Document:

Exhibit 10.4

Exhibit 10.4

AMENDMENT NUMBER ONE TO GROUND LEASE

This AMENDMENT NUMBER ONE TO GROUND LEASE (the “Amendment”) is dated the
17th day of September, 2010, and is made by and among HASINA, LLC, a California limited
liability company, TARSTONE HOTELS, LLC, a Delaware limited liability company, KALPANA, LLC, a
California limited liability company, RIGG HOTEL, LLC, a California limited liability company, and
JRIA, LLC, a Delaware limited liability company (collectively, “Lessor”), and CLIFT
HOLDINGS, LLC, a Delaware limited liability company (“Lessee”).

RECITALS

A. Lessor, as assignees from and successors-in-interest to GEARY HOTEL HOLDINGS, LLC, a
Delaware limited liability company (“Geary”), are (i) the owners of certain real property
(land and improvements) commonly known as 495 Geary Street, San Francisco, California, as more
particularly described on Exhibit “A” attached hereto (the “Premises”), as well as
certain Personal Property, and (ii) the “Lessor” under that certain “Ground Lease” dated
October 14, 2004 (the “Lease”), originally between Geary, as the “Lessor”, and Lessee, as
the “Lessee,” copy of which is attached hereto as Exhibit “B.”

B. Lessor and Lessee desire to amend and modify Section 4.1(a) of the Lease to provide that
the Annual Base Rent shall be temporarily reduced as provided herein below.

C. Unless otherwise defined herein, capitalized terms shall have the meanings ascribed to them
in the Lease.

AGREEMENT

NOW, THEREFORE, for valuable consideration, including the performance of the promises,
covenants, representations and warranties hereinafter set forth, the parties, intending to be
legally and equitably bound, agree as follows:

I.

INCORPORATION OF RECITALS

The Recitals set forth hereinabove are incorporated into this Agreement as if set forth at
length, are true and correct, and shall be binding upon the parties hereto.

 

 

 

II.

AMENDMENT

2.1 Section 4.1(a) of the Lease is hereby amended to provide that, for the period from
March 1, 2010 through the earlier of (a) February 29, 2012, or (b) the date that Lessee fails to
pay any Defaulted Rent Payment (as defined in the Settlement Agreement described hereinbelow)
only (the “Adjustment Period”), the Annual Base Rent shall be Four Million Nine
Hundred Sixty-Seven Thousand One Hundred Twelve Dollars ($4,967,112). The Annual Base
Rent payable during the Adjustment Period shall be paid in equal monthly installments of Four
Hundred Thirteen Thousand Nine Hundred Twenty-Six Dollars ($413,926) on the first day of each
calendar month in accordance with the terms of the Lease; provided that the Annual Base
Rent for the period from March 1, 2010 through August 1, 2010 shall be paid in the manner set forth
in that certain “Settlement and Release Agreement” dated September 17, 2010 to which Lessor and
Lessee and certain other persons are parties (the “Settlement Agreement”). Upon the
expiration or earlier termination of the Adjustment Period (as hereinabove provided), Annual Base
Rent shall, without any notice, demand, act, consent or instruction by or from Lessor to Lessee,
automatically revert to the Annual Base Rent specified in the Lease as if this Amendment had not
been executed or effective, and from and after such date, Lessee shall pay the installments of
Annual Base Rent (including any increases pursuant to the terms of the Lease) as and when due, all
as provided in the Lease.

2.2 The definition of “Rent” in Section 4.2 of the Lease is hereby amended to read in its
entirety as follows: ”’Rent’ shall mean and include any and all amounts and charges Lessee is
obligated to pay to Lessor or any Lessor Indemnitee pursuant to this Lease, including Annual Base
Rent and Additional Rent, and the Defaulted Rent Payments (as defined in the Settlement
Agreement).”

2.3 Section 7.2(d)(ii) of the Lease is hereby amended to read in its entirety as follows:
“Second, to the payment of the monthly installment of Annual Base Rent, any Additional Rent, and
any Defaulted Rent Payments (as defined in the Settlement Agreement).

2.4 Section 13.1 of the Lease is hereby further amended by the addition of the following:
”Notwithstanding any other provision of the Lease to the contrary, the consent of Lessor shall not
be required for a Transfer of a direct or indirect equity interest in Lessee; provided that
(a) not more than an aggregate of fifty percent (50%) of the equity interest in Lessee is so
Transferred (whether in one or a series of transactions), (b) following such Transfer, Morgans
Group LLC (or any successor thereof) has oversight of the day-to-day management of Lessee and an
Affiliate of Morgans Group LLC (or its successor) is the Operator; (c) Morgans Group, LLC (or any
successor thereof) has joint control or veto power over any transaction not in the ordinary course
of Lessee’s business, and (d) Lessor is furnished with written notice (in accordance with the
notice requirements in this Lease) of such Transfer not later than ten (10) business days prior to
the effective date of such Transfer.”

I.

RATIFICATION

Except as amended and/or modified by this Amendment, the Lease is hereby ratified and
confirmed and all other terms of the Lease shall remain in full force and affect, unaltered and
unchanged by this Amendment. In the event of any conflict between the provisions of this Amendment
and the provisions of the Lease, the provisions of this Amendment shall prevail. Whether or not
specifically amended by the provisions of this Amendment, all of the terms and provisions of the
Lease are hereby amended to the extent necessary to give effect to the purpose and intent of this
Amendment. The provisions hereof shall be binding on, and are for the benefit of, the successors
and assigns of the parties hereto.

 

2

 

II.

COUNTERPARTS

This Amendment may be executed in any number of counterparts, each of which shall be deemed an
original, but all of which, when taken together, will constitute one and the same instrument. The
signature page of any counterpart may be detached therefrom without impairing the legal effect of
the (signature) thereon, provided such signature page is attached to any other counterpart
identical thereto except as having additional signature pages executed by other parties to this
Amendment attached hereto.

III.

FACSIMILE SIGNATURES

The execution of this Amendment may be effected by facsimile signatures, all of which shall be
treated as originals; provided, however, that any party receiving this Amendment with a facsimile
signature may, by written notice to the other party(ies), require the prompt delivery of an
original signature to evidence and confirm the delivery of the facsimile signature. The parties
each intend to be bound by its respective facsimile transmitted signature, and are aware that the
other parties will rely thereon, and each party waives any defenses to the enforcement of the
Amendment delivered by facsimile transmission.

[The remainder of this page is intentionally left blank]

[Signatures on following page]

 

3

 

III.

EXECUTION

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the
17th day of September, 2010.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	LESSOR:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	HASINA, LLC,

a California limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	BY:	 	TUP ONE, LLC, a
California limited 
liability
company, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Tushar Patel	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	Tushar Patel	 	 
	 

	 	 	 	 	 	Title:
	 	Member

	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	TARSTONE HOTELS, LLC,

a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Nilesh Madhar	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	Nilesh Madhar	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Manager	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	KALPANA, LLC,

a California limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	BY:	 	MKP ONE, LLC, a
California limited 
liability
company, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Mayur Patel	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	Mayur Patel	 	 
	 

	 	 	 	 	 	Title:
	 	Member

	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	RIGG HOTEL, LLC,

a California limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Nilesh Madhar	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	Nilesh Madhar	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	Manager	 	 
	 	 	 	 	 	 	 	 	 

[SIGNATURES CONTINUTED ON NEXT PAGE]

 

4

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	JRIA, LLC, a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	BY:	 	TUP ONE, LLC, a
California limited 
liability
company, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Tushar Patel	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	Tushar Patel	 	 
	 

	 	 	 	 	 	Title:
	 	Member

	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	LESSEE:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	CLIFT HOLDINGS, LLC,

a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Fred J. Kleisner	 	 
	 	 	 	 	Name:	 	Fred J. Kleisner	 	 
	 	 	 	 	Title:	 	Chief Executive Officer	 	 

 

5

 

Exhibit A to Grant Deed

Legal Description

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF San Francisco, COUNTY OF San
Francisco, STATE OF California AND IS DESCRIBED AS FOLLOWS:

PARCEL 1:

BEGINNING AT THE POINT OF INTERSECTION OF THE SOUTHERLY LINE OF GEARY STREET AND THE EASTERLY LINE
OF TAYLOR STREET; RUNNING THENCE SOUTHERLY ALONG THE EASTERLY LINE OF TAYLOR STREET, 137 FEET, 6
INCHES; THENCE AT A RIGHT ANGLE EASTERLY 137 FEET, 6 INCHES; THENCE AT A RIGHT ANGLE NORTHERLY 137
FEET, 6 INCHES TO THE SOUTHERLY LINE OF GEARY STREET; THENCE AT A RIGHT ANGLE WESTERLY, ALONG SAID
LINE OF GEARY STREET, 137 FEET, 6 INCHES TO THE POINT OF BEGINNING.

BEING A PORTION OF 50 VARA BLOCK NO. 196.

PARCEL 2:

A PERPETUAL EASEMENT FOR LIGHT AND AIR OVER A 15-FOOT STRIP OF LAND IMMEDIATELY ADJOINING THE
ABOVE DESCRIBED PROPERTY ON THE SOUTH, AS GRANTED BY HILBAR PROPERTIES COMPANY TO PACIFIC STATES
SAVINGS AND LOAN COMPANY, DATED February 1, 1934, RECORDED February 10, 1934, IN BOOK 2606 OF
OFFICIAL RECORDS, PAGE 325, IN THE OFFICE OF THE RECORDER OF THE CITY AND COUNTY OF SAN FRANCISCO,
STATE OF CALIFORNIA. SAID GRANT OF EASEMENT FOR LIGHT AND AIR WAS MODIFIED BY THAT CERTAIN
AGREEMENT DATED June 5, 1941, BY AND BETWEEN PACIFIC STATES SAVINGS AND LOAN COMPANY, A CALIFORNIA
BUILDING AND LOAN ASSOCIATION, RALPH W. EVANS, AS BUILDING AND LOAN COMMISSIONER FOR THE STATE OF
CALIFORNIA, J. F. BARRETT. H. H. HILP AND LAWRENCE BARRETT, SAID MODIFICATION AGREEMENT WAS
RECORDED ON January 29, 1942, IN BOOK 3821, PAGE 399, OFFICIAL RECORDS, IN SAID RECORDER’S OFFICE.

APN: LOT 013, BLOCK 0316

 

A-1

 

Exhibit B

See Attached

 

 

 

GROUND LEASE

BY AND BETWEEN

GEARY HOTEL HOLDINGS, LLC,

a Delaware limited liability company

AS LESSOR

And

CLIFT HOLDINGS, LLC,

a Delaware limited liability company

AS LESSEE

DATED October 14, 2004

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	1. Definitions
	 	 	2	 
	 
	 	 	 	 
	2. Lease of Premises
	 	 	20	 
	2.1 Lease of Premises
	 	 	20	 
	2.2 Assignment of Acquired Interests
	 	 	20	 
	2.3 Acceptance of the Premises
	 	 	20	 
	2.4 Purchase Agreement
	 	 	21	 
	2.5 Hotel Operations
	 	 	23	 
	2.6 Quiet Enjoyment
	 	 	25	 
	2.7 Materiality Provisions
	 	 	25	 
	 
	 	 	 	 
	3. Lease Term
	 	 	26	 
	3.1 Lease Term
	 	 	26	 
	3.2 Possession
	 	 	26	 
	3.3 Memorandum of Lease
	 	 	26	 
	 
	 	 	 	 
	4. Rent
	 	 	27	 
	4.1 Annual Base Rent
	 	 	27	 
	4.2 Rent and Additional Rent Defined
	 	 	28	 
	4.3 Payment of Rent
	 	 	29	 
	4.4 Lessee’s Obligations Unconditional
	 	 	29	 
	4.5 Late Charge
	 	 	30	 
	 
	 	 	 	 
	5. Net Lease; Taxes and Assessments
	 	 	30	 
	5.1 Net Lease
	 	 	30	 
	5.2 Project Costs
	 	 	31	 
	5.3 Payment of Taxes and Assessments
	 	 	31	 
	 
	 	 	 	 
	6. Use of Premises
	 	 	33	 
	6.1 Permitted Use
	 	 	33	 
	6.2 No Nuisance
	 	 	34	 
	6.3 Applicable Requirements
	 	 	34	 
	6.4 Utility Easements Over Premises
	 	 	35	 
	6.5 Lessor’s Right of Entry
	 	 	35	 

 

i

 

	 	 	 	 	 
	7. Operation of Hotel
	 	 	36	 
	7.1 Hotel Business
	 	 	36	 
	7.2 Escrow Accounts
	 	 	39	 
	7.3 FF&E Reserve Account
	 	 	45	 
	7.4 Improvements and Alterations
	 	 	45	 
	7.5 Operating and Financial Reports for Hotel
	 	 	46	 
	 
	 	 		 
	8. Surrender
	 	 	48	 
	8.1 Surrender of Premises and Assigned Acquired Interests
	 	 	48	 
	8.2 Surrender
	 	 	49	 
	8.3 Holding Over
	 	 	51	 
	8.4 Survival
	 	 	52	 
	 
	 	 		 
	9. Management of Hotel
	 	 	52	 
	9.1 Operator and Food and Beverage Operators
	 	 	52	 
	9.2 Management Agreement; Food and Beverage Operator Agreements
	 	 	53	 
	 
	 	 		 
	10. Insurance and Indemnity
	 	 	55	 
	10.1 Required Insurance
	 	 	55	 
	10.2 Policy Form and General Requirements
	 	 	58	 
	10.3 Lessee’s Indemnity
	 	 	60	 
	10.4 Lessee’s Assumption of Risk and Waiver
	 	 	60	 
	 
	 	 		 
	11. Alterations
	 	 	61	 
	11.1 Permitted Alterations
	 	 	61	 
	11.2 Designated Alterations
	 	 	61	 
	11.3 Required Alterations
	 	 	62	 
	11.4 Design of Alterations
	 	 	63	 
	11.5 Construction of Alterations
	 	 	65	 
	 
	 	 		 
	12. Hazardous Materials
	 	 	67	 
	12.1 Use of Hazardous Materials; Compliance with Environmental Laws
	 	 	67	 
	12.2 Releases
	 	 	68	 
	12.3 Remediation
	 	 	69	 
	12.4 Lessee’s Environmental Indemnity
	 	 	70	 
	12.5 Waiver and Release
	 	 	71	 
	12.6 Survival
	 	 	71	 

 

ii

 

	 	 	 	 	 
	13. Assignment and Subletting
	 	 	71	 
	13.1 Lessor’s Consent
	 	 	71	 
	13.2 Approval of Transfer Documentation
	 	 	73	 
	13.3 Administrative Costs
	 	 	73	 
	13.4 Continuing Responsibility
	 	 	74	 
	13.5 Successors
	 	 	74	 
	13.6 Right to Collect Rent
	 	 	74	 
	13.7 Lessor’s Right to Mortgage or Encumber
	 	 	75	 
	 
	 	 		 
	14. Events of Default; Lessor’s Remedies
	 	 	77	 
	14.1 Events of Default
	 	 	77	 
	14.2 Lessor’s Remedies
	 	 	78	 
	14.3 Survival of Obligations
	 	 	82	 
	14.4 Reentry No Acceptance of Surrender
	 	 	82	 
	14.5 Application of Payments
	 	 	82	 
	14.6 Waiver of Notice and Right of Redemption
	 	 	82	 
	14.7 Rights Cumulative
	 	 	83	 
	 
	 	 		 
	15. Impairment of Lessor’s Title; Leasehold Mortgage
	 	 	83	 
	15.1 No Encumbrance on Lessor’s Title
	 	 	83	 
	15.2 Adverse Claims
	 	 	83	 
	15.3 Lessor’s Notice of Nonresponsibility
	 	 	83	 
	15.4 Liens
	 	 	84	 
	15.5 Leasehold Financing
	 	 	84	 
	15.6 Equipment Financing
	 	 	86	 
	15.7 Lender Protections
	 	 	86	 
	 
	 	 		 
	16. Representations, Warranties and Covenants
	 	 	93	 
	16.1 Lessee’s Representations, Warranties and Covenants
	 	 	93	 
	16.2 Lessor’s Representations, Warranties and Covenants
	 	 	94	 

 

iii

 

	 	 	 	 	 
	17. Casualty or Appropriation
	 	 	94	 
	17.1 No Termination; No Effect on Rental Obligation
	 	 	94	 
	17.2 Evaluation of Extent and Effect of Casualty or Appropriation
	 	 	94	 
	17.3 Effect of Casualty
	 	 	95	 
	17.4 Effect of Appropriation
	 	 	96	 
	17.5 Allocation of Award
	 	 	97	 
	17.6 Restoration Work; Disbursement of Proceeds
	 	 	98	 
	17.7 Termination
	 	 	99	 
	17.8 Emergency Repairs
	 	 	100	 
	17.9 No Extension of Term; Rent Obligations Continue
	 	 	100	 
	17.10 Right to Participate in Settlement
	 	 	100	 
	17.11 Disputes
	 	 	100	 
	17.12 Survival
	 	 	101	 
	 
	 	 		 
	18. Arbitration of Specified Disputes
	 	 	101	 
	 
	 	 		 
	19. Financial Information
	 	 	102	 
	 
	 	 		 
	20. General Provisions
	 	 	102	 
	20.1 Notices
	 	 	102	 
	20.2 Estoppel Certificates
	 	 	103	 
	20.3 Nonrecourse to Lessor
	 	 	103	 
	20.4 Attorneys’ Fees
	 	 	104	 
	20.5 No Waiver
	 	 	104	 
	20.6 Amendment
	 	 	104	 
	20.7 Successors and Assigns
	 	 	105	 
	20.8 No Joint Venture or Loan Transaction
	 	 	105	 
	20.9 Severability
	 	 	105	 
	20.10 No Recordation; Quitclaim
	 	 	105	 
	20.11 Interpretation
	 	 	105	 
	20.12 Entire Agreement
	 	 	105	 
	20.13 Governing Law and Forum
	 	 	106	 
	20.14 Brokers
	 	 	106	 
	20.15 No Dedication
	 	 	106	 
	20.16 No Third Party Beneficiaries
	 	 	106	 
	20.17 Limitation on Effect of Approvals
	 	 	106	 
	20.18 Time of the Essence
	 	 	107	 
	20.19 Termination Not Merger
	 	 	107	 
	20.20 Waiver of Limitation on Releases
	 	 	107	 

 

iv

 

	 	 	 	 	 	 	 
	Exhibit	 	 	 	 	 	 
	A
	 	Description of Premises	 	 	 	 
	B
	 	Existing Hotel Operating Agreements	 	 	 	 
	C
	 	Memorandum of Lease	 	 	 	 
	D
	 	Outline of Liquor License Entity Operating Agreement Terms	 	 	 	 
	E-1
	 	Form of Account Control Agreement (Bank Accounts)	 	 	 	 
	E-2
	 	Form of Account Control Agreement (Escrow Accounts)	 	 	 	 
	F
	 	Approved Designated Alterations	 	 	 	 
	G
	 	Approved Asbestos O&M Plan	 	 	 	 

	 	 	 
	Schedule	 	 
	1
	 	List of Initial Disqualified Expenses
	2
	 	Schedule of Unsecured Creditors

 

v

 

GROUND LEASE

THIS GROUND LEASE (“Lease”) is made and entered into as of October 14, 2004 (the “Effective
Date”), by and between GEARY HOTEL HOLDINGS, LLC, a Delaware limited liability company (“Lessor”),
and CLIFT HOLDINGS, LLC, a Delaware limited liability company (“Lessee”).

RECITALS

A. Lessor, as purchaser (in such capacity, “Purchaser”), and Lessee, as
seller (in such capacity, “Seller”), are parties to that certain Purchase and Sale Agreement, dated
as of June 29, 2004 (as amended from time to time, the “Purchase Agreement”), providing for, among
other things, the sale by Seller and the purchase by Purchaser of the Land (as defined in the
Purchase Agreement), commonly known as 495 Geary Street, located in the City and County of
San Francisco, California, and more particularly described in Exhibit A attached hereto, together
with all Appurtenances, Improvements (including the Hotel, as defined hereinbelow), Personal
Property, Intangible Property (including without limitation all rights to the use of the name
“Clift Hotel” and all derivatives thereof), and Licenses and Approvals, as such capitalized terms
are defined in, but only to the extent intended to be acquired by Purchaser under, the Purchase
Agreement (collectively, the “Acquired Interests”). The Improvements presently consist of a luxury
hotel facility commonly known as the Clift Hotel, containing 363 keyed furnished guest rooms and
suites, together with banquet, meeting and conference rooms, food and beverage facilities, gift and
sundry shops, fitness center, and other amenities (the “Hotel”).

B. Pursuant to the Purchase Agreement, upon the Closing (as such term is
defined in the Purchase Agreement) of the purchase and sale transaction described therein, and as
contemplated therein, Seller (in its capacity as Lessee hereunder) will continue to hold various
Contracts (as such term is defined in the Purchase Agreement), rights and other interests that were
held by Seller immediately prior to the Closing in and to the Hotel and the Hotel Business (for the
purpose of this Recital B, as such term is defined in the Purchase Agreement), which Lessee shall
use and employ in and for the operation of the Hotel pursuant to the requirements of this Lease
(collectively, the “Retained Interests”). In addition, following the Closing, the Hotel will
continue to be operated and managed pursuant to the provisions of the Hotel Operating Agreements
(as defined herein).

C. As used herein, the term “Premises” shall mean and include the Land and
the Improvements and any Alterations thereof hereafter constructed or installed in accordance with
the provisions of this Lease. All Acquired Interests other than the Land and Improvements will be
assigned herein by Lessor to Lessee for use and enjoyment by Lessee exclusively for and in
connection with the operation of the Hotel during the Term of this Lease, as more specifically
provided hereinbelow.

D. Lessee desires to lease the Premises from Lessor and to take an
assignment of the other Acquired Interests from Lessor for Lessee’s use and enjoyment exclusively
for and in connection with the operation of the Hotel and the Hotel Business (as defined in this
Lease) during the Term of this Lease, and Lessor desires to lease the Premises to Lessee and to
assign such other
Acquired Interests to Lessee for the above-stated use and purpose, in each instance subject to and
in accordance with each and all of the terms and conditions set forth in this Lease.

 

1

 

NOW THEREFORE, in consideration of the foregoing and the agreements, covenants and conditions
contained herein, and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1. DEFINITIONS

The following terms, as used in this Lease and the Exhibits hereto, shall have the respective
meanings set forth below, whether used in the singular or plural. Certain other terms not
specifically defined in this Section 1 shall have the meanings set forth elsewhere in this Lease or
in the Exhibits hereto.

“AAA” means the office of the American Arbitration Association (or any successor, or any
alternative organization mutually acceptable to Lessor and Lessee) situated in the City and County
of San Francisco, California.

“Accounting Standards” means the hotel accounting system set forth in the Uniform System of
Accounts for Hotels (9th Rev. Ed.), as the same may hereafter be revised or amended, as
adopted by the American Hotel and Motel Association; provided, however, that in the event and to
the extent of any inconsistency between GAAP, and the Uniform System of Accounts for Hotels, GAAP
shall control.

“Acquired Interests” is defined in Recital A.

“Actual Knowledge” (together with the term “actually known,” or equivalent phrasings) means,
at any given time, with respect to Lessor or Lessee, the then-current actual knowledge, without any
duty of inqury or investigation, of (i) in the case of Lessor, the principal executive officer of
Lessor, having primary responsibility within Lessor’s organization or business structure for the
administration and/or monitoring of Lessor’s investment in the Premises, or (ii) in the case of
Lessee, (A) the principal executive officer within each of Lessee’s and Operator’s respective
organizations or business structures for the administration and/or monitoring of the performance by
Lessee of its obligations under this Lease or by Operator of its obligations under the Management
Agreement, or for the oversight by Lessee or Operator of the operation of the Hotel and the Hotel
Business, and (B) the general manager of the Hotel.

“Additional Rent” is defined in Section 4.2.

“Adjustment Date” is defined in Section 4.1(c).

 

2

 

“Affiliate” means, with respect to any Person: (i) any constituent partner or member at any
ownership level holding a ten percent (10%) or greater equity or profits interest, voting power
(whether direct or indirect), or other beneficial interest in such Person; (ii) any officer,
director or shareholder holding a ten percent (10%) or greater equity or
profits interest, voting power (whether direct or indirect), or other beneficial interest in such
Person; (iii) any partnership, limited liability company, corporation, or other entity in which
such Person is a partner, member, shareholder, or equity owner, as applicable, holding a ten
percent (10%) or greater equity or profits interest, voting power (whether direct or indirect), or
other beneficial interest; (iv) any Person that is under the control of any Person described in
clauses (i)-(iii) above; (v) any Person that controls any Person described in
clauses (i)-(iii) above; and (vi) any Person that is under common control with any Person described
in clauses (i)-(iii) above. For purposes of this definition, “control” means the direct or
indirect ownership of fifty percent (50%) or more of the beneficial interest in a Person, or the
direct or indirect power to control the management policies of such Person, whether through
ownership, by contract or otherwise.

“Alcoholic Beverage Service Operations” is defined in Section 14.2(h).

“Alterations” means any alterations, renovations, reconstructions, replacements, upgrades, or
modifications of any Improvements.

“Annual Base Rent” is defined in Section 4.1.

“Applicable Laws” means all present and future laws, statutes, ordinances, resolutions,
Entitlements, codes, orders, rules, regulations and requirements of all federal, state, and
municipal governments, and the departments, commissions, boards and offices thereof, that are
applicable at any time between the Term Commencement Date and the Surrender Date to Lessee or the
Premises, as the context may require.

“Applicable Requirements” is defined in Section 6.3(a).

“Appropriation” (and derivatives thereof) means (i) any taking by exercise of the power of
condemnation (direct or inverse) or eminent domain; (ii) any requisitioning by military or other
public authority under power of eminent domain for any purpose arising out of a temporary emergency
or other temporary circumstance; or (iii) any conveyance under threat of any such taking or
requisitioning under power of eminent domain. As used herein, the effective date of any
“Appropriation” shall be the first to occur of (x) the date of entry of the final order of
condemnation pursuant to which title is vested in the condemning authority, (y) the date a deed or
other instrument given under threat of eminent domain is recorded, or (z) the date that the
condemning authority takes possession of the Premises.

“Appropriation Report” is defined in Section 17.2.

“Assessment District” is defined in Section 5.3(d).

“Assigned Acquired Interests” is defined in Section 2.2.

“Assumed Obligations” is defined in Section 2.4.

“Attornment Agreement” is defined in Section 13.7.

“Award” means any and all awards and other compensation paid by the Appropriating authority as
a result of an Appropriation, including any award for “just compensation” or other damages,
interest, and fees and costs (including attorneys’ fees and costs).

“Base Rent Escrow Account” is defined in Section 7.2(a).

 

3

 

“Base Rent Escrow Payments” is defined in Section 7.2(b).

“Building” means any structure that is now or hereafter constructed or situated on the
Premises in accordance with this Lease and is intended to be used or operated by Lessee pursuant to
this Lease.

“Business Day” means any day which is not a Saturday, Sunday, or official holiday declared by
the United States of America or the State.

“Capital Event Proceeds” means, without duplication of any items, all payments and proceeds
received by or for the account of Lessee for or in respect of (i) any Casualty (excluding the
proceeds from any business interruption insurance coverage), (ii) any Appropriation (except to the
extent representing an Award for loss of revenues or income during the period of any temporary
Appropriation), (iii) any sale, transfer or other disposition of all or substantially all of
Lessee’s leasehold interest in the Premises or this Lease, (iv) any sale, transfer or other
disposition of any capital assets or other items, other than in the ordinary course of the business
of operation of the Hotel; (v) any recovery under any policy of insurance maintained by Lessee with
respect to the Premises (excluding the proceeds from any business interruption insurance coverage),
or (vi) any Lessee Loan or any Equipment Financing. Subject to compliance by Lessee with the
provisions of Section 17 with respect to any Casualty Proceeds or Award, the requirements of this
Lease that the Hotel be operated at all times as a Luxury Hotel, and any other express provisions
of this Lease, Lessee shall have the exclusive right to use and apply any Capital Event Proceeds in
Lessee’s sole discretion.

“Capital Reserve Accounts” is defined in Section 7.1(e).

“Casualty” is defined in Section 17.2.

“Casualty Proceeds” means any and all insurance payments and proceeds of insurance payable on
account of any Casualty under any insurance provided for in Section 10.

“Casualty Report” is defined in Section 17.2.

“City” means San Francisco, California.

“Claims” is defined in Section 12.4.

“Conditions of Title” is defined in Section 2.1.

“CPI” means the Consumer Price Index published by the U.S. Department of Labor Bureau of Labor
Statistics (San Francisco-Oakland-San Jose, All Urban Consumers, All Items) (1982-84=100), or if
such index is discontinued, such successor index measuring the average rate of inflation in the
San Francisco Bay Area as may be published by an agency of the United States, and if there is none,
then such other index measuring the average rate of inflation in the San Francisco Bay Area as
Lessor and Lessee may mutually agree, or if the parties cannot so agree, then as may be determined
by arbitration pursuant to Section 18. If the base year of the CPI (e.g., 1982-84=100 on the
Effective Date) is changed at any time or times during the Term,
the CPI shall be converted in accordance with the conversion factor published by the United States
Department of Labor, Bureau of Labor Statistics, or any official successor thereto.

 

4

 

“Debt Service” means the sum of the maximum principal and interest payments, reserve deposits
and other periodic charges that are payable during any applicable period for or in connection with
any borrowed indebtedness.

“Debt Service Coverage Ratio” or “DSCR” means, for any specified period, the ratio of: (i) the
NOI for such period, minus the Annual Base Rent payable for such period, to (ii) all Debt Service
payable for such period with respect to any Lessee Loan.

“Default Rate” means four hundred (400) basis points in excess of the Interest Rate, but in no
event higher than the maximum rate permitted by applicable law.

“Demolition Notice” is defined in Section 17.7.

“Designated Alteration” is defined in Section 11.2.

“Designated Alterations Escrow Account” is defined in Section 7.1(a).

“Designated Alterations Escrow Payments” is defined in Section 7.2(b).

“Deposit Month” is defined in Section 7.2(f).

“Disqualified Expenses” means any management fees, expense reimbursements, or other
consideration paid or payable to an Operator which is an Affiliate of Lessee, to a Food and
Beverage Operator which is an Affiliate of Lessee or the Operator, or to any other Person providing
goods or services for the Premises, the Hotel or any part of the Hotel Business, which is an
Affiliate of Lessee, the Operator, or any Food and Beverage Operator, if and to the extent that
such fees or other consideration shall be, for the period in question, in excess of the management
fee, expense reimbursement, or other consideration that would be payable under the same terms and
conditions of management or operation of the Premises, the Hotel, or the pertinent part of the
Hotel Business, or for the provision of such goods or services, to a qualified and experienced
hotel management company, food and beverage operator, or provider of such goods and services, which
is not affiliated with Lessee, the Operator, or any such Food and Beverage Operator, as applicable;
provided that, (i) with respect to the Hotel Operating Agreements that are in existence on
the Term Commencement Date, Disqualified Expenses shall be limited to those fees, expense
reimbursements, and other consideration payable under the Hotel Operating Agreements listed in part
A of Schedule 1 attached hereto and made a part hereof which are expressly identified as
Disqualified Expenses in part B of Schedule 1, and all other fees, expense reimbursements and
other consideration payable under the Hotel Operating Agreements that are in existence on the Term
Commencement Date shall constitute Ordinary Operating Expenses, and (ii) payments made by Lessee or
the Operator to an Affiliate of Lessee or the Operator in payment of the cost of goods or services
that are supplied to or performed for the benefit of the Hotel by third parties who are not
Affiliates of Lessee or the Operator, and which are used by such Affiliate of Lessee or Operator
solely to pay such third parties for such goods or services, without markup or retention of any
portion of such payments by such Affiliate of Lessee or Operator, shall not be Disqualified
Expenses. Prior to or at

 

5

 

any time after entering into any agreement, lease or contract for which the payment of any fee, expense reimbursement, or
other consideration thereunder could qualify as a Disqualified Expense, Lessee may submit a written
request to Lessor (accompanied by a true and correct copy of the subject agreement, lease or
contract, and a summary of the nature of the Affiliate relationship of the other party to such
agreement, lease or contract) for a determination of whether or to what extent any fee, expense
reimbursement, or other consideration proposed to be paid thereunder would constitute a
Disqualified Expense in the opinion of Lessor. Such request may, at Lessee’s election, be
submitted in connection with Lessee’s approval of the annual budget for the Hotel for any Operating
Year. Lessor shall respond to such request within a commercially reasonable period of time, and
shall advise Lessee in writing whether and to what extent Lessor would consider, in the exercise of
Lessor’s reasonable discretion, any such fee, expense reimbursement, or other consideration to be a
Disqualified Expense. If and to the extent that Lessor’s response indicates that any fees, expense
reimbursements, or other consideration will not be considered to constitute a Disqualified Expense,
such response shall be binding upon Lessor for the purpose of applying this definition of
Disqualified Expenses with respect to the agreement, lease or contract which is the subject of such
determination, except to the extent of any subsequent modification or amendment of or to such
agreement, lease or contract which relates to or affects any fees or other consideration payable
thereunder. Solely for the purposes of this definition of Disqualified Expenses and for
Section 15.5(b) below, the term “Affiliate” as used in this definition and in Section 15.5(b) below
shall include any and all of the following: (A) any Affiliate as defined above in this Section 1;
and (B) any Person which has a substantial business relationship with Lessee, the Operator, or a
Food and Beverage Operator, other than in connection with the Hotel or the Hotel Business, which
could reasonably enable the parties to the subject agreement, lease or contract to agree upon terms
or conditions of payment or performance of the obligations of Lessee, the Operator, or such Food
and Beverage Operator thereunder that would be in excess of the reasonable commercial value of the
goods or services to be provided thereunder by such Person in return for concessions or credits to
be given or provided by such Person in connection with such other business relationship.

“Effective Date” is defined in the introductory paragraph to this Lease.

“Eligible Costs” is defined in Section 11.2.

“Employment Obligations” is defined in Section 2.4(d).

“Employment Liabilities” is defined in Section 8.2.

“Engineer” is defined in Section 17.2.

“Entitlements” means all present and future approvals, permits, licenses and other
entitlements, including all development approvals, mitigation measures, and conditions of
development, that have been issued or may hereafter be issued by any federal, state, regional or
municipal government or authority, and that are required at any time between the Effective Date and
the Surrender Date in connection with the development, construction, use, ownership, management,
operation, occupancy or Alteration of the Premises.

“Entitlements Change” is defined in Section 7.1(c).

 

6

 

“Environmental Laws” means all federal, state and local laws, statutes, ordinances,
regulations, rules, final and enforceable judicial and administrative orders and decrees, including
any rules or principles of common law, permits, licenses, approvals, and authorizations, of all
federal, state, regional and municipal governmental agencies, bodies or officials, or other
governmental entities with legal authority, pertaining to the protection of the health and safety
of persons, animals, or the environment, and which are in effect at the time as of which any
reference to Environmental Laws is applicable or pertinent under this Lease, including any such
laws, statutes, ordinances, regulations, rules, final and enforceable judicial and administrative
orders and decrees, permits, licenses, approvals, authorizations and similar requirements
regulating or relating to Hazardous Materials or to the generation, use, storage, release,
presence, disposal, transport, or handling of any other substance or material which has the
potential to pollute, contaminate, or harm any land, subsurface area, water source or watercourse,
air or other natural resource.

“Equipment Financing” is defined in Section 15.6.

“Equipment Lenders” is defined in Section 15.6.

“Escrow Accounts” is defined in Section 7.2(a).

“Estimated Costs” is defined in Section 11.2.

“Event of Default” is defined in Section 14.1.

“Excess Costs” is defined in Section 11.2.

“Expiration Date” shall be the day immediately preceding the ninety-ninth (99th) anniversary
of the Term Commencement Date.

“Fee Lender” means any Person (and its successors and assigns) which may, on or after the date
hereof, make a loan to Lessor that is secured, in whole or in part, by Lessor’s fee interest in the
Premises.

“Fee Mortgage” means any mortgage, deed of trust or other security instrument held by a Fee
Lender and encumbering all or any part of Lessor’s fee interest in the Premises.

“FF&E” means all furniture, fixtures and equipment located in or used in connection with the
operation of the Hotel, including, without limitation, lobby, corridor, and guest room furniture
and furnishings; carpeting; flooring; wall coverings; window coverings; artwork; kitchen, bar and
laundry equipment; audio-visual equipment; telephone, computer and telecommunications equipment;
bathroom equipment; cleaning equipment; chinaware, glassware, flatware, linens, bedding, uniforms,
utensils, and items of a like nature used in the operation of the Hotel; vehicles; and fittings and
fixtures (excluding fixtures which, when attached to the Building and Appurtenances, become part of
the real property pursuant to Applicable Laws), together with any and all replacements thereof and
additions thereto during the Term.

 

7

 

“FF&E Reserve Account” means a reserve account established by Lessee for the Hotel, and
administered by either Lessee or the Operator, into which Monthly Cash Flow is to be deposited from
time to time for the purpose of defraying the future costs of acquisition or replacement of any
FF&E, as may be required by any Management Agreement or by this Lease.

“Food and Beverage Agreement” means any agreement, contract or lease (other than a Management
Agreement) entered into by Lessee or Operator, or any Affiliate of either, with any Food and
Beverage Operator for or relating to the operation or management of any food and/or beverage
(including alcoholic beverages) facilities, services or premises at, within or from the Hotel,
including mini-bar service and/or room service, and such term shall include, without limitation,
each food and beverage management or operating agreement which is shown on Exhibit B attached
hereto as one of the Hotel Operating Agreements. Except as otherwise provided in Sections 1.3 and
10.3(b)(xxii) of the Purchase Agreement with respect to the agreements identified on Exhibit B as
items (4), (5) and (6) (herein the “SC Geary Related Agreements”), each Food and Beverage Agreement
shall contain provisions which comply with the requirements of Section 9.2 of this Lease or shall
be subject to a subordination agreement imposing such requirements.

“Food and Beverage Operator” means any entity from time to time retained by Lessee or the
Operator, or any Affiliate of either, to manage and/or operate any food and/or beverage (including
alcoholic beverages) facilities, services or premises at, within or from the Hotel, including
mini-bar service and/or room service, which is a party to a Food and Beverage Agreement.

“Force Majeure Events” means fire, earthquake, flooding, acts of God, wars, riots, legal
challenges not instituted by the Person claiming the benefit of a Force Majeure Delay,
unanticipated delays caused by the City or any other public agency with jurisdiction (but only to
the extent that any such delay caused by the City or any other public agency is not attributable to
the failure of the Person claiming the benefit of a Force Majeure Delay to conform to submission or
other timing requirements imposed by the City or such other public agency in connection with
approvals or permits being sought by such Person), delays caused by the other party’s failure to
comply with its obligations under this Lease, and other events or circumstances outside the
reasonable control, prevention and foreseeability of the Person claiming the benefit of a Force
Majeure Delay; excluding, however, lack of funds or other financial inability to perform on the
part of the Person claiming the benefit of a Force Majeure Delay. In no event shall any Force
Majeure Event cause the Term of this Lease to be extended beyond the Expiration Date.

“Full Insurable Replacement Value” is defined in Section 10.1.

“GAAP” means generally accepted accounting principles, consistently applied.

“Gross Receipts Taxes” means applicable goods and services taxes, excise, sales, occupancy and
use taxes, or similar government taxes, duties, levies or charges collected directly from patrons
or guests of the Hotel, or as a part of the sales price of any goods, services, or displays, such
as gross receipts, admission, cabaret or similar or equivalent taxes, including, but not limited
to, any transaction tax, resale of electricity tax, soft drink tax, head tax, occupancy tax,
amusement tax, parking tax, beverage tax, sales tax and public utility tax.

 

8

 

“Group Sales Charges” is defined in Schedule 1.

“Hazardous Materials” means any substance which is or at any time becomes: (i) regulated
under or otherwise subject to any Environmental Law as a hazardous substance, hazardous waste,
hazardous material, pollutant or contaminant; (ii) a petroleum hydrocarbon, including crude oil or
any fraction thereof; (iii) a hazardous, toxic, corrosive, flammable, explosive, infectious,
radioactive, carcinogenic, or reproductive toxicant; (iv) radon gas or any similar gas or
substance, or (v) otherwise regulated pursuant to any Environmental Law.

“Hotel Business” means the hospitality and related business operations from time to time
carried on at, within or from the Hotel during the Term of this Lease, including, without
limitation, the rental or sale of rooms, suites and other accommodations for transient occupancy by
Hotel guests, patrons and customers, the provision of meeting, conference, banquet and other
facilities and services for use by Hotel guests, patrons and customers, the subleasing of retail,
office, and other usable space in the Hotel for the provision of various business, retail, and
personal services and concessions for the use and enjoyment of Hotel guests, patrons and customers,
and the operation of all amenities available at or associated with the Hotel, including food and
beverage facilities and services (including the sale and serving of alcoholic beverages at, within
and from the Hotel, mini-bar, and room service), parking services, spa and health facilities, and
any and all other features, services and amenities from time to time provided at or by the Hotel
for the use or enjoyment of the Hotel guests, patrons and customers or the public at large.

“Hotel Employees” means all individuals who, at any time during the Term of this Lease, are
employed by Lessee, the Operator, any Food and Beverage Operator, or any Affiliate of any of such
entities, solely or primarily in connection with the operation of the Hotel or the Hotel Business,
including, without limitation, any management personnel who are employed generally or primarily at
the Hotel or whose primary employment functions relate to the Hotel or any part of the Hotel
Business. Persons who are hired or retained solely as independent contractors for the purpose of
providing goods or services to or for the Hotel, including, without limitation, outside design
professionals and construction contractors, catering services or parking services, and who are not
Affiliates of Lessee, the Operator or any Food and Beverage Operator, shall not be considered to be
Hotel Employees so long as under Applicable Laws Lessee, the Operator or any Food and Beverage
Operator would not be recognized or treated as the employer of such Persons and would not incur
vicarious liability for the acts or omissions of such Persons under Applicable Laws.

“Hotel Investment Experience” means the prior or current ownership, operation, or direct
management oversight of one or more Luxury Hotel properties containing not less than an aggregate
of 1,000 keyed guest rooms or suites.

“Hotel Operating Accounts” is defined in Section 7.1(f).

“Hotel Operating Agreements” means the management agreements for the operation of the Hotel,
and any contracts, leases or other agreements for the management and operation of the food and
beverage facilities, services and premises at the Hotel, which are listed on Exhibit B attached
hereto.

 

9

 

“Impositions” means all real property taxes and assessments; personal property taxes; use and
occupancy taxes; privilege taxes; business and occupation taxes; gross sales taxes; occupational
license taxes; water and sewer charges; charges for public utilities; excises; levies; license and
permit fees; transit taxes; and all other governmental impositions and charges of every name, kind
and nature whatsoever, whether or not now customary or within the contemplation of Lessor or
Lessee, and regardless of whether the same shall be extraordinary or ordinary, general or special,
unforeseen or foreseen, or similar or dissimilar to any of the foregoing, which, at any time during
the Term may be levied, assessed, charged or imposed or become due and payable upon or in
connection with the ownership, development, construction, marketing, use, operation or occupancy of
the Premises or any part thereof; or upon the rent or income of Lessee; or upon the transaction
through which Lessor acquired the Premises from Lessee, this transaction, this Lease or any
document creating or transferring an estate or interest of Lessee in the Premises (including any
documentary transfer taxes); or upon any Improvements, Alterations, FF&E, or Personal Property; or
upon the leasehold of Lessee or upon the estate hereby created; or upon Lessor by reason of its
ownership of the fee underlying this Lease. If at any time during the Term, the present method of
taxation or assessment shall be changed such that there shall be substituted for the whole or any
part of the Impositions now or hereafter levied, assessed and/or imposed any capital levy or other
tax or assessment, including any benefit assessment or other fee, charge, tax or imposition that is
imposed or administered by any governmental entity for a public purpose or for the funding of any
public or private facilities, improvements or amenities, then the term “Impositions” also shall
mean and include such capital levy or other tax or assessment. The term “Impositions” shall not
include any municipal, state or federal income taxes levied against Lessor, any income, profits or
revenues tax, assessment or charge imposed upon the Rent received by Lessor under this Lease (other
than a gross receipts or gross rentals tax or charge), any estate, gift, succession, inheritance or
transfer taxes of Lessor, or any business or occupational tax attributed and imposed upon Lessor
for (and limited to the extent of) work, business or income not related or attributable to the
Premises.

“Impound Account” is defined in Section 5.3.

“Improvements” means the Hotel and all other Buildings, utilities, monuments, fences, walls,
driveways, landscaping and other structures and facilities that are at any time constructed,
planted or installed on, under or within the Premises, including as part of any Alterations.

“Increase” is defined in Section 4.1.

“Interest Rate” means two percent (2%) in excess of the rate published in the Wall Street
Journal for the period in question as the “prime rate,” or, if there is no such rate published, the
rate publicly announced by Citibank or its successors for the period in question as the rate
(however denominated) given to its best commercial customers for unsecured commercial loans, or, if
there is no such rate announced, the rate of ten percent (10%) per annum (calculated on the basis
of a 365/366-day year), or, if less, the maximum rate of interest permitted to be charged under
applicable law by the payee of such interest.

“Intervening Lease” is defined in Section 13.7(c).

“Land” is defined in Recital A.

 

10

 

“Lease” is defined in the introductory paragraph to this Lease, and includes all Exhibits
attached hereto.

“Leasehold Mortgage” means any deed of trust, mortgage, assignment, security interest, lien or
other encumbrance of, in or against Lessee’s leasehold estate created by this Lease or Lessee’s
leasehold interest in the Premises or any part thereof (excluding any lien, pledge or security
interest relating to any Equipment Financing).

“Lender” is defined in Section 15.5.

“Lender Affiliate” means any Lender which is an Affiliate of Lessee or the Operator.

“Lessee” is defined in the introductory paragraph to this Lease.

“Lessee Loan” is defined in Section 15.5.

“Lessee Representatives” means Lessee’s agents, officers, directors, members, employees,
contractors, and invitees.

“Lessee Retained Obligations” is defined in Section 8.1.

“Lessee’s Interest Notice” is defined in Section 13.7(b).

“Lessor” is defined in the introductory paragraph to this Lease.

“Lessor Exceptions” means (i) the lien of and any security interest created by any Fee
Mortgage; and (ii) any liens, exceptions and restrictions on, against or relating to the Premises
which have been created by, or have resulted solely from acts of, Lessor or Lessor Representatives
occurring on or after the Effective Date and in violation of the terms of this Lease, unless the
same were created with the written concurrence of Lessee or as a direct or indirect result of a
default by Lessee under this Lease.

“Lessor Indemnitees” means (i) Lessor; (ii) all Affiliates of Lessor; and (iii) all trustees,
directors, officers, members, employees and agents of any of them.

“Lessor Representatives” means Lessor’s agents, officers, directors, members, employees, and
contractors.

“Lessor’s Share” is defined in Section 17.5(c).

“Lessor Transfer” is defined in Section 13.7.

“Lessor Transfer Obligations” is defined in Section 5.1.

“Liens” is defined in Section 15.4.

“Liquor Licensee” is defined in Section 2.5(c).

 

11

 

“Luxury Hotel” means a hotel facility whose standards of operation and physical
characteristics are substantially equal to or higher than the average standard of operation and
physical characteristics of the five (5) hotels located in the City which reflect a quality
standard of hotel operation at least equal to the higher of (i) the operation of the Hotel as
managed and operated on the Effective Date, and (ii) the top tier of recognition as a so-called
four (4) star hotel or equivalent rating (based on the criteria employed by the primary national
hospitality industry rating services, including the Mobil Travel Guide, Conde Nast Traveler, and
the American Automobile Association) (the “Luxury Hotel Competitive Set”). As of the Effective
Date, the following hotels located in the City are considered to be included within the Luxury
Hotel Competitive Set: the Park Hyatt Hotel; the Campton Place Hotel; the Huntington Hotel; the
Fairmont Hotel; the Westin St. Francis Hotel. It is recognized that not all services and
facilities available in each Luxury Hotel will necessarily be provided by all Luxury Hotels, but
that the composite of services, facilities, and amenities provided by each Luxury Hotel will cause
such hotel to be deemed to constitute a Luxury Hotel. It is also recognized that during the Term
of this Lease: (A) the list of the hotels comprising the Luxury Hotel Competitive Set may require
modification as one or more existing hotels in the City is taken out of operation or suffers a
decline or benefits from an improvement in its quality ratings and/or as new or remodeled hotels
are added to the hotel market in the City and are operated in a manner that would qualify them for
inclusion as part of the Luxury Hotel Competitive Set; and (B) the four-star quality rating for
hotels in the City, as currently determined by the existing primary national hospitality rating
services, includes a variety of hotels of different sizes, types, geographic locations and
operations that fall within a quality range which varies from slightly less than five-star (or
absolute top quality) status and slightly better than three-star (or somewhat lower quality)
status. As used in this definition of Luxury Hotels, the term “top tier” hotels, when used to
refer to hotels within the four-star or equivalent rating, shall refer to those hotels within the
four-star or equivalent rating which occupy the top level of recognition within such four-star
category (i.e., that are closest in ranking to five-star hotels). The parties acknowledge that the
Luxury Hotel Competitive Set may be revised from time to time during the Term of this Lease, but
not more frequently than at five (5) year intervals, to reflect current conditions and quality
ratings of hotels in the City at a four-star or equivalent rating (based on rating standards and
criteria at the time being employed by the companies or firms which are then generally recognized
as the primary national hospitality rating services), provided that at all times the Luxury Hotel
Competitive Set shall consist only of hotels in the City that occupy the top tier of recognition
within such four-star rating range or its equivalent. In the event that any dispute arises between
Lessor and Lessee as to which five (5) hotels in San Francisco reflect a quality standard of hotel
operation which satisfies the above-stated requirements, such dispute shall, upon the request of
either party, be resolved by arbitration pursuant to Section 18.

“Major Alteration” is defined in Section 11.1.

“Major Casualty” is defined in Section 17.2.

“Management Agreement” means any agreement, contract or lease (other than a Food and Beverage
Agreement) entered into by Lessee from time to time with any Operator relating to the management or
operation of the Hotel or any other Improvements, including the property management agreement which
is described on Exhibit B attached hereto as one of the Hotel Operating Agreements, and also
includes any franchise, license or similar agreement, whether
entered into with the Operator, any affiliate of the Operator, or any third party, relating to the
use of any trade names, trademarks, central or corporate services, or other rights or facilities in
connection with the operation of the Hotel or any other Improvements. Each Management Agreement
shall contain provisions which comply with the requirements of Section 9.2 of this Lease or shall
be subject to a subordination agreement imposing such requirements.

 

12

 

“Memorandum of Lease” means the Memorandum of Lease, in the form attached hereto as Exhibit C,
to be recorded by Lessee, at Lessee’s cost and expense, promptly following the execution and
delivery of this Lease by the parties.

“Monetary Obligations” means (i) Rent and all other sums payable by Lessee under this Lease to
Lessor or to any Lessor Indemnitee, (ii) Impositions, (iii) premiums for insurance required to be
maintained by Lessee under this Lease, and (iv) all sums payable by Lessee under this Lease to any
Person other than Lessor or any Lessor Indemnitee, which sums, if not timely paid, could result in
the imposition of a lien or charge against the Premises.

“Monthly Cash Flow” means, for each calendar month during the Term, the actual gross receipts
of revenue and income from the operation of the Premises, the Hotel, and/or the Hotel Business for
such month, as determined in accordance with the cash receipts method of accounting. Monthly Cash
Flow shall not include any Capital Event Proceeds.

“Morgans” means Morgans Hotel Group, LLC, a Delaware limited liability company.

“Net Operating Income” or “NOI” means, for any Operating Year or, in the case of the
provisions of Section 7.2(f) for any period of twelve (12) consecutive calendar months, the Total
Revenues for such Operating Year or 12-month period, as applicable, less the sum of (for the
applicable period) (i) Ordinary Operating Expenses, (ii) amounts deposited into the FF&E Reserve,
but not in excess of an aggregate deposit equal to four percent (4%) of Total Revenues, and
(iii) Debt Service payable on any Equipment Financing.

“Notice of Election to Terminate” is defined in Section 17.7.

“Notices” is defined in Section 20.1.

“Operating Contract” is defined in Section 13.1.

“Operating Year” means each consecutive calendar year during the Term, commencing with the
calendar year in which the Effective Date occurs and ending with the calendar year in which this
Lease shall expire or terminate. In the event that the Term of this Lease shall commence on a date
other than January 1 of a calendar year, or shall terminate on a date other than December 31 of a
calendar year, that portion of any such calendar year in which the Term of this Lease shall be in
effect shall be considered to be an Operating Year for purposes of this Lease. Without limiting
the foregoing, the parties acknowledge and agree that the initial Operating Year shall commence
upon the Bankruptcy Court Approval Date, as defined in the Purchase Agreement and shall end on
December 31, 2004.

“Operator” means the management company or other entity (excluding any Food and Beverage
Operator) retained by Lessee from time to time to manage and operate the Hotel and/or
any other Improvements on the Premises. Each Operator shall be subject to the approval of Lessor
as and to the extent provided in Section 9.1 of this Lease.

 

13

 

“Ordinary Operating Expenses” means, for any specified period, without duplication of any
item, all costs, expenses, debts, liabilities and/or obligations arising from the operation of the
Hotel which are paid or incurred by Lessee or by Operator as agent for Lessee and which are treated
as expenses under both GAAP and the Accounting Standards, but excluding:

(a) depreciation of any Improvements, FF&E, and capitalized operating
equipment;

(b) amortization of assets held under capital leases and costs of
acquiring leaseholds and leasehold improvements;

(c) all Disqualified Expenses;

(d) capital expenses (meaning any item of expense that, according to
GAAP, is not properly treated as a current expense on the books of the Hotel, but rather
should be capitalized);

(e) Debt Service on any Lessee Loans or Equipment Financing, or any
other payments made in respect of any Lessee Loans or Equipment Financing;

(f) any payment on account of dividends or other return on the equity
investment of the owners of Lessee;

(g) Rent payable under this Lease;

(h) amounts deposited into any Reserve Account, including the FF&E
Reserve Account.; and

(i) any other sums which any other provision of this Lease expressly
states shall not constitute Ordinary Operating Expenses.

Notwithstanding the foregoing, amounts which are funded by Lessee to SC Geary LLC from time to
time for the purpose of covering or defraying any operating deficits arising from the operation of
the restaurant and bar facilities at the Hotel (whether such funding is made by Lessee directly or
indirectly to SC Geary LLC, and whether made in the form of equity contributions or otherwise),
including any such amounts funded for payment of any shortfall in the payment of management fees
owed to ZM SF Ventures LLC, shall, but in each such case only to the extent funded pursuant to the
provisions of the Hotel Operating Agreement listed as item (4) in Exhibit B hereto, be included as
Ordinary Operating Expenses even if, under the Accounting Standards and/or GAAP, such amounts would
not otherwise qualify as expenses.

“Owner’s Policy” means the ALTA Owner’s Policy of Title Insurance issued by Title Company to
Lessor concurrently with Lessor’s acquisition of fee ownership of the Premises pursuant to the
Purchase Agreement.

“Permitted Alterations” is defined in Section 11.1.

 

14

 

“Permitted Exceptions” means any liens, exceptions and restrictions on, against or relating to
the Premises which (A) exist on the Effective Date (excluding only matters which are actually known
to Lessee but have not been disclosed in writing to Lessor prior to the Effective Date, whether by
Lessee or the Title Company, and are not otherwise actually known to Lessor on the Effective Date),
or (B) are expressly permitted under the terms of this Lease to be created by Lessee for a period
that could extend beyond the Termination Date, or (C) will terminate by their express provisions on
or before the Termination Date, or (D) are unconditionally subordinate to this Lease and Landlord’s
rights hereunder, and expressly provide that they will not remain in effect following any
termination of this Lease by Landlord upon an Event of Default, or (E) are hereafter consented to
in writing by Lessor as liens, exceptions or restrictions which would be binding on Lessor or the
Premises following the Termination Date, but specifically excluding any Leasehold Mortgage unless
such Leasehold Mortgage is fully released and reconveyed prior to the Termination Date.

“Permitted Materials” is defined in Section 12.1.

“Permitted Transferee” is defined in Section 13.1.

“Permitted Uses” means the use, occupancy, operation, maintenance, repair, improvement,
replacement and Alteration of the Improvements as a Luxury Hotel (including the roof of the
Improvements), and uses customarily ancillary thereto (excluding any gaming casino or similar
facility, and excluding any condominium, cooperative or other residential development which is
offered to the public for sale), or such other or additional use as may hereafter be expressly
consented to in writing by Lessor, which consent may be given or withheld, and shall be subject to
such conditions as are required by Lessor (including, without limitation, an increase in the Rent
payable hereunder and/or a restructuring of all or part of the Rent as participating rent), in
Lessor’s sole and absolute discretion.

“Person” means any individual, trust, partnership, corporation, limited liability company, or
other entity, including any governmental body, agency, authority or official.

“Personal Property” is defined in Section 15.6.

“Potential Default” means a condition or event which, with the giving of notice or the passage
of time, or both, would constitute an Event of Default hereunder.

“Premises” is defined in Recital C of this Lease.

“Proceeds” is defined in Section 17.6.

“Project Costs” is fined in Section 5.2.

“Public Accommodations Laws” means all applicable laws, ordinances, rules and regulations of
all duly constituted federal, state or municipal authorities, including, without limitation,
Title III of the Americans with Disabilities Act of 1990, 42 U.S.C. Sections 12181-12183,
12186(b)-12189, the ADA Accessibility Guidelines promulgated by the Architectural and
Transportation Barriers Compliance Board, the public accommodations title of the Civil Rights Act
of 1964, 42 U.S.C. 2000a et seq., the Architectural Barriers Act of Rehabilitation Act of
1968, 42 U.S.C. 4151 et seq., Title V of the Rehabilitation Act of 1973, 29 U.S.C. 790 et seq., the
Minimum Guidelines and Requirements for Accessible Design, 36 C.F.R. Part 1190, and the Uniform
Federal Accessibility Standards, and any and all similar state and municipal laws, ordinances,
rules and regulations now or hereafter adopted, published or promulgated, or otherwise in force,
all as the same are in effect on the Term Commencement Date or as may be hereafter modified,
amended or supplemented.

 

15

 

“Purchase Agreement” is defined in Recital A to this Lease.

“Purchaser” is defined in Recital A to this Lease.

“Qualified Transferee” is defined in Section 13.1.

“Qualifying Amount” is defined in Section 7.2(f).

“Receiving Party” is defined in Section 20.2.

“Recipient Agencies” means the City, the State, and any other federal, state or municipal
governmental bodies, or public or private utility companies.

“Related Instruments” is defined in Section 16.1.

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, leaching, migrating, dumping or disposing into the air, land, surface water, ground
water or the environment of any Hazardous Materials (including the abandonment or discarding of
receptacles containing any Hazardous Materials).

“Release Requirement” is defined in Section 7.2(f).

“Rent” is defined in Section 4.2.

“Replacement Operator” is defined in Section 9.2.

“Requesting Party” is defined in Section 20.2.

“Required Alterations” is defined in Section 11.3.

“Required Alterations Escrow Account” is defined in Section 7.2(a).

“Required Alterations Escrow Payments” is defined in Section 7.2(b).

“Restoration Work” is defined in Section 17.2.

“Retained Interests” is defined in Recital B.

“Seasonal Rent Reserve” is defined in Section 7.2(a).

“Seasonal Rent Reserve Escrow Payments” is defined in Section 7.2(b).

 

16

 

“State” means the State of California, and all of its agencies, departments and divisions.

“Substantial Completion” or “Substantially Completed” means, with respect to any Improvements
or Alterations, the completion of work on such Improvements or Alterations to a condition in which
they are usable for their intended purposes, subject only to completion of minor punch list items,
in accordance with and without material deviation from approved plans, applicable construction
contract requirements and the terms and conditions of this Lease, and provided that all inspection
signoffs required from any City officials or inspectors under applicable City building codes and
ordinances for lawful occupancy and operation of the Hotel in accordance with this Lease have been
obtained.

“Surrender Date” means the later of: (i) the Termination Date; or (ii) the date Lessee fully
quits and surrenders the Premises to Lessor in accordance with the applicable requirements of this
Lease.

“Surviving Obligations” means any obligations of Lessee or Lessor under this Lease, actual or
contingent, which arise on or prior to the Termination Date and which by their express terms, or
pursuant to any other provisions of this Lease, survive the Termination Date.

“Term” is defined in Section 3.1.

“Term Commencement Date” is defined in Section 3.1.

“Termination Date” means the Expiration Date, or such earlier date as this Lease may be
terminated in accordance with its terms.

“Title Company” means Chicago Title Insurance Company.

“Total Appropriation” is defined in Section 17.4.

“Total Revenues” means, without duplication of any item, all revenue, sales, proceeds and
income of any kind or character earned by or paid to Lessee which are treated as revenue under GAAP
and the Accounting Standards in respect of the Premises or the operation of the Hotel, including
without limitation the proceeds of any business interruption insurance relating to the loss of
revenues from the operation of the Hotel, except that the following shall not be included in
determining Total Revenues:

(a) Gross Receipts Taxes;

(b) Capital Event Proceeds;

(c) rebates, discounts, or credits of a similar nature with respect to
purchases, except (other than for purposes of calculating the required amount of deposits to
the FF&E Reserve Account) to the extent that the amount of such rebates, discounts or credits
has been or is to be included in the calculation of Ordinary Operating Expenses;

(d) other income or proceeds derived from business operations or
investments outside of the Hotel and resulting other than from (i) the use or occupancy of the
Hotel, or any part
thereof, including income derived from securities or other property acquired and held for
investment, or (ii) the sale of goods, services, room accommodations, food and beverage, or
other items sold on or provided from the Hotel in the ordinary course of business;

 

17

 

(e) interest earned on funds held in any Reserve Account;

(f) the value of any complimentary rooms, goods or services;

(g) gratuities, to the extent the same are collected for the benefit of
and paid over to any Hotel Employees;

(h) charges or payments collected from patrons or guests for telephone,
telegraph, facsimile transmission, computer access services, and other communications systems
access or toll charges;

(i) any rent, license fee, concession charge, or other fees or
charges in lieu of rent paid by any sublessee, concessionaire, or licensee whose revenues are
otherwise included in the calculation of Total Revenues;

(j) refunds to Hotel guests or credits to any Hotel customers for
lost or damaged items; and

(k) refunds to parking customers or any credits to any parking customers
for lost or damaged items.

Notwithstanding the foregoing, amounts which are paid or distributed to Lessee from time to
time on account of or arising from any income, profits or other earnings from the restaurant and/or
bar operations at the Hotel, whether such payments or distributions are made in respect of Lessee’s
ownership interest in 495 Geary LLC or otherwise, including without limitation any rent payments
made to Lessee pursuant to the Operating Lease (Food and Beverage Premises) listed as item (2) in
Exhibit B hereto, shall, but only to the extent made pursuant to the provisions of the Hotel
Operating Agreements listed as item(s) (2), (3), (4), (5) and (6) in Exhibit B hereto, be included
as Total Revenues even if, under the Accounting Standards and/or GAAP, such amounts would not
otherwise qualify as revenues from the operation of the Hotel. All such payments or distributions
to Lessee shall also be included in determining Monthly Cash Flow.

 

18

 

“Transfer” means any sublease, sale, assignment, conveyance, exchange, encumbrance,
hypothecation or other transfer, voluntary or involuntary, by operation of law or otherwise, of all
or any portion of Lessee’s estate or interest in the Premises or this Lease, other than a Leasehold
Mortgage or an Equipment Financing complying with the requirements of Section 15.5 or Section 15.6,
respectively. “Transfer” also shall mean and include any of the following transactions: (i) if
Lessee is a corporation with fewer than 500 shareholders and is not listed on a recognized exchange
or other public trading system regulated by the United States or any foreign government, an
assignment, sale, conveyance, exchange or
other transfer, directly or indirectly, whether through a single transaction or multiple
transactions, of the lesser of (A) fifty percent (50%) or more of the stock or voting rights of
Lessee or (B) a controlling interest (as defined below) in such corporation, (ii) if Lessee is a
trust, an assignment, sale, conveyance, exchange or other transfer, directly or indirectly, whether
through a single transaction or multiple transactions, of fifty percent (50%) or more of the
beneficial interest of Lessee from that existing on the date that Lessee became Lessee under this
Lease; (iii) if Lessee is a limited liability company, any assignment, sale, conveyance, exchange
or other transfer, directly or indirectly, whether through a single transaction or multiple
transactions, of (A) such portion of the interest of any member which is designated as a manager of
such limited liability company in the operating agreement for such company which would result in
such member no longer having a controlling interest in such company, or (B) either (1) fifty
percent (50%) or more of the beneficial ownership of the membership interests of Lessee from that
existing on the date that Lessee became Lessee under this Lease or (2) a controlling interest in
such limited liability company; (iv) if Lessee is a partnership, any assignment, sale, conveyance,
exchange or other transfer, directly or indirectly, whether through a single transaction or
multiple transactions, of (x) any general partnership interest of Lessee or (y) fifty percent (50%)
or more of the beneficial ownership of the limited partnership interests of Lessee from that
existing on the date that Lessee became Lessee under this Lease; or (v) if Lessee is a joint
venture other than a partnership, trust, or limited liability company, any assignment, sale,
conveyance, exchange or other transfer, directly or indirectly, whether through a single
transaction or multiple transactions, of (A) fifty percent (50%) or more of the beneficial
ownership of the joint venture interests of Lessee from that existing on the date that Lessee
became Lessee under this Lease, or (B) a controlling interest in such joint venture. As used
herein, the term “controlling interest” shall mean the ownership of stock or voting rights in a
corporation, or membership interests in a limited liability company, which by reason of the
articles or by-laws of the corporation, the operating agreement of the limited liability company,
or any voting trust or other contract or agreement among the stockholders of the corporation or the
members of the limited liability company, authorizes, enables or permits the holder of such stock,
voting rights, or membership interests to effectively control the management and/or policies of
such corporation or limited liability company.

“Transfer Notice” is defined in Section 13.2.

“Transferee” means and includes any sublessee (other than pursuant to a minor sublease, as
defined in Section 13.1(b), where permitted hereunder), purchaser, assignee or other transferee or
recipient of all or any portion of Lessee’s estate or interest in the Premises or this Lease,
pursuant to a Transfer which is permitted hereunder.

“Transition Period” is defined in Section 9.2.

“Unsecured Debt” means the indebtedness owed by Lessee to any nonaffiliated unsecured
creditors of Lessee, to the extent such indebtedness was in existence prior to the Term
Commencement Date and qualifies as an allowed claim in that certain bankruptcy proceeding of
Lessee, pending as Case No. 03-41984-brl, in the United States Bankruptcy Court for the Southern
District of New York, filed August 15, 2003.

“Withdrawal Month” is defined in Section 7.2(f).

“Work” is defined in Section 7.1(b).

 

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2. LEASE OF PREMISES

2.1 Lease of Premises

Lessor hereby leases the Premises to Lessee, and Lessee hereby leases the Premises from
Lessor, subject to each and all of the terms, conditions and reservations contained in this Lease,
all Entitlements and other Applicable Laws, and all liens (including the lien for any Impositions),
easements, encumbrances, restrictions, exceptions, rights and conditions now or hereafter affecting
the Premises, but excluding any Lessor Exceptions (collectively, “Conditions of Title”).

2.2 Assignment of Acquired Interests

Lessor hereby assigns to Lessee, without any warranty or representation, express or implied,
for the use and enjoyment of Lessee exclusively for and in connection with the operation of the
Hotel, but solely for and during the Term of this Lease, and without the payment of any
consideration by Lessee to Lessor other than the Rent payable hereunder, all Acquired Interests
other than the Premises (the “Assigned Acquired Interests”), and Lessee hereby accepts such
assignment and agrees to use and employ the Assigned Acquired Interests solely and exclusively for
the use, benefit and operation of the Hotel for and during the Term of this Lease in accordance
with and subject to the provisions of this Lease. Upon any termination of this Lease, whether upon
or prior to the Expiration Date, all Assigned Acquired Interests shall automatically and without
further action by the parties revert and be deemed reassigned to Lessor, without the payment of any
additional consideration by Lessor, and upon request by Lessor, Lessee shall promptly execute and
deliver to Lessor such instruments of assignment as shall be reasonably required by Lessor to
evidence such reversion and reassignment to Lessor. Without limiting any other provisions of this
Lease relating to the indemnification of Lessor, including Sections 10.3 and 12.4 hereof, Lessee
shall indemnify, defend and hold Lessor harmless from and against any and all damages, losses,
claims, liabilities, costs and expenses (including reasonable attorneys’ fees and costs) arising
with respect to the Assigned Acquired Interests and accruing at any time prior to the Termination
Date (or if Lessee holds over, the Surrender Date). The obligations of Lessee set forth in this
Section 2.2 shall survive the expiration or any earlier termination of this Lease.

2.3 Acceptance of the Premises

Lessee accepts the lease of the Premises and the assignment of each of the Assigned Acquired
Interests “AS IS, WITH ALL FAULTS,” in their respective condition, and Lessee assumes the risk of
any and all latent or patent defects in the condition of the Premises or any of the Assigned
Acquired Interests. Lessor makes no representations or warranties of any kind regarding title,
condition, adequacy or suitability, the presence or absence of any defects, deficiencies,
limitations or restrictions thereon or relating thereto, or the validity or enforceability of any
rights or interests acquired by Lessee under this Lease relating to any of the Assigned Acquired
Interests. Without limiting the foregoing, Lessee expressly acknowledges and agrees that Lessor
has not made any express or implied representations or warranties of any kind or nature with
respect to the Premises or the Assigned Acquired Interests, and that Lessor has disclaimed any
warranties that otherwise may be implied by law, as to any matters relating to the Premises or the
Assigned

 

20

 

 Acquired Interests, including the suitability of the soils or subsoils; the presence, absence, location or character of any archaeological, architectural, cultural, or
historical resources or improvements; the characteristics of the Premises or any Improvements
thereon or of any of the Assigned Acquired Interests; the suitability of the Premises or the use of
any Assigned Acquired Interests for or in connection with the operation of the Hotel or for any
other use; the validity or enforceability of any currently-existing Entitlements; the economic
feasibility of the Hotel or the Premises or any of the Assigned Acquired Interests; any matter
relating to or any aspect of the Conditions of Title to the Premises; and/or the presence, absence,
location, character, condition or nature of any Hazardous Materials on, under, about or in the
vicinity of the Premises. Lessee acknowledges that in determining to enter into this Lease, Lessee
is fully familiar with the Premises and the Assigned Acquired Interests based both on the
possession and operation of the Premises and the use and enjoyment of the Assigned Acquired
Interests by Lessee for a substantial period immediately prior to the Effective Date and also on
the performance by Lessee of all investigations of the Premises and the Assigned Acquired Interests
that Lessee has deemed to be necessary or appropriate for use as a Luxury Hotel or any other use,
including soils and environmental studies; zoning, utilities and drainage studies; physical site
inspections and investigations; a thorough review of the Entitlements and any related zoning, land
use, cultural, historical, architectural, design, construction, or environmental requirements;
appraisals; market and economic feasibility studies; and discussions with the City, State and all
other public agencies with jurisdiction over the Premises, and Lessee has fully satisfied itself as
to suitability, feasibility and all other matters relating to the Premises and the Assigned
Acquired Interests based solely on Lessee’s pre-existing familiarity with the Premises and the
Assigned Acquired Interests and on Lessee’s investigations and analyses and not in reliance on the
accuracy or completeness of any information provided by Lessor or any of its directors, officers,
members, employees, agents, consultants or contractors. Without limiting the generality of the
foregoing, Lessee assumes the risk of any and all liens, easements, encumbrances and other
restrictions, rights or conditions affecting the Premises and/or the Assigned Acquired Interests
(excluding solely any Lessor Exceptions), regardless of whether the same would materially and
adversely affect the development, construction, financing, marketing, operation, management,
repair, Alteration, use or occupancy of the Premises or the operation of a Luxury Hotel on the
Premises.

2.4 Purchase Agreement

(a) Assumption and Performance of Obligations. As part of the consideration
for this Lease, Lessee hereby unconditionally agrees to assume, as of and from and after the
Effective Date, and to pay or perform, as applicable, (i) any and all covenants, obligations and
liabilities of the Lessor arising under, in connection with, or relating to the Premises or the
Assigned Acquired Interests, which either (A) become performable, accrue or arise on or following
the Effective Date (other than Lessor Transfer Obligations), or (B) became performable, accrued or
arose prior to the Effective Date to the extent that the same relate in any manner to the use,
occupancy or condition of the Premises or the Hotel Business conducted therein; and (ii) any and
all covenants, obligations and liabilities of the Seller under the Purchase Agreement which by
their terms survive the Closing of the purchase and sale transaction contemplated therein (but only
to the extent and during the period of such survival), including, without limitation, any such
covenants, obligations and liabilities set forth in Section 4.3 of the Purchase Agreement
(collectively, the “Assumed Obligations”). Lessee shall indemnify, defend and hold all Lessor
Indemnities harmless from and against any and all claims, liabilities, losses, damages, injuries,
and costs and expenses (including, without limitation, attorneys’ fees and expenses) arising
directly or indirectly, in whole or in part, from or in connection with any failure of performance
under or with respect to, or any breach of, any Assumed Obligations.

 

21

 

(b) Certain Insurance and Condemnation Proceeds. Lessor shall pay over or
assign to Lessee, as applicable, for deposit into the Hotel Operating Accounts, a sum equal to such
amount, if any, as may be paid or assigned to the Purchaser on account of the proceeds of any
business interruption insurance carried by or for Seller to the extent that such proceeds relate to
any period on or following the Term Commencement Date and have been actually paid over or assigned
to Purchaser by Seller at the Closing pursuant to the provisions of Section 7.1 of the Purchase
Agreement. In addition, to the extent that the Seller has assigned to Purchaser at the Closing
under the Purchase Agreement any insurance or condemnation proceeds, or right to receive the same,
that were paid or are payable on account of damage to or loss or appropriation of any Improvements
or Personal Property (as such terms are defined in the Purchase Agreement), Lessor agrees to cause
Purchaser to deposit such proceeds, as and when received, in the appropriate Capital Reserve
Account to be used by Lessee for the repair and reconstruction of the Improvements or the
replacement of such Personal Property.

(c) Closing Costs. As Additional Rent, Lessee agrees to pay, or to reimburse
Lessor upon demand for the payment of, as applicable, all stamp and documentary transfer taxes,
sales and use taxes, personal property taxes, utility or other deposits for goods or services
provided or to be provided to the Premises, permit or license transfer fees or charges, and any
escrow fees and charges, to the extent relating to or incurred in connection with the creation of
this Lease or Lessee’s leasehold interest in the Premises, the assignment of the Assigned Acquired
Interests, or the recordation of any Memorandum of Lease or other instrument evidencing or relating
to the leasehold estate of Lessee.

(d) Employees. Lessee agrees that effective upon and following the Closing,
Lessee shall continue to employ or cause to be employed a sufficient number of the employees who
are employed at the Hotel or in connection with the Hotel Business (for the purpose of this
clause (d), as such term is defined in the Purchase Agreement) immediately prior to the Closing so
that Lessor (in its capacity as Purchaser or otherwise) shall have no obligation under any
Applicable Law to give any layoff, closing or other termination notices, or otherwise incur any
liability with respect to any Hotel Employees in connection with the acquisition of the Property by
Purchaser pursuant to the Purchase Agreement, including, without limitation, pursuant to the
provisions of the Federal Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101-2109,
and/or the California Worker Notification Law, Cal. Labor Code 1400 et seq. In addition, following
the Closing, neither Lessee, nor any Operator or Food and Beverage Operator, shall terminate the
employment of any Hotel Employees if such termination would, under Applicable Law (including the
statutes noted above), in any manner impose any obligations or liabilities on Lessor (in its
capacity as Purchaser or otherwise) under or with respect to any requirements of the aforesaid
statutes. In no event shall Lessor (in its capacity as Purchaser or otherwise incur, assume, or be
deemed to have assumed any liability or responsibility for payment or performance of the salaries,
benefits and/or all other payments and obligations owing at any time for or with respect to any
Hotel Employees who are, were or will be employed at the Hotel, whether by Seller, Lessee, the
Operator, any Food and Beverage Operator, or any Affiliate of any of such entities (“Employment
Obligations”),

 

22

 

and as between Lessor and Lessee, Lessee shall be responsible for all such Employment Obligations. Lessee shall
deliver to Lessor within thirty (30) days after the Term Commencement Date a true and complete list
of all Hotel Employees, identifying their positions and date of hire, and shall update such list
from time to time upon Lessor’s reasonable request, but in any event not less frequently than once
each Operating Year, and further, at Lessor’s request from time to time, Lessee shall deliver to
Lessor a true and complete copy of any employment agreements in effect with respect to any one or
more Hotel Employees, including any contracts or collective bargaining agreements entered into with
any labor organization or union representing any Hotel Employees. Except as otherwise expressly
provided in this Lease or as Lessor may hereafter agree otherwise in writing, and except as may be
required under the provisions of any collective bargaining agreements now in existence (including
any renegotiation thereof) applicable to union employees performing services for or at the Hotel,
all employment agreements relating to or affecting any Hotel Employees shall be subject and
subordinate to the right, title and interest of Lessor under this Lease, and shall not survive the
expiration or any earlier termination of this Lease or otherwise be binding on Lessor in any
respect, regardless of whether Lessor shall exercise any of its rights under Section 14.2(h)
relating to the hiring of any Hotel Employees following the termination of this Lease by reason of
an Event of Default; provided that nothing herein shall be construed to obligate Lessor under or to
make Lessor a party to any collective bargaining agreement covering any Hotel Employees, either
during the Term of this Lease or following the termination of this Lease with respect to any Hotel
Employees who are not actually hired by Lessor upon or following such termination.

(e) Retained Interests and Assigned Acquired Interests. Lessee agrees to use
and employ the Retained Interests and any Assigned Acquired Interests solely for and in connection
with the operation of the Hotel and the Hotel Business, all in accordance with and subject to the
requirements of this Lease.

2.5 Hotel Operations

(a) Lessor acknowledges that it has approved the Hotel Operating Agreements,
as the same are in effect on the Term Commencement Date. No material modification of or amendment
to such Hotel Operating Agreements shall be effective unless and until such modification or
amendment has been approved by Lessor, which approval shall not be unreasonably withheld or
delayed. In addition, Lessee shall not enter into any new or replacement Management Agreement, or
enter into or permit the Operator or any Affiliate thereof to enter into a new or replacement Food
and Beverage Agreement, without the prior written approval of Lessor as and to the extent provided
in Section 9 of this Lease.

(b) Subject to the provisions of Sections 11.5(h) and 17, Lessee shall take all
actions reasonably required to ensure that all operations at the Hotel, including all guest and
meeting room facilities, all restaurant and bar premises, mini-bar facilities, and any other areas
in which alcoholic or other beverages and/or food will be served or made available to guests and
customers of the Hotel (including room service and banquet facilities), will be fully serviceable
and in full operation on and following the Term Commencement Date. In addition, except to the
extent provided below or as Lessor may hereafter agree otherwise in writing, all contracts and
agreements for or relating to the provision of goods or services to or for the Hotel (i) shall not
be binding upon or

 

23

 

enforceable against Lessor, (ii) shall be fully subordinate to the rights and interests of Lessor under this Lease, and (iii) except as otherwise expressly provided in Section
8.1, Section 8.2(b), Section 9.2, or Section 14.2(h) hereof, shall terminate and be of no further
force or effect on the Termination Date; provided that the foregoing requirements shall not apply
with respect to (A) any such contracts or agreements that are entered into with a Person who is not
an Affiliate of Lessee, the Operator, or any Food and Beverage Operator, where the contract or
agreement is terminable at the election of the Lessee, the Operator, or any Food and Beverage
Operator, upon not more than sixty (60) days notice and without the payment of any fee, penalty or
other consideration on account of such termination, and (B) any such contracts or agreements that
were in effect and actually known to the Purchaser on the Approval Date (as such term is defined in
the Purchase Agreement).

(c) Without limiting the foregoing provisions of this Section 2.5, Lessee
shall ensure that at all times during the Term (i) any and all liquor licenses required for the
lawful sale and service of alcoholic beverages at or within the Hotel, whether in or from any
restaurant, bar or lounge areas, or mini-bar facilities, and including room service operations,
shall have been issued and shall be in full force in effect, and (ii) the holder of any liquor
license(s) relating to the sale or serving of alcoholic beverages at, within or from the Hotel
(“Liquor Licensee”), and the terms of any contract or agreement with the Liquor Licensee relating
to the sale or serving of alcoholic beverages at, within or from the Hotel, shall be in compliance
with the requirements of Section 14.2(h) of this Lease. The parties contemplate that upon or as
soon as reasonably practicable following the Term Commencement Date, the existing liquor licenses
for the Hotel will be transferred to a limited liability company or other joint venture entity in
which Lessor or an Affiliate of Lessor holds an equity interest without operating management rights
and without an interest in profits, losses or distributions, and Lessee, the Operator, or an
Affiliate of Lessee or the Operator holds an equity interest together with operating management
rights and all interest in profits, losses and distributions, which entity shall be governed by an
operating agreement substantially in the form attached hereto as Exhibit D. In the event that the
Liquor Licensee is an entity in which Lessor or any Affiliate of Lessor holds any equity interest,
and Lessee, Operator, or any Affiliate of Lessee or Operator, holds any equity interest together
with operating management rights and all interest in profits, losses and distributions, Lessor and
Lessee agree to cooperate, and cause any Affiliate of the respective party (including in the case
of Lessee the Operator and any Affiliate of the Operator) to cooperate, in causing the Liquor
Licensee to become a party to any existing Hotel Operating Agreement which provides for the sale or
serving of alcoholic beverages at, from or within the Hotel, or otherwise to enter into such
operating agreements or operating leases with Lessee, the Operator, or any Food and Beverage
Operator, as may be required from time to time to permit the lawful sale and serving of alcoholic
beverages pursuant to the applicable liquor license. Any such operating agreement or operating
lease shall be in form and substance permitted by Applicable Laws and otherwise reasonably
acceptable to Lessor and Lessee, including, without limitation, indemnification of Lessor or such
Affiliate of Lessor from and against any liability (civil, statutory, regulatory or criminal)
relating to the sale or serving of alcoholic beverages pursuant to such liquor license (excluding
solely any liability which results from the gross negligence or willful

 

24

 

misconduct of Lessor or any
Affiliate of Lessor which has an equity interest in the Liquor Licensee), but shall not impose any fees on the operator thereunder in consideration of the
creation of such operating agreement or lease. In the event that at any time only a temporary
liquor license has been issued for the sale or serving of alcoholic beverages in any area of the
Hotel, Lessee and Lessor (to the extent that Lessee, Lessor or any Affiliate of Lessee or Lessor
holds an equity or management interest in the Liquor Licensee) shall cooperate in taking or causing
to be taken all actions as shall be reasonably required (A) to ensure that the Liquor Licensee
holding such temporary license shall not make or permit any change in the ownership or control of
such Liquor Licensee if such change would in any way obstruct or delay the issuance of a permanent
liquor license in replacement of such temporary liquor license, and (B) to cause the Liquor
Licensee which holds such temporary liquor license to diligently pursue the issuance of a permanent
liquor license in replacement of such temporary liquor license as quickly as is permitted under
Applicable Law.

2.6 Quiet Enjoyment

So long as this Lease has not been terminated as the result of any Event of Default or the
occurrence of any other event of termination hereof expressly provided herein, Lessee shall have
the right to lawfully and quietly hold, occupy and enjoy the Premises during the Term, subject to
the terms, conditions and reservations contained in this Lease, without hindrance, interruption,
disturbance or molestation by Lessor or anyone claiming by, through or under Lessor. Lessee’s sole
remedies for a breach of the covenant contained in this Section 2.6 shall be (i) a suit for damages
instituted against Lessor, provided that any recovery against Lessor shall be limited as provided
in Section 20.3, and/or (ii) a proceeding in equity for injunctive or other equitable relief for
the purpose of eliminating or mitigating the cause of the breach of the covenant of quiet
enjoyment. By its execution of this Lease, Lessee expressly waives any and all rights at law or in
equity to terminate this Lease or to withhold, setoff, abate or otherwise reduce or defer the
payment of Rent or any other sums or charges payable by Lessee hereunder, or to exercise any other
remedy against Lessor except as expressly provided above, as a result of the breach by Lessor of
the covenant of quiet enjoyment contained herein.

2.7 Materiality Provisions

Without limiting the circumstances under which a particular matter may be considered to be
material or to have a substantial impact, the parties agree that any provisions of this Lease
which, with respect to any obligation of or performance by Lessee under this Lease, or with respect
to any rights or obligations of Lessor under this Lease, refer to the materiality of any actions or
conditions, or to whether there may be a material effect, change or impact, or to whether an item
or matter is in material or substantial compliance with a requirement of this Lease, shall be
construed so that it shall be a material action or condition, a material effect, change or impact,
or a lack of material or substantial compliance, if such action, condition, effect or impact, or
lack of compliance, would have a reasonable potential to result in (i) any failure to maintain and
continuously operate the Hotel as a Luxury Hotel within the meaning of this Lease, or (ii) any
interference which is more than de minimis with the right or practical ability of the Lessee to use
the Premises for any Permitted Uses, or (iii) any violation of or non-compliance with any
Applicable Requirements, if such violation or non-compliance would, subject to Lessee’s right to
contest any such Applicable Requirements as expressly set forth in Section 6.3(b), expose Lessor to
any liability (civil, criminal, regulatory or statutory) to any governmental body or third party
which (in the case of any civil liability) would be more than de minimis, or would in the case of a
violation of Applicable Laws survive a termination of this Lease and impose on the fee owner of the
Land and Improvements any cost which is more than de minimis for the correction, removal or
remediation of such violation, or (iv) any reduction in the fair market value of the Property or
the value of the Lessor’s interest under this Lease which is more than de minimis, or (v) any
impairment of or restriction on the rights and remedies of Lessor upon the occurrence of an Event
of Default.

 

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3. LEASE TERM

3.1 Lease Term

The term of this Lease (the “Term”) shall commence on the Effective Date of this Lease, as set
forth on the opening page hereof (the “Term Commencement Date”) and shall end at 11:59 p.m. on the
Expiration Date, or such earlier date as this Lease may be terminated in accordance with its terms.

3.2 Possession

Commencing on the Term Commencement Date, Lessee shall have possession of the Premises,
subject to each and all of the terms, conditions and reservations contained in this Lease.

3.3 Memorandum of Lease

Concurrently with the execution and delivery of this Lease, Lessor and Lessee shall execute,
acknowledge and record (at Lessee’s sole cost) a Memorandum of Lease in the form attached as
Exhibit C (the “Memorandum of Lease”). In the event of any termination of this Lease, whether
occurring on the Expiration Date or on or as of any earlier date in accordance with the terms
hereof, Lessee shall, upon request by Lessor, promptly execute, acknowledge and deliver to Lessor a
recordable instrument sufficient to remove this Lease, and any and all rights and interests of
Lessee in and to the Premises, as an encumbrance on or other exception to Lessor’s fee title to the
Premises, and upon any failure of Lessee to provide such recordable instrument to Lessor as
provided above, Lessor shall be entitled to take all action that may be reasonably necessary to
cause the Memorandum of Lease to be released of record (and for such purpose, Lessee, for itself
and its successors-in-interest as the tenant under this Lease, hereby irrevocably appoints and
constitutes Lessor as Lessee’s true and lawful attorney-in-fact, which appointment is coupled with
an interest in the Land and Improvements, for the purpose of executing, acknowledging and recording
all such documents, on behalf of and in the name of Lessee or its then successor-in-interest as the
tenant under this Lease, as applicable), and Lessee shall be obligated to reimburse Lessor for all
reasonable costs and expenses, including reasonable attorneys’ fees and costs, incurred by Lessor
in causing such Memorandum of Lease to be released of record. The provisions of this Section 3.3
shall survive the expiration or earlier termination of this Lease. In the event of any failure by
Lessee to perform its obligations under this Section 3.3, Lessee shall be liable to Lessor for any
and all losses, damages and liabilities suffered or incurred by Lessor on account of such failure,
including, without limitation, any consequential damages suffered by Lessor with respect to its
business, its investments, its credit standing, or any economic or financial penalty or burden.

 

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4. RENT

4.1 Annual Base Rent

(a) During the period commencing on the Term Commencement Date and continuing
thereafter until the Expiration Date, Lessee shall pay Lessor annual base rent as provided in this
Section 4.1 (“Annual Base Rent”):

(i) For the period from the Term Commencement Date up to the second
(2nd) anniversary of the Term Commencement Date, the annual sum of Two Million Eight Hundred Forty
Thousand and Four Dollars ($2,840,004.00), payable in equal monthly installments, in advance as
provided below, of Two Hundred Thirty-Six Thousand Six Hundred Sixty-Seven Dollars ($236,667.00).

(ii) For the period from the second anniversary of the Term
Commencement Date up to the tenth (10th) anniversary of the Term Commencement Date, the annual sum
of Five Million Nine Hundred Fifty-Six Thousand One Hundred Fifty-Two Dollars ($5,956,152.00),
payable in equal monthly installments, in advance as provided below, of Four Hundred Ninety-Six
Thousand Three Hundred Forty-Six Dollars ($496,346.00).

(iii) For all subsequent periods during the Term, the Annual Base Rent
shall be adjusted and shall be payable as provided in subparagraph (c) of this Section 4.1.

The portion of the Annual Base Rent allocable to the lease of the tangible personal property
included as part of the Premises shall be equal to ten percent (10%) of the Annual Base Rent per
annum for the period commencing on the Term Commencement Date and continuing thereafter until the
seventh (7th) anniversary of the Term Commencement Date. Following the seventh (7th)
anniversary of the Term Commencement Date, no portion of the Annual Base Rent payable under this
Lease shall be allocated to the lease of the tangible personal property in recognition that the
maximum useful life of the tangible personal property included in the Premises is no more than
seven (7) years. For the avoidance of doubt, the portion of the Annual Base Rent allocated to the
lease of tangible personal property under this paragraph is solely for the purpose of allocating a
portion of the Annual Base Rent otherwise payable hereunder and shall not increase, decrease or
otherwise affect the amount of the Rent payable hereunder.

(b) Lessee shall pay Annual Base Rent in advance in equal monthly installments,
in the respective amounts set forth in Section 4.1(a) above, with the first such monthly
installment to be paid on the Term Commencement Date (prorated on the basis of the actual number of
days remaining until the end of the calendar month in which the Term Commencement Date occurs), and
each subsequent monthly installment to be due and payable on the first day of each succeeding
calendar month during the Term; provided that the monthly installment of the Annual Base Rent
payable for any partial month in which the Term of this Lease shall expire or shall otherwise be
terminated in accordance with the provisions of this Lease shall be prorated on the basis of the
actual number of days in such month.

 

27

 

(c) Annual Base Rent shall be adjusted on the tenth (10th) anniversary of the
Term Commencement Date and every five (5) years thereafter during the Term (each, an “Adjustment
Date”), by multiplying the then-current Annual Base Rent by the Annual Base Rent Adjustment
Percentage, and the Annual Base Rent, as so adjusted, shall be payable, monthly in advance as
provided above, until the next Adjustment Date. For example, if the then-current Annual Base Rent
were Ten Million Dollars ($10,000,000.00) and the Annual Base Rent Adjustment Percentage were one
hundred six and one-half percent (106.5%), the new Annual Base Rent would be Ten Million Six
Hundred Fifty Thousand Dollars ($10,650,000.00). Lessor shall provide Lessee with notice of the
adjusted Annual Base Rent not less than ten (10) Business Days prior to the date on which such
adjusted amount is due and payable; provided that any failure of Lessor to provide such notice
shall not invalidate any adjustment of the Base Rent provided for hereunder or defer the effective
date of the accrual of such adjusted Annual Base Rent, but in such event Lessee shall not be deemed
to be in default under this Lease in the payment of the accrued and adjusted Annual Base Rent
unless and until the expiration of ten (10) Business Days after Lessor has provided such notice to
Lessee. For purposes of this Section 4.1(c), the following terms shall have the following
meanings:

(i) The “Annual Base Rent Adjustment Percentage” shall be the sum of
one hundred percent (100%) plus the increase (if any) (“Increase”) in the Ending Index over the
Beginning Index, expressed as a percentage; provided that the Increase calculated for the first
Adjustment Date shall not be greater than forty percent (40%) nor less than twenty percent (20%),
and the Increase calculated for any subsequent Adjustment Date following the first Adjustment Date
shall not be greater than twenty percent (20%) nor less than ten percent (10%). Lessee expressly
understands and agrees that the Annual Base Rent payable hereunder shall not be subject to
reduction if on any Adjustment Date the Ending Index is lower than the Beginning Index, so that for
any period following any Adjustment Date in no event shall the Annual Base Rent as adjusted be less
than the Annual Base Rent that was payable for the annual period immediately preceding such
Adjustment Date.

(ii) The “Ending Index” shall be the CPI for the second calendar month
preceding the Adjustment Date. For example, if the Adjustment Date were July 21, 2014, the Ending
Index would be the CPI for May, 2014.

(iii) The “Beginning Index” shall be the same as the Ending Index used to
calculate the previous adjustment (for example, if the Adjustment Date were July 21, 2019, the
Beginning Index would be the CPI for May, 2014); except that, for purposes of calculating the first
adjustment to the Annual Base Rent, the Beginning Index shall be the CPI for the second calendar
month preceding the month in which the Term Commencement Date shall occur.

4.2 Rent and Additional Rent Defined

For purposes of this Lease: (a) “Annual Base Rent” shall have the meaning assigned in Section
4.1 above; (b) “Rent” shall mean and include any and all amounts and charges Lessee is obligated to
pay to Lessor or to any Lessor Indemnitee pursuant to this Lease, including Annual Base Rent and
Additional Rent; and (c) “Additional Rent” shall mean and include any Impositions, Project Costs,
and other amounts and charges, except Annual Base Rent, which are payable to Lessor or at the
direction of Lessor or are reimbursable by Lessee to Lessor pursuant to this Lease (including
without limitation any reimbursement due to Lessor on account of Lessor’s election to perform or
pay any obligation of Lessee hereunder as and to the extent
provided for in this Lease). Unless otherwise expressly provided in this Lease, Lessee shall pay
Lessor any Additional Rent within thirty (30) days after delivery of Lessor’s invoice therefor.

 

28

 

4.3 Payment of Rent

Lessee shall pay Rent to Lessor at the prescribed times by wire transfer of immediately
available and lawful funds of the United States to such account or accounts located in the United
States of America as Lessor may designate to Lessee in writing from time to time. If Lessor fails
to so designate an account for receipt of wire transfers of Rent, Lessee shall pay Rent to Lessor
at the address provided in Section 20.1, or to such other person and/or at such other address as
Lessor may designate in writing from time to time.

4.4 Lessee’s Obligations Unconditional

To the maximum extent permissible under Applicable Laws, this Lease shall continue in full
force and effect, and Lessee’s obligations (including Lessee’s obligation to pay Rent) shall not be
released, discharged, abated, or otherwise affected by reason of: (a) any Casualty or
Appropriation affecting all or any portion of the Premises or the Improvements, except and solely
to the extent expressly provided in Section 17 below; (b) any restriction on, prevention of, or
interference with any use or operation of all or any portion of the Premises, the Improvements, the
FF&E, any Personal Property, or any revenues or income received from or relating to the Premises;
(c) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation
or other proceeding relating to Lessor or Lessee, or any action taken with respect to this Lease by
any court, trustee, debtor in possession, or receiver in any such proceeding; (d) any claim of any
type or nature which Lessee or any other Person has or might have against Lessor or any Lessor
Indemnitee; (e) any failure by Lessor to comply with any of its obligations under this Lease or any
other agreement between Lessor and Lessee; (f) the failure of any Person using, occupying or
otherwise present on the Premises to perform or comply with any of the terms of any agreement with
Lessee; or (g) the termination of any or all of the Entitlements, any Management Agreement, or any
sublease or other agreement relating to or affecting the Premises or any Improvements, whether
voluntarily or by operation of law. The obligations of Lessee under this Lease shall be separate
and independent covenants; and Lessee hereby waives, to the maximum extent permitted by Applicable
Laws, any rights that it may now or in the future have to quit or surrender the Premises, to
terminate this Lease, or to any abatement (subject only to the provisions of Section 17 below),
diminution, offset, reduction or suspension of Rent on account of any event or circumstance
whatsoever, whether or not foreseeable.

 

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4.5 Late Charge

Notwithstanding any other provision of this Lease, Lessee hereby acknowledges that late
payment to Lessor of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. If Lessee fails to pay any Rent
owed to Lessor within five (5) days after the date any such payment is required to be made
hereunder and fails to cure such default within two (2) days after receipt of notice from Lessor
(it being agreed that the requirement for receipt of any such notice from Lessor shall apply only
to imposition of the late charge provided for in this Section 4.5, and shall not be construed to
require Lessor to deliver any notice to Lessee in order for an Event of Default to occur, except
solely as may be expressly provided in Section 14.1), then Lessee shall pay to Lessor a late charge
equal to five percent (5%) of such overdue amount, plus all reasonable attorneys’ fees and costs
incurred by Lessor by reason of Lessee’s failure to pay such Rent when due hereunder. Lessor and
Lessee hereby agree that such late charge represents a fair and reasonable estimate of the costs
that Lessor will incur by reason of Lessee’s late payment and shall not be construed as a penalty.
Lessor’s acceptance of any such late charge shall not constitute a waiver of Lessee’s default with
respect to such overdue amount or preclude Lessor from exercising any of the other rights and
remedies granted under this Lease on account of such default.

	 	 	 	 	 	 	 	 	 
	 

	 	INITIALS:	 	 	 	 	 	 
	 

	 	 
	 	 

Lessor
	 	 

Lessee
	 	 

5. NET LEASE; TAXES AND ASSESSMENTS

5.1 Net Lease

Without limiting the provisions of Section 4.4 of this Lease, the Annual Base Rent and any
Additional Rent payable to Lessor hereunder shall be absolutely net to Lessor and shall be paid
without assertion of any counterclaim, setoff, deduction or defense and without any abatement,
suspension, deferment or reduction, except only as otherwise expressly provided in Section 17 of
this Lease. Except as specifically provided otherwise in this Lease, under no circumstances or
conditions, whether now existing or hereafter arising, and whether within or beyond the present
contemplation of the parties, shall Lessor be expected or required to make any payment of any kind
or incur any obligation whatsoever with respect to the Premises, or otherwise have any obligation
or liability with respect to the Premises; provided that the foregoing shall not be
construed to require Lessee (i) to perform any obligations of Lessor under any contract or
agreement entered into by Lessor with any third party to which Lessee or any Affiliate of Lessee is
not a party, or (ii) to pay or reimburse Lessor for any costs or expenses incurred by Lessor in
connection with the making of any Lessor Transfer, or (iii) require Lessee to assume any liability
for any obligations of Lessor arising under any Lessor Transfer or otherwise incurred by Lessor
under or in connection with such Lessor Transfer, including payment of debt service on any
obligation secured by any Fee Mortgage (the items referred to in clauses (i), (ii) and (iii) above
shall be referred to collectively herein as the “Lessor Transfer Obligations”), provided that (A)
the foregoing shall not be construed to relieve Lessee from complying with and performing any
express obligations of Lessee under this Lease that may also constitute covenants or obligations of
Lessor under any such contract or agreement entered into by Lessor with any third party or under
any Lessor Transfer, and (B) Lessee agrees to comply with any other requirements imposed on Lessor
under any such contract or agreement entered into by Lessor with any third party or under any
Lessor Transfer with respect to the operation or condition of the Hotel so long as such
requirements are not in any manner or to any degree inconsistent with Lessee’s rights or
obligations under this Lease, cause no additional cost or expense to Lessee, and do not expose
Lessee to any additional liability. Without limiting the generality of the Lessee obligations
referred to in the preceding sentence, Lessee shall be obligated to pay any real property tax
increases and assessments that may result from any Lessor Transfer.

 

30

 

5.2 Project Costs

In addition to Annual Base Rent, Lessee shall pay or fund when due all Impositions (but
subject to Lessee’s right to contest pursuant to Section 5.3(c) below), insurance premiums, Debt
Service on any Lessee Loan or Equipment Financing, reserves provided for or required hereunder
including the FF&E Reserve Account, the Escrow Account (to the extent provided in Section 7.2),
permit and license fees, costs of utilities, design, construction, maintenance, repair,
replacement, remediation, rebuilding, restoration, management, marketing, services, operations, and
other costs and expenses of any type, character or nature whatsoever accruing at any time during
the Term or any holdover period in connection with the development, ownership, marketing, leasing,
operation, management, maintenance, repair, replacement, restoration, renovation, improvement,
upgrading, use, occupancy or enjoyment of the Premises, excluding solely any Lessor Transfer
Obligations (collectively, “Project Costs”). Lessee shall pay all Project Costs directly, and
shall contract directly for all required services, utilities and other items described herein;
provided, however, that Lessor shall have the right to contract for any such services, utilities or
other items if Lessee has failed to do so, or has failed to make any payment of Project Costs which
is due and owing, provided that (a) such failure constitutes an uncured Event of Default; or (b)
there is an imminent threat to the health or safety of persons or property on or about the Premises
and Lessee has failed to act promptly following written notice from Lessor. Lessee shall provide
Lessor, from time to time upon written request, with copies of invoices, receipts, canceled checks
and/or other documentation reasonably substantiating Lessee’s payment of all Project Costs.

5.3 Payment of Taxes and Assessments

(a) Lessee’s Obligation to Pay. Without limiting the generality of Sections
5.1 and 5.2, but subject to Section 5.3(c) below, Lessee shall pay all Impositions allocable to the
Premises during the Term or any holdover period on or before the date due, and in any event before
delinquency and before any fine, interest or penalty may become due or be imposed by operation of
law for nonpayment; provided, however, that: (i) Lessor shall pay or, if paid by Lessee, shall
reimburse Lessee for any Impositions to the extent that the same are allocable to periods after the
Expiration Date (or, if Lessee holds over following the Expiration Date, to periods after the
Surrender Date); and (ii) if any assessment is permitted by law to be paid in installments without
additional charge or penalty, Lessee may pay such assessments in installments, but in no event
later than the actual due date for such installments.

(b) Direct Payment. Lessee shall pay all Impositions directly to the
applicable taxing authority, and shall deliver to Lessor, within ten (10) days after request
therefor, true and correct copies of the receipted bills or other reasonable evidence showing such
payment of all Impositions required to have been paid as of such date. Lessor shall cooperate with
Lessee to cause all bills for Impositions to be sent directly to Lessee, but if the tax collection
agency will not so agree, then Lessor shall tender all bills to Lessee promptly upon Lessor’s
receipt, and in such event, if Lessor fails to tender any such bill to Lessee within the later of
(i) ten (10) Business Days following the date of Lessor’s receipt of such bill from the taxing
authority or (ii) twenty (20) Business Days prior to the date on which the tax, or installment
thereof, represented by such bill shall become delinquent, then (A) Lessee shall not be in

 

31

 

default
hereunder for failure to make timely payment of such Imposition until the expiration of twenty (20) business days following the date on which Lessee shall receive a copy of such bill from
Lessor or the taxing authority, and (B) if Lessee has not received any tax bill from Lessor or the
taxing authority prior to the twentieth (20th) Business Day before the date on which the
applicable tax payment shall become delinquent, Lessee may deliver written notice to Lessor
requesting Lessor to promptly forward any tax bill that may have been delivered to Lessor for the
tax period in question, and if Lessor fails to deliver any such tax bill that has actually been
received by Lessor from the taxing authority prior to the receipt of Lessee’s notice within ten
(10) days following Lessor’s receipt of such notice from Lessee, Lessor shall be obligated to pay
any penalties incurred by Lessee for late payment of such tax bill which are not reasonably
avoidable by Lessee. Notwithstanding the foregoing terms of this Section 5.3(b), (i) if any Fee
Lender or Leasehold Mortgagee shall at any time require that Impositions be paid to such Fee Lender
or Leasehold Mortgagee or to an escrowee designated by such Fee Lender or Leasehold Mortgagee in
monthly or other installments or otherwise deposited into an “impound account” (an “Impound
Account”) maintained by or for the benefit of such Fee Lender or Leasehold Mortgagee, then Lessee
shall comply with all such requirements of such Fee Lender (provided that such requirements are
commercially reasonable) or Leasehold Mortgagee and shall provide evidence of such compliance to
Lessor from time to time upon request, and (ii) if Lessee shall at any time fail to pay any
Impositions when due and shall fail to cure such default within the applicable period provided
under Section 14.1(b) below, then Lessor shall have the right at any time thereafter to require
that Lessee pay monthly installments of Impositions into an Impound Account maintained by Lessor or
an escrowee designated by Lessor. Lessee shall not be entitled to receive any interest or other
return on any funds on deposit in any Impound Account, unless otherwise agreed by the Fee Mortgagee
or Leasehold Mortgagee requiring such Impound Account, and any funds so held in any Impound Account
may be commingled with other funds of the Fee Lender, the Leasehold Mortgagee, Lessor or Lessor’s
escrowee, or other parties depositing funds in such Impound Account, as applicable; provided that,
except as otherwise provided upon the occurrence of an Event of Default, any funds held in an
Impound Account maintained by Lessor or an escrowee designated by Lessor shall be used and
disbursed by Lessor or such escrowee (subject to reduction for payment of customary account
charges) for payment of the Impositions in respect of which such deposits have been made, and for
no other purpose unless an Event of Default has occurred and is continuing. Nothing in this
Section 5.3(b) shall be deemed to relieve Lessee from its obligation to keep and maintain at all
times during the Term of this Lease a reserve account in an amount sufficient to pay all
Impositions and insurance premiums as provided in Section 7.1(e) hereof; provided that if an
Impound Account is created hereunder pursuant to the foregoing provisions, then the amounts on
deposit in such Impound Account for the payment of Impositions shall be credited against any
amounts that would otherwise be required to be deposited into the reserve account created pursuant
to Section 7.1(e) for the payment of Impositions.

(c) Right to Contest. Lessee shall have the right, at its sole cost and
expense, to contest the full or partial amount or validity of any Imposition by appropriate
administrative and legal proceedings, either in its own name or jointly with Lessor if Lessor so
elects. Lessor shall cooperate with Lessee in any reasonable manner requested by Lessee, provided
that (i) Lessee shall reimburse Lessor as Additional Rent hereunder for Lessor’s actual
out-of-pocket costs incurred in connection with any such contest, (ii) no action by Lessee in
connection with such contest shall expose Lessor to personal liability for the payment of any
Impositions, (iii) Lessee shall

 

32

 

not be authorized to settle any such action if an Event of Default
has occurred and is continuing, and (iv) Lessee shall not settle any such contest in any manner that would provide for
or consent to an increase in the amount of the Impositions payable with respect to the Premises
after the Expiration Date over and above the Impositions payable by Lessee during the five (5) year
period immediately preceding the Expiration Date. Lessee may postpone payment of any contested
Imposition pending prompt and diligent prosecution of any such proceedings and appeals, but only if
Lessee shall post a bond or other assurance of payment or performance with Lessor, an escrow
designated by Lessor, or the court or administrative agency or other legal authority having
jurisdiction over the contest, to ensure payment of all sums ultimately determined to be due by
Lessee. Lessee shall indemnify, defend and hold Lessor harmless from and against any and all
claims, damages, liabilities and costs and expenses, including penalties, interest, and reasonable
attorneys’ fees and costs, arising from or related to any such contest, noncompliance or postponed
compliance.

(d) Assessment Proceedings. If at any time during the Term any public or
quasi-public authority proposes to create an improvement, special assessment, benefit, or other
like district which would or could impose assessments or other Impositions on the Premises (an
“Assessment District”), the boundaries of which would or could include the Premises, Lessor shall
not cast any votes allocable to the Premises in favor of creation of such Assessment District (as
distinguished from votes allocable solely to other property of Lessor, which Lessor may cast in any
manner it deems appropriate in its sole discretion) without Lessee’s prior written consent. In the
event Lessee requests that Lessor vote in favor of creation of an Assessment District which would
include the Premises, Lessor shall be obligated to cast those votes that are allocable to the
Premises in favor of creation of such Assessment District (as distinguished from those votes that
are allocable solely to other property of Lessor, which Lessor may cast in any manner it deems
appropriate in its sole discretion), but only in the event that there is no Event of Default, or
Potential Default which would be a Material Default, then existing and the creation of the proposed
Assessment District would not result in Impositions being assessed against the Premises following
the Expiration Date. Lessor shall cooperate with Lessee in taking all reasonable steps necessary
to create any such Assessment District, provided Lessee shall reimburse Lessor as Additional Rent
for Lessor’s actual out-of-pocket costs in connection therewith. Lessee shall have the right (but
not the obligation), regardless of Lessor’s position, to participate in any proceeding relating to
the creation of an Assessment District which would result in additional Impositions being assessed
against the Premises and seek to have the Premises excluded from or included in any proposed
Assessment District. The party receiving any notice or other information relating to the proposed
creation of any Assessment District the proposed boundaries of which would or could include the
Premises shall promptly provide the other party with copies of all such notices and other
information.

6. USE OF PREMISES

6.1 Permitted Use

The Premises shall be used at all times during the Term solely for the Permitted Uses, all in
accordance with and subject to the terms and conditions of this Lease. Lessee shall not use or
permit the Premises to be used for any other purpose without the prior written consent of Lessor,
which Lessor may grant, condition or withhold in its sole and absolute discretion.

 

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6.2 No Nuisance

Without limiting the applicability of Section 6.1 or any other provision of this Lease, Lessee
shall not use or allow the Premises or the Project to be used for any unlawful purpose, nor shall
Lessee cause, maintain or permit any nuisance, waste or dangerous condition in, on or about the
Premises or the Project.

6.3 Applicable Requirements

(a) Compliance with Applicable Requirements. Lessee shall comply in all
material respects with the following (collectively, “Applicable Requirements”), including, without
limitation, in connection with any construction, use, occupancy, operation, maintenance, repair,
reconstruction, replacement, remediation, restoration, upgrading, marketing and management of the
Premises: (i) all Applicable Laws, including the Entitlements, all Environmental Laws, and all
Public Accommodations Laws; (ii) all contracts and other agreements, whether with individuals or
pursuant to any collective bargaining arrangements or agreements, relating to or governing the
employment of any persons on or at the Premises in connection with the operation of the Hotel;
(iii) all requirements of this Lease relating to the operation of the Hotel as a Luxury Hotel; (iv)
the requirements of any insurer or insurance authority now or hereafter constituted to the extent
required to obtain and maintain the insurance coverage required pursuant to the terms of this
Lease; and (v) the requirements of any liens, easements, encumbrances, restrictions, rights and
conditions to which the Premises or any part thereof may at any time be subject (other than any
Lessor Exceptions, unless otherwise expressly provided herein). Lessee shall provide Lessor
promptly with copies of any notices of violation or deficiency Lessee may receive respecting the
Premises from any public agency with jurisdiction or insurance authority, and subject to Lessee’s
right to contest provided in Section 6.3(b) below, Lessee shall promptly and fully cure and correct
at its sole cost and expense any such violation or deficiency.

(b) Right to Contest. Lessee shall have the right, at its sole cost and
expense, to contest the application to the Premises of any law or legal requirement or other matter
referred to in Section 6.3(a) above, by appropriate administrative and legal proceedings, either in
its own name or jointly with Lessor if Lessor so elects. Lessee may postpone compliance with any
contested law or legal requirement or other such matter pending prompt and diligent prosecution of
any such proceedings and appeals, provided that, if required in order to suspend the application of
the contested law or legal requirement or such other matter to the Premises or if Lessee’s failure
to pay or perform any contested law, legal requirement or other matter could impose any lien or
charge against the Premises, Lessee shall post a bond or other assurance of payment or performance
with Lessor, an escrow designated by Lessor, or, the court or administrative agency or other legal
authority having jurisdiction over the contest, which is sufficient to suspend the application of
the contested law or legal requirement or other such matter to the Premises and to ensure payment
of all sums and performance of all obligations ultimately determined to be due by Lessee. Lessee
shall indemnify, defend and hold Lessor harmless from and against any and all claims, damages,
liabilities and costs, including penalties, interest, and reasonable attorneys’ fees and costs,
arising from or related to any such contest, noncompliance or postponed compliance.

 

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6.4 Utility Easements Over Premises

Lessor shall cooperate with Lessee at no expense to Lessor in granting licenses, permits or
easements over, across or under the Premises to Recipient Agencies, to the extent such licenses,
permits or easements are reasonably necessary to enable Lessee to operate the Premises as a Luxury
Hotel, or for the purpose of constructing, maintaining and (as necessary) replacing such
sub-surface utilities or other sub-surface utility-related facilities (e.g., storm drainage and
sanitary sewer facilities) as are necessary for the proper operation of the Premises, provided that
such licenses, permits and easements shall not be inconsistent with any of the provisions of this
Lease. Notwithstanding anything herein to the contrary, Lessee shall not, without the prior
written consent of Lessor, which consent may be given or withheld in Lessor’s sole and absolute
discretion, grant or purport to grant any licenses, permits or easements over, across or under the
Premises to Recipient Agencies for any non-utility-related facilities such as (but without
limitation) open space, walkways, driveways, parking areas or public access, unless and only to the
extent that the same expressly provide for their cancellation, without payment of any cancellation
charge or penalty, immediately upon the expiration or earlier termination of this Lease.

6.5 Lessor’s Right of Entry

Lessor reserves (for itself and any Lessor Representatives) the right to enter the Premises at
any and all reasonable times during the Term of this Lease and, except in cases of emergency, after
giving Lessee and the Operator reasonable advance notice, for the purpose of: inspecting the
Premises, the physical condition thereof, and the operation of the Hotel; ascertaining whether
Lessee is complying with its obligations under this Lease, including without limitation the
operation of the Hotel as a Luxury Hotel; showing the Premises to prospective purchasers or Fee
Lenders; showing the Premises to prospective tenants (during the final three (3) years of the
Term); posting notices of nonresponsibility; inspecting any Alterations under construction;
reviewing, inspecting and auditing the books, files and records of Lessee, the Operator, and any
Food and Beverage Operator, relating to the Hotel or the Hotel Business (to the extent reasonably
necessary to enable Lessor to confirm Lessee’s compliance with the provisions of Section 7 or any
other provisions of this Lease, and provided that Lessor agrees, as a condition of the inspection,
review or audit of any such books, files and records, to enter into a reasonable and customary
written confidentiality agreement providing for the confidential treatment of any proprietary or
other confidential books, files and records of Lessee, the Operator, or any Food and Beverage
Operator); and otherwise for any other purpose which is not inconsistent with the rights and
obligations of Lessee under this Lease; provided that Lessor shall use commercially reasonable
efforts during the course of any such entry to minimize any disruption of or interference with the
operation of the Hotel or the Hotel Business and shall not take any action in connection with any
such entry which would be inconsistent with the operation or reputation of a Luxury Hotel. Lessor
shall have the right to use any and all lawful means it deems necessary or appropriate under the
circumstances in order to obtain entry to the Premises upon or following an Event of Default, or in
case of an imminent threat or danger to persons or property if Lessee shall have failed to take
prompt action to mitigate such threat or danger. No entry by Lessor pursuant to the foregoing
provisions shall be deemed to be an unlawful or forcible entry into, or a detainer of, the
Premises, or constitute a constructive or other eviction of Lessee, or entitle Lessee to any
abatement of Rent, or create any limitation on the performance by Lessee of its obligations under
this Lease. Nor shall Lessor or any Lessor Representative incur any liability to Lessee, Operator,
any Food and Beverage Operator, any Hotel guest or customer, or any Hotel Employee, or any other
Person, for or on account of such entry or any activity on the Premises by Lessor or such Lessor
Representative in the course of such entry, except to the extent of any damage, loss, injury or
liability that is attributable to the gross negligence or willful misconduct of Lessor or such
Lessor Representative, as applicable.

 

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7. OPERATION OF HOTEL

7.1 Hotel Business

(a) Continuation of Hotel Operations. On and as of the Term Commencement
Date, Lessee shall assume full responsibility for and thereafter carry on with diligence and
continuity the operation of the Hotel pursuant to and in accordance with the requirements of this
Lease. Lessee shall use and apply the Assigned Acquired Interests solely for the benefit and
operation of the Hotel.

(b) Covenant to Operate. Each day during the Term, commencing upon and at all
times from and after the Term Commencement Date, Lessee shall operate and have open for business,
or cause to be operated and kept open for business, the Hotel as a Luxury Hotel; provided that the
foregoing covenant (i) shall be subject to interruptions due to Force Majeure Events and any
disruptions pursuant to any Casualty or Appropriation referred to in Section 17 (provided that
Lessee shall use all commercially reasonable efforts to mitigate and minimize the impact of any
Force Majeure Event, Casualty or Appropriation on the Hotel and the Hotel Business); and (ii) shall
be subject to the provisions of Section 11.5(g) with respect to limited temporary closures of
certain portions of the Hotel to the extent expressly permitted by Section 11.5(h). In the event
that any dispute arises between Lessee and Lessor as to whether the Hotel is being operated at any
given time as a Luxury Hotel, such dispute shall, upon the request of either party, be resolved by
arbitration pursuant to Section 18.

(c) Utilities, Services, Maintenance and Repairs. At all times during the
Term and any holdover period, Lessee shall: (i) procure all utilities and other services which may
be necessary or desirable in connection with the operation of the Hotel as a Luxury Hotel
(including water, gas, electricity, telephone, communications, cable, janitorial, trash removal,
security and landscaping); (ii) keep, maintain, operate, preserve and protect the Premises in
substantial compliance with all Applicable Requirements, and in a first class, attractive and safe
condition and repair fully consistent with a Luxury Hotel; (iii) obtain and maintain in full force
and effect any and all licenses and permits required or appropriate for the operation of the Hotel
as a Luxury Hotel, including liquor licenses, catering licenses, food and beverage service permits,
entertainment and cabaret permits, elevator, boiler and machinery permits, environmental permits,
and all other City, State and federal permits or authorizations required or appropriate for the
normal and lawful operation of the Hotel, and (iv) undertake and complete in a diligent manner all
necessary repairs, replacements, remediation, renovations, upgrades and Alterations to both the
structure and contents (including FF&E) of all Buildings (whether structural or nonstructural,
foreseen or unforeseen, ordinary or extraordinary) in order to maintain and operate the Premises in
accordance with the requirements of this Lease and in substantial compliance with all Applicable
Laws, including, without limitation, all Public Accommodations Laws.

 

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Lessor shall not be obligated to undertake or complete any repairs, replacements, remediation,
renovations, upgrades or Alterations of any kind, nature or description whatsoever, and Lessee
hereby expressly waives any right to terminate this Lease (except as otherwise expressly provided
in Section 17 below) or to make repairs or perform any other action relating to the Premises at
Lessor’s expense pursuant to any Applicable Laws, including, without limitation, Sections 1932(1)
and (2), 1933(4), 1941 and 1942 of the California Civil Code. If Lessee fails to comply with any
of the foregoing provisions of this Section or with any other provision of this Lease relating to
the repair, replacement, remediation, renovation, upgrade or Alteration of the Premises as required
by this Lease (“Work”), and if such failure is not cured within the applicable time period set
forth in Section 14 after notice from Lessor, then Lessor shall have the right, but not the
obligation, to enter onto the Premises and perform any such Work for the account of Lessee, and in
such event Lessor shall have no liability to Lessee for any loss or damage to the Premises, any
FF&E or any Personal Property, or for any interference with the operation of the Premises (unless
due to the gross negligence or willful misconduct of Lessor or Lessor Representatives). If Lessor
performs any such Work, Lessee shall pay to Lessor all costs thereof reasonably incurred by Lessor
on demand as Additional Rent.

(d) Entitlements. Lessee shall not, at any time during the Term, apply to the
City or other governmental entity with jurisdiction over the Premises for any zoning or general
plan classification or modification or variance thereof, development permit, conditional use
permit, environmental clearance, or other permit, approval or other Entitlement (collectively,
“Entitlements Change”) which would permit a material alteration of the interior or exterior
appearance of the Hotel or otherwise permit any change which would make the Hotel less likely to
continue to receive at least a top tier four-star rating (as contemplated in the definition of
Luxury Hotel), or would adversely affect the value of the Premises or the use of the Premises for
any Permitted Uses in any material respect, or change any of the Permitted Uses, or would impose
any personal liability or obligation on Lessor, or would impose any material increased cost on the
Hotel or the owner thereof with respect to Hotel operations or the physical condition of the Hotel,
or would be inconsistent with and/or disallowed by the provisions of any Fee Mortgage and/or any
Leasehold Mortgage. Without limiting the foregoing, Lessor hereby covenants that it will, upon the
request of Lessee, reasonably cooperate with Lessee in the prosecution of any application for an
Entitlements Change which is not precluded pursuant to the preceding sentence; provided, however,
that any application for an Entitlements Change shall be pursued at Lessee’s sole cost and expense
and Lessee shall promptly reimburse Lessor for all actual out-of-pocket expenses reasonably
incurred by Lessor in connection with such cooperation. In connection with the foregoing, Lessee
shall provide Lessor with not less than thirty (30) days’ prior written notice of any requested
Entitlements Change and, concurrently with the delivery of such notice, shall furnish Lessor with
copies of all applications, plans, drawings, and other materials relating thereto.

 

37

 

(e) Reserve Accounts. In addition to the FF&E Reserve Account and the Escrow
Account, Lessee shall establish and maintain, or shall cause the Operator to establish and maintain
in the name of and for the benefit of the Hotel, adequate reserve accounts for the payment of all
Impositions, insurance premiums, deferred maintenance, and capital repairs, replacements and
improvements as shall be required to ensure the continued operation of the Hotel as a Luxury Hotel
for the full Term of this Lease. The amounts to be funded into such accounts, whether from Hotel
revenues or income or from direct contributions from Lessee, shall
be sufficient to defray the reasonably anticipated or projected expenditures for such items, for
such periods of time, as shall be consistent with the then current practices of other Luxury
Hotels, and in any event Lessee shall comply with all applicable requirements of any Management
Agreement with respect to the establishment and funding of any such reserve accounts. Lessee
hereby grants Lessor, for the purpose of securing the performance by Lessee of its obligations
under this Lease, a first priority security interest in and to the FF&E Reserve Account and in and
to all other reserve accounts at any time maintained by or in the name of Lessee or the Operator
for the purpose of funding capital repairs, replacements or improvements to the Premises
(collectively, together with the FF&E Reserve Account, the “Capital Reserve Accounts”). Lessee
shall also cause the Operator to grant to Lessor, for such purpose, a first priority security
interest in and to any Capital Reserve Accounts at any time maintained by or in the name of the
Operator. Lessee shall from time to time execute and deliver, or cause the Operator to execute and
deliver, as applicable, any and all financing statements, account control agreements (which shall
be substantially in the form attached hereto as Exhibit E-1, in the case of the FF&E Reserve
Account, and substantially in the form attached hereto as Exhibit E-2 in the case of any other
Capital Reserve Account), and other instruments as may be required under Applicable Law to perfect
and maintain the perfection of such security interest at all times during the Term of this Lease.
Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be
continuing, Lessee and the Operator shall be entitled to withdraw funds from any Capital Reserve
Account to pay any costs incurred for the purpose for which such funds were deposited in the
applicable account.

(f) Hotel Operating Accounts. Throughout the Term of this Lease, Lessee
shall deposit, or cause the Operator to deposit, into one or more operating accounts established
and maintained by Lessee or the Operator with a federally insured banking institution in the City
which is reasonably acceptable to Lessor (“Hotel Operating Accounts”), all income, revenues,
proceeds and other receipts received by Lessee or the Operator from or with respect to the Hotel or
the Hotel Business (excluding only any amounts referred to in clauses (b) and (d) of the definition
of Total Revenues). Lessee hereby grants Lessor, and shall cause Operator to grant to Lessor where
the applicable account is maintained by or in the name of the Operator, a first priority security
interest in and to all Hotel Operating Accounts for the purpose of securing the performance by
Lessee of its obligations under this Lease. Lessee shall from time to time execute and deliver, or
cause the Operator to execute and deliver, as applicable, all financing statements, account control
agreements (which shall be substantially in the form attached hereto as Exhibit E-1), and other
instruments as may be required under Applicable Law to perfect and maintain the perfection of such
security interest at all times during the Term of this Lease, or as may otherwise be required
pursuant to Section 7.1(g) below. The funds from time to time held or deposited in any Hotel
Operating Accounts shall be used and withdrawn by Lessee or Operator solely for the purposes
provided or contemplated by this Lease, and in a manner consistent with the requirements of Section
7.2(d), unless otherwise approved in writing by Lessor in Lessor’s reasonable discretion; provided
that upon the occurrence and during the continuance of an Event of Default, Lessor shall have the
sole and unilateral right to control and direct the withdrawal or use of any and all funds in the
Hotel Operating Accounts.

 

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(g) Initial Bank Control Agreements. Concurrently with the execution of this
Lease, Lessor and Lessee shall execute and deliver bank account control agreements covering each
Hotel Operating Account and each Capital Reserve Account, substantially in the form attached
hereto as Exhibit E-1 (in the case of each Hotel Operating Account and the FF&E Reserve Account)
and substantially in the form attached hereto as Exhibit E-2 (in the case of each Capital Reserve
Account other than the FF&E Reserve Account), and shall obtain the written acknowledgement and
consent of the applicable banking institution to such agreements as provided therein. Thereafter,
and without limiting the provisions of subparagraphs (e) and (f) of this Section 7.1, as and when
any additional Hotel Operating Accounts or Capital Reserve Accounts are established, Lessor and
Lessee shall execute and deliver substantially comparable bank account control agreements
sufficient under Applicable Law to provide Lessor with the rights and benefits with respect to such
accounts as are contemplated in the forms of agreements attached hereto as Exhibit E-1 (in the case
of each Hotel Operating Account and the FF&E Reserve Account) and substantially in the form
attached hereto as Exhibit E-2 (in the case of each Capital Reserve Account other than the FF&E
Reserve Account).

7.2 Escrow Accounts

(a) Establishment and Initial Funding of Accounts. On or before the Effective
Date, Lessor and Lessee shall establish four (4) escrow accounts (each an “Escrow Account”) with
the branch office of a reputable banking institution located in the City selected by Lessee and
reasonably approved by Lessor, as follows: (i) an escrow account for the payment of Annual Base
Rent owing from time to time by Lessee under this Lease (the “Base Rent Escrow Account”); (ii) an
escrow account for the payment of all Required Alterations which Lessee is from time to time
obligated under this Lease to carry out (the “Required Alterations Escrow Account”); (iii) an
escrow account for any Designated Alterations (the “Designated Alterations Escrow Account”); and
(iv) an additional escrow account for certain payments of Annual Base Rent (the “Seasonal Rent
Reserve”) as provided in Section 7.2(b) below. Lessor is hereby granted, for the purpose of
securing the performance by Lessee of its obligations under this Lease, a first priority security
interest in each such Escrow Account, and Lessor and Lessee shall execute and deliver from time to
time such control agreements and other account instructions as Lessor may reasonably require to
perfect and maintain the perfection of Lessor’s security interest in each Escrow Account,
including, without limitation, an Account Control Agreement (Escrow Accounts) in the form attached
hereto as Exhibit E-2. The Escrow Accounts shall be held in the name of Lessee, and Lessee’s and
Lessor’s respective rights therein shall be subject to and governed by the terms of this Section
7.2 and the applicable Account Control Agreement (Escrow Accounts) for each Escrow Account. On the
Effective Date, the Escrow Agent under the Purchase Agreement will deposit into the Base Rent
Escrow Account the amount of the Property Reserves Deposit (as defined in the Purchase Agreement),
if any. In addition, Lessee shall deposit “Seller’s Compliance Contribution” and “Seller’s
Property Enhancement Contribution” (as such terms are defined in the Purchase Agreement), if any,
into the Required Alterations Escrow Account concurrently with the Closing. Thereafter, all
deposits into the Escrow Accounts and disbursements therefrom shall be made in strict compliance
with the provisions of this Section 7.2. In no event shall Lessor have any obligation whatsoever
to pay for any costs of any Property Enhancements, or any Hazardous Materials remediation, removal
or restoration work, required to be undertaken or completed by Lessee pursuant to the provisions of
the Purchase Agreement following the “Closing” (as defined in the Purchase Agreement), including
any obligation to make any deposits into the Required Alterations Escrow Account or any other
Escrow Account for any such purpose, except solely for

 

39

 

Lessor’s obligation, if any, in its
capacity as the Purchaser under the Purchase Agreement, to fund or concurrently with the Closing deposit into the Required Alterations Escrow Account, as applicable (i) any “Reinstatement
Amount” (as defined in the Purchase Agreement), plus (ii) such additional sums, if any, that are in
excess of the sum of the Reinstatement Amount plus the Excessive Compliance Threshold (as defined
in the Purchase Agreement) as Lessor, in its capacity as the Purchaser under the Purchase
Agreement, shall be obligated to pay pursuant to the express provisions of Section 3.1(e)(ii)(A)
and/or Section 4.1(b)(ii)(A) of the Purchase Agreement. The parties contemplate that, to the
extent permitted by applicable banking regulations and the rules and account procedures established
by the banking institution which holds the applicable Escrow Account, the funds from time to time
held in each Escrow Account shall be invested in United States Government treasury securities,
federally insured interest bearing bank accounts, or any other readily marketable liquid
investments from time to time reasonably approved by both Lessor and Lessee, and any interest or
other return earned on such securities, accounts and investments shall be considered to be
additional Escrow Account funds; provided that the maturity dates of any such securities, accounts
and investments shall be scheduled so as to enable Lessee or Operator to make withdrawal of the
applicable Escrow Account funds in a timely manner for the purposes set forth in Section 7.2(c)
below without the imposition of early withdrawal, termination or breakage fees or charges that may
be applicable to such securities, accounts or investments.

(b) Purposes of Accounts. Funds in the Escrow Accounts shall be disbursed from
time to time in strict accordance with, and as limited by, the provisions of this Section 7.2 for
the following purposes only: (i) with respect to the Base Rent Escrow Account, payment of the
monthly installments of Annual Base Rent (including the monthly installment of the Annual Base Rent
owing for the next succeeding month), if and to the extent that the NOI for the immediately
preceding month is not sufficient to make such payment (“Base Rent Escrow Payments”) and there are
no remaining funds in the Seasonal Rent Reserve; provided that no disbursement of funds from the
Base Rent Escrow Account shall be made if, after such disbursement, the balance remaining in such
account shall be (A) at any time prior to the second anniversary of the Term Commencement Date,
less than the sum of One Million Dollars ($1,000,000.00), or (B) at any time on or following the
second anniversary of the Term Commencement Date until the fourth anniversary of the Term
Commencement Date, less than an amount equal to the Annual Base Rent payable under this Lease for
the next succeeding four (4) months, or (C) at any time thereafter, less than an amount equal to
the Annual Base Rent payable under this Lease for the next succeeding six (6) months; (ii) with
respect to the Required Alterations Escrow Account, payment of the Eligible Costs of such Required
Alterations or any Excess Costs of such Required Alterations (using only funds which have been
deposited by Lessee in such Escrow Account for the purpose of funding such Excess Costs and not
previously disbursed) (“Required Alterations Escrow Payments”); (iii) with respect to the
Designated Alterations Escrow Account, payment of the Eligible Costs of such Designated Alterations
or any Excess Costs of such Designated Alterations (using only funds which have been deposited by
Lessee in such Escrow Account for the purpose of funding such Excess Costs and not previously
disbursed) (“Designated Alterations Escrow Payments”); and (iv) with respect to the Seasonal Rent
Reserve, payment of the monthly installments of Annual Base Rent (including the monthly installment
of the Annual Base Rent owing for the next succeeding month), if and to the extent that the NOI for
the immediately preceding month is not sufficient to make such payment (“Seasonal Rent Reserve
Escrow Payments”).

 

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(c) Disbursements from the Accounts. Disbursements from the Escrow Accounts
shall be made by the escrow holder as follows:

(i) for the purpose of making any payment of Annual Base Rent
described in clause (iv) of Section 7.2(b) from funds on deposit in the Seasonal Rent Reserve,
either (A) upon the written direction of Lessee given not sooner than two (2) Business Days
following delivery to Lessor of a written statement from Lessee showing that the Monthly Cash Flow
for the then current month, after the application thereof in accordance with the requirements of
Section 7.2(d)(i), will be insufficient to permit Lessee to pay the full amount of the Annual Base
Rent installment owing for the next succeeding month, which statement shall contain reasonably
sufficient detail and supporting information to enable Lessor to confirm such insufficiency; or (B)
at Lessor’s sole and absolute discretion at any time following and during the continuation of an
Event of Default, in which event amounts shall be disbursed from the Seasonal Rent Reserve under
this subsection (c)(i) upon written direction from Lessor given in its sole and absolute
discretion;

(ii) for the purpose of making any of the payments of Annual Base Rent
described in, and as limited by, clause (i) of Section 7.2(b) from funds on deposit in the Base
Rent Escrow Account, either (A) upon the written direction of Lessee given not sooner than two (2)
Business Days following delivery to Lessor of a written statement from Lessee showing that the
Monthly Cash Flow for the then current month, after the application thereof in accordance with the
requirements of Section 7.2(d)(d)(i), will be insufficient to permit Lessee to pay the full amount
of the Annual Base Rent installment owing for the next succeeding month, which statement shall
contain reasonably sufficient detail and supporting information to enable Lessor to confirm such
insufficiency; or (B) at Lessor’s sole and absolute discretion at any time following and during the
continuation of an Event of Default, in which event amounts shall be disbursed from the Base Rent
Escrow Account under this subsection (c)(ii) upon written direction from Lessor given in its sole
and absolute discretion; and

(iii) for the purpose of making a Required Alterations Escrow Payment or a
Designated Alterations Escrow Payment, upon the written direction of Lessee given not sooner than
ten (10) business days following delivery to Lessor of a written statement from Lessee (containing
reasonably sufficient detail and supporting information) that (A) the amount of funds on deposit in
the Required Alterations Escrow Account or the Designated Alterations Escrow Account, as
applicable, will be sufficient to pay for the Eligible Costs of the Required Alteration or
Designated Alteration for which a disbursement is requested, and (B) the sums to be disbursed (1)
are required for the payment of the Eligible Costs of construction or installation of such Required
Alteration or Designated Alteration, as applicable (or for payment of any Excess Costs therefor,
using only funds which have been deposited by Lessee in the applicable Escrow Account for such
purpose and not previously disbursed) which is being constructed or installed in substantial
compliance with plans and specifications approved by Lessor pursuant to the provisions of Section
11, and without any changes therein except as have previously been approved in writing by Lessor to
the extent such approval is required pursuant to Section 11, and (2) are limited to the amounts
then payable to the contractor, subcontractor or materials supplier for work or services actually
completed at the Premises or for materials to be incorporated into the Premises (provided that if
payment is made for any materials prior to their incorporation into

 

41

 

the Premises and such materials
have not been delivered to and stored on the Premises, Lessee shall have obtained a first priority perfected security interest in such materials), subject to a
reasonable retainage not less than ten percent (10%) with respect to such work or services and
provided that all lien releases and waivers that can at such time lawfully be obtained under
Applicable Laws for all work previously performed in respect of such Required Alteration or
Designated Alteration, as applicable, have been obtained from each such contractor, subcontractor,
and materials supplier; and (3) do not exceed the sum of the Eligible Costs for such Required
Alteration or Designated Alteration, as applicable, remaining on deposit in the applicable Escrow
Account plus the amount, if any, of funds deposited into such Escrow Account by Lessee on account
of any Excess Costs for such Required Alteration or Designated Alteration, as applicable, pursuant
to the provisions of Section 11.2 or 11.3; provided that no disbursement from the Required
Alterations Escrow Account or the Designated Alterations Escrow Account shall be made on account of
a Required Alterations Escrow Payment or a Designated Alterations Escrow Payment if an Event of
Default has occurred and is then continuing or if a Potential Default exists.

In the event that any condition of a disbursement from any Escrow Account is not satisfied as
provided above, Lessor shall have the right to deliver a written notice to the escrow holder
instructing the escrow holder not to comply with any direction it may receive from Lessee with
regard to making a disbursement from the applicable Escrow Account, or otherwise limiting the
amount which may be disbursed by escrow holder from the applicable Escrow Account pursuant to
Lessee’s direction, which instruction from Lessor shall supercede and prevail over any contrary
direction or instruction from Lessee.

(d) Application of Monthly Cash Flow from the Premises. Lessee agrees that the
Monthly Cash Flow shall be applied in the following manner and order of priority:

(i) First, to the payment of all Ordinary Operating Expenses then
due and owing;

(ii) Second, to the payment of the monthly installment of Annual Base
Rent and any Additional Rent then due and owing;

(iii) Third, to the funding of the FF&E Reserve Account in an amount equal
to four percent (4%) of the Total Revenues for the immediately preceding month, plus such
additional amount, if any, as shall be required to make up for any shortfall in the required four
percent (4%) deposit that has occurred in any prior month(s);

(iv) Fourth, to the Base Rent Escrow Account, whenever the amount on
deposit in the Base Rent Escrow Account (including any interest or other cash return earned
thereon) is less than the sum of One Million Dollars ($1,000,000.00);

(v) Fifth, to the funding of the Seasonal Rent Reserve, whenever the
amount on deposit in the Seasonal Rent Reserve (including any interest or other cash return earned
thereon) is less than the sum of One Million Dollars ($1,000,000);

(vi) Sixth, to the funding of the Required Alterations Escrow Account,
whenever the amount on deposit in the Required Alterations Escrow Account (including any interest
or other cash return earned thereon) is less than an amount equal to the Eligible Costs which are
then required for the completion of all Required Alterations which have not been funded through any
Lessee Loans permitted under this Lease, as such costs have been approved by Lessor pursuant to
Section 11.3; provided that in determining the amount so required to be deposited into the Required
Alterations Escrow Account pursuant to this clause (v), the amount of any Excess Costs deposited
therein by Lessee shall not be taken into account;

 

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(vii) Seventh, to the Base Rent Escrow Account, whenever the amount on deposit
in the Base Rent Escrow Account (including any interest or other cash return earned thereon) is
less than the sum of Three Million Dollars ($3,000,000.00);

(viii) Eighth, to repay the Unsecured Debt (not exceeding a payment of Three
Million Six Hundred Thousand Dollars ($3,600,000.00) in the aggregate, inclusive of both principal
and interest payments), provided that (A) such payments shall be made only to unsecured creditors
identified in the Schedule of Unsecured Creditors attached hereto as Schedule 2 and not in excess
of the principal amounts (plus interest thereon) scheduled to be paid to each such unsecured
creditor as set forth in Schedule 2; and (B) no more than One Hundred Thousand Dollars
($100,000.00) of Monthly Cash Flow for any month during the Term shall be applied for the purpose
of paying the Unsecured Debt, provided that if there is insufficient Monthly Cash Flow to fund the
payment of Unsecured Debt in accordance with the priorities set forth in this Section 7.2(d) for
any month up to, but not exceeding, the sum of $100,000 for such month, then the amount of such
insufficiency shall accrue and be added to the maximum permitted amount to be paid from future
Monthly Cash Flow for the payment of the Unsecured Debt in any one or more of the next succeeding
eleven (11) months, but in no event shall the maximum permitted amount of Monthly Cash Flow to be
used for the payment of the Unsecured Debt exceed a total of One Million Two Hundred Thousand
Dollars ($1,200,000.00) in the aggregate for any period of twelve (12) consecutive months;

(ix) Ninth, to the Base Rent Escrow Account as and to the extent required
pursuant to the provisions of Section 7.2(f);

(x) Tenth, to the funding of the Designated Alterations Escrow
Account, whenever the amount on deposit in the Designated Alterations Escrow Account (including any
interest or other cash return earned thereon) is less than an amount equal to the Eligible Costs
which are then required for the completion of all Designated Alterations which have not been funded
through any Lessee Loans permitted under this Lease, as such costs have been approved by Lessor
pursuant to Section 11.2; provided that in determining the amount so required to be deposited into
the Designated Alterations Escrow Account pursuant to this clause (ix), the amount of any Excess
Costs deposited therein by Lessee shall not be taken into account;

(xi) Eleventh, to repay any remaining Unsecured Debt in excess of the
limitations set forth in clause (viii) above;

(xii) Twelfth, to the payment of any Disqualified Expenses; and

(xiii) Thirteenth, provided that no Event of Default has occurred and is
continuing, and that no Potential Default exists, the remaining balance of any Monthly Cash Flow
shall be applied for such purposes as Lessee may direct.

 

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(e) Deposits into the Account. Lessee agrees to make deposits of Monthly Cash
Flow into the Escrow Accounts from time to time in accordance with the provisions of Section
7.2(d). When any such deposit is required to be made, Lessee agrees not to use or divert any of
the Monthly Cash Flow for any other purpose without first obtaining the prior written approval of
Lessor, which may be given or withheld in Lessor’s sole and absolute discretion. All monthly
deposits required to be made by Lessee into the Escrow Accounts as provided in Section 7.2(d) shall
be made in respect of any month not later than ten (10) days after the commencement of the next
succeeding month during the Term.

(f) Minimum Account Balance; Release of Funds from Account.

(i) Lessee and Lessor have agreed that additional deposits into the
Base Rent Escrow Account pursuant to clause (ix) of Section 7.2(d) shall be made by Lessee each
month (a “Deposit Month”) whenever and for so long as either (A) the NOI for the twelve (12)
calendar month period immediately preceding the applicable Deposit Month is less than the following
aggregate amount (the “Qualifying Amount”): (1) at all times prior to the first Adjustment Date,
Seven Million Four Hundred Forty-Five Thousand One Hundred Ninety Dollars ($7,445,190.00), or (2)
following the first Adjustment Date, an amount equal to one hundred twenty-five percent (125%) of
the then applicable Annual Base Rent; or (B) the Qualifying Amount has not been achieved for each
of the six (6) calendar months immediately preceding the applicable Deposit Month; provided
that no monthly deposit into the Base Rent Escrow Account pursuant to clause (ix) of Section
7.2(d) shall be required to be made during any Deposit Month if the amounts then projected
to be on deposit in the Base Rent Escrow Account and the Seasonal Rent Reserve as of the end of
such Deposit Month (including any interest or other cash return earned on the funds in the Base
Rent Escrow Account and the Seasonal Rent Reserve, but taking into account any funds reasonably
anticipated to be disbursed from the Base Rent Escrow Account and/or the Seasonal Rent Reserve
during such Deposit Month pursuant to the provisions of Section 7.2(c) of this Lease) equals or
exceeds the Qualifying Amount.

(ii) Without limiting the provisions of clause (i) of this Section
7.2(f), during any calendar month (a “Withdrawal Month”) in which the Release Requirement is
satisfied and has also been satisfied for each month during the immediately preceding six (6)
months, and provided that no Event of Default then exists or has existed during the immediately
preceding six (6) months, Lessee shall be entitled to withdraw from the Base Rent Escrow Account
the amount, if any, by which the funds projected to be on deposit in the Base Rent Escrow Account
and the Seasonal Rent Reserve as of the end of such Withdrawal Month (including any interest or
other cash return earned on the funds in the Base Rent Escrow Account and the Seasonal Rent
Reserve, but taking into account any funds reasonably anticipated to be disbursed from the Base
Rent Escrow Account and/or the Seasonal Rent Reserve during the Withdrawal Month pursuant to the
provisions of Section 7.2(c) of this Lease) exceed an amount equal to six (6) months of the monthly
installments of the then applicable Annual Base Rent. As used herein, the “Release Requirement”
shall mean that the NOI for the immediately preceding twelve (12) calendar months exceeds (A) until
the first Adjustment Date, the amount of Eight Million Three Hundred Thirty-Eight Thousand Six
Hundred Thirteen Dollars ($8,338,613.00), or (B) following the first Adjustment Date, an amount
equal to one hundred forty percent (140%) of the then applicable Annual Base Rent.

 

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7.3 FF&E Reserve Account

Lessee shall establish and maintain at all times during the Term a reserve account for the
acquisition and replacement of FF&E. Lessee shall deposit into the FF&E Reserve Account such
amounts as may be required from time to time to ensure the operation of the Hotel as a Luxury
Hotel, but in any event an amount not less than four percent (4%) of Total Revenues, such FF&E
Reserve Account to be funded on a monthly basis as provided in Section 7.2(d). Lessee shall obtain
Lessor’s prior written approval, which shall not be unreasonably withheld or delayed, for the
acquisition or installation of any new or replacement FF&E which will be funded from the FF&E
Reserve Account, including the quality and quantity of such FF&E and the cost thereof, and Lessee
shall submit to Lessor with any such request for approval (which request may be made, at Lessee’s
option, in connection with the delivery to Lessor of the annual budget for any Operating Year) a
description in reasonable detail of the FF&E proposed to be acquired and the terms and conditions
of such acquisition, including a statement of whether the provider or seller of such FF&E is an
Affiliate of Lessee, the Operator, or any Food and Beverage Operator. Notwithstanding the
foregoing, Lessee shall be permitted to expend funds from the FF&E Reserve Account for the
acquisition of FF&E for the Hotel in an amount not in excess of Ten Thousand Dollars ($10,000.00)
per month (non-cumulative) without the approval of Lessor, and Lessee shall report such
expenditures in the monthly reports submitted to Lessor pursuant to Section 7.5(c) hereof. Except
as provided in the immediately preceding sentence, Lessee shall not be permitted to withdraw any
funds from the FF&E Reserve Account unless, and then only to the extent that, such funds are
required to pay for the acquisition or installation of any FF&E that has been approved by Lessor in
an amount which is not in excess of the cost therefor so approved by Lessor.

7.4 Improvements and Alterations

(a) Alterations. Alterations shall be designed, approved, and constructed in
accordance with the terms and conditions set forth in Section 11 of this Lease.

(b) Title to Improvements and Alterations. Fee title to the Premises
(excluding Alterations owned by Lessee as provided herein), including the Improvements as the same
exist on and as of the Effective Date, shall at all times during the Term of this Lease be and
remain in Lessor, and Lessee shall have a leasehold interest in the Premises, including such
Improvements, for the Term of and subject to the provisions of this Lease. Title to any
Alterations that are paid for by Lessee shall be and remain in Lessee until the Termination Date,
even if such Alterations shall be considered to constitute real property, at which time title to
such Alterations shall automatically pass to Lessor as provided in Section 8.2(a) below free from
any claim or interest of Lessee or any Person claiming by, through or under Lessee and without the
payment of any additional consideration or other compensation by Lessor. Lessee may not demolish
any of the Improvements, or any Alterations, or remove all or any portion of the Improvements or
any Alterations from the Premises, except in accordance with Sections 11 and 17, nor may Lessee
transfer its interest in the Improvements or any Alterations separate and apart from a Transfer of
Lessee’s leasehold interest in the Premises.

(c) Depreciation of Improvements. Lessee acknowledges and agrees that Lessor
is the fee owner of the Improvements during the Term of this Lease, and that Lessee shall not be
entitled to
have or claim any depreciation deductions with respect to the Improvements, other than for any
Alterations which are paid for and will be owned by Lessee as provided herein.

 

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7.5 Operating and Financial Reports for Hotel

Lessee will, and will cause the Operator and the Food and Beverage Operator to, keep books of
account and records relating to or reflecting the results of the operation of the Hotel
substantially in accordance with the Accounting Standards. Upon any termination of this Lease,
Lessor shall have the right to review, copy, audit and inspect all such books of account and
records as reasonably required to enable Lessor to provide for the orderly continued operation of
the Hotel. The originals or true and complete copies of all such books of account and records
shall be kept at the Hotel. In addition, Lessee agrees to provide to Lessor true and correct
copies of the following operating, financial and other information and reports from time to time
prepared by or for Lessor, Operator, and/or any Food and Beverage Operator with respect to the
Premises, the Hotel and/or the operation of the Hotel Business, such items to be provided to Lessor
at the time and in the manner set forth below:

(a) Copies of the annual operating and capital budgets for the Hotel, the
annual sales and marketing plan for the Hotel and the annual capital improvement budget for the
Hotel for each Operating Year, and all updates of or revisions to such annual operating and capital
budgets, marketing plan and/or capital improvements budget, to be delivered to Lessor on or before
December 31 of the year preceding the applicable Operating Year to which such budgets or plans
apply, or in the case of any update or revision to any such budgets or plans, as and when such
update or revision is approved by Lessee and the Operator (if required).

(b) On a monthly basis, promptly following the preparation thereof, copies of
the profit and loss statement for the Hotel operations for such month, showing the actual year to
date performance versus the budgeted performance targets for such month, as well as, a comparison
showing the actual monthly performance and year to date performance for the Hotel versus the
performance during the same period of the prior year, together with any budget adjustments proposed
to be made relating to such operations.

(c) On a monthly basis, copies of all reports relating to Hotel operations,
revenue projections, bookings (including group booking reports), FF&E Reserve Account expenditures,
and similar matters, prepared by or for Lessee, the Operator or any Food and Beverage Operator
(including any monthly operational report that the general manager may produce for the Lessee that
provides a summary of salient activities during the prior month of the Hotel operations), to be
delivered to Lessor within ten (10) Business Days after such items become available to Lessee.

(d) On a quarterly and annual basis, copies of the balance sheet for the Hotel
and the financial statements for the Hotel for the applicable period (audited by a reputable
independent public accounting firm in the case of the annual financial statements), to be delivered
to Lessor within ten (10) Business Days after such items become available to Lessee in their final
form.

 

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(e) Copies of the monthly Smith Travel Research (STR) reports showing the
performance of the Hotel as compared to other hotels in the City considered to be included within
the Luxury Hotel Competitive Set.

(f) Copies of any written report relating to the physical condition of the
Hotel or the compliance of the Hotel or any Hotel operations with Applicable Laws), to be delivered
to Lessor within ten (10) Business Days after such report or statement becomes available to Lessee.

(g) Copies of (i) any material claim made by any third party (including any
governmental agency or authority) against the Hotel, Lessee, the Operator or any Food and Beverage
Operator, relating to the Hotel or the Hotel Business, or the performance of the Management
Agreement, any Food and Beverage Agreement, or any Operating Contract, or relating to any
employment agreement covering any Hotel Employee or the terms or conditions of employment of any
Hotel Employee or to any alleged discrimination against or disciplinary action involving any Hotel
Employee (provided that any such employment claims shall be treated by Lessor as confidential);
(ii) any written notices received from any governmental agency or authority, or from any insurance
company or insuring authority, relating to an alleged violation of Applicable Law or to any
condition on or affecting the Land or Improvements that could adversely affect the availability or
cost of any insurance coverage required under this Lease; and (iii) any action or proceeding filed
or commenced in any court, or by or before any mediator or arbitrator, or pursuant to any judicial
reference, alleging any material liability on the part of the Hotel, Lessee, the Operator, or any
Food and Beverage Operator in connection with the Land, the Improvements, the Hotel or the Hotel
Business (unless such action occurs in the ordinary course of business of the Hotel and is covered
by insurance).

Lessor shall have the right to meet periodically at reasonable times (but not more frequently
than quarterly), upon written request to Lessee, with the senior executive personnel of Lessee, the
Operator, and any Food and Beverage Operators, including without limitation the general manager of
the Hotel and the persons holding senior executive or management positions at the Hotel, to
discuss, on a confidential basis, Hotel operations, the financial performance of the Hotel, and any
other matters relating to the Hotel Business. In addition, Lessor shall have the right to meet
periodically at reasonable times, upon written request to Lessee, with the senior sales and
marketing staff at the Hotel, to discuss, on a confidential basis, Hotel sales and marketing plans
and marketing budgets for the Hotel, and any other matters relating to the Hotel Business. In
addition, Lessee will, and will cause the Operator and the Food and Beverage Operator to,
reasonably cooperate (at no material cost to Lessee, the Operator, or the Food and Beverage
Operator, as applicable) with the due diligence inquiries and requests submitted by any prospective
Fee Lender or prospective purchaser of or investor in Lessor’s interest in the Premises, including,
without limitation, providing such parties access to, on a confidential basis, the information to
be delivered to Lessor pursuant to this Section 7.5 and permitting such parties to meet with the
senior executive personnel of Lessee, the Operator and any Food and Beverage Operators to discuss,
on a confidential basis, Hotel operations, the financial performance of the Hotel, and any other
matters related to the Hotel Business.

 

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8. SURRENDER

8.1 Surrender of Premises and Assigned Acquired Interests

On the Termination Date, Lessee shall surrender the Premises to Lessor, in the manner and
condition required by this Section 8, free and clear of all tenancies, occupancies and other rights
or interests of any third parties, whether pursuant to written or oral agreements of any nature or
otherwise (including, without limitation, any Management Agreement and Food and Beverage
Agreement), and the rights of any public agencies with jurisdiction, any Leasehold Mortgagees,
equipment lessors, service providers, materials providers, or other third parties, except solely
(i) such agreements, rights and obligations as may be contained in or created by the Permitted
Exceptions, or arise under Applicable Laws, or are Lessor Exceptions, or (ii) as Lessor may
otherwise request by written notice to Lessee delivered not less than ten (10) days prior to the
Termination Date (provided that (A) Lessee shall be required to use only commercially reasonable
efforts to comply with such request of Lessor, and Lessee shall not be in default hereunder if
Lessee, despite using such commercially reasonable efforts, is unable to comply with Lessor’s
request, and (B) such request shall not impose any material additional cost or burden on Lessee,
but such proviso shall not be construed to limit any right of Lessor to recover damages from Lessee
on account of an Event of Default as permitted under Applicable Laws). In addition, following the
Surrender Date, Lessee shall have no further right, title or interest in or to the Assigned
Acquired Interests, and the Assigned Acquired Interests shall automatically and without further
action by the parties revert to Lessor on and as of the Surrender Date; provided that Lessor shall
not be bound by or be deemed to have assumed any covenants, obligations or liabilities contained
in, arising under, or related to any of the Assigned Acquired Interests to the extent that the same
accrue or arise on or prior to the Surrender Date, unless and until Lessor, in its sole and
absolute discretion, shall affirmatively elect in writing to assume all or any (as may be
designated by Lessor) of such covenants, obligations or liabilities. Lessee shall be and remain
liable following the Surrender Date for the payment and performance of all such covenants,
obligations and liabilities to the extent that Lessor does not affirmatively elect to assume the
same (“Lessee-Retained Obligations”), and Lessee shall indemnify, defend and hold Lessor harmless
from and against any and all losses, claims, damages, liabilities, and costs and expenses
(including reasonable attorneys’ fees and costs) arising from or relating to any Lessee-Retained
Obligations. In the event that this Lease terminates for any reason other than an Event of Default
by Lessee, including termination on the Expiration Date of this Lease: (i) Lessee shall be entitled
to retain all revenues and receivables arising from or attributable to the Hotel Business prior to
the Termination Date, and to recover any security deposits posted by Lessee with third parties in
connection with the operation of the Hotel, and (ii) without limiting any other provision of this
Lease, Lessee shall be obligated to pay all Impositions, accounts payable, and other costs and
expenses relating to the Hotel Business which are attributable to any period prior to, or which
accrue prior to, the Termination Date, provided that Lessee shall receive a credit to the extent of
any prepayments made by Lessee prior to the Termination Date for (A) Impositions that are allocable
to any period following the Termination Date or (B) any costs and expenses that are allocable to
any period following the Termination Date on account of any contract, agreement or purchase order
which will be binding upon Lessor following the Termination Date as expressly provided in this
Lease.

 

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8.2 Surrender

(a) Condition of Premises on Surrender. On the Termination Date, Lessee shall
peaceably quit and surrender the Premises to Lessor. Lessee shall leave the Premises, including
all Improvements thereon, in first-class and serviceable condition and repair consistent with the
operation of a Luxury Hotel, except for reasonable wear and tear, and except as otherwise expressly
provided in Section 17. Lessee shall deliver the Premises and Improvements to Lessor free and
clear of all liens created or suffered by, under or through Lessee, excepting only the Permitted
Exceptions. On the Termination Date, all of Lessee’s rights and interests under this Lease in and
to the Premises, including all Improvements and Alterations, shall automatically terminate, and any
title held by Lessee in and to any portion of the Premises, including any Alterations, shall, to
the extent not then owned by Lessor, automatically be deemed transferred to and shall vest in
Lessor, without payment of any additional consideration or other compensation therefor by Lessor,
and free of any right, title, claim or interest therein on the part of Lessee or any other Person
claiming by, through or under Lessee.

(b) Delivery of Documents, Etc. Lessee shall deliver to Lessor on the
Termination Date:

(i) Such documents, assignments, instruments and conveyances as
Lessor may request to confirm and implement the termination of all of Lessee’s right, title and
interest in and to the Premises, and the transfer, as provided herein, of full, lien-free title to
Lessor with respect to any Alterations and any other portions of the Premises (subject to the
Permitted Exceptions and any Lessor Exceptions);

(ii) All Entitlements, plans, surveys and other documents, all keys and
other items of Personal Property in Lessee’s possession or control, and all transferable licenses,
permits and other governmental authorizations that relate to or are necessary or appropriate for
the lawful or proper operation or occupancy of the Premises and its use as a Luxury Hotel;

(iii) An amount equal to any unpaid Impositions and other Project Costs
which have accrued as of the Termination Date (but only to the extent that funds to pay such
Project Costs have not otherwise been reserved and paid over to Lessor), prorated to the
Termination Date, but subject to the provisions of the final sentence of Section 8.1 in the case of
a termination of this Lease other than on account of an Event of Default; and

(iv) All funds then on deposit in all Capital Reserve Accounts, and the
Designated Alterations Escrow Account and the Required Alterations Escrow Account (but only to the
extent of any Eligible Costs and Excess Costs not theretofore disbursed from the Designated
Alterations Escrow Account and the Required Alterations Escrow Account), and, in the case of any
termination of this Lease on account of an Event of Default, all funds then on deposit in the Hotel
Operating Accounts and all other amounts on deposit in the Base Rent Escrow Account and the
Seasonal Rent Reserve.

 

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If this Lease is terminated prior to the Expiration Date due to an Event of Default, Lessee also
shall deliver, if and to the extent requested by Lessor in a written notice delivered to Lessee not
less than ten (10) days prior to the Termination Date, any or all of the following, as and to the
extent designated by Lessor: An assignment of Lessee’s interest in (i) any Management
Agreement and/or any Food and Beverage Agreement, (ii) any subleases entered into in compliance
with Section 13 hereof, (iii) any contracts entered into by Lessee or any Affiliate of Lessee for
the provision of parking or other services at or for the Hotel or the Hotel Business, (iv) any
equipment leases or other equipment contracts, including data processing equipment, entered into by
Lessee or any Affiliate of Lessee and reasonably required for the lawful and proper continued
operation of the Hotel as a Luxury Hotel, to the extent that the same relate exclusively to the
Premises, (v) any other assignable contracts, property rights or claims (including utility and
other deposits) of Lessee or any Affiliate of Lessee to the extent that the same relate exclusively
to the Premises or the ownership, operation, management, maintenance, alteration, construction,
repair, or leasing of the Premises or any part thereof, (vi) all inventories, supplies, equipment,
and other personal property, tangible and intangible, owned or leased by Lessee or any Affiliate of
Lessee to the extent used exclusively in connection with the operation of the Hotel, (vii) all
transferable and assignable licenses and permits that relate exclusively to the operation of the
Hotel and/or the Hotel Business, and in addition Lessee shall cooperate with Lessor, and shall
cause any Affiliate of Lessee, Operator or any Affiliate of Operator to cooperate with Lessor (at
no material cost to Lessee, Operator, or any such Affiliate; provided that the foregoing
restriction shall not be construed to limit any right of Lessor to recover damages from Lessee on
account of an Event of Default as permitted under Applicable Laws), in the filing and processing of
any applications by Lessor, any Affiliate of Lessor, or any Replacement Operator (as defined in
Section 9.2 hereof) for the issuance of any new, replacement or modified licenses and permits that
may be necessary or appropriate for the operation of the Hotel and the Hotel Business as a Luxury
Hotel; and (viii) any and all advance reservations and bookings and other assets relating to the
operation of a Luxury Hotel on the Premises (collectively, the “Termination Assignments”). Any
Termination Assignments shall be made without the payment of any additional consideration or other
compensation by Lessor to Lessee or any Affiliate of Lessee, and shall include: (A) Lessor’s
assumption of all obligations of Lessee or any such Affiliate of Lessee under all such Termination
Assignments to the extent accruing on and after the Termination Date (or, if Lessee holds over, the
Surrender Date); and (B) Lessee’s indemnification of Lessor for the performance and payment of any
obligations of Lessee or any Affiliate of Lessee under or with respect to any rights, interests or
other matters covered by such Termination Assignments and accruing prior to the Termination Date
(or, if Lessee holds over, the Surrender Date).

(c) Lessor as Lessee’s Attorney in Fact. Lessee hereby constitutes and
appoints Lessor as its true and lawful attorney-in-fact, with full power of substitution, and with
full power and authority to execute, acknowledge and deliver any instruments referred to in this
Section 8.2 in the name and on behalf of Lessee which said attorney-in-fact shall deem necessary to
transfer and convey to Lessor all of Lessee’s right, title and interest in and to the Premises
and/or any Assigned Acquired Interests or the subject matter of any Termination Assignments in
accordance with this Section 8.2, including any agreements, rights, accounts, documents or other
items that are to be assigned to Lessor as provided in Section 8.2(b), and Lessee hereby further
authorizes said attorney-in-fact to take any further action which said attorney-in-fact may
consider necessary or advisable in connection with the foregoing. The power of attorney granted
pursuant to the immediately preceding sentence is a special power of attorney, coupled with an
interest, and shall be irrevocable. All parties dealing with the attorney-in-fact, including any
title company insuring title to the Premises and any bank, depository, trustee or other financial
institution holding deposits, rents, accounting or other funds described in, or connected with any
contracts or agreements described in, this Section 8.2, may fully rely on the power and authority
of the attorney-in-fact to do any and all things described in this power of attorney.

 

50

 

(d) Lessee Indemnity. Lessee shall indemnify, defend and hold Lessor harmless
from and against any and all claims, damages, losses, liabilities, and costs and expenses
(including reasonable attorneys’ fees and costs) arising directly or indirectly, in whole or in
part, out of any failure by Lessee to surrender the Premises to Lessor on the Termination Date as
provided in this Section 8. Except for any agreements to which Lessor is a party or which Lessor
expressly elects in writing to assume in accordance with this Lease, as of the Termination Date,
neither Lessor nor the Premises shall be bound by or have any obligations or liabilities with
respect to (i) any contracts, agreements or other obligations of Lessee or anyone claiming under
Lessee, including, without limitation, any Management Agreement, except solely as and to the extent
required to be assigned by Lessee to Lessor pursuant to Section 8.1 or the final paragraph of
Section 8.2(b), and Lessee shall have the obligation to terminate or settle, at Lessee’s sole cost
and expense, any and all such contracts, agreements or other obligations that are not so assigned;
or (ii) the employment, retention, hiring, terms or conditions of employment, or termination of
employment of any Hotel Employees, or any claims or liabilities relating thereto, whether held or
asserted by or owing to any individual or any labor union or collective bargaining unit or
organization, including any claims or liabilities for salary, benefits, contributions, or other
compensation, and any claims or liabilities relating to any determination not to employ, any terms
or conditions of employment, or any termination of employment, or relating to any acts or omissions
of the employer or any other Person with respect to any Hotel Employees (collectively, “Employment
Liabilities”), and Lessee shall indemnify, defend and hold Lessor and all Lessor Indemnitees
harmless from and against any and all claims, damages, losses, liabilities, governmental
enforcement actions, fines, penalties, and costs and expenses (including reasonable attorneys’ fees
and costs), arising directly or indirectly, in whole or in part, out of or in connection with, or
otherwise relating to any Employment Liabilities.

8.3 Holding Over

If Lessee remains in possession of all or any part of the Premises after the Termination Date
with Lessor’s prior written consent: (a) Lessee’s occupancy of the Premises shall be
deemed a month-to-month tenancy (not a renewal or extension of the Term), which shall be terminable
by either party upon thirty (30) days’ written notice to the other; (b) unless otherwise hereafter
agreed in writing by Lessor and Lessee, the Annual Base Rent during the holdover period shall be
one hundred fifty percent (150%) of the Annual Base Rent in effect during the final month of the
Term (and Lessor’s acceptance of any Rent without all or any part of such fifty percent (50%)
increase shall not be deemed or construed as a waiver by Lessor of its right to collect the entire
fifty percent (50%) increase in Annual Base Rent); and (c) Lessee’s use of the Premises otherwise
shall be subject to all applicable terms and conditions of this Lease, including, without
limitation, timely payment of all Additional Rent, as if the Term had not expired or this Lease had
not been terminated, as the case may be. Nothing in this Section 8.3 shall be deemed or construed
as a consent by Lessor to any holding over by Lessee. If Lessee remains in possession of all or
any part of the Premises or the Project after the Termination Date without Lessor’s prior
written consent: (i) the Annual Base Rent during such holdover period shall be two hundred percent
(200%) of the Annual Base Rent in effect during the final month of the Term (and Lessor’s
acceptance of any Rent without all or any part of such one hundred

 

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percent (100%) increase shall not be deemed or construed as a waiver by Lessor of its right to collect the entire
one hundred percent (100%) increase in Annual Base Rent); (ii) Lessee’s occupancy of the Premises
shall be solely as a tenant at sufferance and no notice of termination shall be necessary in order
to recover possession; (iii) Lessee’s use of the Premises otherwise shall be subject to all
applicable terms and conditions of this Lease, including, without limitation, timely payment of all
Additional Rent; and (iv) in addition to such other remedies as may be available to Lessor at law
or in equity, Lessee shall indemnify, defend and hold Lessor harmless from and against any and all
claims, damages, losses, liabilities and costs arising from or in connection with, or related to,
Lessee’s continued possession, including reasonable attorneys’, brokers’ and consultants’ fees,
costs and expenses, and damages, including consequential damages, arising from Lender’s inability
to sell, assign or finance the Premises or relet or deliver the Premises to a succeeding tenant.

8.4 Survival

The provisions of this Section 8 shall survive the expiration or any earlier termination of
this Lease.

9. MANAGEMENT OF HOTEL

9.1 Operator and Food and Beverage Operators

The initial Operator (i.e. Morgans Hotel Group Management LLC, a Delaware limited liability
company), and the initial Food and Beverage Operator(s) (i.e. 495 Geary LLC, a Delaware limited
liability company, SC Geary LLC, a Delaware limited liability company, and China Grill Management
BD, Inc., a Florida corporation), each as identified in Exhibit B attached hereto, have been
approved by Lessor. Each successor Operator, and each successor Food and Beverage Operator which
is an Affiliate of Lessee or Operator, shall be subject to the prior written approval of Lessor,
which approval shall not be unreasonably withheld or delayed. No replacement of or change in any
Operator, or any Food and Beverage Operator for which Lessor’s approval is required as provided
herein, shall be made or permitted without obtaining Lessor’s prior written consent, which consent
shall not be unreasonably withheld or delayed. Prior to giving or withholding approval of an
Operator or any Food and Beverage Operator, Lessor shall have received from Lessee such information
concerning the Operator or Food and Beverage Operator, as applicable, as Lessor shall reasonably
require, including, without limitation, (i) evidence that the Operator has a demonstrated history
of successfully operating Luxury Hotels, or that the Food and Beverage Operator has a demonstrated
history of successfully operating food and beverage services in Luxury Hotels, in either case
whether in the City or other areas of the United States, (ii) evidence that the Operator or Food
and Beverage Operator, as applicable, or any corporate family of which the Operator or Food and
Beverage Operator, as applicable, is a member, has sufficient financial resources to ensure the
faithful and timely performance of the Operator or Food and Beverage Operator, as applicable, under
the Management Agreement or the Food and Beverage Agreement, as applicable, and (iii) the absence
of any litigation or other proceedings to which the Operator or Food and Beverage Operator, as
applicable, is a party that would create a reasonable concern regarding the reputation or
management skills of the Operator or Food and Beverage Operator, as applicable.

 

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Without limiting
the circumstances in which Lessor may be deemed to be reasonable in withholding approval of any Operator, or Food and Beverage Operator for which Lessor’s approval is
required hereunder, Lessor shall be deemed to be reasonable in withholding its approval of any
Operator or Food and Beverage Operator which does not have the qualifications referred to in
clauses (ii), (iii) and/or (iv) above. Notwithstanding the foregoing, Lessor agrees that Lessor
will approve a new or replacement Operator so long as such new or replacement Operator (A) has a
tangible net worth (determined in accordance with GAAP) not less than the then tangible net worth
of the Operator to be replaced, and (B) is a national hotel operations company for which one or
more of David Hamamoto, Edward Scheetz, or Ian Schrager (or any successor individuals who have been
expressly approved in writing by Lessor for the purposes of this provision) are senior managers or
senior executives with primary responsibility for overseeing day-to-day operations; provided,
however, that the Management Agreement entered into with such Operator shall comply with the
requirements of Section 9.2 below. In the event that Lessee desires to retain a new or replacement
Operator which Lessee believes complies with the requirements set forth in the immediately
preceding sentence, Lessee shall deliver to Lessor reasonable evidence of such compliance together
with a copy of the Management Agreement that is to govern the respective rights and obligations of
Operator and Lessee.

9.2 Management Agreement; Food and Beverage Operator Agreements

Lessor shall not be bound by or incur any obligations under any Management Agreement or Food
and Beverage Agreement (including without limitation any of the foregoing which constitute Hotel
Operating Agreements) entered into by Lessee with any Operator, or by Lessee or Operator with any
Food and Beverage Operator, relating to the operation or management of the Hotel or any portion
thereof, or any goods or services provided at or by the Hotel, regardless of whether Lessor has
approved or is required to approve the Operator or the Food and Beverage Operator or any such
Management Agreement or Food and Beverage Agreement. Lessor shall be entitled to approve any and
all Management Agreements, and all Food and Beverage Agreements that are entered into with any
Affiliate of Lessee or any Affiliate of the Operator, which approval shall not be unreasonably
withheld or delayed. Except as otherwise provided in Sections 1.3 and 10.3(b)(xxii) of the
Purchase Agreement with respect to the SC Geary Related Agreements, each Management Agreement, and
each Food and Beverage Agreement whether or not requiring Lessor’s approval, shall contain an
express provision (or be subject to a subordination agreement containing such a provision) in which
the Operator or the Food and Beverage Operator shall agree, for the benefit of Lessor, that (i)
Lessor shall have no obligation or liability under the Management Agreement or Food and Beverage
Agreement; (ii) the Management Agreement or Food and Beverage Agreement shall be subject and
subordinate to this Lease and to the rights of Lessor hereunder, and except to the extent otherwise
provided in clause (iv) below shall terminate immediately upon the Termination Date of this Lease,
without any liability on the part of Lessor for the payment of any termination fee, penalty or
other sum; (iii) upon or in connection with the termination of the Management Agreement or Food and
Beverage Agreement, the Operator or the Food and Beverage Operator shall not contact any Hotel
guests or customers who have booked rooms or facilities at the Hotel for the purpose of soliciting
or encouraging such guests or customers to cancel their previously booked rooms or facilities or to
transfer their business to any other transient lodging facility or any other food or beverage
facility, and (iv) in the case of any termination of this Lease on account of an Event of Default,
at the written request of Lessor delivered to the Operator and/or any Food and Beverage Operator
not less than ten (10) days prior to the Termination Date, the Operator and/or such

 

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Food and Beverage Operator shall remain at the Premises, and continue to perform its obligations
under the Management Agreement or the Food and Beverage Agreement, as applicable, for a transition
period (“Transition Period”) not exceeding one hundred twenty (120) days from the Termination Date.
In the event that Lessor delivers the written request described in clause (iv) above to Operator
and/or any Food and Beverage Operator, and for so long as the Operator and/or any such Food and
Beverage Operator shall continue to perform its obligations under the Management Agreement or Food
and Beverage Agreement, as applicable, pursuant to such request, the Operator and/or any such Food
and Beverage Operator shall be entitled to receive its management fee or other equivalent
compensation for such services, and to be reimbursed for its costs and expenses, as provided in,
and as would be applicable under the Management Agreement or the Food and Beverage Agreement, as
applicable, if the Termination Date had not occurred; provided that (A) in the event that any
Operator or Food and Beverage Operator shall be an Affiliate of Lessee, such Operator or Food and
Beverage Operator shall not be entitled to receive as payment for its management or other services
under the applicable Management Agreement or Food and Beverage Agreement during the Transition
Period any payments or reimbursements for hotel or restaurant chain services which are in excess of
an annual charge of two and one-half percent (2-1/2%) of Total Revenues (in the case of the
Operator) or of the gross revenues of the restaurant business at the Hotel (in the case of any Food
and Beverage Operator); (B) Lessor shall not be obligated to perform any obligation of Lessee under
the Management Agreement or any obligation of Lessee or the Operator under the Food and Beverage
Agreement, as applicable, that arose or accrued prior to the Termination Date (but the Operator or
the Food and Beverage Operator shall retain any rights or claims against Lessee on account of any
default of Lessee), and (C) except only to the extent as may hereafter be expressly agreed by
Lessor in a separate written agreement with the Operator or the Food and Beverage Operator, as
applicable, Lessor shall not be deemed to have assumed any obligations of Lessee under the
Management Agreement or the Food and Beverage Agreement, as applicable, with respect to any period
following the Termination Date, including without limitation any obligation of Lessee to fund any
capital or operating expenses, and any Operator or Food and Beverage Operator that is an Affiliate
of Lessee or the Operator, as applicable, shall look solely to the revenues and income of and from
the Hotel (in the case of such Operator) or the food and beverage operations at the Hotel (in the
case of such Food and Beverage Operator) for payment of its management fee and reimbursement of its
costs and expenses and for recovery of any other indebtedness or liability owing under the
Management Agreement or the Food and Beverage Agreement, as applicable, for or with respect to any
period of time following the Termination Date (provided that nothing herein shall be deemed
to grant to any Operator or any Food and Beverage Operator, as applicable, any title to, or
security interest in, any revenues, income or receivables of the Hotel or the food and beverage
operations at the Hotel, and provided further that the foregoing shall not be construed to
obligate the Operator or any Food and Beverage Operator to fund any capital or operating expenses
that are required to be funded by Lessee under the applicable Management Agreement or Food and
Beverage Agreement if Lessor shall fail to provide such funds); and (D) Operator or the Food and
Beverage Operator, as applicable, shall reasonably cooperate with Lessor (at no material cost to
the Operator or the Food and Beverage Operator, as applicable, provided that such restriction shall
not be construed to limit any right of Lessor to recover damages from Lessee on account of an Event
of Default as permitted under Applicable Laws) to ensure a smooth transition of the management of
the Hotel or

 

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the food and beverage services at the Hotel, as applicable, from Operator or the Food and Beverage Operator, as applicable, to such new management company, franchise company, and/or other
entity as shall be designated by Lessor (each a “Replacement Operator”), including, without
limitation, assisting the Replacement Operator in identifying any Hotel Employees who should be
considered for retention, facilitating the transfer or assignment of all licenses and permits
specific to and required for the lawful operation of the Hotel or the food and beverage operations
at the Hotel, as applicable (including, without limitation, any liquor licenses to the extent
permitted by Applicable Laws) and all third party operating agreements, leases or contracts (as and
to the extent designated by Lessor) relating to or reasonably required for the proper operation of
the Hotel or the food and beverage operations at the Hotel, as applicable, providing a final
accounting to Lessor of all operations of the Hotel or the food and beverage operations at the
Hotel, as applicable, through the Termination Date and thereafter for the Transition Period, and
permitting the continued use during the Transition Period of all tradenames, trademarks, central or
corporate services, proprietary computer software and programs, and such other rights held or
controlled by Operator or the Food and Beverage Operator, as applicable, or otherwise provided for
in the Management Agreement or the Food and Beverage Agreement, as applicable, as are reasonably
required to continue the operation of the Hotel or the food and beverage services at the Hotel, as
applicable, in conformance with the standards of a Luxury Hotel during the Transition Period and to
which Lessee would have been entitled under the Management Agreement or to which Lessee or Operator
would have been entitled under the Food and Beverage Agreement, as applicable, had the Termination
Date not occurred.

10. INSURANCE AND INDEMNITY

10.1 Required Insurance

At all times during the Term and any holdover period, at its sole cost and expense, Lessee
shall obtain and keep in force for the benefit of Lessee and Lessor as their respective interests
may appear insurance against such risks and in such amounts as Lessor or any Fee Lender may
reasonably require from time to time, or such greater amounts or additional risks as are required
under any Leasehold Mortgage, subject to the provisions of Section 10.1(i) below. Without limiting
the generality of the foregoing, Lessee shall obtain and keep in force the following minimum levels
of insurance:

(a) Property Insurance. Lessee shall maintain, or cause to be maintained,
property insurance for the perils covered by a standard fire insurance policy, extended coverage
perils, smoke damage, vandalism, flood, malicious mischief, sprinkler leakage, boiler, machinery
and pressure vessel, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil
commotion, aircraft, vehicles, smoke and earthquake, at all times during the Term, in an amount
equal to the then-applicable Full Insurable Replacement Value, but in no event less that the sum of
Seventy-One Million Dollars ($71,000,000), or, in the case of earthquake insurance only, in an
amount which is not less than the “probable maximum loss” (or the equivalent standard at the time
customarily used by the insurance industry in determining the maximum likely exposure of property
to risk of damage from earthquakes), based on the full replacement cost of the Improvements, as
determined by a seismic engineering firm selected by Lessee and reasonably acceptable to Lessor.
All such policies shall specify that proceeds shall be payable whether or not any Improvements are
actually rebuilt, and shall include a “guaranteed amount” or “stipulated amount” endorsement of
coverage in lieu of a coinsurance provision under the policy.

 

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“Full Insurable Replacement Value” means one hundred percent (100%) of the actual cost to
replace the Improvements (without deduction for depreciation but with standard exclusions such as
foundations, excavations, paving and landscaping, as applicable to specific perils), including the
costs of demolition and debris removal, an increased cost of construction endorsement and, in the
case of builders risk or course of construction insurance, materials and equipment not in place but
in transit to or delivered to the Premises. The Full Insurable Replacement Value initially shall
be determined at Lessee’s expense by an appraiser selected by Lessee and reasonably approved by the
insurer(s) and Lessor. Lessor may require the Full Insurable Replacement Value to be redetermined,
at Lessee’s expense, not more frequently than once in any three (3) year period, by an appraiser
selected by Lessee and reasonably approved by the insurer(s) and Lessor.

(b) Business Interruption Insurance. Lessee shall maintain, or cause to be
maintained, insurance against loss of income, including loss of revenues and earnings from the
Hotel, under a business interruption and extra expense policy covering risk of loss due to the
perils insured against under Section 10.1(a) above, in an amount sufficient to cover at least
twelve (12) months of Annual Base Rent that would be payable to Lessor pursuant to Section 4.

(c) Worker’s Compensation and Employer’s Liability Insurance. Lessee shall
maintain, or cause to be maintained, worker’s compensation insurance in the amounts and coverages
required under worker’s compensation, disability and similar employee benefit laws applicable to
Lessee or the Premises, and employer’s liability insurance, with limits of not less than One
Million Dollars ($1,000,000.00) for bodily injury by accident and One Million Dollars
($1,000,000.00) for bodily injury by disease, or such higher amounts as may be required by law.

(d) General Liability. Lessee shall maintain, or cause to be maintained,
comprehensive or commercial general liability insurance, through one or more primary and umbrella
or excess coverage liability policies as determined by Lessee, insuring against claims for bodily
injury, personal injury, and property damage occurring on or about the Premises or the streets,
curbs or sidewalks adjoining the Premises, or otherwise in connection with the operation of the
Hotel, with coverage limits of not less than Ten Million Dollars ($10,000,000.00), combined single
limit and annual aggregate for the Project.

The general liability insurance shall: (i) be written on an “occurrence” basis, (ii) delete
any employee exclusion on personal injury coverage; (iii) include the Operator and its management
personnel engaged at or for the Hotel, any employees of Lessee, and the Hotel Employees, as
additional insureds; (iv) provide for broad form blanket contractual coverage, including coverage
for Lessee’s indemnification obligations under this Lease for bodily injury, personal injury, death
and/or property damage (provided that Lessee’s liability under any such indemnification obligations
shall not be limited to the amount of insurance so carried by Lessee); (v) provide Products and
Completed Operations and Independent Contractors coverage; (vi) provide liquor law liability and
advertising liability coverage; and (vii) provide insurance against loss or damage from an accident
to and/or caused by boilers, heating apparatus, pressure vessels, pressure pipes, electrical or air
conditioning equipment. The general liability insurance coverage shall insure against any and all
claims for bodily injury, including death resulting therefrom, personal injury, and damage to or
destruction of property of any kind whatsoever and to whomever belonging and arising from any
operations on or at the Premises, including the
operation of the Hotel, and whether arising from acts or omissions of Lessee, any of Lessee’s
officers, directors, partners, members, agents or employees, contractors, subcontractors, any other
person or entity for whom Lessee may be responsible, or any additional insureds.

 

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(e) Automobile Liability. Lessee shall maintain, or cause to be maintained,
automobile liability insurance, through one or more primary and umbrella policies, providing
aircraft liability coverage, if applicable, and automobile liability coverage for owned, non-owned
and hired vehicles used in connection with the operation of the Premises, with coverage limits of
not less than Five Million Dollars ($5,000,000.00), combined single limit and annual aggregate
(inclusive of the base automobile liability policy plus umbrella policy coverage).

(f) Builder’s Risk. During the course of construction of any Alterations,
Lessee shall maintain, or cause to be maintained, comprehensive “all risk” builder’s risk
insurance, if available, and otherwise course of construction coverage, including vandalism and
malicious mischief, covering all Improvements in place on the Premises in the case of all risk
builder’s risk insurance, all Alterations under construction at the Premises, materials and
equipment stored at the Premises or an off-site storage facility and furnished under contract, and
all materials and equipment that are in the process of fabrication at the premises of any third
party or that have been placed in due course of transit to the Premises or an off-site storage
facility when such fabrication or transit is at the risk of, or when title to or an insurable
interest in such materials or equipment has passed to, Lessee or its construction manager,
contractors or subcontractors (excluding any construction managers’, contractors’ and
subcontractors’ tools and equipment, and property owned by the employees of the construction
manager, any contractor or any subcontractor), such insurance to be written on a completed value
basis in an amount not less than the full estimated replacement value of the Alterations.

(g) Fidelity Insurance. Lessee shall maintain, or cause to be maintained,
fidelity insurance covering the Operator and all Hotel Employees who have access to or are
responsible for the handling of any funds, securities, or other valuables at or relating to the
Hotel, all in reasonable amounts consistent with the practice of other Luxury Hotels.

(h) Required Coverage. Lessee shall maintain, or cause to be maintained, all
other insurance that Lessee is required to maintain under Applicable Laws or the terms of any
Leasehold Mortgage.

(i) Adjustments to Coverage Amounts. If either Lessee or Lessor shall at
any time believe that the limits or extent of coverage or deductibles with respect to any of the
insurance required in this Section 10 then carried are either excessive or insufficient for a
prudent operator of a Luxury Hotel, Lessee and Lessor shall endeavor to agree upon the proper and
commercially reasonable limits and extent of coverage and deductibles for such insurance, and upon
reaching agreement shall execute a letter agreement or other writing memorializing such agreement;
provided that in no event shall the insurance coverage required to be maintained by Lessee under
this Lease be less protective of the interests of Lessee and Lessor than the comparable coverage
maintained by owners and operators of other Luxury Hotels in the City. If Lessee and Lessor are at
any time unable to agree upon the proper and commercially reasonable limits and extent of coverage
and deductibles for any insurance, the matter(s) in dispute shall be resolved pursuant to the
arbitration provisions of Section 18 by an arbitrator having at least ten (10) years of
experience in insurance coverage matters for the hospitality industry. Notwithstanding any of the
foregoing to the contrary: (i) the limits of property insurance coverage shall be determined as
provided in Section 10.1(a); and (ii) the limits of liability insurance required under Sections
10.1(d) and 10.1(e) shall not be reduced under any circumstances, and shall be increased on each
Adjustment Date by a percentage at least equal to the percentage increase in the CPI occurring
since the last preceding Adjustment Date.

 

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10.2 Policy Form and General Requirements

(a) All of the insurance required under this Lease, and all renewals thereof,
shall be issued by one or more companies of recognized responsibility admitted to sell insurance in
the State with a financial rating of at least A-:X (or its equivalent successor) in the most recent
edition of Best’s Insurance Reports (or its equivalent successor, or, if there is no equivalent
successor, an insurance rating service otherwise reasonably acceptable to Lessor). The proceeds of
property damage and builder’s risk policies of insurance required hereunder shall be payable in
accordance with and subject to the terms of Section 17 below, and any loss adjustment or
disposition of insurance proceeds by the insurer shall require the written consent of Lessor (and
any Fee Lender whose Fee Mortgage so requires). All property insurance hereunder shall name Lessor
as a loss payee, as its interests may appear, and all liability insurance policies shall name as
additional insureds, with respect to any liability arising out of or relating to the ownership,
maintenance, operation, occupancy or use of the Premises, all Lessor Indemnitees and such other
parties as Lessor may reasonably request. Any deductibles or self-insurance retentions for
insurance required to be carried by Lessee pursuant to this Section 10 shall be reasonable in
amount, and in any event shall be consistent with amounts which from time to time are considered to
be a prudent deductible or assumed or retained risk for the owners of comparable Hotel properties
in the City. All deductibles and self-insurance retentions (i) shall be paid by Lessee, and (ii)
shall constitute Ordinary Operating Expenses, except for deductibles and self-insurance retentions
applicable to the insurance coverage provided for in Section 10.1(a) which shall not constitute
Ordinary Operating Expenses. All insurance of Lessee shall be primary coverage, and shall be excess
and non-contributory with any insurance carried by Lessor.

(b) All policies provided for herein shall provide expressly that such policies
shall not be canceled, terminated or altered without ten (10) days’ prior written notice to Lessor
and any Fee Lender. Each policy, or a certificate of the policy executed by a properly qualified
representative of the insurance company evidencing that the required insurance coverage is in full
force and effect, shall be deposited with Lessor on or before the Term Commencement Date, shall be
maintained throughout the Term and any holdover period, and shall be renewed at least ten (10) days
before the expiration of the term of the policy. Except for specific provisions described herein,
no exclusion shall be permitted in any policy if it conflicts with any coverage required hereby,
and, in addition, no policy shall contain any exclusion from liability for personal injury or
sickness, disease or death or which in any way impairs coverage under the contractual liability
coverage described above.

(c) Lessee hereby waives all rights of subrogation and recovery against all
Lessor Indemnitees on account of any loss or damage arising from any cause to the extent covered by
any insurance required to be carried by Lessee pursuant to this Section 10. Lessee shall give
notice to its insurance carrier or carriers that the foregoing waiver is contained in this Lease,
and
shall procure waiver of subrogation endorsements to all policies described in Section 10.1 if not
already incorporated into or a part of such policies.

 

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The parties acknowledge that Lessor has no obligation under this Lease to carry or provide any
insurance. If Lessor otherwise elects in its sole discretion to carry any insurance coverage
through an independent third party commercial insurer and such insurance is applicable to the
Premises, such insurance shall be excess and non-contributory with the insurance required to be
carried by Lessee under this Section 10. If such insurance is carried, Lessor waives all rights of
subrogation and recovery against Lessee on account of any loss or damage arising from any cause to
the extent actually covered by such insurance.

(d) On or before the Term Commencement Date, and on each anniversary of the
Term Commencement Date thereafter during the Term, Lessee shall provide Lessor with the certificate
of a person knowledgeable in insurance matters (who may be an officer or employee of Lessee)
stating that all insurance policies required by this Lease are in full force and effect and that
such policies, and the insurance provided thereby, comply with the requirements of Sections 10.1
and 10.2.

(e) No approval by Lessor of any insurer, the terms or conditions of any
policy, or any coverage or amount of insurance or any deductible amount, shall be construed as a
representation by Lessor of the solvency of the insurer or the sufficiency of any policy or any
coverage or amount of insurance or deductible, and Lessee assumes full risk and responsibility for
any inadequacy of insurance coverage or any failure of insurers. Lessor’s approval shall only
constitute Lessor’s acknowledgment that, as to Lessor, the item or matter so approved satisfies the
requirements of this Lease.

(f) Lessee shall be permitted to carry insurance required by this Section 10
under a so-called blanket policy or policies of insurance which also cover other properties owned
or operated by Lessee or its Affiliates in addition to the Premises, provided that the Premises
shall be individually scheduled for coverage under such blanket policy or policies for not less
than the amounts and scope of coverage required under this Section 10 and that a recovery under any
such blanket policy for or with respect to any other properties will not reduce or limit the amount
or scope of coverage available for or with respect to the Premises under such blanket policy.

(g) Lessee may elect, from time to time, to require the Operator to obtain and
maintain any or all of the insurance coverages and policies required under this Section 10,
provided that any and all such coverages and policies shall in any event comply fully with the
provisions of this Section 10.

 

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10.3 Lessee’s Indemnity

Lessee shall indemnify, defend and hold Lessor and all other Lessor Indemnitees harmless from
and against any and all claims, damages, losses, liabilities, and costs and expenses (including
reasonable attorneys’ fees and costs) arising from or relating to in any manner, directly or
indirectly, in whole or in part: (a) any failure by Lessee to timely and properly perform each of
its obligations under this Lease; (b) any acts or omissions of Lessee, any Affiliate of Lessee, or
any officers, directors, members, employees, guests, invitees, agents or
contractors of any of them, or any Hotel Employees, on or relating to the Premises; (c) the
financing, design, construction, marketing, operation, management, use, occupancy, maintenance,
repair, remediation, renovation and improvement of the Premises, or any part thereof, at any time
during the Term or any holdover period (including the design, construction, maintenance and repair
of any Improvements or Alterations, and any liability to any federal, state or local governmental
authority relating thereto); (d) other than during the Transition Period, any act or omission of
the Operator or any Food and Beverage Operator relating to the operation or management of the Hotel
or any food and beverage operations at the Hotel, or of any Hotel Employee while on the Premises or
otherwise engaged in the performance of such employee’s duties, or any employee of any independent
contractor working at or performing services for the Hotel, including any parking operator or
parking management company; and (e) any accident occurring or other circumstance or condition
existing on or about the Premises at any time during the Term or any holdover period due to any
cause whatsoever. The foregoing shall not require Lessee to indemnify, defend, protect or hold
harmless Lessor or any Lessor Indemnitee to the extent of any claims, damages, losses, liabilities,
and costs and expenses that arise from the gross negligence or willful misconduct of Lessor or any
Lessor Representatives, except to the extent that such claims, damages, losses, liabilities, and
costs and expenses are covered by any insurance required to be carried by Lessee pursuant to this
Section 10.

Lessee shall promptly assume its defense and indemnification obligations upon written notice
from any Lessor Indemnitee. Any Lessor Indemnitee may also participate in the defense of any such
claim at its own expense, unless such participation is required because of Lessee’s failure to
provide a reasonable and consistent defense of such Lessor Indemnitee’s interests, in which event
such additional participation shall be at Lessee’s expense. Lessee shall not settle any claim
without the consent of all Lessor Indemnitees who would incur any liability for such claim under or
following such a settlement. The provisions of this Section 10.3 shall survive the expiration or
earlier termination of this Lease. The provisions of Section 10.1 shall not limit in any way
Lessee’s obligations under this Section 10.3.

10.4 Lessee’s Assumption of Risk and Waiver

As a material part of the consideration to Lessor for entering into this Lease, Lessee agrees
that no Lessor Indemnitee shall be liable to Lessee for, and Lessee expressly assumes the risk of
and waives, releases and discharges all Lessor Indemnitees from, any and all claims, damages,
losses, liabilities, costs and expenses of any kind or nature, whether or not foreseeable, arising
from or relating to in any manner, directly or indirectly, in whole or in part, the Premises or
this Lease prior to or during the Term or any holdover period, whether resulting from any act or
omission of Lessor or from any other cause, including, without limitation: (a) the performance of
any public or quasi-public works on or near the Premises; (b) any injury to or death of any person,
or loss or damage of any property, occurring on or about the Premises; (c) any and all matters
described or referred to in Section 2.2 or 4.4 above; and (d) any act or omission of any Recipient
Agency, or any member of the public accessing the Premises through any right of public access or
pursuant to any easement or right of entry. The provisions of this Section 10.4 shall survive the
expiration or earlier termination of this Lease. The foregoing shall not require Lessee to waive
or release any claims for damages, losses, liabilities, or costs and expenses to the extent arising
from the gross negligence or willful misconduct of Lessor or any Lessor Representative, except to
the extent that such claims, damages, losses, liabilities, and costs and
expenses are covered by any insurance required to be carried by Lessee pursuant to this Section 10.

 

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11. ALTERATIONS

11.1 Permitted Alterations

Lessee may make from time to time any Alterations (“Permitted Alterations”) which will not (a)
violate, or cause or require a modification in (i) the Permitted Uses, (ii) any other provision of
this Lease, or (iii) any Entitlements; (b) materially adversely affect the value or use of any
Improvements; (c) adversely affect in any material manner the operation of the Hotel as a Luxury
Hotel; (d) modify in any material respect the exterior appearance of any Building or any structural
element of any Building, or materially modify the mechanical, electrical, plumbing or life safety
system of any Building, or (e) impose any liability or obligation on Lessor under Applicable Laws
with respect to the condition of the Premises; or (f) have a total estimated cost per Alteration in
excess of $200,000.00 (such amount to be increased as of each Adjustment Date by an amount equal to
the percentage increase in the CPI occurring since the immediately preceding Adjustment Date, or
since the Term Commencement Date in the case of the first Adjustment Date). If Lessee desires to
make any Alterations which could have any of the effects described in any of clauses (a) through
(f) of the immediately preceding sentence (any such Alteration being herein referred to as a “Major
Alteration”), Lessee shall first obtain Lessor’s prior written consent, which consent shall not be
unreasonably withheld, except that Lessor shall have the right to approve or disapprove, in its
sole and absolute discretion, any Alterations which could have any of the effects described in
clause (a), (b), (c) or (e) above. All Alterations shall be constructed and installed at the sole
cost and expense of Lessee, and Lessor shall not be obligated to pay or contribute toward payment
of the costs of any Alterations, including any Designated Alterations. Lessor acknowledges that
Lessee may desire to propose one or more Alterations that individually or collectively will reduce
the number of keyed guest rooms or suites at the Hotel, and Lessor agrees not to unreasonably
withhold its consent to any such proposed Alterations, provided that (A) following the completion
of such Alterations the keyed guest rooms and suites at the Hotel will number in the aggregate not
less than ninety-five percent (95%) of the total keyed guest rooms and suites at the Hotel on the
Term Commencement Date, and (B) Lessee can establish that the net operating revenues of the Hotel
will not be decreased by reason of such Alterations.

11.2 Designated Alterations

From time to time Lessee may request Lessor to approve certain Alterations to be funded from
monies on deposit in the Designated Alterations Escrow Account (“Designated Alterations”). The
projected costs approved by Lessor for completion of any proposed Designated Alterations submitted
to and approved by Lessor shall be “Eligible Costs” in respect of such Designated Alterations.
Lessee shall be entitled to receive disbursements of funds from the Designated Alterations Escrow
Account for the purpose of paying the costs of any Designated Alterations hereafter approved by
Lessor, up to but not exceeding the Eligible Costs for such Designated Alterations together with
any Excess Costs (as defined below) of any such Designated Alterations (provided, that,
disbursements for Excess Costs shall only permitted from funds which have been deposited by Lessee
in the Designated Alterations

 

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Escrow Account for the purpose of funding such Excess Costs and not previously disbursed in accordance with the provisions
hereof), and in any event subject to and upon the terms and conditions set forth in Section 7.2(c).
Without limiting the foregoing, in the event that the actual costs of construction or installation
of any Designated Alterations will exceed the Eligible Costs for such Designated Alterations,
Lessee shall be obligated to pay all such excess costs, and in such event as a condition to the
making of any further disbursements from the Designated Alterations Escrow Account for such
Designated Alterations, Lessor may require that Lessee deposit into the Designated Alterations
Escrow Account the full amount of the additional costs required to complete such Designated
Alterations, as reasonably approved by Lessor, to the extent such costs are in excess of the
Eligible Costs (“Excess Costs”), provided that, in the event Lessor requires that Lessee deposit
the amount of any such Excess Costs into the Designated Alterations Escrow Account, then Lessee
shall permit the disbursement of such Excess Costs for the purpose of paying the costs of the
Designated Alterations in accordance with the preceding sentence. Lessee shall not commence the
construction or installation of any Designated Alteration unless and until there are sufficient
funds available on deposit in the Designated Alterations Escrow Account for completion of such
Designated Alteration.

11.3 Required Alterations

(a) Initial Required Alterations. Concurrently with the execution of this
Lease, Lessor has approved the Alterations described in Exhibit F attached hereto (which, together
with any Hazardous Materials remediation, removal or restoration work or Property Enhancements
referred to in Section 11.3(b) below, are herein referred to as the “Required Alterations”). The
projected costs approved by Lessor for completion of the Required Alterations described in Exhibit
F, and the projected costs approved by Lessor for completion of any additional Required Alterations
described in Section 11.3(b) below, shall be “Eligible Costs” in respect of such Required
Alterations. For the purposes of this Lease, in addition to any Required Alterations that
constitute Major Alterations pursuant to the provisions of Section 11.1, all Required Alterations
for which Lessor has an obligation to pay or deposit any Reinstatement Amount shall be deemed to be
Major Alterations and shall be subject to all provisions of this Section 11 relating to Major
Alterations. Except as otherwise expressly provided in the following provisions of this Section
11.3(a), Lessee shall not commence the construction or installation of any Required Alteration,
whether described in Exhibit F or in Section 11.3(b) hereof, unless and until there are sufficient
funds available on deposit in the Required Alterations Escrow Account for completion of such
Required Alteration as well as any then uncompleted Required Alteration for which work is either
then currently in progress or for which Lessee has previously deposited funds within the Required
Alterations Escrow Account but has not yet commenced performance of the work required to complete
such Required Alteration; provided that the amount required to be on deposit in the Required
Alterations Escrow Account with respect to the completion of certain Property Enhancements shall be
subject to the provisions of Section 4.1(c) of the Purchase Agreement. Lessee hereby agrees to
commence construction and installation of each Required Alteration described in Exhibit F (in such
priority of construction and installation as shall be reasonably approved by Lessor) as soon as the
funds on deposit in the Required Alterations Escrow Account are sufficient to pay the Eligible
Costs therefor, provided that in the event that upon the second anniversary of the Term
Commencement Date there are not sufficient funds on deposit in the Required Alterations Escrow
Account to pay the Eligible Costs of all such Required Alterations described in Exhibit F, Lessee
shall nevertheless be obligated to

 

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commence (within thirty (30) days following the second anniversary of the Term Commencement Date)
construction and installation of all Required Alterations described in Exhibit F for which
construction or installation has not yet commenced and shall complete the same (subject to Force
Majeure Events) within not more than six (6) months after commencement of construction and
installation, and in addition Lessee shall either (i) deposit into the Required Alterations Escrow
Account, from sources other than Monthly Cash Flow, an amount equal to the Eligible Costs for all
Required Alterations for which construction or installation has not yet commenced, or (ii) cause
Morgans to deliver to Lessor a completion guaranty, in form and substance reasonably acceptable to
Lessor, assuring Lessee and Lessor that the Eligible Costs and any Excess Costs of the construction
and installation of all such Required Alterations will be paid in a timely manner and in full
compliance with all applicable requirements of this Lease, in which event Lessee shall undertake to
pay such costs as the same become due and owing under the applicable contracts for such
construction and installation.

(b) Additional Required Alterations. In the event that, pursuant to the
provisions of the Purchase Agreement, the Seller delivers a Hazardous Materials Remediation Notice
or a Code Compliance Notice that contemplates deferring the completion of any Hazardous Materials
remediation, removal or restoration work or Property Enhancements until after the Closing of the
purchase of the Property by Purchaser (as such capitalized terms are defined in the Purchase
Agreement), Lessee shall be obligated following the Term Commencement Date to diligently undertake
and complete as quickly as practicable, but in any event not later than six (6) months following
the Term Commencement Date (subject to extension of such six (6) month period upon approval by
Lessor, which approval shall not be unreasonably withheld or delayed), the Hazardous Materials
remediation, removal or restoration work referred to in the Hazardous Materials Remediation Notice
in compliance with the provisions of this Section 11 and Section 12.3 of this Lease and/or such
Property Enhancements referred to in the Code Compliance Notice in compliance with the provisions
of this Section 11, and for such purpose, such Hazardous Materials remediation, removal or
restoration work.

(c) Additional Costs. Without limiting the foregoing provisions of this
Section 11.3, in the event that the actual costs of construction or installation of any Required
Alterations will exceed the Eligible Costs for such Required Alterations, Lessee shall be obligated
to pay all such excess costs, and in such event as a condition to the making of any further
disbursements from the Required Alterations Escrow Account for such Required Alterations, Lessor
may require that Lessee deposit into the Required Alterations Escrow Account the full amount of the
additional costs required to complete such Required Alterations, as reasonably approved by Lessor,
to the extent such costs are in excess of the Eligible Costs (“Excess Costs”).

11.4 Design of Alterations

The following provisions shall apply to all Alterations, except to the extent such provisions
are expressly limited to Major Alterations or Designated Alterations:

(a) General Requirements. The design of all Alterations shall: (i) provide
for the construction of Improvements that are first class in quality and appearance; and (ii)
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(b) Architects’ Qualifications. Lessee shall engage only design professionals
who are licensed, reputable, financially capable, experienced in the design of projects similar to
the proposed Alterations and, if applicable, experienced in making effective public presentations
for similar projects. Any design professional engaged by Lessee for any Major Alteration or any
Designated Alteration shall be subject to Lessor’s prior written approval, which shall not be
unreasonably withheld or delayed, and Lessee shall provide Lessor with copies of all contracts with
such design professional upon execution.

(c) Lessor’s Review and Approval. Prior to making any application or
submittal to the City, State or any other public agency with jurisdiction for any architectural
review, design or site review, building permit or any other governmental approval for any Major
Alterations or Designated Alterations, Lessee shall submit to Lessor for Lessor’s information: (i)
two duplicate sets of all plans, drawings, specifications, studies, renderings and related design
documents that are required by the public agency as a part of such application or submittal
(“Design Documents”); and (ii) copies of the application and any other items to be submitted to the
public agency in connection with the application. The Design Documents for any Major Alteration or
Designated Alteration shall be subject to Lessor’s written approval, which approval shall not be
unreasonably withheld or delayed, and in such instances Lessee shall not submit the application
until after obtaining Lessor’s written approval of the Design Documents.

Copies of all submittals to the City, State or any other public agency with jurisdiction
concerning the design of any Major Alteration or Designated Alteration shall be submitted
concurrently to Lessor for its information. Subsequent Design Documents shall be submitted to
Lessor in two duplicate sets upon which any material change from design elements previously
required to be approved by Lessor (including any material design element not shown in previously
approved documents) shall be indicated, and Lessor shall have the right to review and approve or
disapprove such modified Design Documents, which shall not be unreasonably withheld or delayed.

If Lessor disapproves any aspect of the Design Documents or related submittals for which
Lessor’s consent is required, Lessor shall specify in reasonable detail the reasons for such
disapproval and Lessee shall take such steps as may reasonably be necessary to correct any
objections by Lessor made in accordance with the applicable standards set forth in this Lease.

Lessee shall pay all third party costs incurred by Lessor in reviewing any request for
approval of a proposed Alteration or the Design Documents for any Alteration for which Lessor’s
approval is required pursuant to this Lease. Lessor shall use commercially reasonable efforts to
review and respond to any request for approval of a proposed Alteration or the Design Documents for
an Alteration within ten (10) Business Days of request. Lessor’s failure to respond to such
request within ten (10) Business Days shall not be deemed to constitute approval by Lessor of the
request; provided that Lessee shall have the right to deliver a second notice to Lessor following
the expiration of such ten (10) Business Day period that expressly states that such notice is being
provided on account of Lessor’s failure to respond to the original request for approval and
expressly advises Lessor that Lessor’s subsequent failure to respond by either approving or
disapproving such request within a further period of five (5) Business Days from the date of
Lessor’s receipt of such second notice shall be deemed to constitute approval by Lessor of such
request, and if Lessor thereafter fails to respond to such second notice within such
five (5) Business Day period, the original request shall be deemed to have been approved by Seller.
No approval or deemed approval by Lessor shall be interpreted as a representation of any sort with
respect to the quality or suitability of the design, or a waiver of any rights Lessor may have
under this Lease other than with respect to Lessee’s obligation to seek approval of the Alteration.

 

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11.5 Construction of Alterations

The following provisions shall apply to all Alterations, except to the extent such provisions
are expressly limited to Major Alterations or Designated Alterations:

(a) Preconditions. Before commencing construction of any Alteration, Lessee
shall: (i) procure all Entitlements that may be required by Applicable Laws as a condition to the
start of construction; (ii) obtain the consent of the City, State and any other public agencies
with jurisdiction from whom consent is required, if any; and (iii) provide Lessor with certified
copies of all insurance policies required by Section 11.5(d) below and, in the case of any Major
Alteration or Designated Alteration, with evidence satisfactory to Lessor of the availability of
financing to pay in full the construction costs of such Alteration (to the extent such costs are
not Eligible Costs for Designated Alterations to be funded from the Escrow Account). Lessee shall
provide Lessor with at least fifteen (15) days’ written notice before commencing construction of
any Alteration so that Lessor may post and record one or more notices of non-responsibility, and
Lessee shall maintain the notice(s) in the location(s) reasonably designated by Lessor.

(b) General Requirements. All Alterations shall be constructed in a first
class manner, substantially in accordance with and without material deviation from, the approved
Design Documents (where applicable), and subject to the requirements of all Entitlements applicable
to the Premises and all other requirements of Applicable Laws and this Lease, using workmanship and
materials of a quality consistent with the first class nature of the Premises and the operation of
the Hotel as a Luxury Hotel, all at no cost or liability to Lessor. Once construction is
commenced, Lessee shall prosecute the work diligently and continuously to Substantial Completion,
subject to delays attributable to Force Majeure Events. Lessee shall at no cost to Lessor correct,
or cause its contractor to correct, any defects in any construction work performed in connection
with any Alterations.

(c) Selection of Contractor and Contracts. Lessee shall engage only general
contractors and construction or project managers who are licensed, reputable, have strong financial
capability and are experienced in the construction of projects similar to the Alterations. All
such general contractors and construction or project managers, as well as the terms and conditions
of the construction contract or construction management agreement, as applicable, shall be subject
to Lessor’s prior written approval (not to be unreasonably withheld or delayed) in the case of any
Major Alteration or Designated Alteration. All general contractors and construction managers shall
be required to: (i) carry worker’s compensation insurance, commercial general liability insurance
naming Lessee and all Lessor Indemnitees as additional insureds with minimum coverage limits of at
least Five Million Dollars ($5,000,000.00), and automobile and employer’s liability insurance; and
(ii) comply with all applicable requirements of the approved Design Documents, Entitlements and
Applicable Laws. Lessee shall provide Lessor with copies of all contracts upon execution.

 

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(d) Insurance and Bonds. Without limiting any of the provisions of Section 10
above, Lessee shall maintain or cause to be maintained the construction-related insurance described
in Section 10.1(f) above at all times during the construction of any Alterations. For any Major
Alterations or Designated Alterations, all contractors with contracts in excess of $500,000 (such
amount to be increased as of each Adjustment Date by an amount equal to the percentage increase in
the CPI occurring since the immediately preceding Adjustment Date, or since the Term Commencement
Date in the case of the first Adjustment Date) shall be bondable, and if Lessee or any Leasehold
Mortgagee requires performance and/or payment bonds from any contractor, such bonds shall name
Lessor and any Fee Lender as additional obligees.

(e) Observation. For any Major Alterations or Designated Alterations, Lessee
shall provide Lessor with copies of all contractors’ regular progress reports, by facsimile, e-mail
or other similarly timely means, promptly upon receipt. Lessee may satisfy this obligation by
contractually requiring its contractors to provide Lessor with such reports at the same time and in
the same manner as such reports are provided to Lessee, and by taking reasonable steps to enforce
such contractual requirements if Lessee becomes aware that any contractor is not complying with
such requirements. If any Leasehold Mortgagee requires independent third party construction
oversight, Lessee shall request that the construction monitor provide Lessor with copies of all
reports and other materials he or she generates. If no such independent oversight is implemented
by a Leasehold Mortgagee, or if the Leasehold Mortgagee refuses to provide copies of its oversight
reports, Lessor shall have the right (but not the obligation) in the case of any Major Alterations
or Designated Alterations to engage at Lessee’s cost an independent third party construction
monitor to provide periodic observation of any construction-related activities. In addition,
Lessor shall have the right, but not the obligation, upon reasonable advance notice to Lessee, to
be present at the Premises and observe all aspects of construction at any reasonable time during
construction of any Alterations. No observation by a third party at Lessor’s request or by Lessor,
whether performed or not performed, shall: (i) impose upon or be deemed to impose upon Lessor any
responsibility or liability with respect to the design or construction of the Alterations; (ii) be
construed as an approval or acceptance of the design or construction of the Alterations; or (iii)
constitute or be deemed to constitute a waiver of any rights Lessor may have.

(f) Changes. In the case of any Major Alteration or Designated Alteration,
once such Alteration has been approved by Lessor, Lessee shall not make or permit to be made any
changes in or modifications to the plans and specifications for such Alteration which would change
the aesthetic quality of the Alteration in any material respect, or which would be material in
relation to the nature or type of construction or the quality thereof, quality or quantity of
materials used, location, cost, method of construction, effect on adjoining areas of the Hotel, or
completion time, without first obtaining Lessor’s approval of such changes or modifications, which
approval shall not be unreasonably withheld or delayed. In the case of any Alteration other than a
Major Alteration or Designated Alteration, Lessee shall not make or permit to be made any changes
in or modifications to the plans and specifications for such Alteration if such Alteration, as so
changed or modified, would have required Lessor’s approval had such changes or modifications been
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(g) Completion Requirements. Upon Substantial Completion of any Alterations
which are Major Alterations or Designated Alterations, Lessee shall: (i) record a notice of
completion in the Official Records of the County in which the City is located; (ii) provide Lessor
with reasonable evidence (e.g., copies of lien releases) that no Liens have resulted from the
construction work, subject to Lessee’s right to contest such Liens pursuant to Section 15.4 below;
(iii) as soon as available, provide Lessor with a new or modified certificate of occupancy for the
Alterations, if required for the lawful use or occupancy thereof; and (iv) upon request from
Lessor, provide Lessor with a complete set of as-built drawings for any Major Alterations or
Designated Alterations showing (to the extent customarily included in as-built drawings for
comparable projects) field changes, substitutions and other deviations from and/or approved Design
Documents, on a CAD electronic file and/or mylar or another high quality reproducible medium.

(h) Temporary Closure of Hotel Areas. In the event that the construction of
any Alteration requires, in the prudent business judgment of Lessee, the temporary closure of, or
erection of a temporary barrier affecting access to, any portion or area of the Hotel and there is
no commercially reasonable alternative available to Lessee to avoid such closure or barrier, Lessee
may implement such closure or erect such barrier, provided that the Hotel Business may not cease or
be substantially reduced due to any such barrier or closure and that Lessee shall use all
reasonable efforts to conduct the relevant construction activity in such a way, and to complete
such construction activity as quickly as reasonably possible, so as to limit, to the maximum extent
feasible, the impact of such closure or barrier on the Hotel Business and the comfort of Hotel
guests, patrons and customers as well as Hotel Employees.

12. HAZARDOUS MATERIALS

12.1 Use of Hazardous Materials; Compliance with Environmental Laws

Lessee may use and store, or permit the use and storage of Hazardous Materials at the Premises
to the extent that (i) such Hazardous Materials are commonly used and employed in the operation,
maintenance, repair and servicing of a Luxury Hotel (“Permitted Materials”), and (ii) are used,
stored, and disposed of in compliance with the requirements of all Applicable Laws. Upon demand by
Lessor, Lessee shall immediately cease, or cause to be ceased, the use and storage on the Premises
of any Hazardous Materials which are not being used or stored in full compliance with all
Applicable Laws. Lessee shall at all times during the Term and any holdover period substantially
comply with all applicable Environmental Laws applicable to the Premises. Lessee shall promptly
provide Lessor with copies of any notices that Lessor or the Operator receives from governmental
agencies with jurisdiction over the Premises or pursuant to any Environmental Law, concerning the
presence or Release of any Hazardous Materials on, under, about or beneath the Premises. In
addition, from time to time upon written request by Lessor made not more frequently than once per
year, Lessee shall provide to Lessor, or cause the Operator to provide to Lessor, a complete list
of all Hazardous Materials known to Lessee or Operator and then being used or stored on the
Premises, or contained in any products or materials then being used by Lessee or Operator, or any
of their respective agents, employees or contractors on the Premises, which list shall contain the
common name of each product or material and, if requested by Lessor, and known to Lessee or
Operator, both the scientific name and the CAS number of all chemical substances contained in such
product or material, and shall indicate the quantities thereof at the time known by Lessee or
Operator to be used or stored on the Premises.

 

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12.2 Releases

Lessee shall use its best efforts to not cause or permit to occur at any time during the Term
or any holdover period any Release of a Hazardous Material in violation of any Environmental Laws
or that would require remediation, expose Lessor to any liability, or expose the Property to any
restriction on use or occupancy under any Environmental Laws. Lessee shall remove or cause to be
removed, at no cost to Lessor as between Lessor and Lessee, from the Premises any Hazardous
Materials existing on, under, or (if caused by Lessee, the Operator, any Food and Beverage
Operator, any Hotel Employee, or any employee of any independent contractor working at or
performing services for the Hotel, including any parking operator or parking management company)
about the Premises, to the extent such removal is required by any governmental agency with
jurisdiction over the Premises or pursuant to any Environmental Laws, and Lessee shall commence and
complete such removal with all diligence and within such period of time as shall be required by
such governmental agency or under any Environmental Laws. In addition, Lessee shall comply with
any additional reasonable requirements of Lessor that are reasonably necessary to protect the value
of the Premises or the Improvements, provided that the costs of such compliance shall, to the
extent of any expenditures that are attributable solely to Lessor’s additional requirements which
are beyond what would otherwise be required by Environmental Laws, be funded as Designated
Alterations pursuant to Section 11.2 of this Lease. Without limiting the foregoing, Lessor and
Lessee acknowledge that asbestos containing materials are currently located within portions of the
Hotel which Lessee will be required to remove and remediate. In connection therewith, Lessee has
prepared, and Lessor has approved, the O&M Plan (“Approved O&M Plan”) attached hereto as Exhibit G,
which outlines procedures for the containment, maintenance and ultimate removal of such asbestos
containing materials. Lessee shall, at all times, substantially comply with the provisions of the
Approved O&M Plan and, periodically as reasonably necessary, update the Approved O&M Plan with a
response plan complying with the provisions of Section 12.3(c) below. Additionally, in the event
that there are located on the Premises any underground or above-ground storage tanks or facilities
in which any Hazardous Materials are kept, Lessee shall obtain and maintain, and substantially
comply with all requirements and conditions of, all governmental permits and approvals required
under Applicable Laws for the use or maintenance of such tanks or facilities and, on or prior to
the Surrender Date, Lessee shall, at the request of Lessor and at Lessee’s sole cost and expense,
remove all such tanks and facilities from the Premises in accordance with removal procedures
prescribed or authorized by Environmental Laws and remediate and remove all contamination or other
spillage or leakage that may have emanated from or been released from such tanks or facilities at
any time prior to the Surrender Date in accordance with all Environmental Laws. Lessee shall
promptly undertake, in accordance with the provisions set forth in Section 12.3 below, all remedial
measures reasonably required by Lessor or required by any governmental agency with jurisdiction
over the Premises or pursuant to any Environmental Laws to investigate, monitor, clean up, abate or
otherwise respond to any Release of a Hazardous Material on, under or about the Premises or in
connection with the operation of the Hotel, regardless of the source or cause of origination, at no
cost to Lessor and in compliance with all applicable Environmental Laws. Nothing herein shall
preclude or prevent Lessee from pursuing any remedy, recourse, claim or liability against any third
party for any remedial measures undertaken pursuant to this Section 12.

 

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12.3 Remediation

If Lessee is obligated pursuant to Section 11.3 or Section 12.2 above to remediate any
Hazardous Materials, the following additional provisions shall apply:

(a) There shall be no cost to Lessor in connection with the remediation.

(b) Lessee shall proceed with reasonable diligence and continuity to develop
and carry out an appropriate response plan consistent with the requirements of this Section 12
(including obtaining approval of such response plan from all governmental agencies with
jurisdiction over the Premises).

(c) The response plan: (i) shall be prepared by a licensed environmental
consultant engaged by Lessee and reasonably approved in writing by Lessor; (ii) shall satisfy the
requirements of all applicable Environmental Laws; (iii) shall, to the maximum extent feasible,
achieve a long-term solution for the Premises that will permit the use of the Premises for the
Permitted Uses without the imposition of restrictive covenants or other provisions that would
materially restrict or limit the use of any material portion of the Premises; and (iv) shall not
(A) require the retention of any monitoring or other facilities on the Premises past the end of the
Term (unless no other alternative is both commercially feasible and permitted by Environmental
Law), in which event such monitoring and other facilities shall be maintained and operated at
Lessee’s sole cost and expense (as between Lessor and Lessee) for the shortest period that is
commercially reasonable and thereafter (unless prohibited by applicable Environmental Laws or
governmental agencies with jurisdiction over the Premises) shall be removed and the Premises
restored to its original condition as expeditiously as is feasible, at Lessee’s sole cost and
expense (as between Lessor and Lessee), which obligations shall survive the termination of this
Lease, or (B) cause the imposition of any material restriction on the use or occupancy of any
Improvements on the Premises following completion of the remediation, or impose any material
obligation or liability on Lessor.

(d) The remediation work shall be performed by a licensed environmental
contractor (such contractor to be subject to Lessor’s reasonable approval) under the supervision of
the environmental consultant, and shall be conducted and completed in accordance with all
applicable Environmental Laws and substantially in accordance with the approved response plan.

(e) Lessor may engage an independent environmental consultant to observe the
remediation work at reasonable intervals, and Lessee shall pay such consultant’s reasonable fees
and charges.

(f) As between Lessor and Lessee, Lessee shall be responsible for complying
with, and Lessor shall not be named under, any and all manifest and disposal requirements relating
to any Hazardous Materials to be disposed of off-site, except solely to the extent otherwise
required by Environmental Laws.

 

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12.4 Lessee’s Environmental Indemnity

Without limiting the generality of the indemnity provided by Lessee pursuant to Section 10.3
above, Lessee shall indemnify, defend, and hold Lessor and all other Lessor
Indemnitees harmless from and against any and all claims, suits, causes of action, demands, losses,
damages, liabilities, fines, penalties, costs, taxes, charges, administrative and judicial
proceedings, orders, judgments, remedial actions and compliance requirements, including enforcement
and clean-up actions, third-party tort and property claims, and other costs and expenses (including
reasonable attorneys’ and consultants’ and experts’ fees and costs of defense) (collectively,
“Claims”) arising, directly or indirectly, in whole or in part, out of: (a) any non-compliance
with any Environmental Laws by Lessee, its Affiliates, any Operator, any Food and Beverage
Operator, or any of their respective officers, directors, members, employees, guests, invitees,
agents or contractors, any Hotel Employee, or any employee of any independent contractor working at
or performing services for the Hotel, including any parking operator or parking management company,
and in the case of Lessee, any non-compliance with any of Lessee’s other obligations under this
Section 12; (b) any use, storage, generation, production, Release, disposal or transportation by
Lessee, its Affiliates, any Operator, or any of their respective officers, directors, members,
employees, guests, invitees, agents or contractors, any Hotel Employee, or any employee of any
independent contractor working at or performing services for the Hotel, including any parking
operator or parking management company of any Hazardous Materials at, on, in, about or under the
Premises at any time during the Term or any holdover period; (c) any remediation or removal actions
taken or permitted by Lessee or any Affiliate of Lessee on or about the Premises with respect to
any Hazardous Materials, whether or not conducted in accordance with the requirements of Section
12.3 above; (d) any liability or obligation that may be imposed on or applicable to Lessor by
reason of Lessor being named in or included under any manifest or other disposal requirement
referred to in Section 12.3(f) above; and/or (e) the presence of any Hazardous Materials on, under
or about the Premises at any time during the Term or any holdover period, regardless of the source
or cause of origination and irrespective of whether such Hazardous Materials first became present
on, under or about the Premises prior to or during the Term.

Lessee shall promptly assume its defense and indemnification obligations upon written notice
from any Lessor Indemnitee. Any Lessor Indemnitee may also participate in the defense of any such
claim at its own expense, unless such participation is required because of Lessee’s failure to
provide a reasonable and consistent defense of such Lessor Indemnitee’s interests, in which event
such additional participation shall be at Lessee’s expense. Lessee shall not settle any claim
without the consent of all Lessor Indemnitees who would incur any liability for such claim under or
following such a settlement. The provisions of this Section 12.4 shall survive any termination of
this Lease. The provisions of Section 10.1 shall not limit in any way Lessee’s obligations under
this Section 12.4. The indemnification set forth in this Section 12.4 is in addition to, and shall
not diminish, modify or substitute for, any common law, statutory or other rights that Lessor or
any other Lessor Indemnitee may have against Lessee regarding environmental matters. The
provisions of this Section 12.4 shall not require Lessee to indemnify, defend, protect or hold
harmless Lessor or any Lessor Indemnitee to the extent of any Claims arising from the gross
negligence or willful misconduct of Lessor or any Lessor Representative. Nothing herein shall
preclude or prevent Lessee from pursuing any remedy, recourse, claim or liability against any third
party for any matter for which Lessee is obligated to indemnify any Lessor Indemnitee hereunder.

 

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12.5 Waiver and Release

Without limiting the provisions of Section 2.2 or 4.4 above, Lessee on behalf of itself and
its successors and assigns unconditionally waives and releases Lessor, and its successors and
assigns, from any and all demands, claims, legal or administrative proceedings, losses,
liabilities, damages, penalties, fines, liens, judgments, costs or expenses whatsoever (including
reasonable attorneys’ fees and costs), whether direct or indirect, known or unknown, foreseen or
unforeseen, arising from or relating to the presence, or alleged presence, at any time of any
Hazardous Materials in, on, under or about the Premises, including any claims arising under or on
account of (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
the same may have been or may be amended from time to time, and similar state statutes, and any
regulations promulgated thereunder, (ii) any other federal, state or local law, ordinance, rule or
regulation, now or hereafter in effect, that deals with or otherwise in any manner relates to,
environmental matters of any kind, or (iii) this Lease or the common law.

The foregoing release shall not apply with respect to any claims arising from or relating to any
Release of Hazardous Materials to the extent that such Release was directly caused by Lessor, any
Lessor Indemnitee or any Lessor Representative.

12.6 Survival

The terms and provisions of this Section 12 shall survive the expiration or earlier
termination of this Lease.

13. ASSIGNMENT AND SUBLETTING

13.1 Lessor’s Consent

(a) Lessee shall not effect a Transfer, or enter into any contract or
commitment to effect a Transfer (unless such contract or commitment is expressly conditioned upon
such Transfer complying fully with the requirements of this Lease), without Lessor’s prior written
consent, which consent shall not be unreasonably withheld or delayed, provided that (i) no Event of
Default or Potential Default shall exist hereunder either on the date Lessee delivers the
applicable Transfer Notice (as hereinafter defined) to Lessor or on the effective date of such
Transfer, (ii) there would be no change in the Permitted Uses of the Premises following such
Transfer, and (iii) such Transfer is to a Person (a “Qualified Transferee”) having both (A) Hotel
Investment Experience or who has retained a Person with Hotel Investment Experience to oversee the
operation and management of the Hotel, and (B) the financial ability to fully perform the
obligations of Lessee under this Lease over the Term (including the payment of all Monetary
Obligations); and in determining whether a Person is a Qualified Transferee, Lessor shall be
entitled to consider all reasonable criteria including the level of experience of the proposed
Transferee in the ownership, management, and operation of Luxury Hotel properties that are similar
in character and quality to the Hotel, and the creditworthiness and financial stability of the
proposed Transferee in light of the responsibilities involved. For any proposed Transfer that
would be made to a Person which is not a Qualified Transferee, Lessor may give or withhold its
consent in Lessor’s sole and absolute discretion, and may impose in connection therewith any
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requirements
as Lessor shall determine are necessary or appropriate to preserve and protect the value of the Premises. Any Transfer made without Lessor’s prior written consent in
accordance with the foregoing provisions of this Section 13.1 shall be void at Lessor’s sole
option, which may be exercised by Lessor at any time within one (1) year after Lessor obtains
Actual Knowledge of the consummation of such Transfer. Notwithstanding the foregoing, and provided
that no Event of Default or Potential Default is in existence on the effective date of such
Transfer, the consent of Lessor shall not be required for a Transfer (a “Permitted Transfer”) to
any Person which (1) has a tangible net worth (determined in accordance with GAAP) which is not
less than the tangible net worth of the then current Lessee, and (2) is a national hotel investment
or operating company or firm for which, at all times following the Transfer during which such
Person is the Lessee hereunder, any one or more of David Hamamoto, Edward Scheetz, or Ian Schrager
(or any successor individuals who have been expressly approved in writing by Lessor for the
purposes of this provision) will be senior managers or senior executives with primary
responsibility for overseeing the day-to-day operations of such company or firm relating to the
Hotel; provided that (a) in the event that at any time within the three (3) year period immediately
following such Transfer the requirements of clause (2) above are not satisfied, the failure to
satisfy such requirements shall be deemed to constitute a Transfer which shall require Lessor’s
approval as provided above in this Section 13.1, and Lessee’s failure to request such approval
within ten 10) Business Days following the date on which the requirements of clause (2) above are
not satisfied, or the subsequent failure of Lessee to obtain Lessor’s approval of such deemed
Transfer described in this clause (a) in accordance with the foregoing provisions of this
Section 13.1(a), shall constitute an Event of Default by Lessee hereunder, and (b) the Lessee shall
nevertheless, as a condition to the effectiveness of any such Permitted Transfer, provide Lessor
with written notice of the proposed Transfer not less than ten (10) Business Days prior to the
effective date thereof, accompanied by reasonably detailed information demonstrating compliance
with the foregoing requirements.

(b) Notwithstanding the provisions of Section 13.1(a) above, Lessee shall have
the right from time to time to: (i) enter into, or permit the Operator or any Food and Beverage
Operator to enter into, minor subleases or concessions of space within the Improvements (as used
herein, a “minor sublease or concession” shall mean a sublease or concession arrangement with a
retail merchant or other service provider which is compatible with a Luxury Hotel, is of reasonable
size in relation to the areas of the Hotel suitable for such retail or other service uses, and
(unless approved by Lessor in its reasonable discretion upon request from Lessee, which request
shall include evidence reasonably satisfactory to Lessor that (A) such minor sublease or concession
will not reduce the total keyed guest rooms and suites at the Hotel to less than ninety-five
percent (95%) of the total keyed guest rooms and suites at the Hotel on the Term Commencement Date,
and (B) the net operating revenues of the Hotel will not be decreased by reason of such minor
sublease or concession) does not reduce the size or number of keyed guest rooms and suites in the
Hotel); (ii) engage, or permit the Operator to engage, a qualified parking operator to be
responsible for all garage and valet parking of vehicles at the Hotel for guests and other
customers, which engagement may be in the form of a parking agreement or a garage sublease, in
either instance on customary terms and conditions for a Luxury Hotel; (iii) subject to the
provisions of Section 9 hereof, enter into, or permit the Operator to enter into, one or more food
and beverage operating agreements or leases for the operation of the food and beverage services at
the Hotel, on customary terms and conditions for a Luxury Hotel, provided that the same shall
comply with the provisions of Section 14.2(h); and (iv) enter into, or permit the Operator to enter
into, any other ordinary and customary agreements reasonably

 

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required
for the proper and efficient operation of the Hotel as a Luxury Hotel which do not involve the creation of any
subleasehold estate or other interest in the Premises on the part of the contracting party. None
of the foregoing subleases, concession agreements, parking agreements or garage leases, food or
beverage operating agreements or leases, or other ordinary and customary agreements (collectively,
an “Operating Contract”), shall be considered to constitute a “Transfer” within the meaning of this
Lease; provided that (A) Lessee shall deliver to Lessor within thirty (30) days after the Term
Commencement Date a true and complete list of all Operating Contracts for the Hotel, and shall
update such list from time to time upon Lessor’s reasonable request, but in any event not less
frequently than once each Operating Year, and further, at Lessor’s request from time to time,
Lessee shall deliver to Lessor a true and complete copy of each such Operating Contract then in
existence, and (B) except as otherwise expressly provided in this Lease or as Lessor may hereafter
agree otherwise in writing, each Operating Contract shall be subject and subordinate to the right,
title and interest of Lessor under this Lease and no Operating Contract shall survive the
expiration or any earlier termination of this Lease or otherwise be binding on Lessor in any
respect.

13.2 Approval of Transfer Documentation

Lessee shall provide Lessor, at least thirty (30) days prior to the purposed effective date of
any Transfer other than a Permitted Transfer (which shall comply with the provisions of
Section 13.1(a) hereof), with: (a) written notice of such proposed Transfer (a “Transfer Notice”);
(b) reasonably detailed documentation regarding the proposed Transferee’s experience and
background, financial condition, reputation, references and capability; (c) the economic and other
material terms of the proposed Transfer; and (d) such other information as Lessor may reasonably
request in order to permit Lessor to make an informed judgment regarding satisfaction of the
conditions of approval for such proposed Transfer set forth in Section 13.1. Lessor’s consent to
any proposed Transfer shall be conditioned upon Lessor’s review and approval (not to be
unreasonably withheld or delayed) of both the qualifications of the proposed Transferee and the
form of Transfer documentation (which shall, if required by Lessor, contain an assumption of all
the obligations of the Lessee under this Lease with respect to the portion of the Premises affected
by such Transfer, provided that Lessor shall not be deemed to be a party to such Transfer or
Transfer documentation or to have assumed any obligations or liabilities to the Transferee or under
such Transfer documentation), and Lessor’s subsequent receipt of a fully executed copy thereof.
Lessor’s consent to one Transfer shall not waive the requirement of its consent to any subsequent
Transfer.

13.3 Administrative Costs

If Lessee requests Lessor’s consent to a Transfer, Lessee shall pay, as Additional Rent, all
reasonable attorneys’ fees and other reasonable out-of-pocket costs actually incurred by Lessor in
connection with its review of, and response to, Lessee’s proposed Transfer.

 

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13.4 Continuing Responsibility

Except as expressly provided below, and except to the extent that Lessor may hereafter agree
in writing, in Lessor’s sole and absolute discretion, to release Lessee from its obligations under
this Lease from and after the date of a Transfer, no Transfer shall release Lessee from any
of its obligations under this Lease, and Lessee and the Transferee shall be and remain jointly and
severally liable for the payment of Rent with respect to the portion of the Premises which is the
subject of such Transfer and due performance of all other obligations of the Lessee under this
Lease relating to such portion of the Premises, regardless of whether this Lease is subsequently
terminated; provided, however, that (i) the Lessee making a Transfer shall be released from
liability under this Lease with respect to all obligations of the Lessee first accruing or arising
following the effective date of such Transfer in the case of any Permitted Transfer or any Transfer
to a Qualified Transferee, and (ii) upon an assignment of this Lease in accordance with the terms
hereof by any Leasehold Mortgagee that has acquired its interest in this Lease through foreclosure
or a deed or assignment in lieu thereof, the Leasehold Mortgagee shall be relieved from any further
liability hereunder with respect to all obligations first accruing or arising on or after the date
of such assignment by such Leasehold Mortgagee so long as such assignment is made in compliance
with the provisions of Section 15.7.

13.5 Successors

Each and every successor to the Lessee herein named with respect to the interest of the tenant
under this Lease, including any purchaser of Lessee’s leasehold interest pursuant to a foreclosure
of any Leasehold Mortgage (who also shall be deemed a Transferee), but subject to the provisions of
Section 13.4 above and Section 15.7 below, shall be liable for the payment of Rent and due
performance of all other obligations of the Lessee under this Lease from and after the date of the
Transfer with the same force and effect as though such Transferee were the Lessee named in this
Lease.

13.6 Right to Collect Rent

If a Transfer of this Lease is effected without first procuring Lessor’s consent in accordance
with Section 13.1, Lessor may, at its option to be exercised within one (1) year after Lessor
obtains Actual Knowledge of such Transfer, declare such Transfer to be null and void or proceed to
collect any of the Rent provided for in this Lease from the Transferee. If Lessor elects to
collect any Rent from the Transferee, Lessor shall apply the amount received by it to the Rent due
hereunder, but no such collection or application of proceeds shall be deemed: (a) a waiver of the
restriction against Transfer; (b) Lessor’s consent to the purported Transfer or acceptance or
recognition of the purported Transferee as Lessee under this Lease or as otherwise being entitled
to any of the benefits of this Lease or any rights of Lessee hereunder; (c) a release of Lessee
from any of its obligations under this Lease; or (d) a cure of any Event of Default resulting from
such Transfer.

 

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13.7 Lessor’s Right to Mortgage or Encumber

(a) General. Lessor may at any time and from time to time pledge, assign,
sell, convey, transfer, mortgage or encumber its interest in this Lease, the Rent, and/or its fee
estate in the Premises (individually and collectively, a “Lessor Transfer”); provided, however,
that: (a) any such transaction shall be made subject to this Lease and Lessee’s leasehold estate
in the Premises, and any loan, indebtedness or other obligation secured by Lessor’s interest in
this Lease, the Rent, and/or fee interest in the Premises shall be and remain subordinate to this
Lease and Lessee’s leasehold estate in the Premises; (b) the lien of any Fee Mortgage shall not
attach to
the Lessee’s interest in the Premises, and Lessee’s right of quiet possession of the Premises and
other rights arising out of this Lease shall not be materially and adversely affected thereby so
long as this Lease has not been terminated following the occurrence of an Event of Default; (c) any
party acquiring Lessor’s entire fee interest in the Premises pursuant to a transfer from Lessor, or
in the case of a Fee Mortgage pursuant to the foreclosure of such Fee Mortgage or any conveyance in
lieu of such foreclosure, shall be required to recognize Lessee’s interests hereunder and shall be
deemed to have assumed and agreed to perform Lessor’s obligations under this Lease arising on and
after the date such party acquires Lessor’s fee interest in the Premises (provided that the holder
of any Fee Mortgage or any Affiliate of such holder shall be liable for the performance of the
Lessor’s obligations only to the extent that the same arise and are performable during the period
of such Fee Lender’s or Affiliate’s ownership of the Land and Improvements), in which event the
Lessor making such transfer shall thereupon be released from any further liability under this Lease
with respect to all obligations and liabilities accruing or arising after the effective date of
such transfer; and (d) Lessor shall promptly deliver to Lessee written notice of the consummation
of any such Lessor Transfer, and until Lessee receives such notice Lessee shall be fully protected
in making all payments and tendering all performance required of Lessee under this Lease to Lessor
and not to Lessor’s transferee, and in relying on all consents and approvals given by Lessor
pursuant to this Lease. If requested by any Fee Lender, Lessee shall promptly execute and deliver
to such Fee Lender a commercially reasonable attornment agreement (an “Attornment Agreement”)
providing for, among other things, the delivery to Fee Lender of notices of default provided to
Lessor hereunder concurrently with the delivery of such notices to Lessor, and the agreement of
Lessee to attorn to Fee Lender or any purchaser of the interest of Lessor hereunder upon the
exercise by such Fee Lender of its remedies under a Fee Mortgage, including a foreclosure of such
Fee Mortgage or a conveyance in lieu of foreclosure. Except as provided in the immediately
preceding sentence with respect to the furnishing of notices, no Attornment Agreement shall
increase the obligations or decrease the rights of Lessee under this Lease in any material respect.

(b) Notice of Intent to Dispose of Entire Fee Interest. In the event that
Lessor shall decide to dispose of Lessor’s entire fee interest in the Land and Improvements, and
provided that no Event of Default has occurred and is continuing, Lessor agrees to provide, on a
one-time basis only, written notice of such intention to Lessee, and within ten (10) Business Days
following Lessee’s receipt of such notice Lessee may elect to notify Lessor that Lessee may have an
interest in acquiring Lessor’s entire fee interest (“Lessee’s Interest Notice”). In the event that
Lessee delivers a Lessee’s Interest Notice to Lessor within such ten (10) Business Day period,
Lessor and Lessee agree to meet to discuss in good faith whether and upon what terms and conditions
Lessor might be prepared to dispose of its entire fee interest and Lessee might be willing to
acquire such entire fee interest, but such discussions shall not impose any obligation whatsoever
on the part of either Lessor or Lessee to reach agreement on the sale or other transfer of Lessor’s
fee interest in the Land and Improvements to Lessee or on any terms or conditions of any such
disposition or acquisition, and unless (and then only to the extent that) Lessee and Lessor, each
acting in its sole and absolute discretion, shall within a period of thirty (30) days following
Lessor’s receipt of Lessee’s Interest Notice reach agreement on the terms and conditions of any
such disposition or acquisition or on the terms of an extension of such thirty (30) day period to
permit such discussions to continue, Lessor shall have no further obligation under this Lease to
continue any discussions with Lessee relating to Lessor’s decision to dispose of its

 

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entire fee
interest in the Land and Improvements. In such event, or in the event
that Lessee fails to deliver to Lessor a Lessee’s Interest Notice within the aforesaid ten (10) Business Day
period provided for the delivery of a Lessee’s Interest Notice, it shall be conclusively presumed
that Lessee has no interest in discussing with Lessor the possible acquisition of Lessor’s entire
fee interest in the Land and Improvements, either pursuant to Lessor’s notice of intention to
Lessee provided for above or in the event of any later decision by Lessor to dispose of Lessor’s
entire fee interest in the Land and Improvements, and Lessor may thereupon proceed to market and
dispose of its entire fee interest in the Land and Improvements without further notice to Lessee
and without any right or option of Lessee to negotiate with Lessor for the possible acquisition of
such fee interest. In no event shall the provisions of this Section 13.7(b) (i) be deemed or
construed to provide to Lessee any right of first offer, right of first refusal, right of first
negotiation, or similar or equivalent right or option to acquire or negotiate for the acquisition
of any interest of Lessor in the Land and/or Improvements, or (ii) be deemed to apply to the
creation or enforcement of any Fee Mortgage, or any direct or indirect Transfer by Lessor of only a
portion of its fee interest in the Land and/or Improvements, or any sale, encumbrance, transfer or
other disposition by any Person which is a constituent partner, member, or equity or capital holder
of any entity which is the Lessor or which holds any direct or indirect interest in Lessor, or any
restructuring or reorganization of any entity comprising Lessor. Without limiting the foregoing,
this Section 13.7(b) shall automatically terminate upon, and shall have no further force or effect
following, any foreclosure of a Fee Mortgage or any conveyance in lieu of such foreclosure.

(c) Creation of Intervening Lease. Lessor reserves the right to create a
so-called “sandwich” or intervening leasehold estate (“Intervening Lease”) so that this Lease will
thereupon be and become a direct lease between the lessee under such Intervening Lease and Lessee,
and Lessee shall attorn to and recognize the lessee under such Intervening Lease as Lessor
hereunder pursuant to an attornment agreement reasonably acceptable to Lessee, Lessor and the
lessee under the Intervening Lease; provided, however, that (i) the Intervening Lease shall clearly
provide that either the Lessor under this Lease or the lessee under the Intervening Lease shall be
the sole and only Person with whom Lessee shall be obligated to deal with respect to any and all
matters relating to this Lease, including without limitation obtaining any approvals or consents
from Lessor that are provided for or required herein or the giving of any notices by Lessee to
Lessor; (ii) upon the creation of such Intervening Lease, the lessee under the Intervening Lease
shall assume and agree to comply with all obligations of the Lessor under this Lease arising on and
after the effective date of the Intervening Lease, and either (A) such lessee shall be an Affiliate
of Divco West Properties, LLC, Lubert-Adler Management, Inc., or the Korr Group, or (B) the value
of such lessee’s leasehold estate created by the Intervening Lease shall equal not less than
fifteen percent (15%) of the aggregate value of the Lessor’s fee interest in the Premises
immediately prior to the effective date of the Intervening Lease; (iii) Lessor or the lessee under
the Intervening Lease shall pay all reasonable out-of-pocket costs and expenses of Lessee,
including without limitation reasonable attorneys’ fees and costs, incurred by Lessee in connection
with the creation of the Intervening Lease or the negotiation or documentation thereof (including
without limitation any attornment agreement to be entered into by Lessee as provided above);
(iv) in the event of any termination of the Intervening Lease for any reason whatsoever, such
termination shall not affect this Lease or the rights and interests of Lessee hereunder, and
Lessee’s use and occupancy of the Premises shall not be impaired or adversely affected in any
manner by any such termination of the Intervening Lease; (v) Lessee shall not incur by reason of
the

 

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Intervening
Lease any additional obligation under this Lease or with respect to the Premises or suffer any loss, impairment or diminishment of, or limitation on, any
rights or interests of Lessee under this Lease; and (vi) Lessee shall deliver to Lessor upon
request, for the benefit of Lessor and the lessee under the Intervening Lease, an estoppel
certificate confirming that all requirements of this Section 13.7(c) have been met or stating in
what particulars Lessee claims such requirements have not been met, which estoppel certificate
shall be conclusive and binding on Lessee. Notwithstanding anything to the contrary in this
Section 13.7(c), upon the termination or expiration of any Intervening Lease, this Lease shall once
again automatically, and without any further action of the parties, be and become a direct lease by
and between Lessor and Lessee, and shall thereupon be and remain in full force and effect unless
and until Lessor shall elect to create a new Intervening Lease in accordance with the provisions of
this Section 13.7(c).

14. EVENTS OF DEFAULT; LESSOR’S REMEDIES

14.1 Events of Default

The occurrence of any one or more of the following shall constitute an event of default
(“Event of Default”) and breach of this Lease by Lessee:

(a) If Lessee fails to pay any installment of Annual Base Rent when due;

(b) If Lessee fails to make any payment of Rent or any other Monetary
Obligation (other than any installment of Annual Base Rent), if such failure continues for
five (5) Business Days after notice from Lessor;

(c) If Lessee effects a Transfer without first obtaining the written consent
of Lessor where such consent is required pursuant to Section 13 of this Lease;

(d) If Lessee fails to timely and properly perform any of its obligations under
this Lease, other than as described in Sections 14.1(a), (b) and (c), including, without
limitation, any failure to perform any Assumed Obligations and any failure to cause the Hotel to be
operated as a Luxury Hotel, and such failure continues for twenty (20) days after Lessor gives
written notice to Lessee of such non-performance; provided, however, that if the nature of the
obligation is such that more than twenty (20) days is reasonably required for its proper
performance, Lessee shall not be deemed in default if it commences performance within the
twenty (20) day period and thereafter diligently prosecutes such cure to completion within a
reasonable time, and in any event within not more than one hundred eighty (180) days. No such
notice shall be deemed a forfeiture or a termination of this Lease unless Lessor expressly so
elects in the notice;

(e) If any material representation or warranty made by Lessee in or pursuant
to this Lease is knowingly false or knowingly misleading in any material respect;

(f) If any petition is filed against Lessee in any court, whether or not
under any statute of the United States of America or of any state, in any bankruptcy,
reorganization, composition, extension, arrangement, insolvency or other debtor-relief proceeding,
and Lessee is thereafter adjudicated bankrupt or insolvent, or if such proceeding is not finally
dismissed within sixty (60) days after the institution of same, or if any such petition is so filed
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(g) If, in any proceedings, a receiver, manager, trustee or liquidator is
appointed for all or substantially all of Lessee’s property, and such receiver, manager, trustee or
liquidator is not finally discharged within sixty (60) days after the appointment of such receiver,
manager, trustee or liquidator; and/or

(h) If Lessee shall admit in writing its inability to pay its debts generally
as they become due, file a petition in bankruptcy, insolvency, reorganization, readjustment of
debt, dissolution or liquidation under any law or statute of any government or any subdivision
thereof either now or hereafter in effect, make any assignment for the benefit of its creditors, or
consent to or acquiesce in the appointment of a receiver of itself or of the whole or any
substantial part of the Premises.

14.2 Lessor’s Remedies

In addition to such other remedies as may be available to Lessor under this Lease, at law or
in equity (including the right to enforce indemnities and recover damages), but subject to the
provisions of Section 15.7 below, Lessor shall have right, upon the occurrence of an Event of
Default, to exercise any or all of the following remedies:

(a) Termination. Lessor may elect to terminate this Lease immediately, or at
any time thereafter while the Event of Default remains uncured. If Lessor terminates this Lease,
Lessor shall have the right to recover from Lessee:

(i) The worth at the time of award of any unpaid Rent which had been
earned at the time of such termination; plus

(ii) The worth at the time of award of the amount by which the unpaid
Rent which would have been earned after termination until the time of award exceeds the amount of
such unpaid Rent which Lessee proves reasonably could have been avoided; plus

(iii) The worth at the time of award of the amount by which the unpaid
Rent for the balance of the Term after the time of award exceeds the amount of such unpaid Rent
which Lessee proves reasonably could be avoided; plus

(iv) Any other amount necessary to compensate Lessor for all detriment
proximately caused by Lessee’s failure to perform its obligations under this Lease or which, in the
ordinary course of things, would be likely to result therefrom, including, without limitation,
attorneys’ fees and costs, brokers’ commissions, the costs of refurbishment, alterations,
renovation and repair of the Premises, removal (including the repair of any damage caused by such
removal) and storage (or disposal) of any personal property of Lessee, and removal from the
Premises of any and all third parties claiming any rights of use or occupancy with respect to the
Premises by, through or under Lessee, or any rights to manage, operate, or perform any services for
or with respect to the Premises pursuant to any contractual or other arrangement with Lessee
(excluding only Persons who are Hotel guests and Hotel customers in the ordinary course).

As used in Sections 14.2(a)(i) and (ii), the “worth at the time of award” shall be computed by
allowing interest at the Interest Rate. As used in Section 14.2(a)(iii), the “worth at the time of
award” shall be computed by discounting such amount at a rate equal to the sum of the discount rate
of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

 

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In the event that in connection with any termination of this Lease on account of an Event of
Default, Lessor shall receive (i) any funds from any Capital Reserve Account, the Designated
Alterations Escrow Account, and/or the Required Alterations Escrow Account, as provided in
Section 8.2(b)(iv), Lessee shall receive a credit against any damages otherwise recoverable by
Lessor from Lessee pursuant to the provisions of clause (iv) of this Section 14.2(a) equal to the
amount, if any, of the funds in any such account which Lessor does not apply for the purpose for
which such account was created; or (ii) any funds from the Base Rent Escrow Account and/or the
Seasonal Rent Reserve, as provided in Section 8.2(b)(iv), such funds shall be applied in reduction
of any claim of Lessor for recovery of accrued or future Rent pursuant to the provisions of
clauses (i) through (iii) of this Section 14.2(a).

(b) Re-Entry. Lessor may re-enter the Premises, with or without terminating
this Lease, and remove any or all persons and property from the Premises, subject only to any
provisions of this Lease which expressly require Lessor to recognize the occupancy rights of such
persons. Lessor shall have the right to use or permit the use at the Premises of any personal
property of Lessee and any FF&E, or Lessor may remove the same and store the same in a public
warehouse or elsewhere, and may dispose of any such personal property or FF&E at Lessee’s cost in
accordance with any procedures permitted by law. No re-entry or taking possession of the Premises
by Lessor pursuant to this Section 14.2(b) shall be construed as an election to terminate this
Lease unless Lessor delivers a written notice of such termination to Lessee. Acts of maintenance
or preservation, efforts to relet the Premises or the appointment of a receiver at Lessor’s
initiative to protect its interest under this Lease shall not constitute a termination of Lessee’s
right to possession. Lessee shall reimburse Lessor for all costs and expenses incurred in
connection with such actions, including, without limitation, reasonable consultants’, contractors’
and attorneys’ fees and costs, within ten (10) days after receipt of Lessor’s invoice.

(c) Re-Letting. Lessor shall have the right, without terminating this Lease,
to either recover all Rent from Lessee as it becomes due or relet the Premises or any part thereof
to third parties for the account and at the expense of Lessee for all or any part of the Term, and
in connection therewith Lessor may retain the then existing Operator or contract with a new
Operator to manage and operate the Hotel, in either instance under such terms and conditions as
Lessor may determine in its sole and absolute discretion. Without limiting the generality of the
foregoing, Lessor shall have the remedy described in Civil Code Section 1951.4 and any amended,
similar or successor laws. Lessor may re-let the Premises on such terms and conditions as Lessor
in its sole and absolute discretion may deem advisable, and Lessor shall have the right, but not
the obligation, at the cost and expense of Lessee, to make any necessary or appropriate (as
determined by Lessor in good faith) alterations and repairs to the Premises. If Lessor elects to
so relet, rents received by Lessor from such reletting shall be applied as follows: (i) first, to
the payment of any indebtedness, other than Rent due hereunder, from Lessee to Lessor; (ii) second,
to the payment of any costs of such reletting; (iii) third, to the payment of the costs of any
alterations and repairs to the Premises; (iv) fourth, to the payment of Rent due and unpaid
hereunder; and (v) the residue, if any, shall be held by Lessor and applied to payment of future
Rent as the same may become due and payable. Should that portion of the rents received from any
reletting and applied to the payment of Rent be less than the Rent then due and payable
by Lessee, Lessee shall pay the deficiency to Lessor within ten (10) days after receipt of Lessor’s
invoice. Lessee also shall reimburse Lessor for any costs and expenses incurred by Lessor in such
reletting or in making any alterations and repairs not covered by the rents received from such
reletting, including, without limitation, reasonable consultants’, contractors’ and attorneys’ fees
and costs, within ten (10) days after receipt of Lessor’s invoice.

 

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(d) Performance for Lessee. To the extent permitted by Applicable Laws, Lessor
shall have the right, without waiving or releasing Lessee from any of its obligations, to make any
payment or perform any other obligation on Lessee’s behalf and at Lessee’s expense whenever and for
so long as an Event of Default exists. Without limiting the generality of the foregoing, upon and
during the continuance of an Event of Default, Lessor may, but shall not be required to, pay any
Imposition payable by Lessee hereunder, discharge any Lien, take out, pay for and maintain any
insurance required under Section 10, take any and all actions necessary or appropriate in the good
faith judgment of Lessor to carry on the business of Lessee at the Premises relating to the
operation of the Hotel as a Luxury Hotel, and/or do or perform or cause to be done or performed any
other act or thing (entering upon the Premises for such purposes, if Lessor shall so elect)
intended to protect and preserve the rights and interests of Lessor with respect to the Premises,
and Lessor shall not be or be held liable or in any way responsible for any loss, claim, liability,
disturbance, inconvenience, annoyance or damage resulting to Lessee or any other Person on account
thereof. Lessor may act without notice to Lessee if necessary in Lessor’s reasonable judgment to
respond to an emergency situation or governmental or municipal time limitation or otherwise to
protect Lessor’s interest in the Premises. Lessor shall not be required to inquire into the
correctness of the amount or validity of any Imposition or Lien or other amount which may be paid
by Lessor, and Lessor shall be duly protected in paying the amount of any such Imposition or Lien
claimed, and in such event Lessor shall also have the full authority, in Lessor’s sole and absolute
judgment and discretion and without prior notice to or approval by Lessee, to settle or compromise
any such Lien or Imposition. Any act or thing done by Lessor pursuant to the provisions of this
Section 14.2(d) shall not be or be construed as a waiver of any Event of Default by Lessee, or as a
waiver of any term, covenant, agreement or condition herein contained or of the performance
thereof. If Lessor cures a failure to perform on behalf of Lessee, Lessee shall reimburse Lessor
for all costs incurred in connection with such cure, including, without limitation, reasonable
consultants’, contractors’ and attorneys’ fees and costs, within ten (10) days after receipt of
Lessor’s invoice.

(e) Security. Lessor shall have the right, but not the obligation, to draw on
and apply any funds in the Escrow Account against any Rents, damages or other amounts that Lessor
would be entitled to expend or recover pursuant to this Lease, and further to use the funds in the
FF&E Reserve Account and any other reserve account maintained for the Hotel for the purposes for
which such funds were reserved.

(f) Receivership. Lessor may have a receiver appointed, upon application,
to take possession of the Premises and to collect the rents or profits therefrom and to exercise
all other rights and remedies available to Lessor pursuant to this Section 14.

(g) Injunctive Relief. Lessor may seek to enjoin any breach of this Lease,
seek specific performance of any obligation under this Lease, or pursue any other remedy or right
now or
hereafter available to a lessor against a defaulting lessee under the laws of the State of
California or the equitable powers of its courts, and not otherwise specifically reserved herein.

 

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(h) Continued Operation of Hotel.

(i) Lessee acknowledges and agrees that in the event of the
termination of this Lease upon or following an Event of Default, it is critical that Hotel
operations, including all food and beverage services, will proceed uninterrupted and unimpaired.
To that end, Lessee agrees that Lessee shall cause each Liquor Licensee (other than a Liquor
Licensee in which Lessor or an Affiliate of Lessor and Lessee, Operator or an Affiliate of Lessee
or Operator, have a capital interest as contemplated in Section 2.52.5(c) hereof) to agree (and if
Lessee at any time is the Liquor Licensee, Lessee hereby so agrees), in each contract or agreement
entered into with any Liquor Licensee for or relating to the sale or serving of any alcoholic
beverages at, within or from the Hotel pursuant to the liquor license held by such Liquor Licensee
to (A) at the request of Lessor, stay on the Premises following any Event of Default and also
following any exercise by Lessor of its right to terminate this Lease on account of such Event of
Default, and continue to perform its services and obligations under such contract or agreement,
including the operation of any restaurant and/or bar or lounge facilities within the Hotel which
require the holding of a liquor license under Applicable Laws for the lawful sale and serving of
alcoholic beverages at, from or within the Hotel, including room service and mini-bar service
(collectively, “Alcoholic Beverage Service Operations”), such performance to be on the same terms
and conditions as in effect immediately prior to such Event of Default or on such other terms and
conditions as shall hereafter be agreed in writing between Lessor and the Liquor Licensee; or
(B) at the option of Lessor, quit and surrender the Alcoholic Beverage Service Operations and any
premises within the Hotel occupied by such Liquor Licensee for the purposes of such operations, and
if and to the extent permitted by Applicable Laws, sell, transfer and assign to Lessor or Lessor’s
designee, all alcoholic beverage inventory (whether opened or unopened), and all liquor license(s)
held by the Liquor Licensee relating to the Hotel, and all other transferable licenses or permits
used in connection with the Alcoholic Beverage Service Operations (with such inventory to be sold
at cost, and such liquor license(s) and other licenses to be sold at the total price of Thirty-Five
Thousand Dollars ($35,000.00), such amount to be escalated by the percentage increase in the CPI
occurring between the Term Commencement Date and the date on which Lessor shall declare that an
Event of Default exists), and the Liquor Licensee shall reasonably cooperate with Lessor in the
submittal and processing of all applications for approval by the California Department of Alcoholic
Beverage Control (or its successor) of the transfer of the liquor license(s) to Lessor or Lessor’s
designee, it being agreed that such agreement to sell and transfer such liquor license(s) to Lessor
or Lessor’s designee shall not be construed to give Lessor or Lessor’s designee the lawful right to
sell or serve alcoholic beverages at, from or within the Hotel unless and until the approval of the
Department of Alcoholic Beverage Control (or its successor) has been obtained, to the extent then
required by Applicable Laws.

 

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(ii) Further, in order to facilitate the ongoing operation of the Hotel
and the Hotel Business following any termination of this Lease by reason of an Event of Default,
Lessee agrees that Lessor shall have the right to elect, in Lessor’s sole and absolute discretion,
to attempt to hire, or cause any Affiliate of Lessor or any replacement Hotel management company to
attempt to hire, any or all of the Hotel Employees (excluding only the General Manager of the
Hotel) who are employed by Lessee, the Operator or any Food and Beverage Operator, on such terms
and conditions as Lessor, such Affiliate of Lessor, or such Hotel management company shall
determine and the applicable Hotel Employee(s) may accept, and upon request by Lessor, Lessee shall
cooperate with Lessor in all reasonable respects, at no material cost or expense to Lessee
(provided that the foregoing restriction shall not be construed to limit any right of Lessor to
recover damages from Lessee on account of an Event of Default as permitted under Applicable Laws),
in connection with any such hiring effort undertaken by Lessor, such Affiliate of Lessor, or such
Hotel management Company. Except as otherwise provided in Sections 1.3 and 10.3(b)(xxii) of the
Purchase Agreement with respect to the SC Geary Related Agreements, each Management Agreement and
Food and Beverage Agreement shall include provisions (or shall be subject to a subordination
agreement imposing such provisions) that give to Lessor substantially equivalent rights, and
provide for such cooperation of the Operator or Food and Beverage Operator, as applicable, with
respect to any Hotel Employees employed by such Operator or Food and Beverage Operator.

(i) Past Due Rent Obligations. If Lessee fails to make any payment of Rent
or any other Monetary obligation within thirty (30) days following the date on which such payment
shall be due under this Lease, the amount owing shall automatically thereafter bear interest at the
Default Rate until paid, without the requirement for the delivery of any notice or demand by
Lessor. Payment of interest at the Default Rate shall be in addition to any other sums that Lessee
may owe pursuant to Section 4.5 hereof, and shall in no event be deemed to cure or remedy any Event
of Default arising on account of such nonpayment of Rent or other Monetary obligation.

14.3 Survival of Obligations

Lessor’s rights pursuant to this Section 14, including Lessor’s rights to collect Annual Base
Rent and Additional Rent, shall survive the expiration or any earlier termination of this Lease,
whether such termination is effected pursuant to Section 14.2 of this Lease or otherwise.

14.4 Reentry No Acceptance of Surrender

Notwithstanding anything to the contrary contained herein, except only to the extent required
by Applicable Laws and not subject to waiver under such laws, Lessor and Lessee hereby expressly
agree that any reentry by Lessor onto the Premises shall not be deemed an acceptance of Lessee’s
surrender.

14.5 Application of Payments

Any payment by Lessee of a sum of money less than the entire amount due Lessor at the time of
such payment shall be applied to the obligations of Lessee then furthest in arrears. No
endorsement or statement on any check or accompanying any payment shall be deemed an accord and
satisfaction, and any payment accepted by Lessor shall be without prejudice to Lessor’s right to
obtain the balance due or pursue any other remedy available to Lessor both in law and in equity.

14.6 Waiver of Notice and Right of Redemption

Except as otherwise expressly provided in Section 14.1, Lessee hereby expressly waives, to the
maximum extent permitted by law, the service of any notice of intention to enter or re-enter
provided for in any statute, or of the institution of legal proceedings to that end, and Lessee,
for and on behalf of itself and all persons claiming through or under Lessee, also waives any right
of redemption if Lessee is evicted or Lessor takes possession of the Premises by reason of any
Event of Default.

 

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14.7 Rights Cumulative

The various rights and remedies reserved to Lessor and Lessee, including those not
specifically described herein, shall be cumulative and shall be in addition to every other right or
remedy provided for in this Lease or now or hereafter existing at law or in equity. The exercise
of the rights or remedies provided for in this Lease or now or hereafter existing at law or in
equity shall not preclude the simultaneous or later exercise by Lessor of any or all other rights
or remedies.

15. IMPAIRMENT OF LESSOR’S TITLE; LEASEHOLD MORTGAGE

15.1 No Encumbrance on Lessor’s Title

Lessor and Lessee expressly agree that in no event shall Lessor’s fee title to the Premises or
its interest as Lessor under this Lease (including its right to receive Rents), be encumbered,
impaired or subordinated for the benefit of Lessee or any Lender, and Lessee shall not enter into
(and Lessor shall have no obligation to approve or consent to) any agreement or transaction that
would, could or might deprive Lessor of its fee title to the Premises, or impose any conditions or
restrictions on Lessor’s fee title, or otherwise affect or limit Lessor’s right to receive Rents,
or impair any of Lessor’s rights and remedies under this Lease. Nothing contained in this Lease,
and no action or inaction by Lessor (other than a separate agreement in writing hereafter signed by
Lessor), shall be deemed or construed to mean that Lessor has granted to Lessee any right, power or
permission to do any act or to make any agreement which may create, give rise to, or be the
foundation for, any right, title, interest, lien, charge or other encumbrance upon the estate of
Lessor in the Premises or its interest in this Lease.

15.2 Adverse Claims

In amplification and not in limitation of the provisions of Section 15.1 above, Lessee shall
not permit any portion of the Premises to be used by any person or persons, or by the public, as
such, at any time or times during the Term or any holdover period in such manner as may give rise
to the creation of prescriptive rights or adverse possession, dedication, or other similar claims
of, in, to or with respect to the Premises or any part thereof.

15.3 Lessor’s Notice of Nonresponsibility

Notice is hereby given that Lessor shall not be liable for any labor or materials furnished or
to be furnished to Lessee, the Operator, or any occupant or user of the Premises, and that no
mechanic’s, materialmen’s or other liens, stop notices or encumbrances for any such labor or
materials shall attach to or affect the estate or interest of Lessor in and to the Premises.
Nothing in this Lease shall be deemed or construed in any way as constituting the consent or
request of Lessor, express or implied, by inference or otherwise, to any contractor, subcontractor,
laborer or materialman for the performance of any labor or furnishing of any materials in
connection with
the construction, repair or replacement of the Improvements or any Alterations, or as giving Lessee
any right, power or authority to contract for or to permit, on Lessor’s behalf or as to Lessor’s
interest, the rendering of any services or the furnishing of any materials. Lessor shall have no
obligation to Lessee or to any contractor, subcontractor, supplier, materialman, worker or other
Person who engages in or participates in any construction of any work unless Lessor expressly
undertakes such obligation in writing.

 

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15.4 Liens

Lessee shall not permit or suffer any mechanic’s, materialmen’s or other liens or encumbrances
of any nature, including any environmental lien (collectively, “Liens”), to exist or attach against
all or any part of the Premises, excluding only Leasehold Mortgages and security interests securing
Equipment Financing that are created in full compliance with Sections 15.5 or 15.6, as applicable,
and liens for real estate taxes and assessments that are not delinquent or that are being contested
in full compliance with Section 5.3(c). If any claim or notice of Lien is filed, Lessee shall have
the right to contest the Lien in accordance with Applicable Laws, provided that at Lessor’s written
request, Lessee shall promptly cause the Lien to be bonded over, at no cost to Lessor. If Lessee
fails to bond over the Lien within ten (10) days after receiving Lessor’s written request, Lessor
shall have the right, but not the obligation, without waiving any other rights and remedies it may
have against Lessee and without further notice to Lessee, to cause the Lien to be removed from
record by any means Lessor deems proper in its sole and absolute discretion, including making full
payment to the Lien claimant without regard to the validity of its claim. In the event Lessor
causes a Lien to be removed from record, Lessee shall pay Lessor on demand, as Additional Rent, all
the cost of such removal and all other costs and expenses incurred in connection therewith,
including reasonable attorneys’ fees and costs. The provisions of this Section shall survive the
expiration or earlier termination of this Lease.

15.5 Leasehold Financing

Lessee shall obtain Lessor’s written consent, which may be given or withheld in Lessor’s sole
and absolute discretion, before procuring any loan and/or entering into any other arrangement
(singly or collectively, a “Lessee Loan”) which would have the effect of creating a Leasehold
Mortgage, except for a Lessee Loan which meets each of the following requirements (in which
case Lessor’s consent shall not be required):

(a) The proceeds of the Lessee Loan shall be used by Lessee to pay the cost of
any Alterations to be made by Lessee, or to provide permanent or mini-permanent financing for
Lessee’s leasehold estate created by this Lease;

(b) The Lessee Loan shall be with a commercial bank or other institutional or
private lender (“Lender”) which has assets of over Five Hundred Million Dollars ($500,000,000.00)
(which amount shall escalate on each Adjustment Date in an amount equal to the percentage increase
in the CPI occurring since the last Adjustment Date, or in the case of the first such adjustment
the Term Commencement Date);

(c) The Lessee Loan shall be for a maximum aggregate principal amount
(including any optional or mandatory advances, and including any prior Lessee Loan that will not be
fully
repaid concurrently with the closing of such Lessee Loan) that does not exceed seventy-five percent
(75%) of the value of Lessee’s leasehold estate created by this Lease at the time of loan closing
(inclusive of Lessee’s leasehold interest in the Improvements), and the DSCR (following the closing
of such Lessee Loan) shall not be less than 1.4;

 

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(d) The Leasehold Mortgage securing the Lessee Loan shall encumber Lessee’s
entire leasehold interest in the Premises, including Lessee’s leasehold interest in the
Improvements, and the Lender shall expressly agree for the benefit of Lessor that the Premises is a
single integrated project and there shall be no partial foreclosure, partial deed in lieu, or other
Transfer of anything less than Lessee’s entire leasehold interest in the Premises, including
Lessee’s entire leasehold interest in the Improvements; and

(e) The Lessee Loan shall not be cross-defaulted or cross-collateralized with
any other obligations of Lessee to Lender or any Affiliate of Lender not arising with respect to
the Lessee Loan, or with the obligations of any Affiliate of Lessee or any other Person, except for
any guaranty or other credit enhancement that may be provided by an Affiliate of Lessee to the
Lender in consideration of the Lessee Loan.

Lessee may encumber its leasehold interest in this Lease, including its leasehold interest in
the Improvements, only in accordance with this Section 15.5. Lessee shall provide to Lessor,
within not more than thirty (30) days following the recordation of any Leasehold Mortgage, a true
and correct copy thereof, together with a summary in reasonable detail of the payment terms and
other material monetary obligations of the Lessee under the loan documents secured by such
Leasehold Mortgage to the extent not expressly set forth in the copy of the Leasehold Mortgage
provided by Lessee to Lessor. No Lessee Loan shall contain any provisions that would be
inconsistent with or impair in any manner the rights and interests of Lessor under this Lease,
provided that the exercise of the Lessor’s rights and remedies under this Lease on account of an
Event of Default shall be subject to the provisions of Section 15.7 hereof. There shall be no
modification of a Lessee Loan or Leasehold Mortgage that would be inconsistent with any of the
requirements of this Lease without Lessor’s prior written consent, which may be granted or withheld
in Lessor’s sole and absolute discretion.

Lessor shall execute and deliver to Lessee, within ten (10) Business Days following Lessee’s
request, for the benefit of any Lender, and provided that the pertinent particulars of the
applicable Lessee Loan are described in such request from Lessee, a certificate stating whether a
Lessee Loan which is proposed to be, or has been, funded by such Lender will satisfy the
requirements of this Section 15.5 and entitle the Lender to the benefits contained in Section 15.7
of this Lease or in any other provision hereof which expressly runs in favor of a Lender.

 

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15.6 Equipment Financing

In addition to Leasehold Mortgages obtained by Lessee in accordance with Section 15.5 above,
Lessee shall have the right to obtain financing (“Equipment Financing”) for the acquisition of
items of equipment and other tangible personal property for use in the Hotel (collectively,
“Personal Property”), with vendors or third party lenders (“Equipment Lenders”) so long as (i) the
aggregate principal amount of such financing, whether structured as a loan or a lease, shall not
exceed at any time the sum of Seven Hundred Fifty Thousand Dollars ($750,000.00) (which
amount shall be escalated by the percentage increase in the CPI occurring between the Term
Commencement Date and the date of such Equipment Financing); (ii) the security interest provided to
such Equipment Lenders, whether in the form of a loan or a lease, is limited to the Personal
Property so financed and does not constitute a Leasehold Mortgage or any other lien on the
leasehold estate of Lessee, including Lessee’s leasehold interest in the Improvements, and any
other purported encumbrance shall be void and of no effect; (iii) the actual or imputed interest
rate on such equipment financing shall be at the then current market rate for such type of
financing; and (iv) Lessee shall promptly provide to Lessor a true and correct copy of the
financing documents entered into by Lessee in connection with such Equipment Financing. In the
event that Lessee wishes to use Equipment Financing to acquire any Personal Property other than as
expressly permitted pursuant to the foregoing provisions of this Section 15.6, such Equipment
Financing shall comply with the requirements of clauses (ii) and (iii) above and in addition Lessee
shall first obtain Lessor’s prior written approval of such equipment financing and the amount to be
financed in relation to the cost of the equipment, which approval shall not be unreasonably
withheld or delayed, provided that, without limiting the grounds on which Lessor shall be
entitled to reasonably withhold such consent, it shall be reasonable for Lessor to withhold its
consent to any such proposed equipment financing if Lessor reasonably determines that the lack of
ownership of such equipment by Lessee could materially adversely affect the continued operation of
the Hotel or the Hotel Business following the termination of this Lease on account of an Event of
Default or could materially increase the cost of operation of the Hotel following such
termination. In connection with any Equipment Financing which is permitted under this
Section 15.7, Lessor shall execute such agreements reasonably required by the Equipment Lenders
pursuant to which, among other things, (a) Lessor shall disclaim any title to or interest in the
Personal Property being financed, (b) the Equipment Lenders shall have reasonable rights of entry
upon the Premises and the Improvements for a reasonable period of time and upon reasonable prior
written notice to Lessor for purposes of inspecting, evaluating, removing and disposing of the
Personal Property (provided that the Equipment Lenders agree not to interfere with or disrupt the
operation of the Hotel as a Luxury Hotel, to restore any damage to the Improvements occasioned by
such removal, and to indemnify Lessor from and against any claims arising out of or resulting from
such damage or removal), and (c) in the event of a termination of this Lease, the Equipment Lenders
agree to remove the Personal Property from the Premises within ten (10) days after receipt of
written request from Lessor.

15.7 Lender Protections

Lessor and Lessee expressly agree that any Lender making a Lessee Loan secured by a Leasehold
Mortgage, other than a Lender Affiliate, shall have the rights and protections set forth in the
following paragraphs of this Section 15.7. No Lender Affiliate shall have or be entitled to
exercise any of such rights and protections, except only to the extent otherwise hereafter
expressly agreed in writing by Lessor in Lessor’s sole and absolute discretion.

 

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(a) Lessor shall send to the Lender a duplicate copy of any and all notices
Lessor may from time to time give to or serve on Lessee pursuant to this Lease to the extent such
notices relate to a threatened or claimed Event of Default, to any purported modification or
amendment of this Lease, or to any material dispute between Lessor and Lessee. Such duplicate copy
shall be sent to the Lender concurrently with the notice given to or served on Lessee, but only if
and for so long as Lessee or the Lender shall keep Lessor informed, in writing, of the name and
mailing address of the Lender and any changes in the Lender’s mailing address. As between Lessor
and Lender only, no notice of default shall be effective as to Lender unless and until Lessor gives
to Lender a copy of its notice to Lessee at the most recent address for Lender as provided to
Lessor by Lessee; and without limiting the foregoing, Lessee shall have no defense to the exercise
of any right or remedy by Lessor under this Lease, including on account of an Event of Default, by
reason of any failure of Lessor to deliver a copy of any notice to any Lender, nor shall Lessee or
Lender have any other claim against Lessor on account of such failure, but rather the only effect
of such failure shall be to toll for the benefit of the Lender only the applicable time period
within which such Lender is required to act or respond pursuant to the provisions of
Sections 15.7(d) and 15.7(e). Any notices or other communications required or permitted by this or
any other provision of this Lease or by law to be served on or given to the Lender by Lessor may be
delivered in the manner specified in Section 20.1. Lessee shall deliver to Lessor, promptly after
execution, true and complete copies of the Leasehold Mortgage and all other documents given to
evidence or secure the Lessee Loan, and any subsequent amendments, modifications or extensions
thereof.

(b) If the terms of the applicable loan documents so provide, Lessee and Lessor
shall not modify or consensually terminate this Lease without the prior written consent of the
Lender and any such modification or consensual termination of this Lease without the Lender’s
consent shall not be binding upon the Lender, provided that, if the proposed modification of this
Lease will not limit or impair the rights or security of the Lender, then the Lender shall not
arbitrarily or unreasonably withhold its consent to such modification. No voluntary termination or
surrender of this Lease by Lessee shall be effective without the written consent of the Lender. No
merger of this Lease and the fee estate in the Premises shall occur on account of the acquisition
by the same or related parties of the leasehold estate created by this Lease and the fee estate in
the Premises without the prior written consent of the Lender.

(c) Lessor agrees that, but only to the extent agreed by Lessee and the Lender
(as evidenced by a writing delivered to Lessor), the Lender shall have the right at any time during
the Term to:

(i) do any act or thing required of Lessee under this Lease,
including any act or thing which, if not timely performed, could constitute an Event of Default,
and any such act or thing done and performed by such Lender shall be as effective to prevent a
termination of this Lease and a forfeiture of Lessee’s rights under this Lease as if done by Lessee
itself; and/or

(ii) realize on the security afforded by the leasehold estate by
exercising foreclosure proceedings or power of sale or other remedy afforded at law or in equity,
or under any Leasehold Mortgage, and pursuant to such proceedings to: (A) transfer, convey or
assign Lessee’s leasehold interest to an Affiliate of the Lender or to any Qualified Transferee at
any foreclosure sale, whether the foreclosure sale is conducted pursuant to court order or pursuant
to a power of sale contained in the Leasehold Mortgage; or (B) acquire and succeed, in its own name
or that of an Affiliate of the Lender, to the interest of Lessee under this Lease by virtue of any
foreclosure sale, whether the foreclosure sale is conducted pursuant to court order or pursuant to
a power of sale contained in the Leasehold Mortgage, or by assignment or other conveyance in lieu
of foreclosure.

 

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Foreclosure of a Leasehold Mortgage or any sale thereunder to Lender, an Affiliate of Lender,
or any Qualified Transferee, whether by judicial proceedings or pursuant to any power of sale
contained therein, or any assignment or other conveyance to Lender, an Affiliate of Lender, or any
Qualified Transferee in lieu of foreclosure, shall not require the consent of Lessor or constitute
an Event of Default under this Lease. Upon any such foreclosure, sale, assignment or other
conveyance, Lessor shall recognize Lender, such Affiliate of Lender, or any grantee of a conveyance
in lieu of foreclosure who is a Qualified Transferee, or any foreclosure sale purchaser who is a
Qualified Transferee, as the Lessee hereunder. Notwithstanding anything in the foregoing to the
contrary, any Operator and any Food and Beverage Operator (whether or not an Affiliate of Lessee)
will be subject to Lessor’s approval as described in Section 9.1 above.

(d) Before Lessor may terminate this Lease because of any Event of Default,
Lessor shall give written notice of the Event of Default to the Lender (which notice of default may
be given at the same time as the notice of default given to Lessee) and afford the Lender the
opportunity after service of the notice to: (i) cure any Event of Default involving nonpayment of
Rent or any other sum to be paid hereunder within fifteen (15) days after receipt of notice of
default from Lessor; or (ii) cure any non-monetary Event of Default under this Lease within
thirty (30) days after receipt of Lessor’s notice of default, or within such longer period of time
as may be reasonably required to cure such Event of Default (including such period as may be
required to foreclose the lien of the Leasehold Mortgage in accordance with and to the extent
provided in Section 15.7(e) below), provided that Lender commences such cure within thirty (30)
days after receipt of notice from Lessor and thereafter diligently prosecutes such cure to
completion within a reasonable time.

(e) Lessor agrees that, to the extent agreed by Lessee and the Lender (as
evidenced by a writing delivered to Lessor), the Lender may forestall termination of this Lease by
Lessor by complying with subsections (d) above and (m) below and by commencing foreclosure
proceedings (whether judicially or by exercise of a power of sale) within forty-five (45) days
after Lessor gives Lender a notice of default, so long as: (i) Lender, following commencement of
such foreclosure proceedings, diligently pursues such proceedings to completion within a reasonable
time (taking into account any bankruptcy filings by Lessee or any other actions by Lessee in any
insolvency proceedings which may, as a matter of law, and despite the exercise of all diligence by
Lender, delay or postpone Lender’s foreclosure proceedings); and (ii) Lender or a receiver
appointed by a court of competent jurisdiction upon the application of Lender performs all of the
terms and conditions of this Lease requiring payment or expenditure of money by Lessee, including
the payment of all unpaid Rent due hereunder, and all other terms and conditions of this Lease
which may be performed by Lender or such receiver, until the foreclosure proceedings are complete
or are discharged by redemption, satisfaction, payment or conveyance of the leasehold estate to
Lender or to any other person or party.

 

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(f) Neither Lender nor an Affiliate of Lender shall be liable to Lessor as
Transferee of Lessee’s interest under this Lease unless and until such time as Lender or such
Affiliate acquires the rights of Lessee under this Lease through foreclosure or other proceedings
in the nature of foreclosure, by deed or voluntary assignment in lieu thereof, or as a result of
some other action or remedy provided by law or by any Leasehold Mortgage. At no time shall the
Lender or such Affiliate be liable for any breach of default by Lessee arising or occurring prior
to the time that the Lender or such Affiliate acquires the leasehold estate of Lessee under this
Lease; provided,
however, that the Lender or such Affiliate shall be liable for its acts or omissions once it, or
any receiver obtained by the Lender or such Affiliate, takes possession of the Hotel, and provided
further that Lessor shall have the right to exercise all remedies available as the result of any
breach or default under this Lease, including termination hereof, unless Lender or such Affiliate
cures or causes all such breaches and defaults to be cured in accordance with clauses (i) and
(ii) of subsection (d) above and complies with clause (ii) of subsection (e) above. Subject to
compliance with the provisions of Section 13.1 relating to a subsequent Transfer by the Lender or
such Affiliate, in its capacity as a successor Lessee, of its interest in this Lease, the Lender or
such Affiliate shall remain liable to Lessor for the obligations of the Lessee under this Lease
only for and with respect to obligations arising under this Lease while the Lender or such
Affiliate remains the owner of the leasehold estate. In the event that Lender or such Affiliate
subsequently Transfers its interest under this Lease in accordance with the terms hereof after
acquiring all rights of Lessee hereunder and in connection with any such Transfer Lender or such
Affiliate takes back a mortgage, deed of trust, security agreement, lien or other encumbrance in or
against the Lessee’s leasehold interest in this Lease, including Lessee’s leasehold interest in the
Improvements to secure a portion of the purchase price payable to Lender or such Affiliate for such
Transfer, which loan meets the requirements of a Lessee Loan described in Sections 15.7(a) through
15.5(e) above, then such mortgage, deed of trust, security agreement, lien or other encumbrance
shall also constitute a Leasehold Mortgage and the Lender or such Affiliate shall be entitled to
the benefits of this Lease intended for the benefit of the holder of a Leasehold Mortgage.

(g) If this Lease is terminated prior to the Expiration Date for any reason
other than a termination pursuant to Section 17, including the termination by Lessor on account of
an Event of Default or the rejection by a trustee of Lessee in bankruptcy or by Lessee as a
debtor-in-possession, or if Lessee’s interest under this Lease shall be sold, assigned or
transferred pursuant to the exercise of any remedy of the Lender, or pursuant to foreclosure, or
deed or assignment in lieu thereof, then Lessor shall execute a new lease for the Premises with the
Lender or an Affiliate of Lender as Lessee, if so requested by the Lender within ten (10) days
following the date Lessor gives the Lender notice of the termination, subject to the following:

(i) the new lease shall: (A) be for a term beginning on the date
this Lease was so terminated and ending on the same date the Term of this Lease would have ended
had not this Lease been terminated; (B) provide for the payment of Rent at the same rate that would
have been payable under this Lease during the remaining Term of this Lease had this Lease not been
terminated; (C) provide for the Premises to be used solely for the Permitted Uses; and
(D) otherwise contain the same terms and conditions as are contained in this Lease (except for any
requirements or conditions which have been fully satisfied by Lessee prior to the termination);

(ii) upon, and as a condition to execution of the new lease by Lessor,
Lender or such Affiliate of Lender shall pay to Lessor any and all Rent and other sums that would,
at the time of the execution of the new lease, be due under this Lease if this Lease had not been
terminated, and shall also pay all sums and remedy, or agree in writing to commence to remedy any
other defaults under this Lease committed by the former Lessee that can possibly be remedied by a
party other than the former Lessee, and to diligently prosecute such cure to completion, with such
cure to be completed within a reasonable period of time thereafter;

 

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(iii) upon, and as a condition to execution of the new lease, Lender or
such Affiliate of Lender shall pay all costs and expenses, including reasonable attorneys’ fees and
court costs, incurred by Lessor in connection with the prior defaults under this Lease and in
preparing the new lease, and shall pay any and all other fees, costs, taxes (including transfer
taxes) and impositions that may be payable as a result of the parties entering into the new lease;

(iv) as between Lessor, Lessee and Lender or such Affiliate of Lender, and
with respect to all third parties having actual or constructive notice of the terms of this Lease,
the new lease shall have the same priority as this Lease, and shall be transferable by Lender or
such Affiliate of Lender to the extent expressly provided in this Lease;

(v) The ownership of the Improvements now or hereafter located on the
Premises, excluding any Alterations paid for by Lessee, shall at all times be and remain vested in
Lessor throughout the Term of the new lease, and as to any such Alterations paid for by Lessee,
Lessor shall relinquish any title thereto which Lessor may have acquired by virtue of the
termination of this Lease in favor or Lender or such Affiliate of Lender pursuant to such new
lease, but only for the remaining term of such new lease;

(vi) Upon the execution and delivery of such new lease, the Lender or such
Affiliate of Lender, in its own name or in the name of Lessor (under the conditions provided
herein) and at Lender’s or such Affiliate’s cost and expense, may take all appropriate steps as may
be necessary to remove Lessee, or any other Person claiming by, through or under Lessee, from the
Premises. Lender or such Affiliate of Lender shall be solely responsible for bringing such actions
and proceedings as shall be required to obtain possession of the Premises, including possession of
the Improvements, from any third parties which are not lawfully occupying the Premises, and if
Lessor shall be required by applicable law to be or become a party to any such action or
proceeding, Lessor agrees to cooperate with Lender or such Affiliate in all reasonable respects in
any such action or proceeding, provided that Lender or such Affiliate shall pay all costs and
expenses of Lessor, including reasonable attorneys’ fees and costs, incurred in connection
therewith and indemnify Lessor against any and all claims and liabilities arising by reason of such
action or proceeding;

(vii) Together with the execution and delivery of the new lease, Lessor shall
confirm and acknowledge, by such means as is customary or may be reasonably required by a reputable
title insurance company to insure the leasehold estate of Lender or such Affiliate of Lender
created by the new lease for the term of the new lease, that as between the Lender or such
Affiliate and Lessor, and all Persons claiming by, through or under Lessor (including any Fee
Lender), Lender or such Affiliate has a leasehold estate in and to the Premises, including the
Improvements for the term of the new lease and subject to the terms and conditions of the new
lease; provided, however, that such confirmation and acknowledgment of title shall not negate or
otherwise adversely affect Lessor’s reversionary interest in the Premises; and

(viii) In the event that there is more than one Leasehold Mortgage at the time
such new lease is to be executed and delivered, the Lender which provides to Lessor evidence (as
provided in subparagraph (h) below) that it is first in lien priority shall be entitled to such new
lease.

 

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The provisions of this Section 15.7(g) shall survive any termination of this Lease prior to
the Expiration Date for any reason (other than a termination pursuant to Section 17) for a period
of ten (10) days following the date Lessor gives the Lender notice of the termination, and shall
constitute a separate agreement by Lessor for the benefit of and enforceable by the Lender. If the
Lender delivers notice to Lessor, within such ten (10) day period, of such Lender’s election to
execute a new lease with Lessor as contemplated by this subparagraph (g), then Lessor and Lender
shall be obligated to proceed with diligence and continuity to prepare and execute such new lease
as rapidly as feasible, provided that in any event such new lease shall be fully executed and
become effective no later than thirty (30) days following the date of delivery by Lessor to the
Lender of a comprehensive draft of the proposed new lease, and if such new lease is not fully
executed and effective within such thirty (30) day period, Lender shall have no further right to
enter into a new lease with Lessor and all rights of Lender provided for in this Section 15.7 shall
terminate, provided that such thirty (30) day period shall be subject to extension for and during
the continuance of any Force Majeure Event and, in addition, for such period of time, if any, as
Lessor shall unreasonably fail or refuse to cooperate with Lender in preparing, negotiating, or
executing such new lease.

(h) The Lender whose Leasehold Mortgage would be senior in priority if there
were a foreclosure shall prevail if two or more Lenders exercise their rights hereunder, and there
is a conflict which renders it impossible to comply with all such requests. The Lender who claims
such priority shall provide to Lessor reasonable evidence, which may include a non-appealable court
order or assurance from a reputable title insurance company, in form and substance reasonably
satisfactory to Lessor, on which Lessor shall have the right to rely in determining the relative
priority among multiple Leasehold Mortgages. Any Lender who pays any rent or other sums due
hereunder which relate to periods other than during its actual ownership of the leasehold estate
shall be subrogated to any and all rights which may be asserted against Lessee by Lessor with
respect to such period of time.

(i) As used in this Lease, the term “Lender” shall include the entity that
loaned money to Lessee under a Lessee Loan that meets the requirements of Section 15.5 above and is
named as beneficiary, mortgagee, assignee, secured party or security holder in any Leasehold
Mortgage, and also all subsequent assignees and holders of the security interest created by such
instrument; provided, however, that any such subsequent assignees and holders must satisfy the
requirements of Section 15.5(b) above. As used in this Section 15.7, the term “Lender” shall not
be deemed to include any Fee Lender.

(j) Any Leasehold Mortgage shall by its terms provide that all proceeds of
any property insurance covering the Premises and/or the Improvements, and all Awards, shall be
paid, held and applied in a manner consistent with the provisions of this Lease, and that the
holder of the Leasehold Mortgage shall give Lessor written notice of any default of Lessee under
such Leasehold Mortgage contemporaneously with the giving of such notice to Lessee; provided,
however, that no failure by the Lender to give such notice shall deprive it of any rights or
benefits provided by this Section 15.7 or elsewhere in this Lease. Lessee shall give Lessor a copy
of any notice of default received from any Lender promptly after receipt thereof.

 

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(k) If Lessor receives a notice of default from a Lender based on Lessee’s
failure to make payment when due on a Lessee Loan, and Lessee fails to cause the Lender to rescind
the notice
of default within ten (10) Business Days after the date Lessor gives Lessee a copy of the notice of
default, then Lessor shall have the right, but not the obligation, to cure such default of Lessee
on the Lessee Loan by payment to the Lender of the amount in default, and in such event Lessee
shall repay such amount to Lessor on demand, and until repayment is made the amount owing to Lessor
shall bear interest at the Default Rate; provided, however, that the failure by Lessee to make such
repayment shall not entitle Lessor to terminate this Lease or exercise any other remedy that would
require the Lender to return or otherwise pay over such amount to Lessor, provided that (i) Lessor
shall have all other remedies available at law or in equity in order to enforce Lessee’s obligation
to make such repayment to Lessor, including the right (but not the obligation) to draw on and apply
any funds in any of the Escrow Accounts for such purpose, and (ii) the foregoing provisions shall
not be construed to preclude Lessor from exercising its right to terminate this Lease for or on
account of the existence of any other Event of Default.

(l) Within ten (10) days after receipt of a written request from time to
time, Lessor shall execute and deliver to any Lender a written statement certifying: (i) the
Expiration Date; (ii) that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that this Lease is in full force and effect, and stating the date and nature of
such modifications); (iii) the date to which Rent has been paid; (iv) that, to the Actual Knowledge
of Lessor, there are no current defaults under this Lease by either Lessor or Lessee (or, if
defaults are asserted, so describing with reasonable specificity); and (v) such other matters as
may be reasonably requested by the Lender. Lessor intends that any statement delivered pursuant to
this Section may be relied upon by any auditor, Lender, prospective Lender, or prospective
purchaser of or investor in the leasehold estate in the Premises created by this Lease.

(m) Notwithstanding any other provisions to the contrary in this Section 15.7 or
in any other Section of this Lease, in no event and under no circumstances shall Lessor be
forestalled from terminating this Lease if, except as otherwise expressly permitted by this Lease,
any Hotel operations or the active conduct of the Hotel Business as a Luxury Hotel is suspended at
any time during the Term, whether in connection with the exercise by such Lender of any rights or
remedies under its Leasehold Mortgage, or under this Section 15.7, or otherwise. In the event that
the Lender is unable to enter the Hotel on a voluntary basis to continue any operations following
any default under any Leasehold Mortgage, Lessor shall not terminate this Lease so long as the
Lender shall diligently seek the appointment of a receiver to operate the Hotel and the Hotel
Business in accordance with the requirements of this Lease, and (without limiting the provisions of
Section 15.7(e) hereof) shall continue to make or provide for the payment of all Rent owing under
this Lease for and during any period in which Lender is seeking the appointment of a receiver or
otherwise pursuing the foreclosure of its Leasehold Mortgage. Notwithstanding the foregoing, in
the event that Lessor reasonably determines that the continued operation of the Hotel in accordance
with this Lease following an Event of Default has ceased, regardless of the cause of such failure,
then notwithstanding any other provisions of this Section 15.7 to the contrary, Lessor shall be
entitled, upon ten (10) Business Days’ prior written notice to such Lender, to immediately
terminate this Lease, and upon such termination Lender’s only remaining right under this
Section 15.7 shall be to request and enter into a new lease pursuant to the provisions of
subparagraph (g) of this Section 15.7.

(n) Lessor and Lessee shall cooperate in including in this Lease by suitable
amendment, or by execution of a supplement to this Lease, any provision which may be reasonably
requested by
a Lender in order to implement the provisions and intent of Section 15.5 and this Section 15.7;
provided, however, that any such amendment or supplement shall not increase the obligations or
decrease the rights of Lessor under this Lease in any material respect.

 

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16. REPRESENTATIONS, WARRANTIES AND COVENANTS

16.1 Lessee’s Representations, Warranties and Covenants

Lessee hereby represents, warrants and covenants to Lessor as follows:

(a) Lessee is a limited liability company, duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly qualified to transact
business in the State of California.

(b) Subject to Lessee obtaining the approval of the Bankruptcy Court of the
Purchase Agreement and this Lease as contemplated in Section 10.3(b)(viii) of the Purchase
Agreement, Lessee has taken all necessary action to authorize the execution, delivery and
performance of this Lease and all other agreements and instruments relating to the transactions
contemplated by this Lease (collectively, the “Related Instruments”). This Lease and the Related
Instruments constitute the legal, valid and binding obligations of Lessee.

(c) Subject to Lessee obtaining the approval of the Bankruptcy Court of the
Purchase Agreement and this Lease as contemplated in Section 10.3(b)(viii) of the Purchase
Agreement, Lessee has the right, power, legal capacity and authority to enter into and perform its
obligations under this Lease and the Related Instruments, and no approval or consent of any Person
is required in connection with Lessee’s execution and performance of this Lease and the Related
Instruments which has not been obtained (other than any Entitlements required to be obtained to
construct any Improvements). Subject to Lessee obtaining the approval of the Bankruptcy Court of
the Purchase Agreement and this Lease as contemplated in Section 10.3(b)(viii) of the Purchase
Agreement, the execution and performance of this Lease and the Related Instruments will not result
in or constitute any default or event that would be, or with notice or lapse of time or both would
be, a default, breach or violation of the organizational instruments governing Lessee or any
agreement or any deed restriction or order or decree of any court or other governmental authority
to which Lessee is a party or to which it is subject.

(d) Lessee at all times during the Term expects to be: (i) adequately
capitalized to conduct its business and affairs as a going concern, considering the size and nature
of its business and intended purposes, and to pay in a timely manner all Monetary Obligations;
(ii) solvent; (iii) able to pay its debts as they come due; and (iv) able to conduct its business
as a stand-alone entity.

(e) On and as of the Effective Date, neither Lessee nor any Affiliate of
Lessee has any ownership or other economic interest in ZM SF Ventures LLC or China Grill
Management, Inc.

Lessee shall take all actions necessary to ensure that each of the representations, warranties
and covenants contained in this Section 16.1 remain true and correct in all material respects at
all times during the period between the Effective Date and the expiration of the Term and any
holdover period.

 

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16.2 Lessor’s Representations, Warranties and Covenants

Lessor represents, warrants and covenants to Lessee as follows:

(a) Lessor is a limited liability company organized, validly existing and in
good standing under the laws of the State of Delaware, and is duly qualified to transact business
in the State of California.

(b) Lessor has taken all necessary action to authorize the execution, delivery
and performance of this Lease and the Related Instruments. This Lease and the Related Instruments
constitute the legal, valid and binding obligations of Lessor.

(c) Lessor has the right, power, legal capacity and authority to enter into
and perform its obligations under this Lease and the Related Instruments, and no approval or
consent of any Person is required in connection with Lessor’s execution and performance of this
Lease and the Related Instruments which has not been obtained. The execution and performance of
this Lease and the Related Instruments will not result in or constitute any default or event that
would be, or with notice or lapse of time or both would be, a default, breach or violation of the
organizational instruments governing Lessor or any agreement or any deed restriction or order or
decree of any court or other governmental authority to which Lessor is a party or to which it is a
subject.

17. CASUALTY OR APPROPRIATION

17.1 No Termination; No Effect on Rental Obligation

Except to the extent expressly provided in this Section 17, no Appropriation, Casualty, or
other loss, damage or destruction to or of the Premises, the Improvements, or any other aspect of
the Hotel or its operations, shall cause a termination of this Lease, or relieve or discharge
Lessee from the full and timely payment of Rent or performance of any of Lessee’s other obligations
under this Lease.

17.2 Evaluation of Extent and Effect of Casualty or Appropriation

(a) Casualty. Upon the occurrence of any fire, flood, earthquake or other
event or casualty adversely affecting the physical condition of the Premises and/or the
Improvements in any material respect (a “Casualty”), Lessee shall promptly engage an independent
architect or engineer reasonably acceptable to Lessor (the “Engineer”), and Lessee and the Engineer
shall prepare a detailed written report (the “Casualty Report”) describing and addressing: (i) the
extent of any damage or destruction to the Premises and Improvements; (ii) the legal right, and the
estimated cost and time required, to repair, replace, reconstruct and/or restore the Premises and
Improvements to a physical and operating condition consistent with the requirements of this Lease
(collectively, “Restoration Work”); and (iii) the likely extent and availability of insurance
proceeds. Lessee shall provide Lessor with the Casualty Report as soon as reasonably practicable,
but not later than sixty (60) days after the occurrence of the Casualty.

 

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(b) Appropriation. Upon receipt of written notice that any Appropriation of
less than the entire Premises is pending or contemplated, Lessee shall promptly engage an Engineer,
and Lessee and the Engineer shall prepare a detailed written report (the “Appropriation Report”)
describing and addressing: (i) the effect of such pending or contemplated Appropriation on the
remaining portion of the Premises and the occupancy and operation of the Improvements; (ii) the
legal right, and the estimated cost and time required, to perform all Restoration Work that may be
necessary in order for the Improvements to be operated and occupied in accordance with the
requirements of this Lease; and (iii) the likely extent and availability of an Award. Lessee shall
provide Lessor with the Appropriation Report as soon as reasonably practicable, but not later than
sixty (60) days after receipt of written notice that the Appropriation is pending or contemplated.

17.3 Effect of Casualty

(a) Obligation to Perform Restoration Work. Except as expressly provided in
Sections 17.3(b) and 17.3(c) below, if all or any portion of the Premises or the Improvements shall
be damaged or destroyed at any time during the Term, Lessee shall perform, at Lessee’s cost and
expense, all Restoration Work that may be necessary to restore the Premises and Improvements as
nearly as possible to a first-class condition suitable for operation as a Luxury Hotel, regardless
of whether any insurance proceeds are available or the amount of any such insurance proceeds, as
promptly as reasonably practicable and with all commercially reasonable diligence; provided that
(i) any sums so expended by Lessee for or in connection with any Restoration Work shall not
constitute Ordinary Operating Expenses, and (ii) neither Lessee nor Operator nor any Affiliate of
Lessee or Operator shall charge or receive any project management, project supervision, or
comparable fee or payment in connection with any Restoration Work which would be in excess of the
fee or payment that would be customarily charged by a non-affiliated project management company or
firm for comparable work or services. Except as expressly provided in Sections 17.3(b) or
17.3(c) below, any insurance proceeds payable on account of any Casualty shall be applied to
completion of the Restoration Work and shall be paid, held and disbursed in accordance with the
provisions of Section 17.6.

(b) Major Casualty. If all or substantially all of the Improvements are
damaged or destroyed due to a Casualty such that the estimated cost of the Restoration Work that is
not covered by insurance proceeds shall exceed fifty percent (50%) of the replacement cost of the
Improvements (a “Major Casualty”), then Lessee shall have the right to terminate this Lease, but
only in strict accordance with the requirements and procedures set forth in Section 17.7. In the
event Lessee exercises such right to terminate, Lessee shall vacate and surrender the Premises to
Lessor in the manner required by Section 17.7. In the event this Lease is terminated by Lessee
pursuant to this Section 17.3(b), any Casualty Proceeds shall be divided between Lessor and Lessee
in the manner provided in Section 17.5(d) below. If Lessee shall not elect to terminate this Lease
due to such Major Casualty, then this Lease shall continue in full force and effect and the
provisions of Section 17.3(a) shall apply.

 

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(c) Major Casualty During Last Five Years of Term. If a Major Casualty shall
occur during the final five (5) years of the Term, and Lessee does not elect to terminate this
Lease as provided in Section 17.3(b) above, then this Lease shall continue to the end of the Term,
and Lessee shall have the right, but not the obligation, to perform the Restoration Work, and if
Lessee elects to perform the Restoration Work, any insurance proceeds payable on account of the
Casualty shall be paid, held and disbursed in accordance with Section 17.6. If Lessee elects not
to perform the Restoration Work, then any insurance proceeds payable on account of the Casualty
shall be paid as provided in Section 17.5(d), and in addition, and without regard to the amount, if
any, of any insurance proceeds received by Lessee, Lessee shall (i) promptly demolish and remove,
at Lessee’s sole cost and expense, all damaged or destroyed Improvements from the Premises,
together with all other Improvements which Lessor requires to be so demolished and removed, and
restore the portion of the Premises where such Improvements have been removed to a clean, level and
useable condition, and (ii) continue to pay the full Rent due hereunder (without setoff, reduction
or abatement) for the remainder of the Term.

(d) No Right to Terminate Lease. Under no circumstances shall Lessee be
entitled to terminate this Lease, except as specifically provided in this Section 17.3, or to any
abatement of Rent for or in respect of any Casualty.

17.4 Effect of Appropriation

(a) Total Appropriation. If the entire Premises is Appropriated at any time
during the Term (a “Total Appropriation”), this Lease shall terminate as provided in Section 17.7
effective on the earlier of the date that title to the Premises is obtained by the Appropriating
authority or the date that the Appropriating authority takes possession of the Premises, and the
Award shall be divided between Lessor and Lessee in the manner provided in Section 17.5(a) below.

(b) Major Appropriation. If at any time during the Term a substantial portion
of the Premises or the Improvements is Appropriated, and either (i) there are fewer than
five (5) years remaining in the Term of this Lease, or (ii) then-existing laws would not permit the
repair, replacement, reconstruction and/or restoration of the Premises and Improvements to
substantially the same condition and use as at the time immediately preceding the Appropriation, or
otherwise to a condition that would permit an economically feasible Luxury Hotel to be operated on
the Premises consistent with the requirements of this Lease (a “Major Appropriation”), then Lessee
shall have the right to terminate this Lease, but only in strict accordance with the requirements
and procedures set forth in Section 17.7. In the event Lessee exercises such right to terminate,
then this Lease shall terminate and Lessee shall vacate and surrender the Premises to Lessor in the
manner required by Section 17.7. The effective date of any such termination shall be the earlier
of the date that the Appropriating authority obtains title to the Appropriated portion of the
Premises or Improvements or the date that the Appropriating authority takes possession of the
Appropriated portion of the Premises or Improvements. In the event this Lease is terminated by
Lessee pursuant to this Section 17.4(b), any Award shall be divided between Lessor and Lessee in
the manner provided in Section 17.5(a) below.

(c) Partial Appropriation. If less than the entire Premises or Improvements
are Appropriated and this Lease is not terminated pursuant to Section 17.4(b) above: (A) this
Lease shall be deemed amended, effective as of the earlier of the date that the Appropriating
authority obtains title to the Appropriated portion of the Premises or Improvements or the date
that the Appropriating authority takes possession of the Appropriated portion of the Premises or
Improvements, such that the definition of the term “Premises” shall include only that portion of
the Land described in Exhibit A attached that is not Appropriated and the definition of the term
“Improvements” shall include only those portions of the Improvements that are not appropriated;
(B) Lessee, as promptly as reasonably practicable and with all commercially reasonable diligence,
shall perform all Restoration Work as may be necessary to restore the Premises
consistent with the requirements of this Lease, to the maximum extent feasible for operation as a
Luxury Hotel; (C) Annual Base Rent shall be equitably reduced in the proportion that the gross
square footage of the Improvements which are Appropriated bears to the aggregate gross square
footage of the Improvements immediately prior to the Appropriation, and (D) any Award shall be
divided between Lessor and Lessee in the manner provided in Section 17.5(b) below.

 

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(d) Temporary Appropriation. If the Premises or any portion thereof or any
Improvements are Appropriated for a limited period ending no later than five (5) years before the
Expiration Date, this Lease shall not terminate and Lessee shall continue to perform and observe
all of its obligations hereunder as though such Appropriation had not occurred, including, without
limitation, the payment of all Monetary Obligations owing to Lessor for the period of such
Appropriation as the same shall become due and payable under this Lease, except only to the extent
Lessee may be prevented or substantially impeded from performing any obligations (other than
Monetary Obligations) by reason of such Appropriation. In the event of such a temporary
Appropriation, the respective rights of Lessor and Lessee in and to any Award shall be as set forth
in Section 17.6(c). In the event that any temporary Appropriation would end later than the
five (5) years before the Expiration Date, then the Appropriation shall be deemed a Total
Appropriation and all of the provisions of this Section 17 that are applicable to a Total
Appropriation shall apply.

17.5 Allocation of Award

(a) Total Appropriation; Major Appropriation. In the event of any
Appropriation which results in the termination of this Lease pursuant to Sections 17.4(a) or
(b) above, any Award therefor shall be payable in the following order of priority:

(i) First, Lessee and Lessor shall first be entitled to payment for
all out of pocket third party costs and expenses, including attorneys’ fees and costs, reasonably
incurred in collecting the Award.

(ii) Second, Lessee shall next be entitled to reimbursement for any
out-of-pocket third party costs reasonably incurred by Lessee for demolition, restoration and
removal work or emergency-related work undertaken pursuant to Section 17.7(b), Section 17.7(c), or
Section 17.8 below.

(iii) Third, Lessor shall next be entitled to payment for the value of the
Appropriated Land and Improvements in an amount equal to (i) Seventy-One Million Dollars
($71,000,000.00), plus (ii) an amount equal to $71,000,000.00 multiplied by the cumulative
percentage increase in the CPI occurring between the Term Commencement Date and the date as of
which such Award is payable.

(iv) Fourth, Lessee shall be entitled to the balance, if any, of the Award.

(b) Partial Appropriation. In the event of any Appropriation of the nature
covered by Section 17.4(c) above, all Awards therefor shall be applied first to the restoration,
repair and replacement by Lessee of the Premises, Improvements and Personal Property that were not
Appropriated, with any severance award being applied in its entirety before any other portion of
the Award is so applied, and the unexpended portion of the Award, if any, shall be divided between
Lessor and Lessee in the manner provided by Section 17.5(a) above.

 

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(c) Temporary Appropriation. In the event of a temporary Appropriation of the
nature described in Section 17.4(d), and subject to the rights of any Lender under a Leasehold
Mortgage: (i) Lessee shall be entitled to receive the entire amount of any Award made for such
Appropriation; and (ii) Lessor hereby assigns any and all of its interest in such Award to Lessee.
Lessee agrees to use diligent commercially reasonable efforts to recover as part of the Award
payable by the Appropriating authority on account of such Appropriation all Rent which under this
Lease would be payable to Lessor for the period of such Appropriation (herein, “Lessor’s Share”);
provided, however, (i) the failure of Lessee to recover from the Appropriating authority all Rent
payable under this Lease for the period of such Appropriation shall not excuse or relieve Lessee
from the obligation to pay Lessor all Monetary Obligations owing for such period, and (ii) that if
for any reason the assignment by Lessor to Lessee of Lessor’s interest in any Award made for such
Appropriation is not fully effective or enforceable, Lessor shall have the right, upon written
notice to Lessee, to elect to recover Lessor’s Share directly from the Appropriating authority, in
which event the assignment set forth in clause (ii) of this Section 17.5(c) shall be void and of no
force or effect with respect to Lessor’s interest in the Rent and Lessor shall have the right to
seek Lessor’s Share of any Award to be made for such Appropriation.

(d) Major Casualty. In the event of any Major Casualty which either (1) is
governed by Section 17.3(c) and Lessee does not elect to perform the Restoration Work, or
(2) results in the termination of this Lease pursuant to Section 17.3(b), all Casualty Proceeds
received therefor shall be payable in the following order of priority:

(i) First, to the payment of all out-of-pocket third party costs and
expenses, including, without limitation, reasonable attorneys’ fees, costs and disbursements,
reasonably incurred by Lessee and/or Lessor in collecting the Casualty Proceeds;

(ii) Second, Lessee shall next be entitled to reimbursement for any
out-of-pocket third party costs reasonably incurred by Lessee for demolition, restoration and
removal work or emergency-related work undertaken pursuant to Section 17.7(b), Section 17.7(c), or
Section 17.8 below.

(iii) Third, to Lessor in an amount equal to the Full Insurable
Replacement Value of the Improvements.

(iv) Fourth, Lessee shall receive the balance, if any, of the Casualty
Proceeds.

17.6 Restoration Work; Disbursement of Proceeds

The following provisions shall apply in the event of any Casualty or Appropriation that does
not give rise to a termination of this Lease:

(a) All Restoration Work shall be subject to and performed in accordance with
the requirements of Section 11 of this Lease.

 

98

 

(b) Subject to the provisions of any Leasehold Mortgage which may require that
Casualty Proceeds and Awards (collectively, “Proceeds”) be held by the Lender or an insurance
trustee for application in accordance with the terms of this Lease, all Proceeds received by or
payable to any party with respect to any Casualty or Appropriation, less actual out of pocket third
party costs and expenses reasonably incurred in connection with the collection thereof, shall be
held by Lessor and, subject to the provisions of Section 17.5(b) above, shall be applied to the
costs of the Restoration Work (including the cost of any emergency repairs made by Lessee pursuant
to Section 17.8) in accordance with the provisions of this Section 17.

(c) All Proceeds shall be disbursed by Lessor in accordance with standard
construction loan practices as the Restoration Work progresses. If the Proceeds, less the costs
and expenses incurred in connection with the collection thereof, are insufficient to pay the entire
cost of the Restoration Work, Lessee shall pay the entire amount of the shortfall. If at any time
the amount of the Proceeds held by Lessor, Lender or any insurance trustee pursuant to this
Section 17.6 shall be less than the total remaining unpaid cost of the Restoration Work, Lessee
shall deposit the amount of the shortfall with Lessor, Lender or such insurance trustee, as
applicable, to ensure payment of the shortfall, and such deposit shall be a condition to any
subsequent disbursement of Proceeds to Lessee.

17.7 Termination

The following provisions shall apply in the event of a Casualty or Appropriation that causes a
termination of this Lease or that gives rise to a right of either Lessee or Lessor to terminate
this Lease:

(a) Any party having a right to terminate this Lease pursuant to this
Section 17 shall exercise such right, if at all, by giving written notice to the other party
(“Notice of Election to Terminate”) within sixty (60) days after completion and delivery to Lessor
of the Casualty Report or Appropriation Report (as the case may be) required by Section 17.2.
Failure to give a Notice of Election to Terminate within such sixty (60) day period shall be deemed
an election not to terminate this Lease.

(b) Lessor shall have the right to require, by written notice (“Demolition
Notice”) given to Lessee within thirty (30) days after the date a Notice of Election to Terminate
is given, that Lessee demolish and remove all damaged or destroyed Improvements designated by
Lessor in such Demolition Notice, and any rubble and related debris, leaving the Premises in a
safe, clean and orderly condition, all at Lessee’s cost and expense. Such demolition and removal
work shall be completed by Lessee within ninety (90) days of Lessor’s delivery of the Demolition
Notice or, in the event such demolition and removal cannot reasonably be completed within such
ninety (90) day period, such later date as may reasonably be required to complete such work.

(c) In addition, Lessor may include in the Demolition Notice a requirement
that Lessee restore certain Improvements on the Premises to a usable condition in lieu of
demolishing and removing them, and in such event Lessee shall perform such restoration work with
respect to any such Improvements as specified by Lessor that are reasonably susceptible to
restoration within a period of ninety (90) days (exclusive of the time required to obtain all
governmental permits and approvals required for such restoration); provided that Lessee shall not
be required to expend
more funds for purposes of such restoration work than Lessee would have spent on demolition and
removal of the particular Improvements. Lessee shall use commercially reasonable efforts to
complete any such restoration work within ninety (90) days (exclusive of the time required to
obtain all governmental permits and approvals required for such restoration) following Lessor’s
delivery of the Demolition Notice or, in the event such restoration cannot reasonably be completed
within said ninety (90) day period, such later date as may reasonably be required to complete such
work.

 

99

 

(d) Except to the extent modified by the provisions of Sections 17.7(b) or (c),
if applicable, the Premises shall be vacated and surrendered to Lessor in the condition described
in Section 8.2(a) above.

(e) Except as otherwise provided in Sections 17.4(a), 17.4(b) and 17.4(c), the
date on which Lessee vacates and surrenders the Premises to Lessor in the condition required by
Sections 17.7(b) (if applicable), 17.7(c) (if applicable), and 17.7(d) above shall be the
Termination Date, and shall fix the date after which Lessee shall no longer be obligated for the
further payment of Rent.

17.8 Emergency Repairs

Notwithstanding any other provision of this Section 17, Lessee shall promptly undertake all
such emergency repair work after a Casualty as is necessary or appropriate under the circumstances
to eliminate, or provide adequate protection against loss, damage or injury due to defective or
dangerous conditions and to comply with Applicable Laws.

17.9 No Extension of Term; Rent Obligations Continue

There shall be no extension of the Term on account of any Casualty or Appropriation. Except
as expressly provided in Section 17.4(c) above, following any Casualty or Appropriation, Lessee
shall continue to pay the Annual Base Rent to Lessor in monthly installments at the same times and
in the same amounts as would be payable had there been no Casualty or Appropriation.

17.10 Right to Participate in Settlement

Lessor and Lessee shall both have the right to participate in the negotiation, settlement or
compromise of any insurance claims and in all Awards, except to the extent otherwise provided in
Section 17.4(d) with respect to temporary Appropriation Awards. Lessee shall have the sole right
to negotiate, settle and compromise any Award for a temporary Appropriation (subject to the
provisions of Section 17.5(c), and otherwise so long as the temporary Appropriation is not deemed a
Total Appropriation pursuant to Section 17.4(d)).

17.11 Disputes

In the event the parties are unable to agree upon: (a) the equitable reduction of Annual Base
Rent pursuant to Section 17.4(c), (b) whether the conditions provided in this Section 17 for the
termination of this Lease have been satisfied; or (c) the amount of Proceeds to be paid to either
party under this Section 17 (including any related element which may be required to make such
determination, such as the value of Lessor’s or Lessee’s interest in the Improvements or respective
Percentage Interests in the Improvements), the matter(s) in dispute shall be decided through
arbitration in accordance with the provisions of Section 18 of this Lease.

 

100

 

17.12 Survival

Lessor’s, Lessee’s and any Lender’s rights and obligations under this Section 17, including
their rights to receive Proceeds, shall survive any termination of this Lease.

18. ARBITRATION OF SPECIFIED DISPUTES

(a) Scope of Obligation to Arbitrate. Those disputes which the parties are
expressly required or authorized to resolve through arbitration shall be subject to the procedures
prescribed in this Section 18. This arbitration provision is expressly limited to those matters as
to which arbitration is expressly required or authorized elsewhere in this Lease and no other
matter shall be subject to arbitration unless the parties, each in the exercise of its sole
discretion, mutually agree in writing. The arbitrator shall dismiss any matter submitted to it for
determination if such determination is not expressly required or authorized elsewhere in this Lease
or in another written agreement executed by both parties.

(b) Arbitration Procedure. A party shall initiate arbitration by written
notice to the other (the “Initiation Date”). Such arbitration shall be held by the AAA in
San Francisco, California, according to its commercial arbitration rules except as otherwise
specified herein. The arbitration proceeding shall be conducted by a single neutral arbitrator
selected by Lessor and Lessee from a panel provided by the AAA in San Francisco; provided that if
Lessor and Lessee fail to agree on the selection of an arbitrator within thirty (30) days after the
Initiation Date, the arbitrator shall be selected by the AAA in San Francisco, or in the event of
any failure or refusal of the AAA to so act, by the Presiding Judge of the Superior Court in and
for the County of San Francisco upon application by either party. Any arbitrator appointed
pursuant to this Section shall have at least ten years of experience in commercial ground lease
transactions and shall be reasonably conversant with the hotel industry and hotel operations. The
arbitrator shall set the matter for hearing within thirty (30) days of the selection of such
arbitrator and shall try all issues of law or fact that are the subject of the arbitration, and
report a statement of decision upon them as soon as practicable, but in no event later than
fifteen (15) days after the conclusion of the hearings. The judgment of the arbitrator shall be
final and binding on the parties, and such judgment and any award rendered in the arbitration may
be enforced by the parties in any manner available under Applicable Law.

(c) The fees of the arbitrator and the other costs and expenses of the
procedure described in this Section 18 shall be borne equally by Lessor and Lessee, unless the
arbitrator determines that one party is fairly entitled to recover its attorneys’ fees and costs
from the other party due to the persuasiveness of such party’s position on the matter in dispute,
in which event the arbitrator may award to such party all or any portion of such party’s fees and
costs as shall be determined by the arbitrator to be justified.

 

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19. FINANCIAL INFORMATION

Throughout the Term of this Lease, Lessee shall furnish or cause to be furnished to Lessor
such information and data about the financial condition and operations of the Hotel as Lessor may
reasonably request, including, but not limited to, all financial statements, proposed and approved
budgets, and reports of operations regarding the Hotel prepared by Lessee or by the Operator and
submitted to Lessee.

20. GENERAL PROVISIONS

20.1 Notices

All notices, requests, approvals and invoices (“Notices”) required or permitted under this
Lease: (a) shall be in writing; (b) shall be delivered, given or made to the following addresses,
or to such other addresses as the parties may designate in writing from time to time; and (c) shall
be deemed to have been duly delivered, given or made: (i) upon delivery; or (ii) upon the date
delivery was attempted, if delivery is prevented by the refusal of the addressee to accept delivery
or by the failure by the addressee to be open for business at its address specified below during
regular business hours on Business Days. Delivery may be effected by any of the following means:
(A) personal delivery; (B) certified or registered United States mail, postage prepaid, return
receipt requested; (C) delivery by reputable courier, messenger or overnight delivery service;
(D) facsimile transmission, provided such transmission produces an electronic report confirming
receipt by the party to whom the notice is sent; and (E) electronic mail delivered by a computer or
other digital communications system for which the sender has requested and received confirmation of
the receipt of such electronic mail by the recipient.

	 	 	 
	If to Lessor:

	 	c/o Jacqueline Moore

DIVCO West Properties

400 Hamilton Avenue, Suite 400

Palo Alto, CA 94301

Phone: (650) 688-4133

Fax: (650) 688-4233
	 
	 	 
	with a copy to:

	 	Carl “Kim” Seneker

Morrison & Foerster LLP

425 Market Street, 32nd Floor

San Francisco, CA 94105

Phone: (415) 268-6619

Fax: (415) 268-7522

 

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	If to Lessee:

	 	Edward Scheetz

Northstar Capital Investment Corporation

527 Madison Avenue, 16th Floor

New York, NY 10022

Phone: (212) 319-2414

Fax: (212) 319-4557
	 
	 	 
	with a copy to:

	 	Rand S. April

Skadden, Arps, Slate, Meagher & Flom LLP

300 South Grand Avenue, Suite 3400

Los Angeles, CA 90071

Phone: (213) 687-5060

Fax: (213) 621-5060

20.2 Estoppel Certificates

Within ten (10) days after receipt of a written request from Lessee or Lessor, as the case may
be (each, a “Requesting Party”), from time to time, the party receiving such request (the
“Receiving Party”) shall execute and deliver to the Requesting Party a written statement
certifying: (a) the Expiration Date; (b) that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that this Lease is in full force and effect, and
stating the date and nature of such modifications); (c) the date to which Rent has been paid;
(d) that there are no current defaults under this Lease by either Lessor or Lessee (or, if defaults
are asserted, so describing with reasonable specificity); provided, however, that the statement
contained in this clause (d) shall be made to the Actual Knowledge of the party making such
statement with respect to any default of the other party; and (e) such other matters as may be
reasonably requested. Each party intends that any statement delivered by a Receiving Party
pursuant to this Section 20.2 may be relied upon by any auditor, prospective Lender or Fee Lender
or prospective purchaser of or investor in the Premises or any interest therein.

20.3 Nonrecourse to Lessor

Lessee agrees that, in the event of any default or breach by Lessor under this Lease or
arising in connection herewith or otherwise in connection with the Premises, Lessee’s remedies
shall be limited solely and exclusively to recovery of Lessee’s actual monetary damages in an
amount not exceeding the value of Lessor’s fee interest in the Premises (as encumbered by this
Lease); provided that in no event shall such right of recovery extend to the proceeds of any sale
or financing received by Lessor, or to any insurance proceeds received by Lessor other than
insurance proceeds paid to compensate Lessor for damage or loss to the Improvements. Lessor shall
not have any personal liability hereunder, and Lessee hereby expressly waives and releases such
personal liability on behalf of itself and all Persons claiming by, through or under Lessee. The
limitation of liability contained in this Section 20.3 shall inure to the benefit of Lessor and
Lessor’s present and future partners, members, beneficiaries, officers, directors, trustees,
shareholders, agents and employees, and their respective partners, heirs, successors and assigns.

 

103

 

Under no circumstances shall any present or future officer, director or shareholder of Lessor (if
Lessor is a corporation), present or future partner of Lessor (if Lessor is a partnership), present
or future member in Lessor (if Lessor is a limited liability company), or present or future trustee
or beneficiary (if Lessor or any partner or member of Lessor is a trust), have any liability for
the performance of Lessor’s obligations under this Lease beyond the limitations expressly set forth
herein. Notwithstanding any contrary provision herein, Lessor shall not be liable under any
circumstances for consequential, punitive or other speculative damages, including damages for any
injury or damage to, or interference with Lessee’s business, including loss or profits, loss of
rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each
case, however occurring. The provisions of this Section shall apply only to the Lessor and the
Persons herein described, and shall not be for the benefit of any insurer or any other third
party. The provisions of this Section 20.3 shall survive the expiration or any earlier termination
of this Lease.

20.4 Attorneys’ Fees

In the event of any legal or equitable proceeding in connection with this Lease, the
prevailing party in such proceeding, or the nondismissing party where the dismissal occurs other
than by reason of a settlement, shall be entitled to recover its reasonable costs and expenses,
including reasonable attorneys’ fees, costs and disbursements paid or incurred in such proceeding
and in enforcing any award or judgment granted pursuant thereto. Any award, judgment or order
entered in any such proceeding shall contain a specific provision providing for the recovery of
attorneys’ fees and costs incurred in enforcing such award or judgment, including, without
limitation: (a) post-award or post-judgment motions; (b) contempt proceedings; (c) garnishment,
levy, and debtor and third party examinations; (d) discovery; and (e) bankruptcy litigation. The
“prevailing party,” for purposes of this Agreement, shall be deemed to be that party which obtains
substantially the result sought, whether by dismissal, award or judgment.

20.5 No Waiver

No delay or omission by Lessor or Lessee in exercising or enforcing any right, remedy,
election or option accruing upon the noncompliance or failure of performance by Lessee or Lessor,
as applicable, under the provisions of this Lease, and no acceptance of full or partial Rent by
Lessor during the period of any such non-compliance or failure of performance by Lessee, shall
constitute an impairment or waiver of any such right, remedy, election or option. No alleged
waiver shall be valid or effective unless it is set forth in a writing executed by Lessor or
Lessee, as applicable. A waiver by Lessor or Lessee of any of the covenants, conditions or
obligations to be performed by the other party shall not be construed as a waiver of any subsequent
breach of the same or any other covenants, conditions or obligations.

20.6 Amendment

This Lease may not be amended by oral agreement. It may be amended only by a written
agreement signed by both Lessor and Lessee.

 

104

 

20.7 Successors and Assigns

Subject to and without affecting the limitations herein with respect to Transfers, this Lease
shall be binding on and inure to the benefit of the Lessor and Lessee and their respective
successors and assigns.

20.8 No Joint Venture or Loan Transaction

The parties agree that this Lease is intended to create only a landlord and tenant
relationship, and therefore the parties agree (i) that nothing contained herein shall be construed
as creating a joint venture, agency, lender-borrower, or any other relationship between the parties
hereto other than that of landlord and tenant, and (ii) to treat this Lease as a lease for tax
purposes and to take no tax position inconsistent therewith.

20.9 Severability

If any term or condition of this Lease, or the application thereof to any particular person or
circumstance, is found by a court of competent jurisdiction to be invalid or unenforceable, then
all other terms and conditions of this Lease, and the application of the term or condition in
question to persons or circumstances other than those as to which it was held invalid or
unenforceable, shall not be affected thereby, and shall be valid and enforceable to the full extent
permitted by law.

20.10 No Recordation; Quitclaim

Only the Memorandum of Lease, and not this Lease itself, shall be recorded.

20.11 Interpretation

The provisions of this Lease shall be construed as a whole, according to their common meaning,
and not strictly for or against either party. The parties acknowledge that each party and its
counsel have reviewed and participated in the drafting of this Lease, and therefore that the
rule of construction that any ambiguities are to be resolved against the drafting party shall not
be employed or applied in the interpretation of this Lease. The captions inserted in this Lease
are for convenience only and shall not in any way define, limit or otherwise describe the scope or
intent of this Lease, or any provision hereof, or in any way affect the interpretation of this
Lease. The term “including,” wherever used herein, shall be construed to mean “including, without
limitation.” The singular shall include the plural and vice versa, and each gender shall be deemed
to include any other gender.

20.12 Entire Agreement

This Lease, with exhibits, is a fully-integrated agreement which contains all of the parties’
representations, warranties, agreements and understandings with respect to the Premises. All
correspondence, memoranda, discussions, negotiations, drafts and agreements originating before the
Term Commencement Date with respect to the Premises, whether written or oral, including that
certain letter of intent dated May 17, 2004, executed by Morgans Hotel Group, LLC, a Delaware
limited
liability company, and Divco Properties West LLC, a Delaware limited liability company, are
superseded and replaced in their entirety by this Lease. No prior drafts of this Lease shall be
used or referred to in resolving any questions arising as to the parties’ intent.

 

105

 

20.13 Governing Law and Forum

This Lease shall be governed by and construed in accordance with the laws of the State of
California, without giving effect to any conflicts of laws principles that would cause the
application of the laws of any other jurisdiction. Any action brought by any party against the
other arising out of this Lease shall be brought in the California State Superior Court in and for
the County of San Francisco, or in the United States District Court for the Northern District of
California. Lessor and Lessee hereby consent to the jurisdiction of such courts, and waive any
objection to venue based on forum non conveniens or any other grounds, provided that the right of
either party to commence any action or proceeding in any court of competent jurisdiction as
provided above shall be subject to the arbitration provisions of Section 18 where applicable.

20.14 Brokers

Each party represents and warrants for the benefit of the other that it has not engaged the
services of any broker, finder or other person who may claim any commission, fee or other
compensation in connection with this Lease. Each party shall indemnify, defend and hold the other
harmless from and against any claims, damages, losses, liabilities, and costs and expenses
(including reasonable attorneys’ fees and costs) arising out of any agreement or action alleged on
the part of such first-mentioned party to entitle any broker, finder or other person to a
commission, fee or other compensation in connection with this Lease.

20.15 No Dedication

This Lease shall not be, nor be deemed or construed to be, a dedication to the public of all
or any portion of the Premises, any Improvements, or any areas in which the Premises are located.

20.16 No Third Party Beneficiaries

Except for the rights of any Lender provided in Section 15.7 above and the rights of any Fee
Lender, this Lease shall not be deemed or construed to confer any rights, title or interest upon
any person or entity other than the parties hereto, including any third party beneficiary status or
right to enforce any provision of this Lease.

20.17 Limitation on Effect of Approvals

All rights of Lessor to review, comment upon, approve, inspect or take any other action with
respect to the Premises are specifically for the benefit of Lessor and no other party. No review,
comment, approval or inspection, right or exercise of any right to perform Lessee’s obligations, or
similar actions required or permitted by, of, or to Lessor hereunder, or actions or omissions of
any Lessor Representatives, or other circumstances, shall give or be deemed to give Lessor any
liability, responsibility or obligation for, in connection with, or with respect to, the design,
construction, maintenance or operation of the Premises or any Improvements, nor shall
any such approval, actions, information or circumstances relieve or be deemed to relieve Lessee of
any of its obligations under this Lease, other than the matter so approved.

 

106

 

20.18 Time of the Essence

Subject to the provisions of this Lease relating to Force Majeure Events, time is of the
essence in the performance of each party’s obligations under this Lease.

20.19 Termination Not Merger

The voluntary sale or other surrender of this Lease by Lessee to Lessor, mutual cancellation
of this Lease or termination of this Lease by Lessor pursuant to any provision contained herein
shall not work a merger unless Lessor so elects in its sole discretion and each Lender and Fee
Lender has consented thereto in writing.

20.20 Waiver of Limitation on Releases

In furtherance of the provisions of Sections 10.4 and 12.5 of this Lease, Lessee acknowledges
that it is fully familiar with Section 1542 of the California Civil Code, which provides as
follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Lessee, on behalf of itself, each Affiliate of Lessee, and each other Person now or hereafter
claiming or acting by, through or under Lessee or any Affiliate of Lessee, unconditionally and
irrevocably waives and relinquishes any right or benefit which it now has or may have under
California Civil Code Section 1542, or any similar provision of the statutory or nonstatutory law
of any other jurisdiction, pertaining to any of the matters described or referred to in
Section 10.4 and/or Section 12.5 of this Lease. Lessee acknowledges that in connection with such
waiver and relinquishment, it is aware that it or its attorneys, accountants, consultants or other
experts or representatives or contractors may hereafter discover facts, conditions, liabilities,
claims or other matters in addition to or different from those which it now knows or believes do or
may exist with respect to such matters, but that it is Lessee’s intention to hereby fully, finally
and forever to release, for the benefit of all Lessor Indemnitees, all of the matters described or
referred to in Section 10.4 and/or Section 12.5 of this Lease; and all waivers and releases set
forth in Section 10.4 and/or Section 12.5 of this Lease shall be and remain in force and effect as
full and complete notwithstanding the discovery or existence of any such additional or different
fact, condition, liability, claim or other matter.

The provisions of this Section 20.20 shall survive the expiration or any earlier termination
of this Lease.

	 	 	 	 	 
	INITIALS:

	 	W.E.S.	 	 
	 

	 	 

Lessee
	 	 

Remainder of Page Intentionally Bank

 

107

 

IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease by proper persons thereunto
duly authorized as of the date first above written.

	 	 	 	 	 
	LESSOR: 	GEARY HOTEL HOLDINGS, LLC,

a Delaware limited liability company

 	 
	 	By:  	PMP Geary, LLC,	 
	 	 	a Delaware limited liability company, 	 
	 	Its: Managing Member 	 
	 	 	 	 	 
	 	By:  	             /s/ David A. Taran
 	 
	 	 	Name:  	David A. Taran 	 
	 	 	Title:  	Chief Executive Officer 	 
	 	 	 	 	 
	LESSEE: 	CLIFT HOLDINGS, LLC,

a Delaware limited liability company

 	 
	 	By:  	Morgans Hotel Group LLC,
 	 
	 	 	a Delaware limited liability company
 	 
	 	Its:  Managing Member
 	 

	 	 	 	 	 
	 	By:  	                                             /s/ W. Edward Scheetz
 	 
	 	 	W. Edward Scheetz, Manager 	 
	 	 	 
	 	By:  	                                             /s/ David Hamamoto
 	 
	 	 	David Hamamoto, Manager 	 

 

108

 

Exhibit A to Grant Deed

Legal Description

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF San Francisco, COUNTY OF San
Francisco, STATE OF California AND IS DESCRIBED AS FOLLOWS:

PARCEL 1:

BEGINNING AT THE POINT OF INTERSECTION OF THE SOUTHERLY LINE OF GEARY STREET AND THE EASTERLY LINE
OF TAYLOR STREET; RUNNING THENCE SOUTHERLY ALONG THE EASTERLY LINE OF TAYLOR STREET, 137 FEET, 6
INCHES; THENCE AT A RIGHT ANGLE EASTERLY 137 FEET, 6 INCHES; THENCE AT A RIGHT ANGLE NORTHERLY 137
FEET, 6 INCHES TO THE SOUTHERLY LINE OF GEARY STREET; THENCE AT A RIGHT ANGLE WESTERLY, ALONG SAID
LINE OF GEARY STREET, 137 FEET, 6 INCHES TO THE POINT OF BEGINNING.

BEING A PORTION OF 50 VARA BLOCK NO. 196.

PARCEL 2:

A PERPETUAL EASEMENT FOR LIGHT AND AIR OVER A 15-FOOT STRIP OF LAND IMMEDIATELY ADJOINING THE
ABOVE DESCRIBED PROPERTY ON THE SOUTH, AS GRANTED BY HILBAR PROPERTIES COMPANY TO PACIFIC STATES
SAVINGS AND LOAN COMPANY, DATED February 1, 1934, RECORDED February 10, 1934, IN BOOK 2606 OF
OFFICIAL RECORDS, PAGE 325, IN THE OFFICE OF THE RECORDER OF THE CITY AND COUNTY OF SAN FRANCISCO,
STATE OF CALIFORNIA. SAID GRANT OF EASEMENT FOR LIGHT AND AIR WAS MODIFIED BY THAT CERTAIN
AGREEMENT DATED June 5, 1941, BY AND BETWEEN PACIFIC STATES SAVINGS AND LOAN COMPANY, A CALIFORNIA
BUILDING AND LOAN ASSOCIATION, RALPH W. EVANS, AS BUILDING AND LOAN COMMISSIONER FOR THE STATE OF
CALIFORNIA, J. F. BARRETT. H. H. HILP AND LAWRENCE BARRETT, SAID MODIFICATION AGREEMENT WAS
RECORDED ON January 29, 1942, IN BOOK 3821, PAGE 399, OFFICIAL RECORDS, IN SAID RECORDER’S OFFICE.

APN: LOT 013, BLOCK 0316

 

A-1

 

EXHIBIT B

EXISTING HOTEL OPERATING AGREEMENTS

	(1)	 	Property Management Agreement, dated June 2, 1999, between Clift Holdings
LLC, a Delaware limited liability company, and Morgans Hotel Group Management LLC, a
Delaware limited liability company (f.k.a. Ian Schrager Hotel Management LLC).
	 
	(2)	 	Operating Lease (Food And Beverage Premises), dated May 22, 2001, between
Clift Holdings LLC, a Delaware limited liability company, and 495 Geary LLC, a Delaware
limited liability company.
	 
	(3)	 	Operating Agreement of 495 Geary LLC, dated May 16, 2001, as amended by
that certain First Amendment To Operating Agreement of 495 Geary LLC, dated July 31st,
2001.
	 
	(4)	 	Operating Agreement of SC Geary LLC, dated July 31st, 2001.
	 
	(5)	 	Consulting Agreement, dated July 31st, 2001, between 495 Geary LLC, a
Delaware limited liability company, and China Grill Management BD, Inc., a Florida
corporation.
	 
	(6)	 	Operating Covenants of Member B Attached to Operating Agreement of 495
Geary LLC, dated July 31st, 2001.

 

B-1

 

EXHIBIT C

MEMORANDUM OF LEASE

FORM OF MEMORANDUM OF GROUND LEASE

	 	 	 
	RECORDING REQUESTED BY AND
	 	 
	WHEN RECORDED MAIL TO:
	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

(Space above this line for Recorder’s use)

MEMORANDUM OF GROUND LEASE

This Memorandum of Ground Lease is made and entered into as of this
 _____ 

day of 2004, by and
between [PURCHASER NAME], a [Purchaser Entity] (“Ground Lessor”) and CLIFT HOLDINGS LLC, a Delaware
limited liability company (“Ground Lessee”).

1. Terms and Premises. Ground Lessor leases to Ground Lessee, and Ground Lessee
leases from Ground Lessor, that certain Premises consisting of land and improvements thereon known
by the street address of 495 Geary Street, San Francisco, California and as legally described on
Exhibit A attached hereto, in accordance with the provisions of that certain Ground Lease, dated

 _____, 2004 between the parties hereto (the “Ground Lease”). The provisions of the Ground
Lease are incorporated herein.

2. Term. The initial term of the Ground Lease is for ninety nine (99) years,
commencing on
 _____, 2004.

3. Purpose of Memorandum of Ground Lease. This Memorandum is prepared solely
for purposes of notice and recordation, and in no way modifies the provisions of the Ground Lease.

Remainder of Page Intentionally Blank

 

C-1

 

IN WITNESS WHEREOF, Ground Lessor and Ground Lessee have caused this Memorandum of Ground
Lease to be executed and delivered as of the date above written.

	 	 	 	 	 
	GROUND LESSOR:  	[PURCHASER NAME],

a [Purchaser Entity]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	 	 	 
	GROUND LESSEE:  	CLIFT HOLDINGS LLC,

a Delaware limited liability company

 	 
	 	By:  	Morgans Hotel Group LLC, 

a Delaware limited liability company
 	 
	 	Its:              Managing Member 	 

	 	 	 	 	 
	 	By:  	
 	 
	 	 	W. Edward Scheetz, Manager 	 

	 	 	 	 	 
	 	By:  	
 	 
	 	 	David Hamamoto, Manager 	 

 

C-2

 

	 
	STATE OF                                         

COUNTY OF                                         

	 	 	 	 	 	 	 	 	 	 	 
	On

	 	 	 	before me,
	 	 	,	 	 	 
	 

	 	 

Date
	 	 
	 	 

Name, Title of Officer
	 	 	 	 

	personally appeared 	 	 	, 	 
	

	 	 

Name(s) of Signer(s)
	 	 

	 	 	 	 	 	 	 
	o personally known to me

	 	-OR-
	o	 	proved to me on the basis of
satisfactory evidence to be the
person(s) whose name(s) is/are
subscribed to the within instrument and
acknowledged to me that he/she/they
executed the same in his/her/their
authorized capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s) or the entity
upon behalf of which the person(s)
acted, executed the instrument.

	 
	 	 	 	 	 	 
	 

	 	 	 	 	WITNESS my hand and official seal.	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	Signature of Notary	 

 

C-3

 

	 
	STATE OF                                         

COUNTY OF                                         

	 	 	 	 	 	 	 	 	 	 	 
	On

	 	 	 	before me,
	 	 	,	 	 	 
	 

	 	 

Date
	 	 
	 	 

Name, Title of Officer
	 	 	 	 

	personally appeared 	 	 	, 	 
	

	 	 

Name(s) of Signer(s)
	 	 

	 	 	 	 	 	 	 
	o personally known to me

	 	-OR-
	o	 	proved to me on the basis of
satisfactory evidence to be the
person(s) whose name(s) is/are
subscribed to the within instrument and
acknowledged to me that he/she/they
executed the same in his/her/their
authorized capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s) or the entity
upon behalf of which the person(s)
acted, executed the instrument.

	 
	 	 	 	 	 	 
	 

	 	 	 	 	WITNESS my hand and official seal.	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	Signature of Notary	 

 

C-4

 

EXHIBIT D

FORM OF LIQUOR LICENSE ENTITY OPERATING AGREEMENT TERMS

 

D-1

 

Exhibit D

Outline of Liquor License Entity Operating Agreement Terms

The operating agreement for said limited liability company (the “Company”) shall contain such
provisions as the parties may mutually agree, and in any event shall provide that (i) sole
management control of the daily operations of the Company shall be exercised by, and all profits,
losses and distributions of the Company shall be allocable and distributable solely to or be borne
solely by, (a) prior to any termination of the Ground Lease, the co-owner that is an Affiliate of
Ground Lessee (“Class A Member”), and (b) from and after any termination of the Ground Lease, the
co-owner that is an Affiliate of the Ground Lessor (“Class B Member”), (ii) the Class A Member
shall not have the right to (a) take or cause the Company to take any action with respect to
matters affecting the right, title or interest in and to the liquor licenses owned by the Company,
including, without limitation, any action that would result in a forfeiture, revocation, transfer,
pledge, hypothecation of or other alienation of such Liquor Licenses, or (b) take or cause to be
taken any action which would cause the dissolution or winding up of the Company or which would
otherwise make it impossible or impracticable to carry on the business operations of the Company,
in each case, without the prior written consent of the Class B Member, which may granted or
withheld in the Class B Member’s sole and absolute discretion, (iii) the Class A Member’s interest
in the Company may not be sold, assigned, pledged or hypothecated (other than any sale or
assignment made in connection with any replacement of the Food and Beverage Operator that is
permitted under the Ground Lease) without the prior written consent of the Class B Member, which
may granted or withheld in the Class B Member’s sole and absolute discretion, (iv) following any
termination of the Ground Lease, the Class A Member shall have the right and the obligation to
withdraw from the Company as soon as reasonably practicable in accordance with applicable law
(including, without limitation, applicable liquor license laws) and, in connection therewith, the
Class A Member and the Class B Member shall cooperate in removing the name of the Class A Member
and the names of any individual or entity that is an affiliate of the Class A Member (other than
the Company) from the liquor licenses held by the Company as soon as reasonably practicable, and
(v) during the period (a) prior to the termination of the Ground Lease, the Class A Member shall
indemnify, defend and protect the Class B Member against all damages, losses, costs, expenses and
liabilities that may arise from the operation of the Company and the Class A Member’s actions in
connection therewith, and (b) from and after the termination of the Ground Lease and the Class B
Member’s assumption of control of the management and operation of the Company, the Class B Member
shall indemnify, defend and protect the Class A Member against all damages, looses, costs, expenses
and liabilities that may arise from operation of the Company and the Class B Member’s actions in
connection therewith.

 

D-1

 

EXHIBIT E-1

FORM OF ACCOUNT CONTROL AGREEMENT

(BANK ACCOUNTS)

This ACCOUNT CONTROL AGREEMENT (ESCROW ACCOUNT) dated as of June  , 2004 (this “Agreement”)
is made among CLIFT HOLDINGS LLC, a Delaware limited liability company (“Pledgor”), [INSERT NAME OF
LESSOR] (“Lessor”) and [INSERT NAME OF BANK] (“Bank”).

The
parties hereto refer to Account No. __________  in the name of the Pledgor maintained at
Bank (the “Account”) and hereby agree as follows:

1. As collateral security for Pledgor’s obligations to Lessor under that
certain Ground Lease, dated as of
 _____, 2004, Pledgor hereby grants to Lessor, for its own
benefit, a present and continuing security interest in the Account and all contract rights, claims
and privileges in respect of the Account, and all proceeds of the foregoing, and Bank acknowledges
that this Agreement constitutes notice of Lessor’s security interest in such collateral and does
hereby consent thereto. Bank acknowledges being so notified and confirms that it has no actual
knowledge or notice of any restraint, security interest, lien or other adverse claim in or to the
Account or any funds therein.

2. Bank shall comply with all withdrawal, transfer, payment and other
instructions (collectively, “orders”) received from Lessor (without further consent from Pledgor)
concerning the Account. Bank shall also comply with orders received from Pledgor (without further
consent from Lessor) concerning the Account until Bank has received a notice purporting to be
signed and sent by the Lessor in substantially the form attached as Exhibit A hereto (a “Notice of
Exclusive Control”). After such receipt, Bank shall not honor any orders from Pledgor. Any Notice
of Exclusive Control received by Bank after 1:00 p.m. on any business day shall not be deemed
effective until the opening of business on the next succeeding business day. Notwithstanding the
foregoing: (i) all transactions relating to the Account or any items therein duly consummated or
processed by Bank prior to its receipt of a Notice of Exclusive Control (or duly commenced by Bank
prior to any such receipt and so consummated or processed thereafter) shall be deemed not to
constitute a violation of this Agreement; (ii) Bank may (at its discretion and without any
obligation to do so) commence honoring solely Lessor’s orders concerning the Account at any time or
from time to time after it becomes aware that Lessor has sent to it a Notice of Exclusive Control
(including, without limitation, reversing or redirecting any transaction referred to in
clause (i) above) with no liability whatsoever to Pledgor or any other party for doing so; and
(iii) Bank shall not change the name or account number of any Account without having received the
Lessor’s prior express written consent thereto.

3. Bank waives, releases and agrees not to assert, exercise or claim any
lien, encumbrance, right (including setoff right, banker’s lien or chargeback right) or other claim
against the Account or any funds therein, except solely with respect to (i) payment of customary
fees and charges with respect to the routine maintenance and operation of the Account or (ii) all
“Items” (as defined in the California Uniform Commercial Code) deposited to the Account and
returned, whether for insufficient funds or any other reason, in each case as provided for under
any agreements between the parties hereto relating to the Account. Bank shall neither advance
margin or other credit against the Account, nor hypothecate any funds deposited in the Account,
without the prior written consent of Lessor. Except as required by law, Bank shall not agree with
any other person or entity that it will comply with any withdrawal, transfer, payment instructions,
or any other orders, from such person or entity concerning the Account or any funds therein,
without the prior written consent of Lessor and any such agreement entered into without such
consent shall be null and void.

 

1

 

4. Anything to the contrary in this Agreement notwithstanding: (i) Bank
shall have only the duties and responsibilities expressly set forth in writing herein (and in its
standard account documentation and terms and conditions as in effect from time to time, all of
which shall apply to the Account to the extent not inconsistent with this Agreement) and shall not
be deemed to be a fiduciary for any party hereto; (ii) Bank shall be fully protected in acting or
refraining from acting in good faith on any written notice, instruction or request purportedly
furnished to it by Lessor in accordance with the terms hereof, in which case the parties hereto
agree that Bank has no duty to make any further inquiry whatsoever; and (iii) Bank shall not be
liable to any party hereto or any other person for any action or failure to act under or in
connection with this Agreement except for its failure to honor the instructions set forth herein,
or its willful misconduct or gross negligence.

5. Bank may terminate this Agreement upon the sending of at least thirty (30)
days’ advance written notice to the other parties hereto. Any other termination or any amendment
or waiver of this Agreement shall be effected solely by an instrument in writing executed by all
the parties hereto.

6. All notices shall be in writing and sent (including via facsimile with
receipt confirmed by telephone) to the parties hereto at their respective addresses or facsimile or
telephone numbers (or to such other address or facsimile and telephone numbers as any such party
shall designate in writing to the other parties from time to time):

	 	 	 
	Pledgor:

	 	Clift Holdings LLC
	 
	 	 
	 

	 	Attention:
	 

	 	Telephone:
	 

	 	Facsimile:
	 
	 	 
	Bank:

	 	[insert name of bank]
	 
	 	 
	 

	 	Attention:
	 

	 	Telephone:
	 

	 	Facsimile:
	 
	 	 
	Lessor:

	 	[insert name of lessor]
	 
	 	 
	 

	 	Attention:
	 

	 	Telephone:
	 

	 	Facsimile:

 

2

 

7. This Agreement: (i) may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto and hereto were upon
the same instrument; (ii) shall become effective when counterparts hereof have been signed by the
parties hereto; and (iii) shall be governed by and construed in accordance with the laws of the
State of California.

8. The provisions of this Agreement shall be binding upon and inure to the
benefit of Bank, Lessor and Pledgor and their respective successors and assigns.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
above written.

	 	 	 	 	 
	PLEDGOR: 	CLIFT HOLDINGS LLC,

a Delaware limited liability company

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

	 	 	 	 	 
	BANK:  	[INSERT NAME OF BANK],

a _____________________________

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

	 	 	 	 	 
	LESSOR:  	[INSERT NAME OF LESSOR]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

3

 

EXHIBIT A

(Attached to Exhibit E-1)

GEARY HOTEL HOLDINGS, LLC

a Delaware limited liability company

NOTICE OF EXCLUSIVE CONTROL

_______________________________________________,

[insert name of bank]

Attention:

	 	Re: 	 	 ACCOUNT CONTROL AGREEMENT (ESCROW ACCOUNT) dated as of
June  _______, 2004
(the “Agreement”) among CLIFT HOLDINGS LLC, a Delaware limited liability company, GEARY
HOTEL HOLDINGS, LLC, a Delaware limited liability company, and [insert name of bank]
relating to Account No.

Ladies and Gentlemen:

This constitutes the Notice of Exclusive Control referred to in paragraph 0 of the Agreement.

	 	 	 	 	 
	 	GEARY HOTEL HOLDINGS, LLC,

a Delaware limited liability company

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

1

 

EXHIBIT E-2

FORM OF ACCOUNT CONTROL AGREEMENT

(Escrow Accounts)

None

 

 

 

EXHIBIT F

APPROVED REQUIRED ALTERATIONS

	1.	 	The conversion of ten (10) Hotel guest rooms which are
currently not in use and not included in the aggregate total count of 363 keyed furnished
guest rooms and suites constituting the Hotel and are located on the second floor of the
Hotel, pursuant to a plan to be approved in accordance with the provisions of this Lease, into
meeting rooms for a total estimated cost of $600,000.

 

F-1

 

EXHIBIT G

APPROVED ASBESTOS O&M PLAN

 

G-1

 

SCHEDULE 1

LIST OF INITIAL DISQUALIFIED EXPENSES

The following fees, charges, and expense reimbursements provided for in the agreements
described below shall be Disqualified Expenses:

A. Pertinent agreements are as follows:

1. Property Management Agreement, dated as of June 2, 1999, between
Clift Holdings LLC, as Owner, and Ian Schrager Hotel Management LLC, as Operator, for the
Management of the Clift Hotel (the “Management Agreement”).

2. Exclusive Services Agreement, dated as of February, 1988, between
Ian Schrager Hotels LLC, and Philippe Starck (the “Starck Agreement”).

B. Disqualified Expenses:

1. A sum equal to the amount by which the aggregate of the Management Fee (as
defined in Section 10.1 of the Management Agreement), plus the Allocable Chain Expenses (as defined
in Section 1.1 of the Management Agreement, and as payable pursuant to the provisions of
Section 6.1(iii) of the Management Agreement), plus any and all royalty fees or payments payable
under the Starck Agreement, payable for any Operating Year exceeds four and one-half percent
(4-1/2%) of the annual Gross Revenues (as defined in the Management Agreement) of the Hotel for
such Operating Year, shall constitute Disqualified Expenses; provided, however, that amounts
payable by Lessee to Morgans for the provision of global sales services provided to all hotels
operated by Morgans Hotel Group Management LLC which amounts are not otherwise included within
Allocable Chain Expenses (“Group Sales Charges”) shall be treated as Ordinary Operating Expenses
and not as Disqualified Expenses so long as and to the extent that (i) the amount of Group Sales
Charges allocable to the Hotel shall be in proportion to the number of keyed guest rooms and suites
in the Hotel relative to the number of keyed guest rooms and suites in all other hotels operated by
Morgans Hotel Group Management, Inc. that also receive such global sales services (or such other
allocation method as may hereafter be reasonably approved in writing by Lessor upon Lessee’s
request), and (ii) the annual amount payable by Lessee for such Group Sales Charges which are
allocated to the Hotel and/or its operations for any Operating Year shall not exceed One Hundred
and Twenty-Five Thousand Dollars ($125,000.00), escalated by the percentage increase in the CPI
occurring between the Term Commencement Date and the last day of the calendar year immediately
preceding such Operating Year.

2. Any expense reimbursements payable to the Operator pursuant to
Section 6.1(ii) and/or 6.1(iv) of the Management Agreement shall constitute Disqualified Expenses,
except to the extent otherwise hereafter reasonably approved in writing by Lessor.

 

1

 

SCHEDULE 2

SCHEDULE OF UNSECURED CREDITORS

 

1

 

Schedule 2

Schedule of Unsecured Creditors

Unsecured Creditors

	 	 	 	 	 
	CREDITOR NAME	 	Court Ruling	 
	A 2 Z BUSINESS SYSTEMS
	 	 	144.37	 
	ABC Corporate Services
	 	 	5,593.68	 
	Able Engineering Services
	 	 	682,154.93	 
	Accountemps
	 	 	3,558.11	 
	ADP
	 	 	2,504.89	 
	Airgas NCN
	 	 	142.71	 
	Alhambra
	 	 	1,413.60	 
	ALLAN FRANK & MYRON GROSSMAN
	 	 	2,690.32	 
	AMBROSINO
	 	 	5,295.00	 
	ASSA ABLOY HOSPITALITY INC.
	 	 	1,699.45	 
	BARON & BARON, INC.
	 	 	60,060.62	 
	BLUE WATER
	 	 	6,952.00	 
	Boise Cascade Office Products
	 	 	2,003.67	 
	California Parking Company
	 	 	79,134.72	 
	Calpacific Equipment Co.
	 	 	282.48	 
	CASSINA
	 	 	63,131.00	 
	CCTV/C.C. COURTNEY
	 	 	683.03	 
	CDW DIRECT, LLC
	 	 	163.49	 
	CENTRAL PRINTING GROUP
	 	 	8,478.78	 
	CINTAS CORPORATION
	 	 	695.65	 
	CITY LIGHTS
	 	 	20.18	 
	City Maps, Inc.
	 	 	2,249.38	 
	CLAIR BROTHERS
	 	 	12,039.00	 
	Clean Source, Inc.
	 	 	578.42	 
	COCA-COLA BOTTLING CO.
	 	 	684.00	 
	CONTRA COSTA NEWSPAPERS
	 	 	1,410.00	 
	COSTCO WHOLESALE
	 	 	710.90	 
	Craigslist
	 	 	150.00	 
	DA MKTG., INC.
	 	 	3,344.16	 
	David Edward Co.
	 	 	5,150.20	 
	DELUXE BUSINESS CHECKS
	 	 	166.99	 
	DEM Enterprises, Inc., d/b/a ABC
Worldwide Chauffeured Limosines
	 	 	42,928.32	 

 

1

 

	 	 	 	 	 
	CREDITOR NAME	 	Court Ruling	 
	DESIGN BUSINESS COMMUNICATIONS
	 	 	1,021.93	 
	DIETER FRANCK (Argo)
	 	 	7,326.00	 
	Digital Color Concepts, Inc.
	 	 	37,305.80	 
	DIRECT APPROACH MARKETING SVCS
	 	 	87,403.12	 
	DOWN, INC.
	 	 	1,138.32	 
	DTI BUSINESS CENTER
	 	 	244.13	 
	EARTH ENTERPRISE
	 	 	20,445.15	 
	ECOLAB PEST ELIMINATION SVC.
	 	 	1,635.00	 
	Ecolab, Inc.
	 	 	5,788.74	 
	EEC Industries, Ltd.
	 	 	9,380.00	 
	ENTERPRISE
	 	 	164,643.60	 
	EPIC WINES
	 	 	—	 
	EXOTIC GOURMET CORP.
	 	 	159.64	 
	FASTMETRICS, LLC
	 	 	1,040.37	 
	FILI D’ORO
	 	 	3,947.86	 
	FIRST CALL INC
	 	 	299.29	 
	FIT-TECH SERVICE, INC
	 	 	590.00	 
	Fluid Gauge Company
	 	 	388.85	 
	FREEBAIRN-SMITH & CRANE
	 	 	8,477,75	 
	Fregosi and Company
	 	 	1,029.61	 
	G & S FURNITURE & OFFICE
	 	 	2,324.20	 
	GALILEO INTERNATIONAL
	 	 	1,127.06	 
	Gibson, Dunn & Crutcher LLP
	 	 	48,075.52	 
	GOLDEN GATE DISPOSAL
	 	 	21,528.44	 
	Grinnell Fire Protection
	 	 	1,119.36	 
	Grosvenor Clift Associates
	 	 	581,512.00	 
	HOECK IRON WORKS
	 	 	216.46	 
	HOSPITALITY INFORMATION SRVC
	 	 	630.00	 
	Hospitality Services, Inc.
	 	 	747.00	 
	HOTEL MONACO
	 	 	715.92	 
	HOTEL RESOURCES
	 	 	1,045.16	 
	ICE MACHINES INC
	 	 	35.81	 
	Imagistics International, Inc.,
f/k/a Pitney Bowes Office Systems 
	 	 	1,374.86	 
	

INDUSTRIAL PLUMBING SUPPLY
	 	 	3,588.69	 
	INFRASTRUCTURE CONNECT
	 	 	2,752.53	 
	IN-ROOM WEST, INC.
	 	 	3,601.40	 
	ITT INDUSTRIES-TDS CORP. SRVC
	 	 	3,404.98	 
	Jackson Lewis LLP
	 	 	32,138.24	 
	JOSEPH H. SCHAUF CO., INC.
	 	 	164.92	 

 

2

 

	 	 	 	 	 
	CREDITOR NAME	 	Court Ruling	 
	KLEIN’S CONFECTIONS, INC.
	 	 	602.50	 
	KRISAM GROUP, INC.
	 	 	791.94	 
	LANDMARK INC
	 	 	43,061.00	 
	LAWSON PRODUCTS INC
	 	 	1,492.53	 
	LEXINGTON SERVICES CORP
	 	 	—	 
	LIBERON/STAR WOOD FINISH
	 	 	212.28	 
	Light Source
	 	 	5,055.26	 
	MALTBY ELECTRIC SUPPLY CO
	 	 	192.77	 
	Maui Calls/Bravo Travel
	 	 	457.25	 
	MBL, Inc.
	 	 	307.73	 
	MCMASTER-CARR SUPPLY CO.
	 	 	1,529.85	 
	Modern Express Courier
	 	 	—	 
	MODERNE DRAPERY SERVICE
	 	 	14,734.25	 
	MORTENSEN’S CARPETS INC. (Argo)
	 	 	5,250.00	 
	MURPHY & SIMI CO
	 	 	103.99	 
	NEC Business Network Solutions
	 	 	9,608.52	 
	NEUTRON INDUSTRIES INC.
	 	 	712.39	 
	NRG Energy Center San Francisco LLC
	 	 	47,488.00	 
	OMEGA INDUSTRIAL SUPPLY, CO
	 	 	355.29	 
	Options Tai Ping
	 	 	7,435.00	 
	Otis Elevator Company
	 	 	18,920.00	 
	OVERSTREET ASSOCIATES
	 	 	400.00	 
	Pacific Gas and Electric Company
	 	 	270,704.56	 
	PACIFIC SNAPPLE DISTRIBUTORS
	 	 	153.50	 
	PARKER MECHANICAL CONTRACTING
	 	 	—	 
	Pauline Festa
	 	 	1,075.39	 
	PC CONNECTION SALES CORP
	 	 	192.67	 
	PHILIPPE STARCK
	 	 	133,618.31	 
	PlanetOut Partners USA, Inc.
	 	 	5,851.55	 
	PLAYBILL, INC.
	 	 	2,692.00	 
	PRAXAIR DISTRIBUTION INC
	 	 	87.24	 
	Presentation Services
	 	 	103,892.44	 
	PRINT INTERNATIONAL
	 	 	31,222.32	 
	PROGRESS GLASS CO INC
	 	 	4,061.00	 
	PROGRESSIVE IMPROVEMENTS
	 	 	87,663.00	 
	PURCHASE POWER
	 	 	80.25	 
	PURCHASING ASSOCIATES, INC.
	 	 	18,250.00	 
	PURPLE
	 	 	355.27	 
	Pyramid Van & Storage Co. of San
Francisco, Inc. d/b/a Pyramid Installations
	 	 	11,304.73	 

 

3

 

	 	 	 	 	 
	CREDITOR NAME	 	Court Ruling	 
	Qwest
	 	 	9,522.93	 
	R&H Wholesale Supply, Inc.
	 	 	281.27	 
	RADIUS, THE GLOBAL TRAVEL CO.
	 	 	525.00	 
	RAHCO INTERNATIONAL, INC.
	 	 	244.10	 
	Reed Smith LLP
	 	 	191,774.32	 
	REFRIGERATION SUPPLIES
	 	 	427.43	 
	SAFETY KLEEN
	 	 	1,818.69	 
	SAFLOK
	 	 	623.80	 
	San Jose Mercury News
	 	 	9,359.28	 
	SAN FRANCISCO BUSINESS TIMES
	 	 	85.00	 
	SAN FRANCISCO CHRONICLE
	 	 	4,145.30	 
	San Francisco Culinary, Bartenders,
and Service Employees Pension Fund
	 	 	—	 
	San Francisco Culinary,
Bartenders, and Service Employees
Pension Fund
	 	 	—	 
	San Francisco Culinary,
Bartenders, and Service Employees
Welfare Fund
	 	 	—	 
	San Francisco Culinary,
Bartenders, and Service Employees
Pension Fund
	 	 	—	 
	San Francisco Culinary,
Bartenders, and Service Employees
Pension Fund
	 	 	—	 
	San Francisco Culinary,
Bartenders, and Service Employees
Pension Fund
	 	 	—	 
	SANDERSON
	 	 	3,865.79	 
	SBC Pacific Bell
	 	 	8,760.45	 
	SC MADISON, dba ASIA DE CUBA
	 	 	11,293.19	 
	SCL LONDON LTD
	 	 	5,914.42	 
	SECURITY SAFE
	 	 	282.79	 
	SESAC INC.
	 	 	398.69	 
	SFPUC-WATER DEPARTMENT
	 	 	54,091.39	 
	SILLA PERE
	 	 	183.60	 
	SKASOL INC.
	 	 	2,040.31	 
	SPRINT PCS
	 	 	1,600.15	 
	ST. MARTIN’S LANE
	 	 	8,279.53	 
	Stamats Meetings Media
	 	 	900.00	 
	SUNSET RESTAURANT LLC
	 	 	29,346.42	 
	T.A.P. ENTERPRISES
	 	 	11,615.77	 
	THE APPOINTMENT GROUP
	 	 	35.10	 
	THE COURIER GUYS
	 	 	104.00	 
	THE FAIRMONT HOTEL
	 	 	342.00	 

 

4

 

	 	 	 	 	 
	CREDITOR NAME	 	Court Ruling	 
	The Glidden Company d/b/a ICI
Paints (Argo)
	 	 	4,512.69	 
	THE HOSPITALITY GROUP
	 	 	2,520.00	 
	THE PRESCOTT HOTEL
	 	 	204.06	 
	THE RITZ-CARLTON
	 	 	2,525.05	 
	THE SHORE CLUB
	 	 	223.00	 
	THELEN REID & PRIEST LLP
	 	 	690.95	 
	THOR, INC.
	 	 	2,095.00	 
	Torn Ranch, Inc.
	 	 	6,910.63	 
	TRAVELCLICK INC.
	 	 	1,577.20	 
	ULTRA-CHEM INC.
	 	 	118.07	 
	UNION TRIBUNE PUBLISHING CO.
	 	 	3,063.75	 
	UNION SQUARE ASSOCIATION
	 	 	2,301.00	 
	Unisource
	 	 	8,468.50	 
	Unisource Maintenance Supply
	 	 	83.27	 
	UNIVERSAL SPECIALTIES INC.
	 	 	232.62	 
	Vela Flor
	 	 	10,385.78	 
	W.W. GRAINGER INC.
	 	 	2,105.40	 
	WALKING BILLBOARD PROMOTIONS
	 	 	447.65	 
	Warren’s Fabrics, Inc.
	 	 	9,414.66	 
	WESSCO INTERNATIONAL
	 	 	22,377,47	 
	Western State Design, Inc.
	 	 	2,003.15	 
	Western State Design, Inc.
	 	 	13,177.88	 
	World Travel Partners I, LLC
	 	 	1,100.00	 
	XEROX CORPORATION
	 	 	1,787.76	 
	ZEP MANUFACTURING
	 	 	107.95	 
	Zee Medical Service
	 	 	171.47	 
	 
	 	 	 
	TOTAL
	 	 	3,340,512.22	 

 

5Exhibit 10.5

Exhibit 10.5

LIMITED GUARANTY OF LEASE

This LIMITED GUARANTY OF LEASE (the “Guaranty”) is dated the 17th day of
September, 2010, and is made by MORGANS GROUP LLC, a Delaware limited liability company
(“Guarantor”) to and for the benefit of HASINA, LLC, a California limited liability
company, TARSTONE HOTELS, LLC, a Delaware limited liability company, KALPANA, LLC, a California
limited liability company, RIGG HOTEL, LLC, a California limited liability company, and JRIA, LLC,
a Delaware limited liability company (collectively, “Lessors”).

RECITALS

A. CLIFT HOLDINGS, LLC, a Delaware limited liability company (“Lessee”), 495 GEARY,
LLC, a Delaware limited liability company (“495 Geary”), and MORGANS HOTEL GROUP CO., a
Delaware corporation (“Morgans”), on the one hand, and Lessors and TARSADIA HOTELS, a
California corporation (“Tarsadia”), on the other hand, have concurrently herewith entered
into that certain Settlement and Release Agreement of even date herewith (the “Settlement
Agreement”), a copy of which is attached hereto as Exhibit “A,” with respect to the
Lessors Action and the Morgans Action (as defined therein).

B. Guarantor is the direct or indirect owner of Lessee and 495 Geary, and will benefit
directly from the terms and provisions of the Settlement Agreement.

C. In order to induce Lessors and Tarsadia to enter into the Settlement Agreement, Guarantor
has offered and agreed to guaranty the Guaranteed Obligations (as hereinafter defined) (subject to
the limitations set forth herein) under that certain “Ground Lease” dated October 14, 2004, as
amended from time to time (the “Lease”) for the land and improvements (and certain personal
property thereon) located at and commonly known as 495 Geary Street, San Francisco, California (the
“Premises”).

D. Except as otherwise defined herein, all capitalized terms shall have the means ascribed to
them in the Lease.

AGREEMENT

NOW, THEREFORE, for valuable consideration, including the performance of the promises,
covenants, representations and warranties hereinafter set forth, Guarantor, intending to be legally
and equitably bound, covenants and agrees as follows:

I.

GUARANTY

1.1. Guarantor hereby irrevocably and unconditionally guarantees and promises to, and for the
benefit of, Lessors and each of them, and their successors and assigns, the full and complete
payment and performance by Lessee of the Guaranteed Obligations as and when such payment or
performance shall become due. As used herein, the term “Guaranteed Obligations”) shall
mean any and all Losses (as hereinafter defined) incurred or suffered by Lessors, or any of
them, and arising out of or in connection with the occurrence of any of the matters listed
below from and after the date hereof:

(a) Lessee (i) fails to pay any installment of Annual Base Rent or Defaulted Rent Payment when
due and thereafter within three (3) days after delivery of written notice of such failure to the
offices of Lessee (delivered pursuant to the notice
provisions of the Lease) and Guarantor
(delivered pursuant to the notice provisions set forth herein), and (ii) fails to vacate
and surrender the Premises in compliance with its obligations under Section 8.1 of the Lease
(subject to the obligations of Lessee to transition operations of the Hotel and the Hotel Business
to Lessors in accordance with the terms of Section 9.2 of the Lease, upon the expiration of such
three (3) day period; or

 

 

 

(b) An Event of Default occurs as a result of (i) the failure by Lessee to pay any sums (other
than Annual Base Rent) under the Lease, or (ii) the breach by Lessee of any non-monetary covenant
or obligation of the “Lessee” under the Lease, and in each case Lessee or Morgans disputes the
occurrence of such Event of Default, and it is thereafter determined by a final non-appealable
judgment that an Event of Default, in fact, occurred; or

(c) Lessee fails to comply with any of its transition and other obligations under Section 9.2
of the Lease and such failure is not cured within two (2) business days after delivery of written
notice of such failure to the offices of Lessee (delivered pursuant to the notice provisions of the
Lease) and Guarantor (delivered pursuant to the notice provisions set forth herein); or

(d) (i) Guarantor or any person who controls Guarantor files or colludes in or consents to the
filing of a petition against Lessee in any court, whether or not under any statute of the United
States of America or any State, in any bankruptcy, reorganization, composition, extension,
arrangement, insolvency or other debtor-relief proceeding (other than if requested, in writing, to
do so by all of Lessors), or (ii) Guarantor or any person who controls Guarantor seeks or consents
to the appointment of a receiver, manager, trustee or liquidator for all or substantially all of
Lessee’s assets, or (iii) Lessee (A) admits in writing its inability to pay its debts generally as
they become due, or (B) files a petition in bankruptcy, insolvency, reorganization, readjustment of
debt, dissolution or liquidation under any law or statute of any government or any subdivision
thereof, or (C) makes an assignment for the benefit of creditors, or (D) consents to or acquiesces
to the appointment of a receiver for itself or the whole or any substantial part of the Premises
(other than at the request, in writing, of all of Lessors); or

(e) Guarantor, Morgans, Lessee, 495 Geary or any of their respective Affiliates, in any
material respect, upon the occurrence and during the continuation of an Event of Default,
interferes with or fails to cooperate with Lessors (i) in the transfer, in accordance with the
terms of the Lease, of (A) all sums under the Escrow Accounts, the Capital Reserve Accounts, the
FF&E Reserve Account, the Capital Replacement Account, and the Hotel Operating Accounts, together
with all other accounts that are subject to the Account Control Agreements, and (B) the FF&E and
the Personal Property, or (ii) in the transfer, in accordance with the terms of the Lease, of the
liquor licenses, or the control or interest in the Operating Agreement for the Liquor License
Company; or

 

2

 

(f) Subject to the provisions of Section 4.1 hereof, Lessee, 495 Geary or Morgans breaches any
of its respective representations or warranties as set forth in the Settlement Agreement.

1.2. For the purposes of this Guaranty, the term “Losses” means: (a) any unpaid Rent
(including Annual Base Rent and Defaulted Rent Payments) with respect to the period prior to the
date Lessors obtain possession of the Premises and Lessee has complied with its obligations under
Section 8.1 of the Lease; and (b) any other losses, damages, and expenses directly and proximately
arising from the foregoing matters described in this Section 1.1; and (c) any other amounts payable
under the Lease and reasonable attorneys’ fees and other reasonable costs of defense, collection
and enforcement arising from the foregoing matters; provided, however, that aggregate Losses
hereunder shall not exceed an amount equal to Six Million Dollars ($6,000,000.00).

Subject to the provisions of Section 4.1 hereof, Guarantors obligations under this Agreement
shall survive the termination or expiration of the Term of the Lease. Guarantor understands and
agrees that its obligations under this Guaranty are unconditional, irrevocable and continuing, and
that this Guaranty is a guaranty of payment and performance, and not of collection.

1.2 Notwithstanding any other provision of this Guaranty, (i) nothing in this Guaranty shall
be deemed to prevent Lessee or Guarantor from, or impose any liability on Lessee or Guarantor as a
result of, seeking, in good faith, injunctive relief to contest any exercise by any of Lessors of
any remedies on the grounds that either (A) an Event of Default (except an Event of Default arising
from Lessee’s failure to pay any installment of Annual Base Rent or Lessee’s failure to pay any
portion of the Defaulted Rent Payments) has not occurred or (B) Lessors have failed to comply in
all material respects with the requirements of the Lease relating to the exercise of such remedy
thereunder.

II.

GUARANTOR’S DUTIES

2.1. Independent Obligations. The liability of Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the Guaranteed Obligations, whether executed
by Guarantor or by any other party, and the liability of Guarantor hereunder is not affected or
impaired by (a) any direction of application of payment by Lessors or by any other party, or
(b) any other guaranty, undertaking or maximum liability of Guarantor or of any other party as to
Lessee’s obligations, or (c) any payment on or in reduction of any such other guaranty or
undertaking, or (d) any revocation or release of any obligations of any other guarantor of the
Guaranteed Obligations, or (e) any payment made to Lessors on the Guaranteed Obligations which
Lessors repay to Lessee pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and Guarantor waives any right to the deferral or
modification of Guarantor’s obligations hereunder by reason of any such proceeding.

 

3

 

III.

LESSORS’S RIGHTS

3.1. Enforcement. Lessors reserves the right to proceed against Lessee, Guarantor
and/or any other guarantor of the Guaranteed Obligations, or any of them, or all of them, and to
enforce against each of Lessee, Guarantor and/or any or all other guarantors of the Guaranteed
Obligations, or any or all of them, any and all rights that Lessors may have to said Rent, property
taxes, insurance premiums and other sums or charges accrued pursuant to the terms of the Lease.
Guarantor understands and agrees that Guarantor’s liability under this Guaranty shall be primary,
and that in any right of action which may accrue to Lessors under the Lease or this Guaranty,
Lessors, at their option, may proceed against Guarantor without having taken any action or obtained
any judgment against Lessee.

3.2. Guarantor’ Waivers. Guarantor hereby irrevocably and unconditionally waives:

(a) All defenses by reason of any disability of Lessee;

(b) Any and all rights it may have now or in the future to require or demand that Lessors
pursue any right or remedy Lessors may have against Lessee or any other third party;

(c) Any and all rights it may have to enforce any remedies available to Lessors, now or in the
future, against Lessee;

(d) Any and all rights to participate in any security held by Lessors now or in the future;

(e) The right to require Lessors to (i) proceed against Lessee or any other guarantor(s), (ii)
proceed against or exhaust any security which Lessors now holds or may hold in the future from
Lessee, or (iii) pursue any other right or remedy available to Lessors;

(f) All rights of subrogation, reimbursement, indemnity, and contribution (in each case until
such time as the Lease shall have terminated and all of Lessee’s obligations thereunder, and
Guarantor’s obligations under this Guaranty, shall have been paid in full), all rights to enforce
any remedy Lessors may have against Lessee, and all rights to participate in any security held by
Lessors for the obligations of Lessee under the Lease, as well as any defense based upon the
impairment of any subrogation, reimbursement, indemnity, or contribution rights, or of any of the
other foregoing rights, that Guarantor might have absent the foregoing waiver. Further, Guarantor
agrees (a) not to seek to enforce or to obtain any such right, or to accept any payment from any
other person, in violation of the foregoing waiver, and (b) that any agreement or other
understanding at any time entered into with any person granting any such right to Guarantor shall
be null and void; and

(g) Any and all other waivable defenses.

 

4

 

In addition, Guarantor hereby expressly waives and relinquishes all rights, remedies, and
defenses accorded by applicable law to guarantors and agrees not to assert or take advantage of any
such rights, remedies, or defenses, including but not limited to: (a) the defense of the statute of
limitations in any action hereunder or in any action for the collection of any indebtedness or the
performance of any obligation hereby guaranteed; (b) any defense that may arise by reason of the
incapacity, lack of authority, death or administration, bankruptcy, or any other proceeding) of any
other person or persons; (c) any defense based upon the failure to give notice of the acceptance of
this Guaranty by any person; (d) any defense based upon the failure to make, give, or serve demand,
notice of default or nonpayment, presentment, protest and all other notices of any kind to which
Guarantor might otherwise be entitled in connection with this Guaranty or the Lease (but not
including any notice to Lessee referred to in Section 1.1(a) or any notice to Lessee of an alleged
default under the Lease); (e) all rights and defenses arising out of an election of remedies by
Lessors; (f) any defense based upon any lack of diligence by Lessors in the collection of any sums
owing under the Lease; (g) any defense based upon any statute or rule of law which provides that
the obligation of a surety must be neither larger in amount nor in other respects more burdensome
than that of the principal; (h) any duty on the part of Lessors to disclose to Guarantor any facts
Lessors may now or hereafter know about Lessee, regardless of whether Lessors has reason to believe
that any such facts materially increase the risk beyond that which Guarantor intends to assume or
has reason to believe that such facts are unknown to Guarantor or has a reasonable opportunity to
communicate such facts to Guarantor, it being understood and agreed that Guarantor is fully
responsible for being and keeping informed of the financial condition of Lessee and of all
circumstances bearing on the risk of nonpayment of any obligations hereby guaranteed; and (i) any
defense arising because of an election made by Lessors under the Federal Bankruptcy Code.

IV.

ALTERATION, MODIFICATION OR ASSIGNMENT

4.1. Effect of Assignment, Extension, Modification or Termination of Lease. Guarantor
understands and agrees that the obligations of Guarantor under this Guaranty shall in no way be
affected by any assignment, subletting, extension, modification, alteration or termination of the
Lease or any interest therein, including, but not limited to, Lessee entering into any sublease
thereunder, or any assignment of any of Lessee’s rights or obligations under the Lease, and any
such assignment, extension, modification, alteration or termination of the Lease, shall in no way
release or discharge Guarantor from any obligations accruing under this Guaranty; provided,
however, upon any assignment of all of Lessee’s interest in and to the Lease, and the leasehold
estate created thereby, in compliance with the terms of the Lease, in a bona fide transaction, to a
Transferee in which none of Morgans, Lessee, 495 Geary or any of their direct or indirect commonly
controlled affiliates or controlling persons have any direct or indirect ownership or control, and
either (x) such Transferee has a net worth, determined in accordance with generally accepted
accounting principles of at least Twenty-Five Million Dollars ($25,000,000.00), or (y) a Person
with such net worth enters into a guaranty in substantially the same form as, and in replacement
for, this Guaranty, then for occurrences and events first arising in any periods thereafter
Guarantor shall have no liability; and provided further that except as otherwise set forth in this
Guaranty, upon surrender of possession of the
Premises in accordance with the Lease, the obligations of Guarantor under this Guaranty shall
terminate. The term “Lease” shall include all amendments, modifications, alterations and
extensions of the Lease.

 

5

 

4.2. Assignment. Guarantor understands and agrees that any transfer of the Lease
and/or the Premises by Lessors, or any of them, or any rights or obligations accruing thereunder,
shall in no way affect Guarantor’s obligations under this Guaranty, and all such assignees and
successors of Lessors (or any of them) shall hold the benefits hereof and may enforce the
provisions hereof.

4.3. Delay in Enforcement. Guarantor understands and agrees that any failure or delay
of Lessors to enforce any of its rights under the Lease or this Guaranty shall in no way affect
Guarantor’s obligations under this Guaranty.

V.

MISCELLANEOUS

5.1. Notices. Except as otherwise expressly provided in this Guaranty, all notices,
requests, demands and other communications hereunder (“Notices”) shall be in writing and
shall be deemed delivered by (i) hand delivery upon receipt, (ii) registered mail or certified
mail, return receipt requested, postage prepaid, upon the third day after deposit into the United
States mail, (iii) by confirmed telecopy or facsimile transmission when sent, or (iv) overnight
courier (next business day delivery) on the next business day at 12:00 noon, whichever shall occur
first, as follows:

	 	 	 	 	 
	 

	 	To Guarantor:
	 	Morgans Group LLC.
	 

	 	 	 	475 Tenth Avenue
	 

	 	 	 	New York, New York 10018
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Telephone: (212) 277-4100
	 

	 	 	 	Telecopier: (212) 277-4280
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Hogan Lovells US LLP
	 

	 	 	 	Columbia Square
	 

	 	 	 	555 Thirteenth street, NW
	 

	 	 	 	Washington, DC 20004
	 

	 	 	 	Attn: Bruce Gilchrist, Esq.
	 

	 	 	 	Telephone: (202) 637-5600
	 

	 	 	 	Telecopier: (202) 637-5910

 

6

 

	 	 	 	 	 
	 

	 	To Lessors:
	 	TARSADIA HOTELS
	 

	 	 	 	Attn: Renee Molloy
	 

	 	 	 	620 Newport Center Drive
	 

	 	 	 	Fourteenth Floor
	 

	 	 	 	Newport Beach, CA 92660
	 

	 	 	 	Telephone: (949) 610-8016
	 

	 	 	 	Telecopier: (949) 610-8216
	 
	 	 	 	 
	 

	 	With a Copy to:
	 	TARSADIA HOTELS
	 

	 	 	 	Attn: Edward G. Coss, Esq.
	 

	 	 	 	620 Newport Center Drive
	 

	 	 	 	Fourteenth Floor
	 

	 	 	 	Newport Beach, CA 92660
	 

	 	 	 	Telephone: (949) 610-8022
	 

	 	 	 	Telecopier: (949) 610-8222

Any correctly addressed Notices that is refused, unclaimed or undelivered because of an act or
omission of the party to be notified shall be considered to be effective as of the first
(1st) day that the notice was refused, unclaimed or considered undeliverable by the
postal authorities, messenger or overnight delivery service. The parties hereto shall have the
right from time to time, and at any time to change their respective addresses and each shall have
the right to specify as its address any other address within the United States of America, by
giving to the other party at least thirty (30) days prior written notice thereof, in the manner
prescribed herein; provided, however, that to be effective, any such change of address must be
actually received (as evidenced by a return receipt).

5.2. Subrogation. Guarantor understands and agrees that Guarantor shall have no right
to subrogation against Lessee until such time as all of Lessee’s obligations to Lessors have been
fully paid and discharged.

5.3. Assignability. This Guaranty may be assigned in whole or in part by Lessors upon
written notice to Guarantor. Guarantor shall have no right of assignment or delegation of this
Guaranty or Guarantor’s obligations hereunder.

5.4. Successors and Assigns. The terms and provisions of this Guaranty shall be
binding upon and inure to the benefit of the successors and assigns of the parties hereto.

5.5. Modification of Guaranty. This Guaranty constitutes the full and complete
agreement between the parties hereto, and it is understood and agreed that the provisions hereof
may only be modified by a writing executed by both parties hereto.

5.6. Invalidity. If any term, provision, covenant or condition of this Guaranty is
held to be void, invalid or unenforceable, the remainder of the provisions shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

 

7

 

5.7. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California. If any legal action is necessary to enforce
the terms and conditions of this Agreement, the parties agree that the United States District
Court for the Northern District of California, located in the State of California, County of San
Francisco, or if such court determines, on its own motion, without petition or request of any party
hereto, that it lacks jurisdiction, the California State Superior Court in and for the County of
San Francisco shall be the sole venue and jurisdiction for the bringing of such action.

5.8. Professional Fees and Costs. If a lawsuit, arbitration or other proceedings are
instituted by any party to enforce any of the terms or conditions of this Guaranty against any
other party hereto, the prevailing party in such litigation, arbitration or proceedings shall be
entitled, as an additional item of damages, to such reasonable attorneys’ and other professional
fees and costs (including, but not limited to, witness fees), court costs, arbitrators’ fees,
arbitration administrative fees, travel expenses, and other out-of pocket expenses or costs of such
other proceedings, as may be fixed by any court of competent jurisdiction, arbitrator or other
judicial or quasi-judicial body having jurisdiction thereof, whether or not such litigation or
proceedings proceed to a final judgment or award. For the purposes of this Section, any party
receiving an arbitration award or a judgment for damages or other amounts shall be deemed to be the
prevailing party, regardless of amount of the damage awarded or whether the award or judgment was
based on all or some of such party’s claims or causes of action.

5.9. No Waiver. The failure or delay (without regard to the length of time of such
failure or delay) by Lessors to enforce or insist on the strict performance of any covenant, term,
obligation, provision, right, option or condition hereunder, or to pursue any action, claim or
right arising from any breach, default, or non-performance of any term, obligation or provision of
this Guaranty, shall not constitute or be construed as a waiver or forgiveness of such covenant,
term, obligation, provision, right, option, condition, breach, default or non-performance. To be
binding upon and against Lessors, any waiver must (a) be in writing and signed by all of Lessors,
(b) be delivered to Guarantor (in accordance with the provisions of Section 5.1 hereof), and
(c) identify and specify, in reasonable detail, the covenant, term, obligation, provision, right,
option, condition, breach, default or non-performance being waived; any purported waiver not
complying therewith shall not be effective or binding on Lessors. In addition, any previous waiver
for the benefit of Guarantor may not be relied upon or be enforced by Guarantor’s successors and
assigns, and shall not be binding on Lessors. Under no circumstances shall a waiver by Lessors
complying with the provisions hereof constitute or be construed as a continuing waiver of any
subsequent failure, default, breach or non-performance of any covenant, term, obligation,
provision, right, option or condition under this Guaranty.

5.10. Construction of Guaranty. The parties hereto have negotiated this Guaranty at
length, and have had the opportunity to consult with, and be represented by, their own competent
counsel. This Guaranty is therefore deemed to have been jointly prepared. In determining the
meaning of, or resolving any ambiguity with respect to, any word, phrase or provision of this
Guaranty, no uncertainty or ambiguity shall be construed or resolved against any party under any
rule of construction, including the party primarily responsible for the drafting and preparation of
this Guaranty.

 

8

 

The words “herein,” “hereof,” “hereunder” and words of similar reference shall mean this
Guaranty. The words “this Guaranty” include the exhibits, addenda and any future written
modifications, unless otherwise indicated by the context. All words in this Guaranty shall be
deemed to include any number or gender as the context or sense of the Guaranty requires. The
words “will,” “shall” and “must” in this Guaranty indicate a mandatory obligation. The use of the
words “include,” “includes” and “including” followed by one or more examples is intended to be
illustrative and is not a limitation on the scope of the description or term for which the examples
are provided. All dollar amounts set forth in this Guaranty are stated in United States dollars,
unless otherwise specified. The words “day” and “days” refer to calendar days unless otherwise
stated. The words “month” and “months” refer to calendar months unless otherwise stated. The
words “year” and “years” refer to calendar years unless otherwise stated. When determining when a
period begins to run, the day after receipt, delivery, or occurrence shall be the first
(1st) day after such date, unless the context clearly indicates otherwise.

5.11. Waiver of Jury Trial. ALL DISPUTES WITH RESPECT TO THIS AGREEMENT, WHETHER
ARISING IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, OR RELATED OR INCIDENTAL TO,
THE TRANSACTION GIVING RISE TO THIS AGREEMENT, SHALL BE TRIED BEFORE A JUDGE IN A COURT OF
COMPETENT JURISDICTION AS PROVIDED HEREIN, WITHOUT A JURY. THE JUDGE IN SUCH COURT OF COMPETENT
JURISDICTION SHALL HAVE THE POWER TO GRANT ALL LEGAL AND EQUITABLE REMEDIES. BY EXECUTING THIS
AGREEMENT, EACH PARTY HEREBY WAIVES AND COVENANTS NOT TO ASSERT THEIR CONSTITUTIONAL RIGHT TO TRIAL
BY JURY OF ANY DISPUTES RELATING TO THIS AGREEMENT AND/OR THE ACTS OR OMISSIONS OF A PARTY HERETO
THEREUNDER, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, OR
RELATED OR INCIDENTAL TO, THE TRANSACTION GIVING RISE TO THIS AGREEMENT. THIS MUTUAL WAIVER OF
JURY TRIAL SHALL BE BINDING UPON THE RESPECTIVE SUCCESSORS AND ASSIGNS OF SUCH PARTIES AND UPON ALL
PERSONS AND ENTITIES ASSERTING RIGHTS OR CLAIMS OR OTHERWISE ACTING ON BEHALF OF A PARTY AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS.

VI.

EXECUTION

IN WITNESS WHEREOF, the undersigned has executed this Guaranty and made it effective this
17th day of September 2010.

	 	 	 	 	 	 	 	 	 
	 	 	GUARANTOR:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	MORGANS GROUP LLC,

a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Morgans Hotel Group Co.,

its managing member	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Fred J. Kleisner	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Fred J. Kleisner	 	 
	 

	 	 	 	Title:
	 	Chief Executive Officer	 	 

 

9

 

Exhibit A

See Attached

 

 

 

SETTLEMENT AND RELEASE AGREEMENT

This SETTLEMENT AND RELEASE AGREEMENT (the “Agreement”) is dated the 17th
day of September, 2010, and is made by and among HASINA, LLC, a California limited liability
company, TARSTONE HOTELS, LLC, a Delaware limited liability company, KALPANA, LLC, a California
limited liability company, RIGG HOTEL, LLC, a California limited liability company, and JRIA, LLC,
a Delaware limited liability company (collectively, “Lessors”), TARSADIA HOTELS, a
California corporation (Tarsadia”), CLIFT HOLDINGS, LLC, a Delaware limited liability
company (“Lessee”), 495 GEARY, LLC, a Delaware limited liability company (“495
Geary”), and MORGANS HOTEL GROUP CO., a Delaware corporation (“Morgans”).

RECITALS

A. Lessors, as assignees from and successors-in-interest to GEARY HOTEL HOLDINGS, LLC, a
Delaware limited liability company, are (i) the owners of certain real property (land and
improvements) commonly known as 495 Geary Street, San Francisco, California, as more particularly
described on Exhibit “A” attached hereto (the “Premises”), as well as certain
Personal Property, and (ii) the “Lessor” under that certain “Ground Lease” dated October 14, 2004
(the “Lease”), a copy of which is attached hereto as Exhibit “B.”

B. Lessee is the “Lessee” under the Lease, whereby Lessee leases from Lessor the Premises and
the Personal Property.

C. Morgans is an owner of MORGANS GROUP LLC, a Delaware limited liability company, the sole
member of Lessee (“Lessee Manager), which, in turn, is the owner of (i) Lessee,
(ii) MORGANS HOTEL GROUP MANAGEMENT, LLC, a Delaware limited liability company
(“Operator”), and (iii) 495 Geary (Lessee, Operator, 495 Geary, Lessee Manager and the
Liquor License Company (as hereinafter defined) are, individually and collectively, the
“Morgans Affiliates”). Morgans has represented, and hereby does so represent, to Lessors
that it, Lessee Manager and the Morgan Affiliates, will benefit directly and indirectly from the
terms of this Agreement and the agreements of Lessors hereunder.

D. Lessee, as the “Owner,” and Operator, as successor in interest from and
successor-in-interest to IAN SCHRAGER HOTEL MANAGEMENT, LLC, as the “Operator,” are parties to that
certain “Property Management Agreement” dated June 2, 1999 (the “Property Management
Agreement”) for the management and operation of the Hotel and Hotel Business.

E. 495 Geary is the “Operator” and “Class A Member,” and SARH, a California corporation
(“SARH”), is, by assignment from 495 License Holdings, LLC, a Delaware limited liability
company, the “Class B Member,” of 495 ABC License, LLC, a California limited liability company (the
“Liquor License Company”), and are parties to that certain “495 ABC License LLC Limited
Liability Company Agreement” dated November 4, 2004 (the “Liquor License Company
Agreement”).

 

 

 

F. Lessee, as “Landlord,” and 495 Geary, as “Tenant,” are parties to that certain “Operating
Lease (Food and Beverage Premises)” dated May 22, 2001 (the “Operating Lease”) for the
lease and operation of the Food and Beverage Premises (as defined therein).

G. Operator has previously executed that certain “Subordination of Management and Operating
Agreements” dated October 12, 2004 (the “Operator’s Subordination Agreement”) for the
benefit of the “Lessor” under the Lease, whereby Operator agrees that (i) the Operating Agreements
(as defined in the Operator’s Subordination Agreement) would be and remain subordinate to the Lease
and the “Lessor’s” interest in the Premises, (ii) upon the termination or earlier expiration of the
Term, the “Lessor” under the Lease may terminate any or all of the Operating Agreements without
notice or cost, (iii) Operator would continue to operate the Hotel Business during the Transition
Period in accordance with the terms applicable to Lessee pursuant to Section 9.2 of the Lease, and
(iv) Operator would execute such documents and agreements as the “Lessor” under the Lease may
reasonably request to carry out the terms and purpose of the Operator’s Subordination Agreement.

H. 495 Geary has previously executed that certain “Subordination of Management and Operating
Agreements” dated October 12, 2004 (the “495 Subordination Agreement”) for the benefit of
the “Lessor” under the Lease, whereby 495 Geary agrees that (i) the Operating Agreements (as
defined in the 495 Subordination Agreement) would be and remain subordinate to the Lease and the
“Lessor’s” interest in the Premises, (ii) upon the termination or earlier expiration of the Term,
the “Lessor” under the Lease may terminate any or all of the Operating Agreements without notice or
cost, (iii) Operator would continue to perform its obligations under the Operating Agreements (as
defined in the 495 Subordination Agreement) during the Transition Period in accordance with the
terms applicable to Lessee pursuant to Section 9.2 of the Lease, and (iv) Operator would execute
such documents and agreements as the “Lessor” under the Lease may reasonably request to carry out
the terms and purpose of the 495 Subordination Agreement.

I. Tarsadia is the duly authorized and empowered agent of and for Lessors.

J. Lessee is in default of its obligation under the Lease by failing to pay the installments
of Annual Base Rent (which includes amounts allocated to the rental of the Personal Property which
is the subject of the Lease) due, by the terms of the Lease, on March 1, 2010, April 1, 2010, May
1, 2010, June 1, 2010, July 1, 2010, August 1, 2010 and September 1, 2010, in the aggregate amount
of Three Million Four Hundred Seventy-Four Thousand Four Hundred Twenty-Two Dollars ($3,474,422.00)
(the “Defaulted Rent”).

K. As a result of the non-payment of the Defaulted Rent, Lessor has the right to pursue
unlawful detainer and other adversarial proceedings against Lessee, and to evict Lessee, Operator,
495 Geary and all other tenants and persons in possession of all or any portion of the Premises,
from the Premises, and in fact, has commenced such an action entitled Hasina, LLC, a California
limited liability company, et al v. Clift Holdings, LLC, a Delaware limited liability company et a,
San Francisco Superior Court Case Number CUD-10-633347 (the “Lessors Action”).

 

2

 

L. In response to the Lessors Action, Lessee and Morgans have commenced an action against
Lessors and Tarsadia Hotels, entitled Morgans Hotel Group Co., a Delaware corporation; and Clift
Holdings, LLC, a Delaware limited liability company v. Tarsadia Hotels, a California corporation,
et al., San Francisco Superior Court Case Number CGC-10-500788 (the “Morgans Action”),
alleging claims against the defendants thereunder for breach of contract, fraud, misrepresentation
and additional claims, all related to the Lease.

M. The parties hereto desire to enter into this Agreement and to settle all disputes between
them, including all claims, differences, rights, interests and obligations which may exist and/or
which each may claim to exist between them in any manner relating to the Lessors Action and the
Morgans Action, the Defaulted Rent and by this Agreement, to confirm and memorialize their
agreement on all of the terms and subject to all of the conditions set forth herein, and to set
forth their rights and obligations with respect thereto.

N. Capitalized terms not defined herein have the meanings ascribed to them in the Lease.

AGREEMENT

NOW, THEREFORE, for valuable consideration, including the performance of the promises,
covenants, representations and warranties hereinafter set forth, the parties, intending to be
legally and equitably bound, agree as follows:

I.

INCORPORATION OF RECITALS; RATIFICATION OF LEASE

The Recitals set forth hereinabove are incorporated into this Agreement as if set forth at
length, are true and correct, and shall be binding upon the parties hereto. All of the terms and
provisions of the Lease, and the rights and obligations of the “Lessor” and the “Lessee”
thereunder, are hereby ratified in full.

II.

PAYMENT OF DEFAULTED RENT

Conditioned upon and provided that (a) Lessee pays all of the Defaulted Rent Payments (as
hereinafter defined) as and when due, and does not default in the payment of any installment of the
Annual Base Rent through February 2012, (b) Morgans and Lessee Manager each complies with its
obligations under Article IV hereof, (c) Morgans and Lessee comply with their obligations under
Section 5.2 hereof, and (d) Morgans and Lessee pay to Lessors and Tarsadia, as and when due, the
sums owing under Section 5.3 hereof, then Lessors agree to accept payments (the “Defaulted Rent
Payments”) against the Defaulted Rent as follows:

(a) On the date hereof, Lessee shall pay to Lessors the sum of One Million Dollars
($1,000,000.00) as a reduction of and credit to the Defaulted Rent;

 

3

 

(b) On the date hereof, and thereafter on the first day of each calendar month commencing
October 1, 2010 and continuing, on the same day of each calendar month thereafter that the monthly
installment of Annual Base Rent is payable by the terms of the Lease to and including February 1,
2012, Lessee shall pay to Lessors the sum of Eighty-Two Thousand Four Hundred Twenty Dollars
($82,420.00) as a reduction of and credit to the Defaulted Rent; and

(c) On the date hereof, Lessee shall pay to Lessors the sum of Four Hundred Thirteen Thousand
Nine Hundred Twenty-Six Dollars ($413,926.00) as a reduction of and credit to the Defaulted Rent.

All Defaulted Rent Payments shall be paid by wire transfer of funds (United States Dollars) to
the account of Lessors pursuant to the wire transfer instructions attached hereto as
Exhibit “C.” Provided that Lessee makes all of the Defaulted Rent Payments as required
hereunder, and Morgans and Lessee otherwise comply with their obligations under subsection (a)-(c),
inclusive, hereinabove, then any remaining portion of the Defaulted Rent shall be automatically
deemed waived by Lessors, and Lessee shall have no further obligation with respect thereto.

III.

AMENDMENT OF THE LEASE; LESSEE PERFORMANCE UNDER THE LEASE

3.1 Amendment of Lease. In consideration of and as an inducement to Lessors to enter
into this Agreement, concurrent with the execution hereof, Lessors and Lessee shall execute and
deliver to each other the Amendment Number One to Ground Lease attached hereto as
Exhibit “D” (the “Lease Amendment”) which adjusts the Annual Base Rent for the
period March 1, 2010 through and including February 29, 2012, to Four Million Nine Hundred
Sixty-Seven Thousand One Hundred Twelve Dollars ($4,967,112.00). The Annual Base Rent shall be
paid by Lessee in monthly installments of Four Hundred Thirteen Thousand Nine Hundred Twenty-Six
Dollars ($413,926.00) as provided in the Lease, with the first installment payable hereafter to be
made on October 1, 2010. On March 1, 2012, the Annual Base Rent shall revert to that amount
specified in the Lease, and from and after such date, Lessee shall pay the installments of Annual
Base Rent (including any increases pursuant to the terms of the Lease) as and when due, all as
provided in the Lease. The parties hereto agree that no further or additional amendments to the
Lease are being made or agreed upon.

The parties hereto acknowledge and agree that the adjustment to the Annual Base Rent as
provided in this Section 3.1 and the waiver by Lessors of the balance of the Defaulted Rent as
described in the last paragraph of Article II hereof will result in an aggregate shortfall of
Annual Base Rent that would otherwise be due and payable to Lessors during the period March 1, 2010
to and including February 29, 2012 of approximately Two Million Dollars ($2,000,000.00) (the
“Shortfall”), which Shortfall Lessors hereby waive subject to the provisions of Article II
and Section 3.3 hereof.

3.2 Performance of Lease Terms and Obligations. Lessee covenants and agrees that, for
all periods hereafter, Lessee shall perform and comply with, as and when due and required by
the terms of the Lease, all of the terms, covenants, obligations, undertakings and conditions
applicable to Lessee under the Lease, all of which shall remain in full force and effect.

 

4

 

3.3 Notice of Intent to Abandon or Not Pay Rent. In the event that Lessee, at any
time during the period ending on the earlier of sixty (60) calendar months following the date
hereof or the date on which none of Lessors own an interest in the Premises, determines that it
intends to (a) abandon or vacate the Premises in violation of the terms of the Lease, or (b) cease
paying any portion of the Rent in violation of the terms of the Lease, or (c) both (a) and (b)
(individually and collectively, a “Recapture Event”), then Lessee Manager shall deliver to
Lessors, not less than four (4) calendar months prior to effective date of such Recapture Event
(the “Recapture Period”), written notice (in accordance with the provisions of Article VIII
hereof) (the “Recapture Notice”), which shall include the nature of the Recapture Event and
the effective date thereof. Any such Recapture Event shall be deemed a default under the Lease for
which Lessee shall be liable pursuant to the terms thereof; provided, however, that in the
event that (i) Lessee Manager does not so provide the Recapture Notice as required herein, or (ii)
Lessee fails to pay the Rent pursuant to the terms of the Lease at any time during the Recapture
Period, then the conditional waiver of the Shortfall shall be automatically withdrawn and Lessee
Manager shall be obligated to, and shall within five (5) business days after delivery of written
demand therefor from Lessors, pay to Lessors the Shortfall, less any installments of Annual Base
Rent and Defaulted Rent Payments paid to Lessors for and during the Recapture Period. Nothing in
the Section 3.3 shall be deemed to waive or in anyway alter Lessee’s obligations with respect to
Section 9.2 of the Lease.

3.4 Notice of Intent to Terminate Management of the Premises. If, at any time
during a Recapture Period or a Transition Period, Lessors elect to assume operation of, or close,
the Premises effective on a date prior to the expiration of the Recapture Period or the Transition
Period, as applicable, Lessors shall give not less than seventy-five (75) days advance written
notice to Lessee Manager of such assumption of operation or closure, which notice shall specify the
date of such assumption or closure.

IV.

GUARANTY OF PAYMENT AND PERFORMANCE

4.1 As a condition precedent to the obligations of Lessors hereunder, and in consideration of
and as an inducement to Lessors to enter into this Agreement, concurrent with the execution hereof,
Morgans shall cause Lessee Manager to execute and deliver to Lessors the Limited Guaranty of Lease
attached hereto as Exhibit “E” (the “Guaranty”).

4.2 As a condition precedent to the obligations of Lessors hereunder, and in consideration of
and as an inducement to Lessors to enter into this Agreement, concurrent with the execution hereof,
Lessee and 495 Geary shall both execute and deliver to Lessors the Stipulation for Entry of
Judgment attached hereto as Exhibit “F,” which Lessors shall file with the Court referenced
therein only in the event of the failure of Lessee to make any Defaulted Rent Payment.

 

5

 

V.

DISMISSAL OF LAWSUITS

5.1 Dismissal of Lessors Action. Code of Civil Procedure § 664.6 reads, in relevant
part: “If requested by the parties, the court may retain jurisdiction over the parties to enforce
the settlement until performance in full of the terms of the settlement.” The parties agree that
by signing this Agreement, they are hereby requesting that the Court in the Lessors Action retain
jurisdiction over the parties to enforce the settlement until performance in full of the terms of
the settlement of Lessors Action. To that end, within two (2) business days of the execution and
delivery of this Agreement by all of the parties hereto, provided that Lessee and Morgans have (a)
paid to Lessors and Tarsadia the sums required under Article II and Sections 3.1 and 5.3 hereof,
and (b) Morgans has executed and delivered the Guaranty to Lessors pursuant to the provisions of
Article IV hereof, and (c) Lessee and 495 Geary have executed and delivered to Lessors the
Stipulation for Entry of Judgment, Lessors shall file with the Superior Court of the State of
California, City and County of San Francisco, a Notice of Settlement of Entire Case, Judicial
Counsel form CM-200 of the Lessors Action (the “Notice of Settlement”), and shall provide
reasonable evidence thereof to Lessee as soon thereafter as reasonably possible. Such Notice of
Settlement shall be consistent with the sample attached hereto as Exhibit “G” and shall
indicate that the settlement is conditional and that performance of settlement by Lessor and 495
Geary will not be complete until February 1, 2012. Upon the payment by Lessee of all of the
Defaulted Rent Payments, then Lessors and Tarsadia shall file with the Superior Court of the State
of California, City and County of San Francisco, a dismissal, with prejudice, against all
defendants of the Lessors Action, and shall provide reasonable evidence thereof to Lessee as soon
thereafter as reasonably possible.

5.2 Dismissal of Morgans Action. Within two (2) business days of the execution and
delivery of this Agreement by all of the parties hereto, Lessee and Morgans shall file with the
Superior County of the State of California, City and County of San Francisco, a dismissal, with
prejudice against all defendants, of the Morgans Action, and shall provide reasonable evidence
thereof to Lessors and Tarsadia as soon thereafter as reasonably possible.

5.3 Attorneys Fees and Costs. Lessee and Morgans shall bear all costs and fees
(attorneys’ fees) incurred by them in connection with the Lessors Action and the Morgans Action.
As consideration for Lessors’ and Tarsadia’s agreements herein, Lessee shall, concurrent with the
full execution and delivery hereof, reimburse Lessors and Tarsadia for all of their costs and fees
(including attorneys’ fees) incurred by them in connection with the Lessors Action and the Morgans
Action, in the aggregate amount of Two Hundred Thousand Dollars ($200,000.00).

5.4 Return of Documents Produced. Within twenty (20) business days of the full
execution and delivery of this Agreement, the parties shall return all Confidential Documents (and
all copies thereof) produced in discovery in the course of the Lessors Action to the party
producing the same. For purposes of this provision, “Confidential Documents” means those
documents listed on Schedule “H” attached hereto. The parties shall purge their computer
systems and electronic storage devices of all copies thereof, and shall cause their affiliates,
attorneys and all others to whom such documents and materials were disseminated to, likewise,
so return and purge the same.

 

6

 

VI.

REPRESENTATIONS AND WARRANTIES

6.1 Representations and Warranties of Morgans, Lessee and 495 Geary. Morgans, Lessee
and 495 Geary, jointly and severally, represent and warrant to Lessors as follows:

(a) Each of Morgans, Lessee and 495 Geary (and in the case of the Guaranty, Lessee Manager)
has the full power and authority to enter into this Agreement (and in the case of Lessee Manager,
the Guaranty) and to carry out the transactions contemplated hereby to be carried out by it. The
persons signing this Agreement and the Guaranty and any document pursuant hereto on behalf of
Morgans, Lessee, Lessee Manager and 495 Geary have full power and authority to bind Morgans,
Lessee, Lessee Manager, 495 Geary, and the Morgans Affiliates, as applicable.

(b) Lessee owns (i) all right, title and interest in and to the leasehold estate created under
the Lease and is the “Lessee” thereunder, and (ii) all rights assigned by the “Lessor” under the
Lease to the FF&E, the Personal Property, the Accounts (as of the date hereof only), free and clear
of all Lessee Loans, Leasehold Mortgages and Equipment Financing. Lessee has not sold,
transferred, assigned, or otherwise conveyed any right, title or interest therein except to
Operator, 495 Geary, Liquor License Company, and Food and Beverage Operator, in each case as
referenced in the Recitals hereinabove.

(c) There has been no change in the ownership of Lessee, the Operator, the Food and Beverage
Operator (other than a change in the one percent member), or the Liquor License Company (other than
for and with respect to SARH).

(d) The Liquor License Company is the licensee under the liquor licenses issued for the Hotel.

(e) Except as provided by the terms of this Agreement or on Exhibit “I” attached
hereto, there have been no modifications, changes, additions, terminations, assignments or
amendments to any of the Lease, the Operating Lease, the Property Management Agreement, the Liquor
License Company Agreement, or any other agreement that would be a Management Agreement or a Food
and Beverage Agreement, all of which remain in full force and effect. The Operator is the
“Operator” of the Hotel Business pursuant to the terms of the Property Management Agreement, and
the Food and Beverage Operator remains either Lessee or 495 Geary under the Operating Lease.

(f) The performance of this Agreement (and in the case of Lessee Manager, the Guaranty) and
the transactions contemplated hereunder by Morgans, Lessee, Lessee Manager and 495 Geary have been
duly authorized by all necessary action on the part of Morgans (including the Morgans Affiliates),
Lessee, Lessee Manager and 495 Geary, as applicable, and this Agreement (and in the case of Lessee
Manager, the Guaranty) is binding on and enforceable against Morgans, 495 Geary, Lessee Manager and
Lessee in accordance with its terms. No
further consent of any owner, creditor, board of directors, manager, governmental authority or
other party to such execution, delivery and performance hereunder is required.

 

7

 

(g) To the best of Morgans’ and Lessee’s knowledge, Lessors are not in default under or of any
of the obligations of the “Lessor” under the Lease.

(h) Neither Lessors, either directly or indirectly, or through their agent Tarsadia, nor
Tarsadia, has made any representations, warranties or promises with respect to this Agreement
and/or the settlement herein described not otherwise set forth herein. Each of Lessee and Morgans
has elected to enter into this Agreement of its own free will solely as a result of the covenants
and representations of the parties hereto and without inducement from Lessors or Tarsadia (or
anyone else).

(i) The Lease is a true lease and not a partnership, joint venture, financing arrangement,
financing document, equitable mortgage, loan or security/mortgage arrangement, or similar
instrument, and Lessee and Morgans, for themselves and their successors and assigns, forever and
unconditionally waive any claims that the Lease is anything but a true lease.

6.2 Lessors’ Representations and Warranties. Lessors and Tarsadia, each as to itself
only, represents and warrants to Lessee and Morgans as follows:

(a) Lessors and Tarsadia have full power to enter into this Agreement and to perform their
obligations under this Agreement. The persons signing this Agreement and any document pursuant
hereto on behalf of Lessors and Tarsadia have full power and authority to bind Lessors and
Tarsadia, as applicable. No further consent of any owner, creditor, board of directors, manager,
governmental authority or other party to the execution, delivery and performance hereunder is
required of or by Tarsadia or Lessors.

(b) The execution and delivery of this Agreement has been duly authorized by all necessary and
appropriate action of Lessors and Tarsadia, as the case may be.

(c) To the best of Tarsadia’s and Lessors’ knowledge, Lessee is not in default of any of its
obligations under the Lease, other than the Defaulted Rent, as described herein.

(d) Neither Lessee, 495 Geary nor Morgans, either directly or indirectly, have made any
representations, warranties or promises with respect to this Agreement and/or the settlement herein
described not otherwise set forth herein. Each of Lessors and Tarsadia has elected to enter into
this Agreement of its own free will solely as a result of the covenants and representations of the
parties hereto and without inducement from Lessee, 495 Geary or Morgans (or anyone else).

 

8

 

VII.

RELEASES

7.1 By Lessors and Tarsadia. Except with respect to the agreements and obligations of
Lessee, 495 Geary and Morgans (including the Morgans Affiliates) hereunder (and in the case of
Lessee Manager, by Lessee Manager under the Guaranty), and conditioned upon the full,
timely and complete performance by Lessee, 495 Geary and Morgans (including the Morgans
Affiliates) hereunder (and in the case of Lessee Manager, by Lessee Manager under the Guaranty),
each of Lessors and Tarsadia, for and on behalf of itself and its affiliates, owners, officers,
directors, managers, employees, successors, assigns, predecessors, agents and representatives, does
hereby irrevocably and unconditionally, fully and forever, remiss, release and discharge Lessee,
495 Geary and Morgans (including the Morgans Affiliates), and their respective predecessors,
successors, assigns, affiliates, owners, directors, officers, managers, employees, representatives,
agents, and attorneys (collectively, the “Lessee Released Parties”) of and from all claims,
allegations, losses, causes of action, legal theories of recovery, demands, injuries, rights,
actions, liabilities, fees, fines, penalties, damages, costs and expenses (except as provided in
Section 5.3 hereof), and all other injuries of any and all kind and/or nature whatsoever,
including, without limitation, lost profits, consequential damages, exemplary damages, special
damages and punitive damages, in all cases, whether known or unknown, fixed or contingent, existing
or subsequently arising, in law or in equity, arising from or with respect to the causes of action,
claims and defenses alleged in the Lessors Action and the Morgans Action. Without limiting the
foregoing, this release covers and fully discharges and any claim asserted or which could have been
asserted by Lessors and Tarsadia against the Lessee Released Parties with respect to the matters
released hereunder.

IN ACCORDANCE WITH THE FOREGOING, EACH OF LESSORS AND TARSADIA WAIVES ALL RIGHTS UNDER
CALIFORNIA CIVIL CODE SECTION 1542 (AND ALL SIMILAR STATUTES IN ALL OTHER STATES) WHICH
STATES IN FULL AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

BY INITIALING THIS AGREEMENT CLAUSE, EACH OF LESSORS AND TARSADIA ACKNOWLEDGES THAT THIS SECTION
HAS BEEN READ AND FULLY UNDERSTOOD, AND THAT EACH OF LESSORS AND TARSADIA HAS HAD THE CHANCE TO ASK
QUESTIONS OF ITS COUNSEL ABOUT ITS MEANING AND SIGNIFICANCE.

          INITIALS          

Each of Lessors and Tarsadia represents and warrants to the Lessee Released Parties, and
declares under penalty of perjury, that it has full power and authority to enter into this release,
understands the terms and provisions and consequences hereof, and has not assigned, conveyed,
encumbered or in any manner transferred all or any portion of its rights with respect to the claims
covered by this release.

 

9

 

7.2 By Lessee, 495 Geary and Morgans. Except with respect to the agreements of
Lessors and Tarsadia hereunder, and conditioned upon the full, timely and complete performance by
Lessors and Tarsadia hereunder, each of Lessee, 495 Geary and Morgans, for and on behalf of itself
and its affiliates (including the Morgans Affiliates), owners, officers, directors, managers,
employees, successors, assigns, predecessors, agents and representatives, does hereby irrevocably
and unconditionally, fully and forever, remiss, release and discharge Lessors and Tarsadia, and
their respective predecessors, successors, assigns, affiliates, owners, directors, officers,
managers, employees, representatives, agents, and attorneys (collectively, the “Lessors
Released Parties”) of and from all claims, allegations, losses, causes of action, legal
theories of recovery, demands, injuries, rights, actions, liabilities, fees, fines, penalties,
damages, costs and expenses (including attorney’s fees and costs), and all other injuries of any
and all kind and/or nature whatsoever, including, without limitation, lost profits, consequential
damages, exemplary damages, special damages and punitive damages, in all cases, whether known or
unknown, fixed or contingent, existing or subsequently arising, in law or in equity, arising from
or with respect to the causes of action, claims and defenses alleged in the Lessors Action and the
Morgans Action. Without limiting the foregoing, this release covers and fully discharges and any
claim asserted or which could have been asserted by Lessee and Morgans against the Lessors Released
Parties with respect to the matters released hereunder.

IN ACCORDANCE WITH THE FOREGOING, EACH OF LESSEE, 495 GEARY AND MORGANS WAIVES ALL RIGHTS
UNDER CALIFORNIA CIVIL CODE SECTION 1542 (AND ALL SIMILAR STATUTES IN ALL OTHER STATES)
WHICH STATES IN FULL AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

BY INITIALING THIS AGREEMENT CLAUSE, EACH OF LESSEE, 495 GEARY AND MORGANS ACKNOWLEDGES THAT THIS
SECTION HAS BEEN READ AND FULLY UNDERSTOOD, AND THAT EACH OF LESSEE, 495 GEARY AND MORGANS HAS HAD
THE CHANCE TO ASK QUESTIONS OF ITS COUNSEL ABOUT ITS MEANING AND SIGNIFICANCE.

          INITIALS          

7.3 Mutual Representations and Warranties. Each of Lessee, 495 Geary and Morgans
(including for the Morgans Affiliates), jointly and severally, on the one hand, and Lessors and
Tarsadia, each as to itself only, on the other hand, represents, warrants, and agrees as to itself
as follows:

(a) Each party has received independent legal advice from its attorneys, with respect to the
advisability of making the settlement provided for herein, with respect to the
import of California Civil Code § 1542, and with respect to the advisability of executing this
Agreement.

 

10

 

(b) No party (nor officer, director, manager, owner, agent, employee, representative, or
attorney of or for any party) has made any statement or representation to any other party regarding
any fact relied upon in entering into this Agreement, no party relies upon any statement,
representation or promise of any other party (nor officer, director, manager, owner, agent,
employee, representative, or attorney for the other party), in executing this Agreement, or in
making the settlement provided for herein, except as expressly stated in this Agreement.

(c) Each party to this Agreement has made such investigations of the facts pertaining to this
settlement and this Agreement, and all of the matters pertaining thereto, as it deems necessary.

(d) Each party or responsible manager or officer thereof has read this Agreement and
understands the contents hereof.

(e) Each party has not heretofore assigned, transferred, or granted, or purported to assign,
transfer, or grant, any of the claims, potential claims, demands, and cause or causes of action
disposed of by this Agreement.

(f) Each term of this Agreement is contractual and not merely a recital.

(g) Each party is aware that it may hereafter discover claims or facts in addition to or
different from those it now knows or believes to be true with respect to the matters related
herein. Nevertheless, it is the intention of the parties to fully, finally and forever settle and
release the matters related hereto. In furtherance of such intention, the releases given hereon
shall be and remain in effect as full and complete mutual releases of all such matters,
notwithstanding the discovery or existence of any additional or different claims or facts relative
thereto.

(h) Each party to this Agreement acknowledges and agrees that the provisions of this
Article VII are material consideration to such party’s agreement to the settlement of the Lessors
Action and the Morgans Action. But for each party’s agreement to the provisions of this
Article VII, the other parties would not agree to the settlement of the Lessors Action and the
Morgans Action and the payment of the sums hereunder.

(i) The parties hereby acknowledge and agree that nothing contained in this Agreement shall be
deemed or construed in any manner whatsoever as an admission by any party hereto of any liability
of any kind or nature to the other party hereto with respect to the claims that are the subject
matter of this Agreement.

7.4 Covenant Not to Sue. The parties to this Agreement, on behalf of themselves,
their officers, directors, managers, employees, agents, successors, assigns and affiliates, agree
that they will not make, assert or maintain against any person released herein, any claim, demand,
action or suit arising out of or in connection with the matters herein released. In
addition, so long as Lessee, Morgans and 495 Geary are performing all of their obligations
hereunder, then Lessors and Tarsadia covenant not to sue any of them based upon any obligation
hereunder or any matter that will be released under Section 7.1 upon satisfaction of the conditions
stated therein.

 

11

 

VIII.

NOTICES

Except as otherwise expressly provided in this Agreement, all notices, requests, demands and
other communications hereunder (“Notice”) shall be in writing and shall be deemed delivered
by (i) hand delivery upon receipt, (ii) registered mail or certified mail, return receipt
requested, postage prepaid, upon delivery to the address indicated in the Notice, (iii) by
confirmed telecopy or facsimile transmission when sent, or (iv) overnight courier (next business
day delivery) on the next business day at 12:00 noon, whichever shall occur first, as follows:

	 	 	 	 	 
	 

	 	To Lessors:
	 	c/o Tarsadia Hotels

620 Newport Center Drive

Fourteenth Floor

Newport Beach, CA 92660

Attention: Renee Molloy

Telecopier: (949) 610-8216
	 
	 	 	 	 
	 

	 	With a Copy to:
	 	Tarsadia Hotels

620 Newport Center Drive

Fourteenth Floor

Newport Beach, CA 92660

Attention: Edward G. Coss, Esq.

Telecopier: (949) 610-8222
	 
	 	 	 	 
	 

	 	To Morgans, 495 Geary and Lessee:
	 	Morgans Hotel Group Co.

475 Tenth Avenue

New York, New York 10018

Attention: General Counsel

Telephone: (212) 277-4100

Telecopier: (212) 277-4280
	 
	 	 	 	 
	 

	 	With a Copy to:
	 	Hogan Lovells US LLP

Columbia Square

555 Thirteenth street, NW

Washington, DC 20004

Attn: Bruce Gilchrist, Esq.

Telephone: (202) 637-5600

Telecopier: (202) 637-5910

 

12

 

Any correctly addressed Notice that is refused, unclaimed or undelivered because of an act or
omission of the party to be notified shall be considered to be effective as of the first day that
the Notice was refused, unclaimed or considered undeliverable by the postal authorities, messenger
or overnight delivery service. The parties hereto shall have the right from time to time, and at
any time, to change their respective addresses and each shall have the right to specify as its
address any other address within the United States of America, by giving to the other party at
least thirty (30) days prior Notice thereof, in the manner prescribed herein; provided, however,
that to be effective, any such change of address must be actually received (as evidenced by a
return receipt). Telephone numbers and email addresses, if listed, are listed for convenience
purposes only and not for the purposes of giving Notice pursuant to this Agreement.

IX.

MISCELLANEOUS

9.1 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California. If any legal action is necessary to enforce the terms
and conditions of this Agreement, the parties hereby agree that the United States District Court
located in the State of California, County of San Francisco, shall be the sole jurisdiction and
venue for the bringing of the action. If the United States District Court, on its own motion, and
without petition or request of any party hereto, determines that jurisdiction is not proper in the
United Stated District, legal action may be filed in, or transferred or remanded to, the Superior
Court of the State of California, in and for the County of San Francisco.

9.2 Professional Fees and Costs. If a lawsuit or other proceedings are instituted by
any party to enforce any of the terms or conditions of this Agreement against any other party
hereto, the prevailing party in such litigation or proceedings shall be entitled, as an additional
item of damages, to such reasonable attorneys’ and other professional fees and costs (including,
but not limited to, witness fees), court costs, travel expenses, and other out-of pocket expenses
or costs of such other proceedings, as may be fixed by any court of competent jurisdiction or other
judicial or quasi-judicial body having jurisdiction thereof, whether or not such litigation or
proceedings proceed to a final judgment or award.

9.3 Exhibits and Schedules a Part of This Agreement. The Exhibits and Schedules
attached hereto are incorporated in this Agreement by reference and are hereby made a part hereof.

9.4 Executed Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages are physically
attached to the same document. This Agreement shall become effective upon the due execution and
delivery of this Agreement to the parties hereto.

9.5 Assignment. Except to their respective successors, assigns and lenders, no party
hereto may assign, convey and otherwise transfer all or any part of its interest or rights herein,
and any such attempted assignment shall be void, invalid and unenforceable. No such
assignment shall operate as a release of the assignor hereunder.

 

13

 

9.6 Successors and Assigns. Subject to the provisions of Section 9.5 hereof, this
Agreement shall be binding upon and inure to the benefit of the parties’ respective successors and
assigns.

9.7 Time is of the Essence. Time is of the essence in the performance of the terms
and provisions of this Agreement.

9.8 Entire Agreement. This Agreement, and Exhibits and Schedules and other documents
and instruments attached to or referenced herein, contain all of the representations and the entire
understanding and agreement between the parties hereto with respect to the matters set forth
herein, and all other prior and contemporaneous discussions, negotiations, understandings, letters
of intent, agreements and representations, whether oral or written, are entirely superseded. In
executing this Agreement, each of Morgans (on its own behalf and on behalf of the Morgans
Affiliates), 495 Geary, Lessee, Tarsadia and Lessors expressly disclaim any reliance on any oral or
written representations, warranties, comments, statements or assurances made by Morgans (on its own
behalf and on behalf of the Morgans Affiliates), 495 Geary, Lessee, Tarsadia or Lessors, and any
of their respective affiliates, and their respective agents, employees, representatives, attorneys
or officers, as an inducement or otherwise, to Lessee’s, 495 Geary’s, Lessors’, Tarsadia’s and
Morgans’ respective execution hereof. No amendment of this Agreement shall be binding unless in
writing and executed by all of the parties hereto.

9.9 Further Assurances. Whenever and so often as requested by a party, the other
party will promptly execute and deliver or cause to be executed and delivered all such other and
further instruments, documents or assurances, and promptly do or cause to be done all such other
and further things as may be necessary and reasonably required in order to further and more fully
vest in such requesting party all rights, interests, powers, benefits privileges and advantages
conferred or intended to be conferred upon it by this Agreement.

9.10 Non-Waiver. The failure or delay (without regard to the length of time of such
failure or delay) by either party to enforce or insist on the strict performance of any covenant,
term, obligation, provision, right, option or condition hereunder, or to pursue any action, claim
or right arising from any breach, default, or non-performance of any term, obligation or provision
of this Agreement, shall not constitute or be construed as a waiver or forgiveness of such
covenant, term, obligation, provision, right, option, condition, breach, default or
non-performance. To be binding upon and against a party, any waiver must (a) be in writing, (b) be
delivered to the party in whose favor the waiver is made (in accordance with the provisions of
Article VIII hereof), and (c) identify and specify, in reasonable detail, the covenant, term,
obligation, provision, right, option, condition, breach, default or non-performance being waived;
any purported waiver not complying therewith shall not be effective or binding on the parties
hereto. In addition, any previous waiver for the benefit of a party may not be relied upon or be
enforced by such party’s successors and assigns, and shall not be binding on the waiving party.
Under no circumstances shall a waiver by either party complying with the provisions hereof
constitute or be construed as a continuing waiver of any subsequent failure, default, breach or
non-performance of any covenant, term, obligation, provision, right, option or condition under
this Agreement.

 

14

 

9.11 Headings. The headings of this Agreement are for purposes of convenience only
and shall not limit or define the meaning of the provisions of this Agreement.

9.12 Construction of Agreement. The parties hereto have negotiated this Agreement at
length, and have had the opportunity to consult with, and be represented by, their own competent
counsel. This Agreement is, therefore, deemed to have been jointly prepared. In determining the
meaning of, or resolving any ambiguity with respect to, any word, phrase or provision of this
Agreement, no uncertainty or ambiguity shall be construed or resolved against any party under any
rule of construction, including the party primarily responsible for the drafting and preparation of
this Agreement.

The words “herein,” “hereof,” “hereunder” and words of similar reference shall mean this
Agreement. The words “this Agreement” include the exhibits, schedules addenda and any future
written modifications, unless otherwise indicated by the context. All words in this Agreement
shall be deemed to include any number or gender as the context or sense of the Agreement requires.
The words “will,” “shall” and “must” in this Agreement indicate a mandatory obligation. The use of
the words “include,” “includes” and “including” followed by one or more examples is intended to be
illustrative and is not a limitation on the scope of the description or term for which the examples
are provided. All dollar amounts set forth in this Agreement are stated in United States Dollars,
unless otherwise specified. The words “day” and “days” refer to calendar days unless otherwise
stated. The words “business day” refer to a day other than a Saturday, Sunday or legal holiday on
which banking institutions are closed. The words “month” and “months” refer to calendar months
unless otherwise stated. The words “year” and “years” refer to calendar years unless otherwise
stated.

9.13 No Third-Party Beneficiaries. Morgans, 495 Geary, Lessee, Tarsadia and Lessors
agree that there are no third parties who are intended to benefit from or who are entitled to rely
on any of the provisions of this Agreement except the parties’ successors, assigns and lenders. No
third party (other than the parties’ successors, assigns and lenders) shall be entitled to assert
any claims or to enforce any rights whatsoever pursuant to this Agreement. Except as set forth in
the preceding sentences of this Section 9.13, the covenants and agreements provided in this
Agreement are solely for the benefit of Morgans, 495 Geary, Lessee, Tarsadia and Lessors and their
permitted successors and assigns respectively.

9.14 Facsimile Signatures. The execution of this Agreement and all Notices given
hereunder and all amendments hereto, may be effected by facsimile signatures, all of which shall be
treated as originals; provided, however, that the party receiving a document with a facsimile
signature may, by Notice to the other, require the prompt delivery of an original signature to
evidence and confirm the delivery of the facsimile signature. Lessors, Tarsadia, Lessee, 495
Geary, and Morgans each intend to be bound by its respective facsimile transmitted signature, and
is aware that the other party will rely thereon, and each party waives any defenses to the
enforcement of the Agreement, and documents, and any Notices delivered by facsimile transmission.

 

15

 

9.15 Waiver of Jury Trial. ALL DISPUTES WITH RESPECT TO THIS AGREEMENT, WHETHER
ARISING IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, OR RELATED OR INCIDENTAL TO,
THE TRANSACTION GIVING RISE TO THIS AGREEMENT, SHALL BE TRIED BEFORE A JUDGE IN A COURT OF
COMPETENT JURISDICTION AS PROVIDED HEREIN, WITHOUT A JURY. THE JUDGE IN SUCH COURT OF COMPETENT
JURISDICTION SHALL HAVE THE POWER TO GRANT ALL LEGAL AND EQUITABLE REMEDIES. BY EXECUTING THIS
AGREEMENT, EACH PARTY HEREBY WAIVES AND COVENANTS NOT TO ASSERT THEIR CONSTITUTIONAL RIGHT TO TRIAL
BY JURY OF ANY DISPUTES RELATING TO THIS AGREEMENT AND/OR THE ACTS OR OMISSIONS OF A PARTY HERETO
THEREUNDER, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, OR
RELATED OR INCIDENTAL TO, THE TRANSACTION GIVING RISE TO THIS AGREEMENT. THIS MUTUAL WAIVER OF
JURY TRIAL SHALL BE BINDING UPON THE RESPECTIVE SUCCESSORS AND ASSIGNS OF SUCH PARTIES AND UPON ALL
PERSONS AND ENTITIES ASSERTING RIGHTS OR CLAIMS OR OTHERWISE ACTING ON BEHALF OF A PARTY AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS.

 

16

 

X.

EXECUTION

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the
17th day of September, 2010.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	LESSORS:
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	HASINA, LLC,

a California limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	BY:	 	TUP ONE, LLC, a California limited liability

company, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	TARSTONE HOTELS, LLC,

a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	KALPANA, LLC,

a California limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	BY:	 	MKP ONE, LLC, a California limited liability

company, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	RIGG HOTEL, LLC,

a California limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

[SIGNATURES CONTINUTED ON NEXT PAGE]

 

17

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	JRIA, LLC,

a Delaware limited liability company
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	BY:	 	TUP ONE, LLC, a California limited liability

company, its Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	TARSADIA:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	TARSADIA HOTELS,

a California corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	LESSEE:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	CLIFT HOLDINGS, LLC,

a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 		 	 
	 	 	 	 	 	 	 
	 	 	 	 	Name:	 	Fred J. Kleisner	 	 
	 	 	 	 	Title:	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	MORGANS:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	MORGANS HOTEL GROUP CO.,

a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Name:	 	Fred J. Kleisner	 	 
	 	 	 	 	Title:	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	495 GEARY:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	495 GEARY, LLC,

a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Name:	 	Fred J. Kleisner	 	 
	 	 	 	 	Title:	 	Chief Executive Officer	 	 

 

18

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