, and (ii) such successor has also accepted its
appointment as Independent Director by executing a counterpart to the Agreement
and the Management Agreement; provided, however, the Special Members shall
automatically cease to be members of the Company upon the admission to the
Company of a substitute Member but shall not thereby cease to be Independent
Directors. Each Special Member shall be a member of the Company that has no
interest in the profits, losses and capital of the Company and has no right to
receive any distributions of Company assets. Pursuant to Section 18-301 of the
Act, a Special Member shall not be required to make any capital contributions to
the Company and shall not receive a limited liability company interest in the
Company. A Special Member, in its capacity as Special Member, may not bind the
Company. Except as required by any mandatory provision of the Act, each Special
Member, in its capacity as Special Member, shall have no right to vote on,
approve or otherwise consent to any action by, or matter relating to, the
Company, including, without limitation, the merger, consolidation or conversion
of the Company. In order to implement the future, contingent admission to the
Company of each Special Member, each Person acting as an Independent Director
shall execute a counterpart to this Agreement. Prior to its admission to the
Company as Special Member, each Person acting as an Independent Director shall
not be a member of the Company,
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9. Membership Interests. The Managing Member shall have and own 100% of the
Membership Interests.
10. Capital Contributions. Any Member may make one or more capital contributions
to the Company provided, however, any capital contribution will only be made
with the consent of the Member making such contribution.
11. Capital Accounts. The capital accounts of each Member shall be allocated in
accordance with their capital contributions and shall be maintained in
accordance with Section 704(b) of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder.
12. Admission of Additional Members by the Company. One or more additional
Members of the Company may be admitted to the Company with the unanimous vote or
written consent of all of the Members; provided, however, no additional Member
may be admitted to the Company as a Member of the Company, other than pursuant
to Sections 8(a) or 21(a), unless the Agent consents in writing.
13. Resignation of the Member. No Member may resign from the Company as a Member
of the Company unless a substitute Member or a transferee of such Member’s
interest is admitted as a Member of the Company in accordance with the terms
herein.
14. Assignments; Rights of Assignee To Become a Member. Until such time as Full
Payment of the Obligations has occurred, the Managing Member shall not, except
as expressly permitted by the Loan Documents, take any action to sell, transfer,
exchange, convey, encumber or dispose of any of its Membership Interest. Subject
to the foregoing sentence, if the Member transfers all of its limited liability
company interest in the Company pursuant to this Section 14, the transferee’s
admission shall be deemed effective immediately prior to the transfer and,
immediately following such admission, the transferor Member shall cease to be a
member of the Company. Any successor to the Member by merger or consolidation in
compliance with the Loan Documents shall, without further act, be the Member
hereunder, and such merger or consolidation shall not constitute an assignment
for purposes of this Agreement and the Company shall continue without
dissolution. Notwithstanding anything to the contrary contained herein, the
Member shall not, without the prior written consent of the Agent, issue and
shall not permit the issuance of any additional limited liability company
interests of the Company other than its initial issuance of limited liability
company interests issued on or prior to the date of this Agreement.
15. Liability of Members. Except as otherwise expressly provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be the debts, obligations and liabilities solely of the
Company, and neither the Member nor the Special Members nor any Director shall
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Special Member or Director of the
Company.
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16. Exculpation of Members. Neither the Member nor the Special Member nor any
officer, Director, employee or agent of the Company nor any employee,
representative, agent or Affiliate of the Member or the Special Member
(collectively, the “Covered Persons”) shall be liable to the Company or any
other Person who has an interest in or claim against the Company for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of the authority conferred on such
Covered Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered Persons
gross negligence or willful misconduct.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, all rights and remedies
being governed by said laws, without regard to principles of conflict of laws.
18. Indemnification. To the fullest extent permitted by applicable law and to
the extent permitted under this Agreement, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such
Covered Person by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered
Person by this Agreement, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person’s gross negligence or willful misconduct
with respect to such acts or omissions; provided, however, that any indemnity
under this Section 18 by the Company shall be provided out of and to the extent
of Company assets only, and the Member and the Special Members shall not have
personal liability on account thereof; and provided further, that so long as any
obligation imposed by the Loan Documents is outstanding, no indemnity payment
from funds of the Company (as distinct from funds from other sources, such as
insurance) of any indemnity under Section 18 shall be payable from amounts
allocable to any other Person pursuant to the Loan Documents.
19. Tax Characterization and Returns. It is the intention of the Member that the
Company be disregarded for federal and all relevant state tax purposes and that
the activities of the Company be deemed to be activities of the Member for such
purposes. All provisions of this Agreement are to be construed so as to preserve
that tax status. The Member is hereby authorized to file any necessary
elections, and shall be required to file any necessary tax returns, on behalf of
the Company with any such tax authorities.
20. Amendments.
(a) Subject to Sections 7 and 20(b) below, Sections 3, 5,6, 7, 8(a) and 20 of
this Agreement may only be amended with approval of the Managing Member and all
members of the Board of Directors, including, without limitation, the
Independent Directors.
(b) Notwithstanding Section 20(a) this Agreement shall not be amended except in
compliance with the Loan Documents until Full Payment of the Obligations.
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21. Dissolution; Liquidation; Termination. (a) The Company shall be dissolved,
and its affairs shall be wound up upon the first to occur of the following;
(i) the termination of the legal existence of the last remaining member of the
Company or the occurrence of any other event which terminates the continued
membership of the last remaining member of the Company in the Company unless the
Company is continued without dissolution in a manner permitted by this Agreement
or the Act or (ii) the entry of a decree of judicial dissolution under
Section 18-802 of the Act. Upon the occurrence of any event that causes the last
remaining member of the Company to cease to be a member of the Company or that
causes the Member to cease to be a member of the Company (other than (x) upon an
assignment by Member of all of its limited liability company interest in the
Company and the admission of the transferee, if permitted pursuant to the Loan
Documents, or (y) the resignation of Member and the admission of an additional
member of the Company pursuant to this Agreement, if permitted pursuant to the
Loan Documents), to the fullest extent permitted by law, the personal
representative of such member is hereby authorized to, and shall, within 90 days
after the occurrence of the event that terminated the continued membership of
such member in the Company, agree in writing (i) to continue the Company and
(ii) to the admission of the personal representative or its nominee or designee,
as the case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership of such member
in the Company.
(b) Notwithstanding any other provision of this Agreement, the Member or a
Special Member becoming a Bankrupt Member shall not cause the Member or Special
Member, respectively, to cease to be a member of the Company and upon the
occurrence of such an event, the Company shall continue without dissolution.
(c) Notwithstanding any other provision of this Agreement, each of the Member
and the Special Members waives any right it might have to agree in writing to
dissolve the Company upon the Member or a Special Member becoming a Bankrupt
Member or the occurrence of an event that causes the Member or a Special Member
to cease to be a member of the Company.
(d) In the event of dissolution, the Company shall conduct only such activities
as are necessary to wind up its affairs (including the sale of the assets of the
Company in an orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-804 of the
Act.
(e) The Company shall terminate when (i) all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company shall have been distributed to the Member in the manner provided for in
this Agreement and (ii) the Certificate of Formation shall have been canceled in
the manner required by the Act.
(f) To the fullest extent permitted by law, each of the Member and the Special
Members shall irrevocably waive any right or power that they might have to cause
the Company or any of its assets to be partitioned, to cause the appointment of
a receiver for all or any portion of the assets of the Company, to compel any
sale of all or any portion of the assets of the Company pursuant to any
applicable law or to file a complaint or to institute any proceeding at law or
in equity to cause the dissolution, liquidation, winding up or termination of
the Company.
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22. Entire Agreement. This Agreement contains the entire understanding between
the parties and supersedes any prior understandings or agreements between them
respecting the within subject matter. There are no representations, agreements,
arrangements or understandings, oral or written, between the parties hereto
relating to the subject matter of this Agreement which are not fully expressed
herein.
23. Definitions. Whenever used in this Agreement the following terms shall have
the meanings respectively assigned to them in this Section 23 unless otherwise
expressly provided herein or unless the context otherwise requires:
Affiliate: shall mean any other Person that, directly or indirectly, is in
Control of, is Controlled by or is under common Control with such Person or is a
director or officer of such Person or of an Affiliate of such Person.
Agreement: shall mean this Third Amended and Restated Limited Liability Company
Agreement of the Company as the same may be amended or restated from time to
time in accordance with its terms.
Bankrupt Member: shall mean any member (a) that (i) makes an assignment for the
benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is
adjudged a bankrupt or insolvent, or has entered against such member an order
for relief, in any bankruptcy or insolvency proceeding; (iv) files a petition or
answer seeking for the member any reorganization, arrangement, composition,
readjustment, liquidation, or similar relief under any statute, law or
regulation; (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the member in any
proceeding of the type described in subclauses (i) through (iv) of this clause
(a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the member or of all or any substantial part of the
member’s properties; or (b) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
statute, law or regulation has been commenced and one hundred twenty (120) days
have expired without dismissal thereof or with respect to which, without the
member’s consent or acquiescence, a trustee, receiver or liquidator of the
member or of all or any substantial part of the member’s properties has been
appointed and ninety (90) days have expired without the appointment having been
vacated or stayed, or ninety (90) days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated. The foregoing is
intended to and shall supersede and replace the events of bankruptcy described
in Sections 10-304(a) and (b) of the Act.
Company: shall mean Royalton Pledgor LLC, the Delaware limited liability company
continued pursuant to the Act and this Agreement.
Control: shall mean with respect to any Person, either (i) ownership directly or
indirectly of forty-nine percent (49%) or more of all equity interests in such
Person or (ii) the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, by contract or otherwise.
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Independent Director: shall mean a natural person selected by the Company and
reasonably satisfactory to Agent who shall not have been at the time of such
individual’s appointment as an Independent Director, and shall not have been at
any time during the preceding five years (i) a shareholder/partner/member of, or
an officer or employee of, the Company or any of its shareholders, subsidiaries
or Affiliates, (ii) a director (other than as an Independent Director) of any
shareholder, subsidiary or Affiliate of the Company, (iii) a customer of, or
supplier to, the Company or any of its shareholders, subsidiaries or Affiliates
(other than an individual provided by a business that provides independent
directors and corporate services in the ordinary course), (iv) a Person who
Controls any such shareholder, supplier or customer, or (v) a member of the
immediate family of any such shareholder/director/partner/member, officer,
employee, supplier or customer or of any director of the Company (other than as
an Independent Director). Notwithstanding the foregoing, an Independent Director
may serve in similar capacities for other “special purpose” corporations formed
by the Member or any affiliate thereof. The initial Independent Director of the
Company shall be Kenneth J. Uva.
Management Agreement: shall mean the agreement of the Independent Directors in
the form attached hereto as Schedule B. The Management Agreement shall be deemed
incorporated into, and a part of, this Agreement.
Managing Member: shall mean the Member and any successor Managing Member
appointed pursuant to this Agreement, each in its capacity as a managing member
of the Company;
Member: shall mean Morgans Group LLC and any Person hereafter admitted to the
Company as a member as provided in this Agreement, each in its capacity as a
member of the Company; provided, however, the term “Member” shall not include
the Special Members.
Membership Interest: shall mean the limited liability company interest of the
Member in the Company, including, without limitation, rights in the capital of
the Company, rights to receive distributions (liquidating or otherwise) and
allocations of profits and losses. The Member’s Membership Interest shall be
expressed as a percentage which shall equal the ratio that the value of the
Capital Contributions made by such Member bears to the Capital Contributions of
all members. The Member’s initial Membership Interest shall be one hundred
percent (100%).
Person: means any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unincorporated association, any other
person or entity, and any federal, state, county or municipal government or any
bureau, department or agency thereof and any Fiduciary acting in such capacity
on behalf of any of the foregoing.
24. Distributions. Distributions shall be made to the Members at the times and
in the aggregate amounts determined by the Managing Member. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not be
permitted to make a distribution to a member on account of its interest in the
Company if such distribution would violate Section 18-607 of the Act or any
other applicable law or the Loan Documents.
25. Uncertificated Interests. The limited liability company interests in the
Company shall not be evidenced by certificates. The Company shall maintain books
for the purpose of registering the transfer of limited liability company
interests, and, upon any transfer of limited liability company interests in the
Company, the Company shall notify the registered owner of any applicable
restrictions on the transfer of limited liability company interests.
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26. Benefits of Agreement; No Third Party Rights. (a) None of the provisions of
this Agreement shall be for the benefit of or enforceable by any creditor of the
Company or by any creditor of the Member or a Special Member and (b) nothing in
this Agreement shall be deemed to create any right in any Person (other than
Covered Persons) not a party hereto, and this Agreement shall not be construed
in any respect to be a contract in whole or in part for the benefit of any third
Person.
27. Binding Agreement. Notwithstanding any other provision of this Agreement,
the Member agrees that this Agreement constitutes a legal, valid and binding
agreement of the Member, and is enforceable against the Member by the
Independent Directors, in accordance with its terms.
28. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Member has executed this Agreement effective as of the
date first above written.

            MORGANS GROUP LLC
      By:   Morgans Hotel Group Co.             By:           Name:   Richard
Szymanski        Title:   Chief Financial Officer and Secretary   

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                  Kenneth J. Uva      Independent Director   

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Schedule A
Board of Directors
Morgans Group LLC
Kenneth J. Uva
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Schedule B

Management Agreement
October 6, 2006
Royalton Pledgor LLC
C/o Morgans Hotel Group LLC
475 Tenth Avenue
New York, New York 10018
Re: Management Agreement-Royalton Pledgor LLC (the “Company”)
Ladies and Gentlemen:
For good and valuable consideration, the undersigned, who has been designated as
an Independent Director of the Company, in accordance with the Second Amended
and Restated Limited Liability Company Agreement of the Company, dated as of the
date hereof, as it may be amended or restated from time to time (the “LLC
Agreement”), hereby agrees as follows:
1. The undersigned accepts his rights and authority as an Independent Director
under the LLC Agreement and agrees to perform and discharge his duties and
obligations as an Independent Director under the LLC Agreement, and further
agrees that such rights, authorities, duties and obligations under the LLC
Agreement shall continue until his successor as an Independent Director is
designated or until his resignation or removal as an Independent Director in
accordance with the LLC Agreement. The undersigned agrees and acknowledges that
it has been designated as a “manager” of the Company within the meaning of the
Delaware Limited Liability Company Act.
2. So long as any Obligation is outstanding, the undersigned agrees, solely in
its capacity as a creditor of the Company on account of any indemnification or
other payment owing to the undersigned by the Company, not to acquiesce,
petition or otherwise invoke or cause the Company to invoke the process of any
court or governmental authority for the purpose of commencing or sustaining a
case against the Company under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Company or any substantial part of
the property of the Company, or ordering the winding up or liquidation of the
affairs of the Company.
3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE
GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
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Initially capitalized terms used and not otherwise defined herein have the
meanings set forth in the LLC Agreement.
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IN WITNESS WHEREOF, the undersigned has executed this Management Agreement as of
the day and year first above written.

     
 
   
Kenneth J. Uva
   

[Signature Page to Management Agreement]
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EXHIBIT B-7
Operating Agreement for 43rd Restaurant LLC
See attached.

 

 

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THE TRANSFER OF THE LIMITED LIABILITY COMPANY INTERESTS
DESCRIBED IN THIS AGREEMENT IS RESTRICTED AS DESCRIBED HEREIN.
FIFTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT
OF
43rd RESTAURANT LLC
This Fifth Amended and Restated Limited Liability Company Agreement (this
“Agreement”) of 43rd RESTAURANT LLC, a Delaware limited liability company (the
“Company”), is adopted and entered into as of August  , 2009, by (i) Royalton
Pledgor LLC, a Delaware limited liability company, as managing member (the
“Managing Member” or “Member”, and in the event an additional person or persons
shall become members, the term “Members” shall include such other persons who
shall become members of the Company in accordance with the terms of this
Agreement, provided, however, the term “Member” shall not include the “Special
Members” as hereinafter defined), and (ii) Kenneth J. Uva, as the Independent
Director, pursuant to and in accordance with the Delaware Limited Liability
Company Act, 6 Del, C. § 18-101 et seq, as amended from time to time (the
“Act”). Terms used in this Agreement which are not otherwise defined shall have
the respective meanings given those terms in the Act or in Section 23 hereof.
WHEREAS, the Company was formed on May 2, 2004 pursuant to a Certificate of
Formation filed with the Secretary of State of the State of Delaware (as amended
or amended and restated from time to time, the “Certificate of Formation”); and
WHEREAS, the Member continued the Company pursuant to that certain Amended and
Restated Limited Liability Company Agreement on August 13, 2004, as amended,
restated or modified through the date hereof, including on October 6, 2006 (as
so amended and restated, the “Original Agreement”); and
WHEREAS, the Member desires to amend and restate the terms of the Original
Agreement in the manner provided herein.
The parties hereto hereby agree as follows:
1. Name; Formation. The name of the limited liability company is 43rd RESTAURANT
LLC. The Certificate of Formation of the Company was filed for record in the
office of the Secretary of State of the State of Delaware on May 2, 2000, in
accordance with the Act, by Deborah Reusch, an authorized person within the
meaning of the Act. Upon the filing of the Certificate of Formation with the
Secretary of State of the State of Delaware, her powers as an “authorized
person” ceased, and the Member thereupon became the designated “authorized
person” and shall continue as the designated “authorized person” within the
meaning of the Act. The Member, as an authorized person, within the meaning of
the Act, shall execute, deliver and file, or cause the execution, delivery and
filing of, all certificates (and any amendments and/or restatements thereof)
required or permitted by the Act to be filed with the Secretary of State of the
State of Delaware. The Member shall execute, deliver and file, or cause the
execution, delivery and filing of any certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in any
other jurisdiction in which the Company may wish to conduct business. The terms
and provisions of the Original Agreement are hereby amended and restated in
their entirety as set forth herein.
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2. Term. The Company shall dissolve on December 31, 2048 unless dissolved before
such date in accordance with this Agreement. The existence of the Company as a
separate legal entity shall continue until cancellation of the Certificate of
Formation as provided in the Act.
3. Management; Board of Directors. Except as otherwise specifically provided in
this Agreement, the management of the Company shall be vested in the Managing
Member who shall manage the Company in accordance with the Act.
(a) Until “Full Payment” of the “Obligations” (as such terms are defined in the
Credit Agreement hereinafter defined), the Company shall have a board of
managers which shall be designated as the Company’s “Board of Directors” and
each member of the Board of Directors shall be designated as a “Director.” The
Board of Directors shall only have the authority expressly set forth in this
Agreement. The Directors are “managers” within the meaning of the Act with only
such duties and rights as are expressly set forth in this Agreement. The initial
members of the Board of Directors shall be set forth on Schedule A attached
hereto. Members of the Board of Directors may be appointed and removed from time
to time by the Managing Member, in its sole discretion, provided, however, that
until Full Payment of the Obligations, the Company shall have at least one
Independent Director on the Board of Directors. The Board of Directors shall
hold meetings, at such times and places to be designated by the Managing Member.
(b) Intentionally omitted.
(c) Until Full Payment of the Obligations, the Company may take the following
actions only with approval of the Managing Member and unanimous approvals of all
members of the Board of Directors, including, without limitation, the
Independent Director.
(i) make any assignment for the benefit of the Company’s creditors;
(ii) file, or consent to or acquiesce in the filing of or a petition in, a
bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under laws relating to the
relief from debts or the protection of debtors generally;
(iii) seek or consent to or acquiesce in the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Company or for all or any portion of the Company’s properties;
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(iv) admit in writing its inability to pay its debts generally as they become
due;
(v) take any action that might cause the Company to become insolvent;
(vi) except as permitted by Section 20, amend this Agreement;
(vii) to the fullest extent permitted by law, voluntarily dissolve and wind up,
or consolidate or merge the Company or sell all or substantially all of the
assets of the Company;
(viii) engage in any business activity not set forth in Section 5 of this
Agreement.
To the fullest extent permitted by applicable law, no member of the Board of
Directors shall be guilty of breaching any fiduciary duty to any Member by
refusing to consent to any of the above listed actions.
(d) Notwithstanding anything in this Agreement, to the fullest extent permitted
by law, until Full Payment of the Obligations, the Company may not take any of
the actions set forth in Subsection (vii) of Subparagraph (c) of this Section 3.
(e) To the fullest extent permitted by law, including Section 18-1101(c) of the
Act, the Independent Director shall consider only the interests of the Company,
including its respective creditors, in acting or otherwise voting on the matters
referred to in Section 3(c). No resignation or removal of the Independent
Director, and no appointment of a successor Independent Director, shall be
effective until such successor (i) shall have accepted his or her appointment as
an Independent Director by a written instrument, which may be a counterpart
signature page to the Management Agreement, and (ii) shall have executed a
counterpart to this Agreement as required by Section 8(a). In the event of a
vacancy in the position of Independent Director, the Managing Member shall, as
soon as practicable, appoint a successor Independent Director. All right, power
and authority of the Independent Director shall be limited to the extent
necessary to exercise those rights and perform those duties specifically set
forth in this Agreement. Except as provided in the first sentence of this
Section 3(e), in exercising his rights and performing his duties under this
Agreement, the Independent Director shall have a fiduciary duty of loyalty and
care similar to that of a director of a business corporation organized under the
General Corporation Law of the State of Delaware. The Independent Director shall
at any time serve as trustee in bankruptcy for any Affiliate of the Company. The
Independent Director shall execute and deliver the Management Agreement. The
Independent Director designated by the Managing Member shall continue to be
Kenneth J. Uva. Unless otherwise restricted by law, the Independent Director may
be removed or expelled, with or without cause, at any time by the Managing
Member, and, subject to this Section 3, any vacancy caused by any such removal
or expulsion may be filled by action of the Managing Member provided that any
replacement Independent Director fulfills the requirements of being an
Independent Director hereunder.
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4. Authority. Except as otherwise provided herein and subject to Section 3, the
management of the Company shall be vested solely in the Member, who shall have
all powers to control and manage the business and affairs of the Company and may
exercise all powers of the Company. Subject to Sections 3, 5 and 7, the Managing
Member is authorized to (i) execute any and all documents and agreements on
behalf of the Company, and to engage in all activities related thereto; and
(ii) execute any and all agreements, affidavits and indemnities necessary or
appropriate to effectuate any and all transactions of the Company. The Company,
by or through the Managing Member on behalf of the Company, may enter into and
perform the Loan Documents (as defined herein) and all documents, agreements,
certificates, or financing statements contemplated thereby or related thereto,
all without any further act, vote or approval of any other Person
notwithstanding any other provision of this Agreement, the Act or applicable
law, rule or regulation. The foregoing authorization shall not be deemed a
restriction on the powers of the Managing Member to enter into other agreements
on behalf of the Company, subject to Section 5 and Section 6.
5. Purpose. The purpose of the Company is solely to:
(a) establish, own, operate and manage the restaurant and bars located in the
Royalton Hotel, 44 West 44th Street, New York, New York (collectively, the
“Bar”), together with such other activities as may be necessary or advisable in
connection with the ownership of the Bar in accordance with the Loan Documents;
(b) give security for and guarantee the loans and other credit facilities
provided pursuant to the Credit Agreement dated as of October 6, 2006 among
Morgans Group LLC (“Borrower”), Beach Hotel Associates, LLC, Morgans Holdings
LLC, Royalton, LLC, Morgans Hotel Group Co., Wachovia Bank, National
Association, as Administrative Agent (the “Agent”), Citigroup Global Markets,
Inc., as Syndication Agent, and certain other financial institutions party
thereto, as amended by First Amendment to Credit Agreement dated as of
November 10, 2006, Second Amendment to Credit Agreement dated as of January 8,
2007, Third Amendment to Credit Agreement dated as of October 10, 2007, Fourth
Amendment to Credit Agreement dated as of January 16, 2008, and Fifth Amendment
to Credit Agreement; and Waiver Agreement dated as of August     , 2009, and as
the same may be further amended, restated, supplemented or otherwise modified
from time to time (collectively, the “Credit Agreement”), and the other “Loan
Documents” as defined in the Credit Agreement;
(c) give security for the Obligations under the Loan Documents or for any other
indebtedness to the extent not prohibited by the Loan Documents; and
(d) refinance the Obligations and grant security interests to secure same, to
the extent same is not a violation of the Loan Documents.
6. Company Business. The Company shall not engage in any business unrelated to
the ownership of the Bar and shall not own any assets other than those related
to the Bar or otherwise in furtherance of the purposes of the Company. The
Company shall not incur any indebtedness other than the indebtedness under the
Loan Documents, related to the Bar or otherwise provided herein or permitted
under the Loan Documents.
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7. Separateness Covenants. Notwithstanding anything to the contrary contained
herein (except the penultimate sentence of Section 4), for so long as any
portion of the Obligations is outstanding, the Company shall conduct its affairs
in accordance with the following provisions:
(a) It shall be a limited liability company organized solely for the purpose of
owning the Bar.
(b) It shall not own any assets other than those related to the Bar.
(c) To the fullest extent permitted by law, (i) it shall not engage in, seek or
consent to any dissolution, winding up, or liquidation, (ii) it shall not engage
in any consolidation, merger, or asset sale (except as permitted in the Loan
Documents or if there is Full Payment of the Obligations), (iii) it shall not
transfer any limited liability company interests in the Company (except as
expressly provided in the Loan Documents or with the written consent of the
Agent) and (iv) it shall not further amend this Agreement or the Certificate of
Formation (except as required by law).
(d) It shall remain solvent and maintain adequate capital in light of its
contemplated business operations, provided, however, the foregoing shall not
require the Member to make any additional capital contributions to the Company.
(e) It shall not fail to correct any known misunderstanding regarding the
separate identity of such entity.
(f) It shall maintain its accounts, books and records separate from any other
Person other than the Loan Parties (as defined in the Credit Agreement) and
shall file its own tax returns.
(g) It shall maintain its books, records, resolutions and agreements as official
records.
(h) It shall not commingle its funds or assets with those of any other Person
other than the Loan Parties.
(i) It shall hold its assets in its own name.
(j) Intentionally omitted.
(k) It shall maintain its financial statements, accounting records and other
entity documents separate from any other Person, except that its financial
statements may be consolidated with those of Morgans Hotel Group Co. (the
“Parent”), other Loan Parties or their consolidated Subsidiaries.
(l) It shall pay its own liabilities, including the salaries of its own
employees, out of funds and assets of its own or of any Loan Party, provided,
however, the foregoing shall not require the Member to make any additional
capital contributions to the Company.
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(m) It shall observe all limited liability company formalities.
(n) It shall maintain an arm’s-length relationship with its Affiliates to the
extent required by the Loan Documents.
(o) It shall have no indebtedness other than the Obligations and indebtedness
permitted under the Loan Documents, related to the Bar or otherwise provided
herein.
(p) It shall not assume or guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person except for the obligations of the Loan Parties
or obligations under the Loan Documents.
(q) It shall not acquire obligations or securities of its members.
(r) It shall allocate fairly and reasonably shared expenses, including shared
office space.
(s) It shall not pledge its assets to secure obligations, other than in its
capacity as a pledgor, grantor, or guarantor under the Loan Documents or in
connection with providing security therefor.
(t) Intentionally omitted.
(u) It shall maintain its assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any other Person;
(v) It shall not make loans to any Person other than to any affiliate that is a
Loan Party to the extent permitted by the Credit Agreement.
(w) Intentionally omitted.
(x) It shall not enter into or be a party to, any transaction with its members
or Affiliates except as permitted pursuant to the Loan Documents.
(y) Except as set forth in this Agreement, it shall have no obligation to
indemnify its partners, officers, directors or members, as the case may be,
unless such obligation is fully subordinated to Obligations and will not
constitute a claim against it if cash flow in excess of the amount required to
pay the Debt is insufficient to pay such obligation.
(z) To the fullest extent permitted by law, it shall consider the interests of
its creditors in connection with all limited liability company actions.
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(aa) It shall not engage in any business unrelated to the ownership of the Bar.
Failure to comply with any of the foregoing covenants shall not affect the
status of the Company as a separate legal entity.
This Section 7 is being adopted in order to comply with certain provisions
required in order to qualify the Company as a “special purpose” entity.
8. Members. The name and the business, residence or mailing address of the
Member is as follows:

      Name   Address
 
 
ROYALTON PLEDGOR LLC
  C/o Morgans Hotel Group LLC
 
  475 Tenth Avenue
 
  New York, New York 10018

(a) Notwithstanding any provision in this Agreement to the contrary, upon the
occurrence of any event that causes the Member to cease to be a member of the
Company (other than (x) upon an assignment by the Member of all of its limited
liability company interest in the Company and the admission of the transferee,
if permitted pursuant to Loan Documents or (y) the resignation of the Member and
the admission of an additional member of the Company pursuant to this Agreement,
if permitted by the Loan Documents), each Person acting as an Independent
Director shall, without any action of any Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the
Company as a member of the Company (the “Special Member”) and shall preserve and
continue the Company without dissolution. No Special Member may resign from the
Company or transfer its rights as Special Member unless (i) a successor Special
Member has been admitted to the Company as Special Member by executing a
counterpart to this Agreement, and (ii) such successor has also accepted its
appointment as Independent Director by executing a counterpart to the Agreement
and the Management Agreement; provided, however, the Special Members shall
automatically cease to be members of the Company upon the admission to the
Company of a substitute Member but shall not thereby cease to be Independent
Directors. Each Special Member shall be a member of the Company that has no
interest in the profits, losses and capital of the Company and has no right to
receive any distributions of Company assets. Pursuant to Section 18-301 of the
Act, a Special Member shall not be required to make any capital contributions to
the Company and shall not receive a limited liability company interest in the
Company. A Special Member, in its capacity as Special Member, may not bind the
Company. Except as required by any mandatory provision of the Act, each Special
Member, in its capacity as Special Member, shall have no right to vote on,
approve or otherwise consent to any action by, or matter relating to, the
Company, including, without limitation, the merger, consolidation or conversion
of the Company. In order to implement the future, contingent admission to the
Company of each Special Member, each Person acting as an Independent Director
shall execute a counterpart to this Agreement. Prior to its admission to the
Company as Special Member, each Person acting as an Independent Director shall
not be a member of the Company.
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9. Membership Interests. The Managing Member shall have and own 100% of the
Membership Interests.
10. Capital Contributions. Any Member may make one or more capital contributions
to the Company provided, however, any capital contribution will only be made
with the consent of the Member making such contribution.
11. Capital Accounts. The capital accounts of each Member shall be allocated in
accordance with their capital contributions and shall be maintained in
accordance with Section 704(b) of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder.
12. Admission of Additional Members by the Company. One or more additional
Members of the Company may be admitted to the Company with the unanimous vote or
written consent of all of the Members; provided, however, no additional Member
may be admitted to the Company as a Member of the Company, other than pursuant
to Sections 8(a) or 21 (a), unless the Agent consents in writing.
13. Resignation of the Member. No Member may resign from the Company as a Member
of the Company unless a substitute Member or a transferee of such Member’s
interest is admitted as a Member of the Company in accordance with the terms
herein.
14. Assignments; Rights of Assignee To Become a Member. Until such time as Full
Payment of the Obligations has occurred, the Managing Member shall not, except
as expressly permitted by the Loan Documents, take any action to sell, transfer,
exchange, convey, encumber or dispose of any of its Membership Interest. Subject
to the foregoing sentence, if the Member transfers all of its limited liability
company interest in the Company pursuant to this Section 14, the transferee’s
admission shall be deemed effective immediately prior to the transfer and,
immediately following such admission, the transferor Member shall cease to be a
member of the Company. Any successor to the Member by merger or consolidation in
compliance with the Loan Documents shall, without further act, be the Member
hereunder, and such merger or consolidation shall not constitute an assignment
for purposes of this Agreement and the Company shall continue without
dissolution. Notwithstanding anything to the contrary contained herein, the
Member shall not, without the prior written consent of the Agent, issue and
shall not permit the issuance of any additional limited liability company
interests of the Company other than its initial issuance of limited liability
company interests issued on or prior to the date of this Agreement.
15. Liability of Members. Except as otherwise expressly provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be the debts, obligations and liabilities solely of the
Company, and neither the Member nor the Special Members nor any Director shall
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Special Member or Director of the
Company.
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16. Exculpation of Members. Neither the Member nor the Special Members nor any
officer, Director, employee or agent of the Company nor any employee,
representative, agent or Affiliate of the Member or the Special Members
(collectively, the “Covered Persons”) shall be liable to the Company or any
other Person who has an interest in or claim against the Company for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Covered Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of the authority conferred on such
Covered Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered Persons
gross negligence or willful misconduct.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, all rights and remedies
being governed by said laws, without regard to principles of conflict of laws.
18. Indemnification. To the fullest extent permitted by applicable law and to
the extent permitted under this Agreement, a Covered Person shall be entitled to
indemnification from the Company for any loss, damage or claim incurred by such
Covered Person by reason of any act or omission performed or omitted by such
Covered Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered
Person by this Agreement, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person’s gross negligence or willful misconduct
with respect to such acts or omissions; provided, however, that any indemnity
under this Section 18 by the Company shall be provided out of and to the extent
of Company assets only, and the Member and the Special Members shall not have
personal liability on account thereof; and provided further, that so long as any
obligation imposed by the Loan Documents is outstanding, no indemnity payment
from funds of the Company (as distinct from funds from other sources, such as
insurance) of any indemnity under Section 18 shall be payable from amounts
allocable to any other Person pursuant to the Loan Documents.
19. Tax Characterization and Returns. It is the intention of the Member that the
Company be disregarded for federal and all relevant state tax purposes and that
the activities of the Company be deemed to be activities of the Member for such
purposes. All provisions of this Agreement are to be construed so as to preserve
that tax status. The Member is hereby authorized to file any necessary
elections, and shall be required to file any necessary tax returns, on behalf of
the Company with any such tax authorities.
20. Amendments.
(a) Subject to Sections 7 and 20(b) below, Sections 3, 5, 6, 7, 8(a) and 20 of
this Agreement may only be amended with approval of the Managing Member and all
members of the Board of Directors, including, without limitation, the
Independent Directors.
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(b) Notwithstanding Section 20(a), this Agreement shall not be amended except in
compliance with the Loan Documents until Full Payment of the Obligations.
21. Dissolution; Liquidation; Termination. (a) The Company shall be dissolved,
and its affairs shall be wound up upon the first to occur of the following:
(i) the termination of the legal existence of the last remaining member of the
Company or the occurrence of any other event which terminates the continued
membership of the last remaining member of the Company in the Company unless the
Company is continued without dissolution in a manner permitted by this Agreement
or the Act or (ii) the entry of a decree of judicial dissolution under
Section 18-802 of the Act. Upon the occurrence of any event that causes the last
remaining member of the Company to cease to be a member of the Company or that
causes the Member to cease to be a member of the Company (other than (x) upon an
assignment by Member of all of its limited liability company interest in the
Company and the admission of the transferee, if permitted pursuant to the Loan
Documents, or (y) the resignation of Member and the admission of an additional
member of the Company pursuant to this Agreement, if permitted pursuant to the
Loan Documents), to the fullest extent permitted by law, the personal
representative of such member is hereby authorized to, and shall, within 90 days
after the occurrence of the event that terminated the continued membership of
such member in the Company, agree in writing (i) to continue the Company and
(ii) to the admission of the personal representative or its nominee or designee,
as the case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership of such member
in the Company.
(b) Notwithstanding any other provision of this Agreement, the Member or a
Special Member becoming a Bankrupt Member shall not cause the Member or Special
Member, respectively, to cease to be a member of the Company and upon the
occurrence of such an event, the Company shall continue without dissolution
(c) Notwithstanding any other provision of this Agreement, each of the Member
and the Special Members waives any right it might have to agree in writing to
dissolve the Company upon the Member or a Special Member becoming a Bankrupt
Member or the occurrence of an event that causes the Member or a Special Member
to cease to be a member of the Company.
(d) In the event of dissolution, the Company shall conduct only such activities
as are necessary to wind up its affairs (including the sale of the assets of the
Company in an orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-804 of the
Act.
(e) The Company shall terminate when (i) all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company shall have been distributed to the Member in the manner provided for in
this Agreement and (ii) the Certificate of Formation shall have been canceled in
the manner required by the Act.
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(f) To the fullest extent permitted by law, each of the Member and the Special
Members shall irrevocably waive any right or power that they might have to cause
the Company or any of its assets to be partitioned, to cause the appointment of
a receiver for all or any portion of the assets of the Company, to compel any
sale of all or any portion of the assets of the Company pursuant to any
applicable law or to file a complaint or to institute any proceeding at law or
in equity to cause the dissolution, liquidation, winding up or termination of
the Company.
22. Entire Agreement. This Agreement contains the entire understanding between
the parties and supersedes any prior understandings or agreements between them
respecting the within subject matter. There are no representations, agreements,
arrangements or understandings, oral or written, between the parties hereto
relating to the subject matter of this Agreement which are not fully expressed
herein.
23. Definitions. Whenever used in this Agreement the following terms shall have
the meanings respectively assigned to them in this Section 23 unless otherwise
expressly provided herein or unless the context otherwise requires:
Affiliate: shall mean any other Person that, directly or indirectly, is in
Control of, is Controlled by or is under common Control with such Person or is a
director or officer of such Person or of an Affiliate of such Person.
Agreement: shall mean this Fifth Amended and Restated Limited Liability Company
Agreement of the Company as the same may be amended or restated from time to
time in accordance with its terms.
Company: shall mean 43rd Restaurant LLC, the Delaware limited liability company
continued pursuant to the Act and this Agreement.
Control: shall mean with respect to any Person, either (i) ownership directly or
indirectly of forty-nine percent (49%) or more of all equity interests in such
Person or (ii) the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, by contract or otherwise.
Bankrupt Member: shall mean any member (a) that (i) makes an assignment for the
benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is
adjudged a bankrupt or insolvent, or has entered against such member an order
for relief, in any bankruptcy or insolvency proceeding; (iv) files a petition or
answer seeking for the member any reorganization, arrangement, composition,
readjustment, liquidation, or similar relief under any statute, law or
regulation; (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the member in any
proceeding of the type described in subclauses (i) through (iv) of this clause
(a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the member or of all or any substantial part of the
member’s properties; or (b) against which, a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
statute, law or regulation has been commenced and one hundred twenty (120) days
have expired without dismissal thereof or with respect to which, without the
member’s consent or acquiescence, a trustee, receiver or liquidator of the
member or of all or any substantial part of the member’s properties has been
appointed and ninety (90) days have expired without the appointment having been
vacated or stayed, or ninety (90) days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated. The foregoing is
intended to and shall supersede and replace the events of bankruptcy described
in Sections 18-304(a) and (b) of the Act.
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Independent Director: shall mean a natural person selected by the Company and
reasonably satisfactory to Agent who shall not have been at the time of such
individual’s appointment as an Independent Director, and shall not have been at
any time during the preceding five years (i) a shareholder/partner/member of, or
an officer or employee of, the Company or any of its shareholders, subsidiaries
or Affiliates, (ii) a director (other than as an Independent Director) of any
shareholder, subsidiary or Affiliate of the Company, (iii) a customer of, or
supplier to, the Company or any of its shareholders, subsidiaries or Affiliates
(other than an individual provided by a business that provides independent
directors and corporate services in the ordinary course), (iv) a Person who
Controls any such shareholder, supplier or customer, or (v) a member of the
immediate family of any such shareholder/director/partner/member, officer,
employee, supplier or customer or of any director of the Company (other than as
an Independent Director). Notwithstanding the foregoing, an Independent Director
may serve in similar capacities for other “special purpose” corporations formed
by the Member or any affiliate thereof. The initial Independent Director of the
Company shall be Kenneth J. Uva.
Management Agreement: shall mean the agreement of the Independent Directors in
the form attached hereto as Schedule B. The Management Agreement shall be deemed
incorporated into, and a part of, this Agreement.
Managing Member: shall mean the Member and any successor Managing Member
appointed pursuant to this Agreement, each in its capacity as a managing member
of the Company.
Member: shall mean Royalton Pledgor LLC and any Person hereafter admitted to the
Company as a member as provided in this Agreement, each in its capacity as a
member of the Company.
Membership Interest: shall mean the limited liability company interest of the
Member in the Company, including, without limitation, rights in the capital of
the Company, rights to receive distributions (liquidating or otherwise) and
allocations of profits and losses. The Member’s Membership Interest shall be
expressed as a percentage which shall equal the ratio that the value of the
Capital Contributions made by such Member bears to the Capital Contributions of
all members. The Member’s initial Membership Interest shall be one hundred
percent (100%).
Person: means any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unincorporated association, any other
person or entity, and any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
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24. Distributions. Distributions shall be made to the Members at the times and
in the aggregate amounts determined by the Managing Member. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not be
permitted to make a distribution to a member on account of its interest in the
Company if such distribution would violate Section 18-607 of the Act or any
other applicable law or the Loan Documents.
25. Uncertificated Interests. The limited liability company interests in the
Company shall not be evidenced by certificates. The Company shall maintain books
for the purpose of registering the transfer of limited liability company
interests, and, upon any transfer of limited liability company interests in the
Company, the Company shall notify the registered owner of any applicable
restrictions on the transfer of limited liability company interests.
26. Benefits of Agreement; No Third Party Rights. (a) None of the provisions of
this Agreement shall be for the benefit of or enforceable by any creditor of the
Company or by any creditor of the Member or a Special Member and (b) nothing in
this Agreement shall be deemed to create any right in any Person (other than
Covered Persons) not a party hereto, and this Agreement shall not be construed
in any respect to be a contract in whole or in part for the benefit of any third
Person.
27. Binding Agreement. Notwithstanding any other provision of this Agreement,
the Member agrees that this Agreement constitutes a legal, valid and binding
agreement of the Member, and is enforceable against the Member by the
Independent Directors, in accordance with its terms.
28. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Member has executed this Agreement effective as of the
date first above written.

                      ROYALTON PLEDGOR LLC    
 
                    By:   Morgans Group LLC, its sole member    
 
                    By:   Morgans Hotel Group Co., its managing member    
 
               
 
  By:                          
 
      Name:   Richard Szymanski    
 
      Title:   Chief Financial Officer and Secretary    

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                        Kenneth J. Uva      Independent Director     

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Schedule A
Board of Directors
Royalton Pledgor LLC
Kenneth J. Uva
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Schedule B
Management Agreement
October 6, 2006
43rd Restaurant LLC
C/o Morgans Hotel Group LLC
475 Tenth Avenue
New York, New York 10018

      Re: Management Agreement — 43rd Restaurant LLC (the “Company”)

Ladies and Gentlemen:
For good and valuable consideration, the undersigned, who has been designated as
an Independent Director of the Company, in accordance with the Fourth Amended
and Restated Limited Liability Company Agreement of the Company, dated as of the
date hereof, as it may be amended or restated from time to time (the “LLC
Agreement”), hereby agrees as follows:
1. The undersigned accepts his rights and authority as an Independent Director
under the LLC Agreement and agrees to perform and discharge his duties and
obligations as an Independent Director under the LLC Agreement, and further
agrees that such rights, authorities, duties and obligations under the LLC
Agreement shall continue until his successor as an Independent Director is
designated or until his resignation or removal as an Independent Director in
accordance with the LLC Agreement. The undersigned agrees and acknowledges that
it has been designated as a “manager” of the Company within the meaning of the
Delaware Limited Liability Company Act.
2. So long as any Obligation is outstanding, the undersigned agrees, solely in
its capacity as a creditor of the Company on account of any indemnification or
other payment owing to the undersigned by the Company, not to acquiesce,
petition or otherwise invoke or cause the Company to invoke the process of any
court or governmental authority for the purpose of commencing or sustaining a
case against the Company under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Company or any substantial part of
the property of the Company, or ordering the winding up or liquidation of the
affairs of the Company.
3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE
GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
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Initially capitalized terms used and not otherwise defined herein have the
meanings set forth in the LLC Agreement.
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IN WITNESS WHEREOF, the undersigned has executed this Management Agreement as of
the day and year first above written.

     
 
Kenneth J. Uva
   

[Signature Page to Management Agreement]
43rd Restaurant LLC Fifth Amended & Restated Operating Agreement

 

 

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Exhibit C
See Attached

 

 

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SUBORDINATION AND ATTORNMENT AGREEMENT
THIS SUBORDINATION AND ATTORNMENT AGREEMENT (“Agreement”) is entered into as of
August 5, 2009 (the “Effective Date”) by and between WACHOVIA BANK, NATIONAL
ASSOCIATION, in its capacity as Agent, having an address at 301 South College
Street, NC0172, Charlotte, North Carolina 28288 (together with its participants,
successors and assigns, collectively, “Mortgagee”), and BASE USA, INC., a
Florida corporation, having an address at 939 Lincoln Road, Miami Beach, FL
33139 (hereinafter “Tenant”), with reference to the following facts:
A. Beach Hotel Associates LLC, a Delaware limited liability company, whose
address is c/o Morgans Hotel Group LLC, 475 Tenth Avenue, 11 Floor, New York,
New York 10018 (“Landlord”) owns fee simple title in the real property described
in Exhibit “A” attached hereto (the “Property”).
B. Mortgagee has made or intends to make loans and extend other credit to
Landlord (collectively, the “Loan”) pursuant to that certain Credit Agreement
dated as of October 6, 2006, as amended by First Amendment to Credit Agreement
dated as of November 10, 2006, Second Amendment to Credit Agreement dated as of
January 8, 2007, Third Amendment to Credit Agreement dated as of October 10,
2007, Fourth Amendment to Credit Agreement dated as of January 16, 2008 and
Fifth Amendment to Credit Agreement; and Waiver Agreement dated as of the date
hereof among Landlord, Mortgagee and other parties (as the same may be further
amended, restated, supplemented, or otherwise modified from time to time being
hereinafter referred to as the “Credit Agreement”).
C. The Loan is secured by that certain Mortgage, Security Agreement, Assignment
of Leases and Rents, and Fixture Filing dated as of the date hereof between
Landlord and Mortgagee, recorded or to be recorded in the Office of the City
Register, New York County, New York (as amended, restated, supplemented, or
otherwise modified from time to time, the “Security Instrument”), encumbering
the Property.
D. Pursuant to that certain Lease dated as of June 30, 2005 between Landlord, as
owner or landlord and Tenant, as tenant (the “Lease”), Landlord demised to
Tenant that portion of the Property for a gift shop, as well as a right of
access thereto, as more particularly described in the Lease (the “Leased
Premises”).
E. Tenant and Mortgagee desire to agree upon the relative priorities of their
interests in the Property and their rights and obligations if certain events
occur.

 

 

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NOW, THEREFORE, for good and sufficient consideration, Tenant and Mortgagee
agree:
1. Definitions. The following terms shall have the following meanings for
purposes of this Agreement.
a. Foreclosure Event. A “Foreclosure Event” means: (i) foreclosure under the
Security Instrument; (ii) any other exercise by Mortgagee of rights and remedies
(whether under the Security Instrument or under applicable law, including
bankruptcy law) as holder of the Loan and/or the Security Instrument, as a
result of which a Successor Landlord becomes owner of the Property; or
(iii) delivery by Landlord to Mortgagee (or its designee or nominee) of a deed
or other conveyance of Landlord’s interest in the Property in lieu of any of the
foregoing.
b. Former Landlord. A “Former Landlord” means Landlord and any other party that
was landlord under the Lease at any time before the occurrence of any attornment
under this Agreement.
c. Offset Right. An “Offset Right” means any right or alleged right of Tenant to
any offset, defense (other than one arising from actual payment and performance,
which payment and performance would bind a Successor Landlord pursuant to this
Agreement), claim, counterclaim, reduction, deduction, or abatement against
Tenant’s payment of Rent or performance of Tenant’s other obligations under the
Lease, arising (whether under the Lease or under applicable law) from Landlord’s
breach or default under the Lease.
d. Rent. The “Rent” means any fixed rent, base rent or additional rent under the
Lease.
e. Successor Landlord. A “Successor Landlord” means any party that becomes owner
of the Property as the result of a Foreclosure Event.
f. Termination Right. A “Termination Right” means any right of Tenant to cancel
or terminate the Lease or to claim a partial or total eviction arising (whether
under the Lease or under applicable law) from Landlord’s breach or default under
the Lease.
g. Other Capitalized Terms. If any capitalized term is used in this Agreement
and no separate definition is contained in this Agreement, then such term shall
have the same respective definition as set forth in the Lease.
2. Subordination. The Lease, as the same may hereafter be modified, amended or
extended, shall be, and shall at all times remain, subject and subordinate to
(i) the terms conditions and provisions of the Security Instrument and the other
Loan Documents (as such term is defined in the Security Instrument), (ii) any
and all advances, increases, renewals, extensions, modifications, assignments,
replacements or consolidations thereof and the rights, privileges, and powers of
the Mortgagee thereunder, (iii) the lien imposed by the Security Instrument and
all advances made under the Security Instrument, and (iv) any refinancing of the
Loan.

 

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3. Attornment.
a. Upon Successor Landlord’s request after taking title to the Property
(i) Tenant shall recognize and attorn to Successor Landlord as Tenant’s direct
landlord under the Lease as effected by this Agreement and (ii) the Lease shall
continue in full force and effect as a direct lease, in accordance with its
terms (except as provided in this Agreement), between Successor Landlord and
Tenant for the remaining term of the Lease or any portion thereof selected by
Successor Landlord. Notwithstanding such attornment, Successor Landlord shall
have the unilateral right to terminate the Lease at any time. Tenant hereby
acknowledges that pursuant to the Security Instrument and assignment of rents,
leases and profits, Landlord has granted to the Mortgagee an absolute, present
assignment of the Lease and Rents which provides that Tenant continue making
payments of Rents and other amounts owed by Tenant under the Lease to the
Landlord and to recognize the rights of Landlord under the Lease until notified
otherwise in writing by the Mortgagee or a Successor Landlord. Notwithstanding
anything to the contrary contained in the Lease, Landlord hereby irrevocably
directs Tenant to make all payments of rent due to Landlord under the Lease
payable to the order of “Wachovia Bank, National Association, as Agent” upon the
written demand of Mortgagee therefor. The foregoing direction is irrevocable,
except with the written consent of Mortgagee (or its successors or assigns),
notwithstanding any future contrary request or direction from the undersigned or
any other person (other than Mortgagee (or its successors or assigns)). Landlord
consents to the foregoing and waives any right, claim or demand which Landlord
may have against Tenant by reason of such payments to Mortgagee or as Mortgagee
directs.
b. The provisions of this Article 3 shall be effective and self-operative
without any need for Successor Landlord or Tenant to execute any further
documents. Tenant and Successor Landlord shall, however, confirm the provisions
of this Article 3 in writing upon request by either of them within ten (10) days
of such request.
4. Protection of Successor Landlord. Notwithstanding anything to the contrary in
the Lease or the Security Instrument, Successor Landlord shall not be liable for
or bound by any of the following matters:
a. Claims Against Former Landlord. Any Offset Right that Tenant may have against
any Former Landlord relating to any event or occurrence before the date of
attornment, including any claim for damages of any kind whatsoever as the result
of any breach by Former Landlord that occurred before the date of attornment.
The foregoing shall not limit either (i) Tenant’s right to exercise against
Successor Landlord any Offset Right otherwise available to Tenant because of
events occurring after the date of attornment or (ii) Successor Landlord’s
obligation to correct any conditions that existed. as of the date of attornment
and violate Successor Landlord’s obligations as landlord under the Lease.
b. Prepayments. Any payment of Rent that Tenant may have made to Former Landlord
more than thirty (30) days before the date such Rent was first due and payable
under the Lease with respect to any period after the date of attornment other
than, and only to the extent that, the Lease expressly required such a
prepayment.
c. Payment; Security Deposit; Work. Any obligation: (i) to pay Tenant any sum(s)
that any Former Landlord owed to Tenant unless such sums, if any, shall have
been actually delivered to Mortgagee by way of an assumption of escrow accounts
or otherwise; (ii) with respect to any security deposited with Former Landlord,
unless such security was actually delivered to Mortgagee; (iii) to commence or
complete any initial construction of improvements in the Leased Premises or any
expansion or rehabilitation of existing improvements thereon, unless such
obligation first accrued during any period after Tenant has attorned to
Successor Landlord; (iv) to reconstruct or repair improvements following a fire,
casualty or condemnation, unless such obligation first accrued during any period
after Tenant has attorned to Successor Landlord; or (v) arising from
representations and warranties related to Former Landlord.

 

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d. Modification, Amendment or Waiver. Any modification or amendment of the
Lease, or any waiver of the terms of the Lease, made without Mortgagee’s written
consent.
e. Surrender, Etc. Any consensual or negotiated surrender, cancellation, or
termination of the Lease, in whole or in part, agreed upon between Landlord and
Tenant without Mortgagee’s consent, unless effected unilaterally by Tenant
pursuant to the express terms of the Lease.
5. Exculpation of Successor Landlord. Notwithstanding anything to the contrary
in this Agreement or the Lease, Successor Landlord’s obligations and liability
under the Lease shall never extend beyond Successor Landlord’s (or its
successors’ or assigns’) interest, if any, in the Leased Premises from time to
time, including insurance and condemnation proceeds, security deposits, escrows,
Successor Landlord’s interest in the Lease, and the proceeds from any sale,
lease or other disposition of the Property (or any portion thereof) by Successor
Landlord (collectively, the “Successor Landlord’s Interest”). Tenant shall look
exclusively to Successor Landlord’s Interest (or that of its successors and
assigns) for payment or discharge of any obligations of Successor Landlord under
the Lease as amended by this Agreement. If Tenant obtains any money judgment
against Successor Landlord with respect to the Lease or the relationship between
Successor Landlord and Tenant, then Tenant shall look solely to Successor
Landlord’s Interest (or that of its successors and assigns) to collect such
judgment. Tenant shall not collect or attempt to collect any such judgment out
of any other assets of Successor Landlord.
6. Mortgagee’s Right to Cure. Notwithstanding anything to the contrary in the
Lease or this Agreement, before exercising any Offset Right or Termination
Right:
a. Notice to Mortgagee. Tenant shall provide Mortgagee with notice of the breach
or default by Landlord giving rise to same (the “Default Notice”) and,
thereafter, the opportunity to cure such breach or default as provided for
below.
b. Mortgagee’s Cure Period. After Mortgagee receives a Default Notice, Mortgagee
shall have a period of thirty (30) days beyond the time available to Landlord
under the Lease in which to cure the breach or default by Landlord. Mortgagee
shall have no obligation to cure (and shall have no liability or obligation for
not curing) any breach or default by Landlord, except to the extent that
Mortgagee agrees or undertakes otherwise in writing. In addition, as to any
breach or default by Landlord the cure of which requires possession and control
of the Property, provided that Mortgagee undertakes by written notice to Tenant
to exercise reasonable efforts to cure or cause to be cured by a receiver such
breach or default within the period permitted by this paragraph, Mortgagee’s
cure period shall continue for such additional time (the “Extended Cure Period”)
as Mortgagee may reasonably require to either: (i) obtain possession and control
of the Property with due diligence and thereafter cure the breach or default
with reasonable diligence and continuity; or (ii) obtain the appointment of a
receiver and give such receiver a reasonable period of time in which to cure the
default.

 

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7. Cooperation Regarding Licenses. Tenant agrees to maintain in full force and
effect for the benefit of Landlord and Successor Landlord all alcoholic beverage
licenses issued by the New York State Liquor Authority and such other licenses,
permits or authorizations that are required for the sale of alcoholic beverages
at the Property by Tenant (collectively, the “Liquor Licenses”). Upon any
termination of the Lease, Tenant agrees to (a) fully cooperate and take any
action permitted by law required to transfer any one or more of the Liquor
Licenses to Mortgagee’s designee and (b) continue to maintain each of the Liquor
Licenses for the benefit of Successor Landlord to the extent permitted by law
until Tenant receives written notice from Successor Landlord that the Liquor
Licenses have been assigned or Mortgagee’s designee has been issued its own
alcoholic beverage licenses in connection with the Premises.
8. Miscellaneous.
a. Tenant hereby covenants and agrees that it will not change or alter the
economic terms or any other terms, covenants, conditions and agreements of the
Lease without the prior written consent of Mortgagee. No amendment or
modification of the Lease shall become effective without Mortgagee’s prior
written consent.
b. Tenant hereby covenants and agrees that it will not mortgage or grant any
other lien on its leasehold estate without the prior written consent of
Mortgagee. No such mortgage or lien on Tenant’s leasehold estate shall become
effective without Mortgagee’s prior written consent.
c. Landlord shall be solely liable to Tenant for all fees, reimbursements,
indemnifications and charges of any kind or nature accruing to Tenant under the
Lease, if any, or at law or in equity with respect to the leasing, occupancy and
operation of the Property. Mortgagee shall in no event or under any
circumstances be responsible for any termination payments or fees, or other
charges, indemnifications, reimbursements or other payments to or claims of
Tenant whatsoever.
d. Notices. Any notice or request given or demand made under this Agreement by
one party to the other shall be in writing, and may be given or be served by
hand delivered personal service, or by depositing the same with a reliable
overnight courier service or by deposit in the United States mail, postpaid,
registered or certified mail, and addressed to the party to be notified, with
return receipt requested or by telefax transmission, with the original
machine-generated transmit confirmation report as evidence of transmission.
Notice deposited in the mail in the manner hereinabove described shall be
effective from and after the expiration of three (3) days after it is so
deposited; however, delivery by overnight courier service shall be deemed
effective on the next succeeding business day after it is so deposited and
notice by personal service or telefax transmission shall be deemed effective
when delivered to its addressee or within two (2) hours after its transmission
unless given after 3:00 p.m. on a business day, in which case it shall be deemed
effective at 9:00 a.m. on the next business day. For purposes of notice, the
addresses and telefax number of the parties shall, until changed as herein
provided, be as follows:

  i.  
If to the Mortgagee, at:
       
Wachovia Bank, National Association, as Agent
One Wachovia Center
301 South College Street
Mail Code: NC 0172
Charlotte, North Carolina 28288-0166
       
Attn: Anand J. Jobanputra
Telephone: (704) 383-4013
Telecopy: (704) 383-6205

 

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  ii.  
If to the Tenant, at:
       
c/o China Grill Management, Inc.
420 Lincoln Road, Suite 448
Miami Beach, Florida 33139
Telephone:
Telecopy:

e. Successors and Assigns. This Agreement shall bind and benefit the parties,
their successors and assigns, any Successor Landlord, and its successors and
assigns.
f. Entire Agreement. This Agreement constitutes the entire agreement between
Mortgagee and Tenant regarding the subordination of the Lease to the Security
Instrument and the rights and obligations of Tenant and Mortgagee as to the
subject matter of this Agreement.
g. Interaction with Lease and with Security Instrument. If this Agreement
conflicts with the Lease, then this Agreement shall govern as between the
parties and any Successor Landlord, including upon any attornment pursuant to
this Agreement. This Agreement supersedes, and constitutes full compliance with,
any provisions in the Lease that provide for subordination of the Lease to, or
for delivery of nondisturbance agreements by the holder of the Security
Instrument.
h. Mortgagee’s Rights and Obligations. Except as expressly provided for in this
Agreement, Mortgagee shall have no obligations to Tenant with respect to the
Lease. If an attornment occurs pursuant to this Agreement, then all rights and
obligations of Mortgagee under this Agreement shall terminate, without thereby
affecting in any way the rights and obligations of Successor Landlord provided
for in this Agreement.
i. Interpretation; Governing Law. The interpretation, validity and enforcement
of this Agreement shall be governed by and construed under the internal laws of
the State in which the Leased Premises are located, excluding such State’s
principles of conflict of laws.
j. Amendments. This Agreement may be amended, discharged or terminated, or any
of its provisions waived, only by a written instrument executed by the party to
be charged.

 

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k. Due Authorization. Tenant represents to Mortgagee that it has full authority
to enter into this Agreement, which has been duly authorized by all necessary
actions. Mortgagee represents to Tenant that it has full authority to enter into
this Agreement, which has been duly authorized by all necessary actions.
l. Execution. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
[SIGNATURES FOLLOW ON NEXT PAGE]

 

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IN WITNESS WHEREOF, the Mortgagee and Tenant have caused this Agreement to be
executed as of the date first above written.

            MORTGAGEE:

WACHOVIA BANK, NATIONAL ASSOCIATION, AS AGENT
      By:           Name:   Mark Cagley        Title:   Managing Director   

[SIGNATURES CONTINUE ON NEXT PAGE]

 

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            TENANT:

BASE USA, INC,
a Florida corporation
      By:           Name:           Title:        

 

 

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LANDLORD’S CONSENT
Landlord consents and agrees to the foregoing Agreement, which was entered into
at Landlord’s request. The foregoing Agreement shall not alter, waive or
diminish any of Landlord’s obligations under the Security Instrument or the
Lease. The above Agreement discharges any obligations of Mortgagee under the
Security Instrument and related loan documents to enter into a nondisturbance
agreement with Tenant. Landlord is not a party to the above Agreement.

            LANDLORD:

BEACH HOTEL ASSOCIATES LLC
      By:   Morgans Group LLC, its Managing Member    

                  By:   Morgans Hotel Group Co., its Managing Member  

            By:           Name:   Richard Szymanski        Title:   Chief
Financial Officer and Secretary     

 

 

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MORTGAGEE’S ACKNOWLEDGMENT

             
STATE OF NORTH CAROLINA
    )      
 
     ) ss.    
COUNTY OF MECKLENBURG
    )      

On the  _____  day of  _____  in the year 2009 before me, the undersigned, a
Notary Public in and for said state, personally appeared Mark Cagley, 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.
My commission expires:

         
 
 
 
  (SEAL) 
 
 
 
Signature of Notary Public    

 

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TENANT’S ACKNOWLEDGMENT

         
STATE OF NEW YORK
    )  
 
     ) ss.
COUNTY OF NEW YORK
    )  

On the  _____  day of  _____  in the year 2009 before me, the undersigned, a
Notary Public in and for said state, personally appeared  _____, 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.
My commission expires:

         
 
 
 
  (SEAL) 
 
 
 
Signature of Notary Public    

 

 

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LIST OF EXHIBITS
If any exhibit is not attached hereto at the time of execution of this
Agreement, it may thereafter be attached by written agreement of the parties,
evidenced by initialing said exhibit.
Exhibit “A” — Legal Description of the Land (See Attached)

 

 

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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
Lots 9, 10, 11 and 12, in Block 29 of Fisher’s First Subdivision of Alton Beach,
a subdivision of Miami-Dade County, Florida, according to the Plat thereof duly
recorded upon the Public records of Miami-Dade County, Florida in Plat Book 2,
page 77 thereof;
Also that tract of land shown on plat of Fisher’s First Subdivision of Alton
Beach, according to the Plat thereof recorded in Plat Book 2, page 77, Public
Records of Miami-Dade County, Florida, described as follows:
Begin at the Southeast corner of Lot 9 in Block 29 as shown on plat of Fisher’s
First Subdivision of Alton Beach, according to the Plat thereof recorded in Plat
Book 2, page 77, Public Records of Miami-Dade County, Florida; thence run in a
Northerly direction along the Easterly line of said Block 29 of the aforesaid
plat and the Northerly extension thereof a distance of 136.896 feet, more or
less, to the point of intersection of the center line of 17th Street; thence run
Easterly along the center line of 17th Street; extended, a distance of 204.17
feet, more or less, to the point of intersection of said center line of 17th
Street extended Easterly to the Erosion Control Line of the Atlantic Ocean, said
Line recorded in Plat Book 105, page 62, Public Records of Miami-Dade County,
Florida, thence run Southerly along the said Erosion Control Line, a distance of
137.465 feet to the intersection of the extension Easterly of the southerly Line
of referenced Lot 9, thence run Westerly along the Easterly extension of Lot 9,
a distance of 200.96 feet, more or less, to the Point of Beginning.
Less and except, however, that certain portion of such land as was appropriated
and taken by the City of Miami Beach, Florida, in that certain eminent domain or
condemnation proceeding a final judgment for which was recorded in Deed Book
3106, page 96, which covers that portion of the premises lying northerly of the
northerly line of said Block 29 extended easterly to the Erosion Control Line
recorded in Plat Book 105, page 62 of the Public Records of Miami-Dade County,
Florida.

 

 

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Exhibit D-1
See attached

 

 

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SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (“Agreement”) is
entered into as of August 4, 2009 (the “Effective Date”) by and between WACHOVIA
BANK, NATIONAL ASSOCIATION, in its capacity as Agent, having an address at 301
South College Street, NC0172, Charlotte, North Carolina 28288 (together with its
participants, successors and assigns, collectively, “Mortgagee”), and SC COLLINS
LLC, a Delaware limited liability company, having an address at c/o China Grill
Management, Inc., 420 Lincoln Road, Suite 448, Miami Beach, FL 33139
(hereinafter, collectively “Tenant”), with reference to the following facts:
A. Beach Hotel Associates LLC, a Delaware limited liability company, successor
in interest to Beach Hotel Associates Limited Partnership, whose address is c/o
Morgans Hotel Group LLC, 475 Tenth Avenue, 11 Floor, New York, New York 10018
(“Landlord”) owns fee simple title in the real property described in Exhibit “A”
attached hereto (the “Property”).
B. Mortgagee has made or intends to make loans and extend other credit to
Landlord (collectively, the “Loan”) pursuant to that certain Credit Agreement
dated as of October 6, 2006, as amended by First Amendment to Credit Agreement
dated as of November 10, 2006, Second Amendment to Credit Agreement dated as of
January 8, 2007, Third Amendment to Credit Agreement dated as of October 10,
2007, Fourth Amendment to Credit Agreement dated as of January 16, 2008 and
Fifth Amendment to Credit Agreement; and Waiver Agreement dated as of the date
hereof among Landlord, Mortgagee and other parties (collectively and as the same
may be further amended, restated, supplemented, or otherwise modified from time
to time being hereinafter referred to as the “Credit Agreement”).
C. The Loan is secured by that certain Fourth Amended and Restated Mortgage,
Security Agreement, Assignment of Leases and Rents and Fixture Filing dated as
of October 6, 2006 made by Landlord in favor of Mortgagee, and recorded in O.R.
Book 25014, Page 1305, Public Records of Miami-Dade County, Florida, as amended
by that certain First Amendment to Fourth Amended and Restated Mortgage,
Security Agreement, Assignment of Leases and Rents and Fixture Filing recorded
in O.R. Book 26859, Page 4256, Public Records of Miami-Dade County, Florida, as
further amended by that certain Second Amendment to Fourth Amended and Restated
Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing
dated as of the date hereof and recorded or to be recorded in the Public Records
of Miami-Dade County, Florida (collectively, the “Security Instrument”),
encumbering the Property.
D. Pursuant to that certain Lease effective as of January 1, 2000 between
Landlord, as owner or landlord and Tenant, as tenant (the “Lease”), Landlord
demised to Tenant that portion of the Property which relates to food and
beverage services including all restaurant and bar facilities, as well as a
right of access necessary to provide room services to hotel guests, together
with all furniture, fixtures and equipment thereon (the “Leased Premises”).
E. Tenant and Mortgagee desire to agree upon the relative priorities of their
interests in the Property and their rights and obligations if certain events
occur.

 

 

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NOW, THEREFORE, for good and sufficient consideration, Tenant and Mortgagee
agree:
1. Definitions. The following terms shall have the following meanings for
purposes of this Agreement.
a. Former Landlord. A “Former Landlord” means Landlord and any other party that
was landlord under the Lease at any time before the occurrence of any attornment
under this Agreement.
b. Rent. The “Rent” means any fixed rent, base rent or additional rent under the
Lease.
c. Successor Landlord. A “Successor Landlord” means any party that becomes owner
of the Property as the result of (i) foreclosure under the Security Instrument;
(ii) any other exercise by Mortgagee of rights and remedies (whether under the
Security Instrument or under applicable law, including bankruptcy law) as holder
of the Loan and/or the Security Instrument, as a result of which a Successor
Landlord becomes owner of the Property; or (iii) delivery by Landlord to
Mortgagee (or its designee or nominee) of a deed or other conveyance of
Landlord’s interest in the Property in lieu of any of the foregoing.
d. Other Capitalized Terms. If any capitalized term is used in this Agreement
and no separate definition is contained in this Agreement, then such term shall
have the same respective definition as set forth in the Lease.
2. Subordination. The Lease, as the same may hereafter be modified, amended or
extended, shall be, and shall at all times remain, subject and subordinate to
the Security Instrument and to all renewals, modifications, consolidations,
replacements, and extensions thereof.
3. Attornment.
a. Upon Successor Landlord’s request after taking title to the Property
(i) Tenant shall recognize and attorn to Successor Landlord as Tenant’s landlord
under the Lease unless Successor Landlord shall elect to terminate the Lease and
the rights of Tenant to the possession of the Leased Premises.
b. The provisions of this Article 3 shall be effective and self-operative
without any need for Successor Landlord or Tenant to execute any further
documents. Tenant and Successor Landlord shall, however, confirm the provisions
of this Article 3 in writing upon request by either of them within twenty
(20) days of such request.
4. Non-Disturbance. So long as Tenant is not in default under the Lease (subject
at all times to Tenant’s right to notice and opportunity to cure as provided by
the Lease):
a. Mortgagee agrees not to name Tenant or join Tenant as a party defendant in
any action or proceeding which may be instituted by Mortgagee to foreclose the
Security Instrument or otherwise exercise its rights therein;

 

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b. Mortgagee agrees not to evict Tenant from the Leased Premises; and
c. Mortgagee agrees not to disturb or otherwise affect Tenant’s possession of
the Leased Premises in the exercise of any of its rights under the Security
Instrument or any note secured thereby and any sale of the Property pursuant to
the exercise of any rights and remedies under the Security Instrument or
otherwise shall be made subject to Tenant’s right of possession of the Leased
Premises under the Lease.
5. Protection of Successor Landlord. Notwithstanding anything to the contrary in
the Lease or the Security Instrument, Successor Landlord shall not (i) be
obligated to repair, replace, or restore the Property or the Leased Premises in
the event of damage or destruction, beyond such repair, replacement, or
restoration as can be reasonably accomplished from the net proceeds of insurance
actually received by or made available to such Successor Landlord; (ii) be
responsible for any previous act or omission of the Former Landlord or for the
return of any security deposit unless actually received; (iii) be subject to any
liability or offset accruing to Tenant against the Former Landlord; (iv) be
bound by any previous modification or extension of this Lease unless previously
consented to by Successor Landlord; or (v) be bound by any previous prepayment
of more than one month’s rent or other charge (except for the prepayment by
Tenant of any Taxes that may be required pursuant to Article 10 of the Lease).
Tenant waives the provisions of any statute or rule of law now or hereafter in
effect which may give or purport to give Tenant any right of election to
terminate the Lease or to surrender possession of the Leased Premises in the
event of any foreclosure proceeding brought by Mortgagee and agrees that unless
and until Mortgagee or any Successor Landlord shall elect to terminate the Lease
and to extinguish the leasehold estate of Tenant under the Lease, the Lease
shall not be affected in any way whatsoever by any such proceeding.
6. Cooperation Regarding Licenses. Tenant agrees to maintain in full force and
effect for the benefit of Landlord and Successor Landlord all alcoholic beverage
licenses issued by the Florida Department of Business and Professional
Regulation, Division of Alcoholic Beverages and Tobacco and such other licenses,
permits or authorizations that are required for the sale of alcoholic beverages
at the Property by Tenant (collectively, the “Liquor Licenses”). Upon any
termination of the Lease, Tenant agrees to (a) fully cooperate and take any
action permitted by law required to transfer any one or more of the Liquor
Licenses to Mortgagee’s designee and (b) continue to maintain each of the Liquor
Licenses for the benefit of Successor Landlord to the extent permitted by law
until Tenant receives written notice from Successor Landlord that the Liquor
Licenses have been assigned or Mortgagee’s designee has been issued its own
alcoholic beverage licenses in connection with the Premises.
7. Miscellaneous.
a. Tenant hereby covenants and agrees that it will not change or alter the
economic terms or any other terms, covenants, conditions and agreements of the
Lease without the prior written consent of Mortgagee. No amendment or
modification of the Lease shall become effective without Mortgagee’s prior
written consent.
b. Tenant hereby covenants and agrees that it will not mortgage or grant any
other lien on its leasehold estate without the prior written consent of
Mortgagee. No such mortgage or lien on Tenant’s leasehold estate shall become
effective without Mortgagee’s prior written consent.

 

3

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c. Landlord shall be solely liable to Tenant for all fees, reimbursements,
indemnifications and charges of any kind or nature accruing to Tenant under the
Lease, if any, or at law or in equity with respect to the leasing, occupancy and
operation of the Property. Mortgagee shall in no event or under any
circumstances be responsible for any termination payments or fees, or other
charges, indemnifications, reimbursements or other payments to or claims of
Tenant whatsoever.
d. Notices. Any notice or request given or demand made under this Agreement by
one party to the other shall be in writing, and may be given or be served by
hand delivered personal service, or by depositing the same with a reliable
overnight courier service or by deposit in the United States mail, postpaid,
registered or certified mail, and addressed to the party to be notified, with
return receipt requested or by telefax transmission, with the original
machine-generated transmit confirmation report as evidence of transmission.
Notice deposited in the mail in the manner hereinabove described shall be
effective from and after the expiration of three (3) days after it is so
deposited; however, delivery by overnight courier service shall be deemed
effective on the next succeeding business day after it is so deposited and
notice by personal service or telefax transmission shall be deemed effective
when delivered to its addressee or within two (2) hours after its transmission
unless given after 3:00 p.m. on a business day, in which case it shall be deemed
effective at 9:00 a.m. on the next business day. For purposes of notice, the
addresses and telefax number of the parties shall, until changed as herein
provided, be as follows:

         
 
  i.   If to the Mortgagee, at:
 
       
 
      Wachovia Bank, National Association, as Agent
One Wachovia Center
301 South College Street
Mail Code: NC 0172
Charlotte, North Carolina 28288-0166

Attn: Anand J. Jobanputra
Telephone: (704) 383-4013
Telecopy: (704) 383-6205
 
       
 
  ii.   If to the Tenant, at:
 
       
 
      c/o China Grill Management, Inc.
420 Lincoln Road, Suite 448
Miami Beach, Florida 33139
Telephone:
Telecopy:

 

4

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e. Successors and Assigns. This Agreement shall bind and benefit the parties,
their successors and assigns, any Successor Landlord, and its successors and
assigns.
f. Entire Agreement. This Agreement constitutes the entire agreement between
Mortgagee and Tenant regarding the subordination of the Lease to the Security
Instrument and the rights and obligations of Tenant and Mortgagee as to the
subject matter of this Agreement.
g. Interaction with Lease and with Security Instrument. If this Agreement
conflicts with the Lease, then this Agreement shall govern as between the
parties and any Successor Landlord, including upon any attornment pursuant to
this Agreement. This Agreement supersedes, and constitutes full compliance with,
any provisions in the Lease that provide for subordination of the Lease to, or
for delivery of nondisturbance agreements by the holder of the Security
Instrument.
h. Mortgagee’s Rights and Obligations. Except as expressly provided for in this
Agreement, Mortgagee shall have no obligations to Tenant with respect to the
Lease. If an attornment occurs pursuant to this Agreement, then all rights and
obligations of Mortgagee under this Agreement shall terminate, without thereby
affecting in any way the rights and obligations of Successor Landlord provided
for in this Agreement.
i. Interpretation; Governing Law. The interpretation, validity and enforcement
of this Agreement shall be governed by and construed under the internal laws of
the State in which the Leased Premises are located, excluding such State’s
principles of conflict of laws.
j. Amendments. This Agreement may be amended, discharged or terminated, or any
of its provisions waived, only by a written instrument executed by the party to
be charged.
k. Due Authorization. Tenant represents to Mortgagee that it has full authority
to enter into this Agreement, which has been duly authorized by all necessary
actions. Mortgagee represents to Tenant that it has full authority to enter into
this Agreement, which has been duly authorized by all necessary actions.
l. Execution. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
[SIGNATURES FOLLOW ON NEXT PAGE]

 

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IN WITNESS WHEREOF, the Mortgagee and Tenant have caused this Agreement to be
executed as of the date first above written.

                      MORTGAGEE:    
 
                    WACHOVIA BANK, NATIONAL ASSOCIATION,
AS AGENT    
 
               
 
  By:                          
 
      Name:        
 
      Title:        

[SIGNATURES CONTINUE ON NEXT PAGE]

 

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                      TENANT:    
 
                    SC COLLINS LLC, a Delaware limited liability company    
 
               
 
  By:                          
 
      Name:        
 
      Title:        

 

 

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LANDLORD’S CONSENT
Landlord consents and agrees to the foregoing Agreement, which was entered into
at Landlord’s request. The foregoing Agreement shall not alter, waive or
diminish any of Landlord’s obligations under the Security Instrument or the
Lease. The above Agreement discharges any obligations of Mortgagee under the
Security Instrument and related loan documents to enter into a nondisturbance
agreement with Tenant. Landlord is not a party to the above Agreement.

                              LANDLORD:    
 
                            BEACH HOTEL ASSOCIATES LLC    
 
                            By:   Morgans Group LLC, its Managing Member    
 
                                By:   Morgans Hotel Group Co., its Managing
Member    
 
                       
 
          By:                                  
 
              Name:   Richard Szymanski    
 
              Title:   Chief Financial Officer and Secretary    

 

 

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MORTGAGEE’S ACKNOWLEDGMENT

             
STATE OF NORTH CAROLINA
    )      
 
    ) ss.      
COUNTY OF MECKLENBURG
    )      

On the  _____  day of                      in the year 2009 before me, the
undersigned, a Notary Public in and for said state, personally appeared
                    , 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.
My commission expires:

         
 
      (SEAL)
 
 
 
Signature of Notary Public    

 

 

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TENANT’S ACKNOWLEDGMENT

             
STATE OF NEW YORK
    )      
 
    )   ss.  
COUNTY OF NEW YORK
    )      

On the  _____  day of                      in the year 2009 before me, the
undersigned, a Notary Public in and for said state, personally appeared
                    , 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.
My commission expires:

         
 
    (SEAL)
 
 
 
Signature of Notary Public    

 

 

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LIST OF EXHIBITS
If any exhibit is not attached hereto at the time of execution of this
Agreement, it may thereafter be attached by written agreement of the parties,
evidenced by initialing said exhibit.
Exhibit “A” — Legal Description of the Land (See Attached)

 

 

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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
Lots 9, 10, 11 and 12, in Block 29 of Fisher’s First Subdivision of Alton Beach,
a subdivision of Miami-Dade County, Florida, according to the Plat thereof duly
recorded upon the Public records of Miami-Dade County, Florida in Plat Book 2,
page 77 thereof;
Also that tract of land shown on plat of Fisher’s First Subdivision of Alton
Beach, according to the Plat thereof recorded in Plat Book 2, page 77, Public
Records of Miami-Dade County, Florida, described as follows:
Begin at the Southeast corner of Lot 9 in Block 29 as shown on plat of Fisher’s
First Subdivision of Alton Beach, according to the Plat thereof recorded in Plat
Book 2, page 77, Public Records of Miami-Dade County, Florida; thence run in a
Northerly direction along the Easterly line of said Block 29 of the aforesaid
plat and the Northerly extension thereof a distance of 136.896 feet, more or
less, to the point of intersection of the center line of 17th Street; thence run
Easterly along the center line of 17th Street; extended, a distance of 204.17
feet, more or less, to the point of intersection of said center line of 17th
Street extended Easterly to the Erosion Control Line of the Atlantic Ocean, said
Line recorded in Plat Book 105, page 62, Public Records of Miami-Dade County,
Florida, thence run Southerly along the said Erosion Control Line, a distance of
137.465 feet to the intersection of the extension Easterly of the southerly Line
of referenced Lot 9, thence run Westerly along the Easterly extension of Lot 9,
a distance of 200.96 feet, more or less, to the Point of Beginning.
Less and except, however, that certain portion of such land as was appropriated
and taken by the City of Miami Beach, Florida, in that certain eminent domain or
condemnation proceeding a final judgment for which was recorded in Deed Book
3106, page 96, which covers that portion of the premises lying northerly of the
northerly line of said Block 29 extended easterly to the Erosion Control Line
recorded in Plat Book 105, page 62 of the Public Records of Miami-Dade County,
Florida.

 

 

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Exhibit D-2
See attached

 

 

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SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (“Agreement”) is
entered into as of August  _____, 2009 (the “Effective Date”) by and between
WACHOVIA BANK, NATIONAL ASSOCIATION, in its capacity as Agent, having an address
at 301 South College Street, NC0172, Charlotte, North Carolina 28288 (together
with its participants, successors and assigns, collectively, “Mortgagee”), and
SC MADISON LLC, a Delaware limited liability company, having an address at c/o
China Grill Management, Inc., 420 Lincoln Road, Suite 448, Miami Beach, Florida
33139 (hereinafter, collectively “Tenant”), with reference to the following
facts:
A. Morgans Holdings LLC, a Delaware limited liability company, whose address is
c/o Morgans Hotel Group LLC, 475 Tenth Avenue, 11 Floor, New York, New York
10018 (“Landlord”) owns fee simple title in the real property described in
Exhibit “A” attached hereto (the “Property”).
B. Mortgagee has made or intends to make loans and extend other credit to
Landlord (collectively, the “Loan”) pursuant to that certain Credit Agreement
dated as of October 6, 2006, as amended by First Amendment to Credit Agreement
dated as of November 10, 2006, Second Amendment to Credit Agreement dated as of
January 8, 2007, Third Amendment to Credit Agreement dated as of October 10,
2007, Fourth Amendment to Credit Agreement dated as of January 16, 2008 and
Fifth Amendment to Credit Agreement; and Waiver Agreement dated as of the date
hereof among Landlord, Mortgagee and other parties (as the same may be further
amended, restated, supplemented, or otherwise modified from time to time being
hereinafter referred to as the “Credit Agreement”).
C. The Loan is secured by that certain Mortgage, Security Agreement, Assignment
of Leases and Rents, and Fixture Filing dated as of the date hereof between
Landlord and Mortgagee, recorded or to be recorded in the Office of the City
Register, New York County, New York (as amended, restated, supplemented, or
otherwise modified from time to time, the “Security Instrument”), encumbering
the Property.
D. Pursuant to that certain Amended and Restated Lease dated effective as of
January 1, 2000, between Landlord as “Landlord” thereunder and Tenant as
“Tenant” thereunder, as amended by that certain lease extension letter dated
January 15, 2007 by Tenant to Landlord (together, the “Lease”), Landlord demised
to Tenant that portion of the Property which relates to food and beverage
services including all restaurant and bar facilities, as well as a right of
access necessary to provide room services to hotel guests, together with all
furniture, fixtures and equipment thereon (the “Leased Premises”).
E. Tenant and Mortgagee desire to agree upon the relative priorities of their
interests in the Property and their rights and obligations if certain events
occur.

 

 

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NOW, THEREFORE, for good and sufficient consideration, Tenant and Mortgagee
agree:
1. Definitions. The following terms shall have the following meanings for
purposes of this Agreement.
a. Former Landlord. A “Former Landlord” means Landlord and any other party that
was landlord under the Lease at any time before the occurrence of any attornment
under this Agreement.
b. Rent. The “Rent” means any fixed rent, base rent or additional rent under the
Lease.
c. Successor Landlord. A “Successor Landlord” means any party that becomes owner
of the Property as the result of (i) foreclosure under the Security Instrument;
(ii) any other exercise by Mortgagee of rights and remedies (whether under the
Security Instrument or under applicable law, including bankruptcy law) as holder
of the Loan and/or the Security Instrument, as a result of which a Successor
Landlord becomes owner of the Property; or (iii) delivery by Landlord to
Mortgagee (or its designee or nominee) of a deed or other conveyance of
Landlord’s interest in the Property in lieu of any of the foregoing.
d. Other Capitalized Terms. If any capitalized term is used in this Agreement
and no separate definition is contained in this Agreement, then such term shall
have the same respective definition as set forth in the Lease.
2. Subordination. The Lease, as the same may hereafter be modified, amended or
extended, shall be, and shall at all times remain, subject and subordinate to
the Security Instrument and to all renewals, modifications, consolidations,
replacements, and extensions thereof.
3. Attornment.
a. Upon Successor Landlord’s request after taking title to the Property
(i) Tenant shall recognize and attorn to Successor Landlord as Tenant’s landlord
under the Lease unless Successor Landlord shall elect to terminate the Lease and
the rights of Tenant to the possession of the Leased Premises.
b. The provisions of this Article 3 shall be effective and self-operative
without any need for Successor Landlord or Tenant to execute any further
documents. Tenant and Successor Landlord shall, however, confirm the provisions
of this Article 3 in writing upon request by either of them within twenty
(20) days of such request.
4. Non-Disturbance. So long as Tenant is not in default under the Lease (subject
at all times to Tenant’s right to notice and opportunity to cure as provided by
the Lease):
a. Mortgagee agrees not to name Tenant or join Tenant as a party defendant in
any action or proceeding which may be instituted by Mortgagee to foreclose the
Security Instrument or otherwise exercise its rights therein;
b. Mortgagee agrees not to evict Tenant from the Leased Premises; and
c. Mortgagee agrees not to disturb or otherwise affect Tenant’s possession of
the Leased Premises in the exercise of any of its rights under the Security
Instrument or any note secured thereby and any sale of the Property pursuant to
the exercise of any rights and remedies under the Security Instrument or
otherwise shall be made subject to Tenant’s right of possession of the Leased
Premises under the Lease.

 

2

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5. Protection of Successor Landlord. Notwithstanding anything to the contrary in
the Lease or the Security Instrument, Successor Landlord shall not (i) be
obligated to repair, replace, or restore the Property or the Leased Premises in
the event of damage or destruction, beyond such repair, replacement, or
restoration as can be reasonably accomplished from the net proceeds of insurance
actually received by or made available to such Successor Landlord; (ii) be
responsible for any previous act or omission of the Former Landlord or for the
return of any security deposit unless actually received; (iii) be subject to any
liability or offset accruing to Tenant against the Former Landlord; (iv) be
bound by any previous modification or extension of this Lease unless previously
consented to by Successor Landlord; or (v) be bound by any previous prepayment
of more than one month’s rent or other charge (except for the prepayment by
Tenant of any Taxes that may be required pursuant to Article 10 of the Lease).
Tenant waives the provisions of any statute or rule of law now or hereafter in
effect which may give or purport to give Tenant any right of election to
terminate the Lease or to surrender possession of the Leased Premises in the
event of any foreclosure proceeding brought by Mortgagee and agrees that unless
and until Mortgagee or any Successor Landlord shall elect to terminate the Lease
and to extinguish the leasehold estate of Tenant under the Lease, the Lease
shall not be affected in any way whatsoever by any such proceeding.
6. Cooperation Regarding Licenses. Tenant agrees to maintain in full force and
effect for the benefit of Landlord and Successor Landlord all alcoholic beverage
licenses issued by the New York State Liquor Authority and such other licenses,
permits or authorizations that are required for the sale of alcoholic beverages
at the Property by Tenant (collectively, the “Liquor Licenses”). Upon any
termination of the Lease, Tenant agrees to (a) fully cooperate and take any
action permitted by law required to transfer any one or more of the Liquor
Licenses to Mortgagee’s designee and (b) continue to maintain each of the Liquor
Licenses for the benefit of Successor Landlord to the extent permitted by law
until Tenant receives written notice from Successor Landlord that the Liquor
Licenses have been assigned or Mortgagee’s designee has been issued its own
alcoholic beverage licenses in connection with the Premises.
7. Miscellaneous.
a. Tenant hereby covenants and agrees that it will not change or alter the
economic terms or any other terms, covenants, conditions and agreements of the
Lease without the prior written consent of Mortgagee. No amendment or
modification of the Lease shall become effective without Mortgagee’s prior
written consent.
b. Tenant hereby covenants and agrees that it will not mortgage or grant any
other lien on its leasehold estate without the prior written consent of
Mortgagee. No such mortgage or lien on Tenant’s leasehold estate shall become
effective without Mortgagee’s prior written consent.
c. Landlord shall be solely liable to Tenant for all fees, reimbursements,
indemnifications and charges of any kind or nature accruing to Tenant under the
Lease, if any, or at law or in equity with respect to the leasing, occupancy and
operation of the Property. Mortgagee shall in no event or under any
circumstances be responsible for any termination payments or fees, or other
charges, indemnifications, reimbursements or other payments to or claims of
Tenant whatsoever.

 

3

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d. Notices. Any notice or request given or demand made under this Agreement by
one party to the other shall be in writing, and may be given or be served by
hand delivered personal service, or by depositing the same with a reliable
overnight courier service or by deposit in the United States mail, postpaid,
registered or certified mail, and addressed to the party to be notified, with
return receipt requested or by telefax transmission, with the original
machine-generated transmit confirmation report as evidence of transmission.
Notice deposited in the mail in the manner hereinabove described shall be
effective from and after the expiration of three (3) days after it is so
deposited; however, delivery by overnight courier service shall be deemed
effective on the next succeeding business day after it is so deposited and
notice by personal service or telefax transmission shall be deemed effective
when delivered to its addressee or within two (2) hours after its transmission
unless given after 3:00 p.m. on a business day, in which case it shall be deemed
effective at 9:00 a.m. on the next business day. For purposes of notice, the
addresses and telefax number of the parties shall, until changed as herein
provided, be as follows:

         
 
  i.   If to the Mortgagee, at:
 
       
 
      Wachovia Bank, National Association, as Agent
One Wachovia Center
301 South College Street
Mail Code: NC 0172
Charlotte, North Carolina 28288-0166

Attn: Anand J. Jobanputra
Telephone: (704) 383-4013
Telecopy: (704) 383-6205
 
       
 
  ii.   If to the Tenant, at:
 
       
 
      c/o China Grill Management, Inc.
420 Lincoln Road, Suite 448
Miami Beach, Florida 33139
Telephone:
Telecopy:

e. Successors and Assigns. This Agreement shall bind and benefit the parties,
their successors and assigns, any Successor Landlord, and its successors and
assigns.
f. Entire Agreement. This Agreement constitutes the entire agreement between
Mortgagee and Tenant regarding the subordination of the Lease to the Security
Instrument and the rights and obligations of Tenant and Mortgagee as to the
subject matter of this Agreement.

 

4

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g. Interaction with Lease and with Security Instrument. If this Agreement
conflicts with the Lease, then this Agreement shall govern as between the
parties and any Successor Landlord, including upon any attornment pursuant to
this Agreement. This Agreement supersedes, and constitutes full compliance with,
any provisions in the Lease that provide for subordination of the Lease to, or
for delivery of nondisturbance agreements by the holder of the Security
Instrument.
h. Mortgagee’s Rights and Obligations. Except as expressly provided for in this
Agreement, Mortgagee shall have no obligations to Tenant with respect to the
Lease. If an attornment occurs pursuant to this Agreement, then all rights and
obligations of Mortgagee under this Agreement shall terminate, without thereby
affecting in any way the rights and obligations of Successor Landlord provided
for in this Agreement.
i. Interpretation; Governing Law. The interpretation, validity and enforcement
of this Agreement shall be governed by and construed under the internal laws of
the State in which the Leased Premises are located, excluding such State’s
principles of conflict of laws.
j. Amendments. This Agreement may be amended, discharged or terminated, or any
of its provisions waived, only by a written instrument executed by the party to
be charged.
k. Due Authorization. Tenant represents to Mortgagee that it has full authority
to enter into this Agreement, which has been duly authorized by all necessary
actions. Mortgagee represents to Tenant that it has full authority to enter into
this Agreement, which has been duly authorized by all necessary actions.
l. Execution. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
[SIGNATURES FOLLOW ON NEXT PAGE]

 

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IN WITNESS WHEREOF, the Mortgagee and Tenant have caused this Agreement to be
executed as of the date first above written.

                      MORTGAGEE:    
 
                    WACHOVIA BANK, NATIONAL
ASSOCIATION, AS AGENT    
 
               
 
  By:                          
 
      Name:        
 
      Title:        

[SIGNATURES CONTINUE ON NEXT PAGE]

 

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                      TENANT:    
 
                    SC MADISON LLC    
 
               
 
  By:                          
 
      Name:        
 
         
 
   
 
      Title:        
 
         
 
   

 

 

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LANDLORD’S CONSENT
Landlord consents and agrees to the foregoing Agreement, which was entered into
at Landlord’s request. The foregoing Agreement shall not alter, waive or
diminish any of Landlord’s obligations under the Security Instrument or the
Lease. The above Agreement discharges any obligations of Mortgagee under the
Security Instrument and related loan documents to enter into a nondisturbance
agreement with Tenant. Landlord is not a party to the above Agreement.

                              LANDLORD:    
 
                            MORGANS HOLDINGS LLC    
 
                            By:   Morgans Group LLC, its Managing Member    
 
                                By:   Morgans Hotel Group Co., its Managing
Member    
 
                       
 
          By:                                  
 
              Name:   Richard Szymanski    
 
              Title:   Chief Financial Officer and Secretary    

 

 

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MORTGAGEE’S ACKNOWLEDGMENT

             
STATE OF NORTH CAROLINA
    )      
 
    )   ss.  
COUNTY OF MECKLENBURG
    )      

On the  _____  day of                      in the year 2009 before me, the
undersigned, a Notary Public in and for said state, personally appeared
                    , 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.
My commission expires:

         
 
      (SEAL)
 
 
 
Signature of Notary Public    

 

 

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TENANT’S ACKNOWLEDGMENT

             
STATE OF NEW YORK
    )      
 
    )   ss.  
COUNTY OF NEW YORK
    )      

On the  _____  day of                      in the year 2009 before me, the
undersigned, a Notary Public in and for said state, personally appeared
                    , 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.
My commission expires:

         
 
      (SEAL)
 
 
 
Signature of Notary Public    

 

 

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LIST OF EXHIBITS
If any exhibit is not attached hereto at the time of execution of this
Agreement, it may thereafter be attached by written agreement of the parties,
evidenced by initialing said exhibit.
Exhibit “A” — Legal Description of the Land (See Attached)

 

 

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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
ALL THAT CERTAIN plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:
BEGINNING at a point on the easterly side of Madison Avenue distant 49 feet
northerly from the corner formed by the intersection of the easterly side of
Madison Avenue and the northerly side of 37th Street;
THENCE easterly parallel with the northerly side of 37th Street and part of the
way through a party wall 100 feet;
THENCE northerly parallel with the easterly side of Madison Avenue 49 feet 9
inches to the center line of the block between 37th and 38th Streets;
THENCE westerly along said center line of the block and parallel with 37th
Street 100 feet to the easterly side of Madison Avenue;
THENCE southerly along the easterly side of Madison Avenue 49 feet 9 inches to
the point or place of BEGINNING.
For information only: Said premises are known as 237-239 Madison Avenue, New
York, New York and designated as Section 3 Block 867 Lot 20 as shown on the Tax
Map of the City of New York, County of New York.

 

 

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Exhibit E
TENANT ESTOPPEL CERTIFICATE

     
To:
  Wachovia Bank, National Association,
and its successors and assigns (“Lender”)
301 South College Street, NC0172
Charlotte, North Carolina 28288
Attn: Anand J. Jobanputra
Telephone: (704) 383-4013
Telecopy: (704) 383-6205

         
Landlord:
      (“Landlord”)
 
 
 
   
 
       
 
 
 
   
 
                      ,                                              

         
Property Address:
       
 
 
 
   
 
 
 
(the “Property”)    

         
Premises at Property:
      (the “Premises”)
 
 
 
   

The undersigned tenant (the “Tenant”) acknowledges that Lender has made or
intends to make loans and extend other credit to Landlord (collectively, the
“Loan”) and that the Loan will be secured by the Property. Tenant hereby
certifies to Lender as follows:
(1) Tenant is a tenant at the Property under a lease dated
                                         for the Premises and that lease has not
been canceled, modified, assigned, extended or amended except as follows:
                                         (collectively the “Lease”). The Lease
represents the entire agreement between the parties thereto as to the leasing
and occupancy of the Premises, and there are no other agreements or side letters
in force or effect between the Landlord and Tenant with regard to the Premises
or any other space at the Property.
(2) All base rent, rent escalations and additional rent under the Lease has been
paid through                                         , 200_____. Tenant has
commenced payment of rent for all space subject to the Lease, and Tenant is not
entitled to any free rent, rent concessions, credits, offsets, deductions or
abatements of rent. There is no prepaid rent, except for the current month, and
the amount of security deposit is $  _____. The security deposit is o cash or o
a letter of credit.
(3) Base rent is currently payable in the amount of $                     month,
and Tenant is currently making estimated payments for operating expenses and
taxes in the amount of $                     per month. Tenant’s base year for
payment of operating expenses is  _____, and Tenant’s base year for payment of
taxes is                     .
(4) All requirements for the commencement of the Lease have been satisfied. The
term of the Lease commenced on                                         .
(5) The term of the Lease expires on                     , and Tenant has the
following rights or options of first offer, first refusal, renewal, expansion,
contraction and/or termination:                                          [if
none, state “none”]. There shall be no brokerage commissions or fees due in
connection with the exercise of any Tenant rights or options of first offer,
first refusal, renewal or expansion.
(6) (a) The Lease is in full force and effect; (b) neither the Landlord, nor the
Tenant is in default under the Lease, and the Lease is free from any event which
could become a default under the Lease, whether by the giving of notice or the
passage of time; and (c) Tenant has no claims against the Landlord or offsets or
defenses against the payment of rent or additional rent or any other obligations
of Tenant under the Lease.

 

 

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(7) All conditions to be performed by Landlord pursuant to the Lease have been
satisfied in accordance with the Lease, including the completion of and payment
for any leasehold improvements or other work to be performed by Landlord. Tenant
has unconditionally accepted all leasehold improvements and any other work.
Tenant is not entitled to receive any payments or credits on account of
leasehold improvements, and all obligations of Landlord to provide to Tenant any
cost reimbursements, allowances, credits or tenant concession of any kind have
been paid or satisfied in full, including in connection with the Premises and
any expansion space.
(8) The Tenant has accepted full possession and taken occupancy of, and is
conducting business in, the entire Premises, and Tenant has not assigned the
Lease or sublet any part of the Premises and does not hold the Premises under an
assignment or sublease, except:                                         .
(9) The Tenant has not received notice and is not aware of any prior transfer,
assignment, hypothecation or pledge by Landlord of any of Landlord’s interest in
the Lease, except to Lender.
(10) The Tenant has no rights or options to purchase all or any part of the
Property.
(11) The Tenant is not insolvent or bankrupt and is not contemplating seeking
relief under any insolvency or bankruptcy statutes. There are no actions,
voluntary or otherwise, pending or, to the best knowledge of Tenant, threatened
against Tenant under the bankruptcy, reorganization, moratorium or similar laws
of the United States, any state thereof or any other jurisdiction.
(12) Tenant has not introduced, kept or used any hazardous or toxic substances
or materials on the Property, except as the same may be in standard office
products maintained in the Premises in reasonable quantities and in compliance
with all laws.
(13) The individual executing this Tenant Estoppel Certificate is authorized and
empowered to do so on behalf of Tenant and to bind Tenant to the terms hereof.
(14) Tenant acknowledges that this Tenant Estoppel Certificate shall inure to
the benefit of, and is being relied upon by, Lender and its successors, assigns,
and representatives, and shall be binding upon Tenant, and its successors,
assigns and representatives.
Executed this  _____  day of                                         , 200_____.

                           
 
  By:                          
 
      Title: