EXHIBIT 10.1

 

THE RITZ-CARLTON, HALF MOON BAY

 

PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS

 

BETWEEN

 

VESTAR-ATHENS/YCP II HALF MOON BAY, L.L.C.,

 

a Delaware limited liability company,

 

and

 

VESTAR-ATHENS/YCP II HMB OPERATING COMPANY, L.L.C.,

 

a Delaware limited liability company,

 

collectively, AS SELLER

 

AND

 

SHC HALF MOON BAY, LLC,

 

a Delaware limited liability company,

 

AS PURCHASER

 

As of July 23, 2004

 

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PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS

 

THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this “Agreement”) is
made as of July 23, 2004 (the “Effective Date”), by and between
VESTAR-ATHENS/YCP II HALF MOON BAY, L.L.C., a Delaware limited liability company
(“Land Company”), and VESTAR-ATHENS/YCP II HMB OPERATING COMPANY, L.L.C., a
Delaware limited liability company (individually, “Operating Company” and,
collectively with Land Company, “Seller”), and SHC HALF MOON BAY, LLC, a
Delaware limited liability company (“Purchaser”).

 

W I T N E S S E T H:

 

A. Seller is the owner of the Property (defined below).

 

B. Seller desires to sell the Property and Purchaser desires to purchase the
Property, on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Purchaser and Seller agree as follows:

 

ARTICLE I

PURCHASE AND SALE

 

1.1 Agreement of Purchase and Sale. Subject to the terms and conditions
hereinafter set forth, Seller agrees to sell and convey and Purchaser agrees to
purchase, all of Seller’s right, title and interest in and to the following:

 

(a) the fee simple interest in the land situated in Half Moon Bay, California
more particularly described on Exhibit A-1 attached hereto and made a part
hereof, and the leasehold interest in the land described in Exhibit A-2 attached
hereto, together with all and singular the rights and appurtenances of Seller
pertaining to such property, including any right, title and interest of Seller
in and to adjacent streets, alleys or rights-of-way (the property described in
clause (a) of this Section 1.1 being herein referred to collectively as the
“Land”);

 

(b) the buildings, structures, fixtures and other improvements on the Land,
including specifically, without limitation, that certain hotel commonly known as
“The Ritz-Carlton, Half Moon Bay” (the “Hotel”) (the property described in
clause (b) of this Section 1.1 being herein referred to collectively as the
“Improvements”);

 

(c) all tangible personal property upon the Land or within the Improvements,
including specifically, without limitation, appliances, furniture, furnishings,
equipment, carpeting, draperies and curtains, tools and supplies, decorations,
china, glassware, linens, silver, utensils, all vehicles (if any), and other
items of

 

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personal property (excluding cash and deposit accounts used exclusively in
connection with the operation of the Land and the Improvements, and subject to
(i) depletion, resupply, substitution, replacement and disposition in the
ordinary course of business and (ii) the provisions of subparagraph (g) below
and the provisions of Section 4.4(b) with respect to inventories (the property
described in clause (c) of this Section 1.1(c) (and not excluded) being herein
referred to collectively as the “Personal Property”);

 

(d) subject to Section 4.4(b) below, all contracts or reservations for the use
of guest rooms, ballroom and banquet facilities or meeting rooms or other
facilities of the Hotel or located within the Improvements (“Bookings”);

 

(e) all contracts and agreements (collectively, the “Operating Agreements”)
relating to the upkeep, repair, maintenance or operation of the Land, the
Improvements or the Personal Property or other property used in connection with
the operation of the Hotel, including specifically, without limitation, all
rights of Seller under all equipment leases;

 

(f) (i) all existing warranties and guaranties (expressed or implied) issued to
Seller in connection with the Improvements or the Personal Property; (ii) all
transferable names, marks, logos and designs, used in the operation or ownership
of the Land, the Improvements or the Personal Property or any part thereof, if
any; and (iii) all transferable licenses, franchises and permits owned by Seller
and used in or relating to the ownership, occupancy or operation of the Land,
the Improvements or the Personal Property or any part thereof (the property
described in this clause (f) of this Section 1.1 being herein referred to
collectively as the “Intangibles”);

 

(g) subject to Section 4.4(b) below, (i) all food and beverages (subject to any
legal restrictions pertaining to the sale or transfer of alcoholic beverages);
(ii) engineering, maintenance and housekeeping supplies, including soap and
cleaning materials, fuel and materials; stationery and printing items and
supplies; (iii) all opened and unopened retail inventory held for resale at the
Hotel or any space therein conducting retail sales, and (iv) other supplies of
all kinds, whether used, unused or held in reserve storage for future use in
connection with the maintenance and operation of the Land, the Improvements or
the Personal Property, in each case to the extent located at the Hotel, together
with any additions thereto prior to Closing (defined below) and subject to
depletion, resupply, substitution, replacement and disposition in the ordinary
course of business (all of the foregoing in this clause (g) being referred to
herein as the “Consumable Inventory” and, to the extent contained in unopened
boxes, bottles, jars or containers of any type as of the date of Closing, shall
be collectively referred to, together with unopened packages of china, glass,
silver and linens, as

 

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the “Unopened Inventory”), subject to adjustment of the Purchase Price in
accordance with Section 4.4(b)(v) below;

 

(h) all leases, licenses, concessions and other occupancy agreements, and any
amendments thereto, whether or not of record, for the use or occupancy of any
portion of the Real Property excluding, however, the Bookings and the Ground
Leases (defined below)(collectively, the “Leases”) listed and described on
Schedule 1.1(h) attached hereto and made a part hereof, including any deposits
relating to such Leases held by Seller and not applied to the tenant’s
obligations as of the date of Closing;

 

(i) all accounts receivable of the Hotel and all related operations
(collectively, the “Receivables”) (provided that such receivables are to be
purchased by Purchaser at Closing for an amount in addition to the Purchase
Price which is based on the Hotel’s most current balance sheet as of the Closing
Date, subject to the provisions of Section 4.4(a)(iv) below, and are not
included in the Purchase Price); and

 

(j) subject to Section 4.4(b)(xvi) hereof, Seller’s interest in the funds
contained in “house banks” for the Hotel as of the Cut-Off Time (defined in
Section 4.4(a) below), whether held in the name of Seller, the Hotel or Manager
(as defined below) and owned by Seller (collectively, the “House Bank Funds”).
Seller and Purchaser expressly acknowledge and agree that the Property to be
transferred as of the Closing Date to Purchaser pursuant to this Agreement
includes any reserves existing under the Management Agreement (defined below),
including the “FF&E Reserve”, but does not include any other cash or accounts
created or maintained by Seller or Manager in connection with the ownership or
operation of the Hotel.

 

1.2 Property Defined.

 

(a) The Land and the Improvements are sometimes collectively referred to herein
as the “Real Property” and the Real Property, the Personal Property, the
Bookings, the Operating Agreements, the Intangibles, the Consumable Inventory,
the Receivables and the House Bank Funds are hereinafter sometimes referred to
collectively as the “Property”; provided that, the Purchase Price does not
include, and shall be adjusted with respect to, the Receivables, the House Bank
Funds, the retail inventory and Unopened Inventory and the other adjustment
items described in Section 4.4 below.

 

(b) Notwithstanding anything to the contrary in Section 1.1, the following items
are expressly excluded from the Property:

 

(i) All cash on hand or on deposit, operating account or other account or
reserve, except for security deposits held by Seller as landlord with

 

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respect to any Lease and the House Bank Funds which are to be transferred at
Closing subject to the terms of this Agreement;

 

(ii) Any tangible or intangible property owned by Manager or other rights
reserved by Manager under the Management Agreement or the Colony Club Agreement
(as defined below); and

 

(iii) Any fixtures, personal property or intellectual property owned by (A) the
supplier, vendor, licensor, lessor or other party under any Operating
Agreements, (B) any employees, (C) any guests or customers of the Hotel, (D) the
tenant under any Lease or (E) any other third party.

 

1.3 Permitted Exceptions. The Property shall be conveyed subject to the matters
which are, or are deemed to be, Permitted Exceptions pursuant to Article II
hereof (collectively, the “Permitted Exceptions”).

 

1.4 Purchase Price. Seller is to sell and Purchaser is to purchase the Property
for a total of ONE HUNDRED TWENTY-FOUR MILLION THREE HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($124,350,000.00) (the “Purchase Price”), subject to adjustment
pursuant to Section 4.4 below.

 

1.5 Payment of Purchase Price.

 

(a) On or before the date one (1) business day prior to the scheduled Closing
Date (but in no event later than the business day preceding the Outside Closing
Date (defined below), Purchaser shall deliver to Escrow Agent (defined below) by
wire transfer an amount equal to the Purchase Price, as increased or decreased
by prorations and adjustments as herein provided, less the Earnest Money
(defined below) previously delivered to Escrow Agent.

 

(b) The Purchase Price, as increased or decreased by prorations and adjustments
as herein provided, shall be payable in full at Closing in cash by wire transfer
of immediately available federal funds to a bank account designated by Seller in
writing to Purchaser and Escrow Agent prior to the Closing.

 

1.6 Earnest Money.

 

(a) Concurrently with the execution of this Agreement, Purchaser shall deposit
the sum of FIVE MILLION and No/100 Dollars ($5,000,000)(together with all
interest earned on such sums, the “Earnest Money”) in good funds, either by
certified bank or cashier’s check or by federal wire transfer, with Partners
Title Company (“Escrow Agent”) having its office at 712 Main Street, Suite
2000E, Houston, Texas, 77002, Attention: Reno Hartfiel, Facsimile No.: (713)
238-9199.

 

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(b) Upon the delivery (or required delivery) of all or any portion of the
Earnest Money by Purchaser to Escrow Agent, the Earnest Money (including any
portion thereof that is required to be delivered but has not been delivered by
Purchaser) shall be fully earned by Seller and non-refundable to Purchaser for
any reason whatsoever, except that Purchaser shall be entitled to a return of
the Earnest Money in the event this Agreement is timely terminated as a result
of Purchaser’s election to terminate strictly in accordance with and pursuant to
(i) Section 2.3(b) below, (ii) Section 4.8 below, or (iii) Section 7.2 below
(following the occurrence of a major casualty).

 

(c) Escrow Agent shall hold the Earnest Money in an interest-bearing account in
accordance with the terms and conditions of this Agreement. The Earnest Money
shall be invested in obligations of, or obligations guaranteed as to principal
and interest by, the U.S. government or any agency or instrumentality thereof,
when such obligations are backed by the full faith and credit of the U.S.
investments approved by Purchaser. All interest accruing on such sums shall
become a part of the Earnest Money and shall be distributed as Earnest Money in
accordance with the terms of this Agreement. Notwithstanding any provision of
this Agreement to the contrary, in no event shall Seller have any responsibility
or liability to Purchaser in connection with the accrual or payment of interest
on any portion of the Earnest Money.

 

(d) Time is of the essence for the delivery of Earnest Money under this
Agreement and the failure of Purchaser to timely deliver any portion of the
Earnest Money shall be a material default, and shall entitle Seller, at Seller’s
sole option, to terminate this Agreement immediately and to pursue all remedies
available to Seller under this Agreement and applicable law.

 

1.7 Escrow Instructions. The terms and conditions set forth in this Agreement
shall constitute both an agreement between Seller and Purchaser and escrow
instructions for Escrow Agent. Seller and Purchaser shall promptly execute and
deliver to Escrow Agent any separate or additional escrow instructions requested
by Escrow Agent which are consistent with the terms of this Agreement. Any
separate or additional instructions shall not modify or amend this Agreement
unless expressly set forth by the mutual consent of Seller and Purchaser.

 

1.8 Management Agreement.

 

(a) Purchaser acknowledges that (i) the Hotel is being operated and managed by
The Ritz-Carlton Hotel Company, L.L.C., a Delaware limited liability company
(the “Manager”), pursuant to that certain (A) Operating Agreement dated as of
October 8, 1998 by and between Land Company and Manager, (B) Pre-Commencement
Agreement dated October 8, 1998 between Land Company and Manager, (C) letter
dated October 8, 1998 from Manager to Land Company regarding the golf access and
play agreement, (D) second letter dated October 8,

 

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1998 from Manager to Land Company regarding collective bargaining and reserve
accounts, (E) Memorandum of Operating Agreement dated as of October 8, 1998 by
and between Land Company and Manager, (F) third letter dated October 8, 1998
from Manager to Land Company regarding financing contingency, (G) letter dated
November 20, 1998 from Manager to Land Company regarding accounting
(collectively, as amended, the “Management Agreement”), (ii) and Land Company
and Manager entered into that certain Club Operating Agreement (“Colony Club
Agreement”) dated as of June 1, 2001, pursuant to which Manager was engaged to
operate the facility known as the “Colony Club”, and (iii) the Management
Agreement and the Colony Club Agreement will be assumed by Purchaser and will
remain in effect as of the Closing.

 

(b) Promptly following the execution and delivery of this Agreement, (i) Seller
shall provide written notice to Manager that the parties have entered into this
Agreement and that Seller intends to sell the Hotel to Purchaser, and (ii)
Purchaser shall (A) acknowledge in writing in a form reasonably acceptable to
Manager that Purchaser will execute a Retention Agreement (as defined in the
Management Agreement in a form reasonably acceptable to Manager, (B) provide
Manager with information demonstrating a “verifiable net worth” of at least 10%
of the replacement cost of the Hotel in a manner satisfying Section 12.1 of the
Management Agreement and (C) provide such information as may be reasonably
requested by Manager in order to permit Manager to make its determination that
Manager’s approval of the sale of the Hotel to Purchaser is not required
pursuant to the terms of the Management Agreement.

 

(c) If the Manager either (i) acknowledges that its consent is not required for
the sale of the Hotel to Purchaser or (ii) consents to sale of the Hotel and the
assignment and assumption of the Management Agreement and the Colony Club
Agreement, (A) Purchaser and Seller shall execute and deliver an assignment and
assumption of the Management Agreement and the Colony Club Agreement pursuant to
the Assignment of Contracts (defined below) or such other “Retention Agreement”
(defined in the Management Agreement) as may be reasonably required by Manager,
pursuant to which Purchaser shall assume all obligations of Seller under the
Management Agreement and the Colony Club Agreement arising from and after the
Closing Date.

 

(d) Notwithstanding any provision of this Agreement to the contrary, Seller
shall not be liable or responsible for the performance by Manager of its
obligations under the Management Agreement or the Colony Club Agreement
regardless of whether such obligations are required to be performed prior to or
after the Closing.

 

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1.9 Assumed Liabilities. At Closing, to the extent either (a) arising after the
Closing or (b) Purchaser receives a credit to the Purchaser Price with respect
to such Liabilities at Closing, Purchaser shall assume all liability,
obligation, damage, loss, diminution in value, cost or expense of any kind or
nature whatsoever, whether accrued or unaccrued, actual or contingent, known or
unknown, foreseen or unforeseen (collectively, “Liabilities”) arising from,
relating to, or in connection with the Property or the Hotel, including, without
limitation, subject to the Seller’s express representations and warranties in
Section 5.1, all Liabilities with respect to the condition of the Property,
including, without limitation, the design, construction, engineering,
maintenance and repair or environmental condition of the Property; provided
that, Seller shall retain and remain liable for all liabilities which accrue
prior to the Closing and which are not expressly assumed by Purchaser under this
Agreement or the conveyance documents to be executed pursuant to this Agreement
at Closing. Purchaser shall have no liability for that certain Promissory Note
(Contingent Purchase Payments) dated January 14, 1999 made by Land Company in
favor of Ocean Colony Partners, L.P. The parties’ rights and obligations under
this Section 1.9 shall survive the Closing.

 

ARTICLE II

TITLE AND SURVEY

 

2.1 Title Examination; Commitment for Title Insurance. Seller has obtained and
delivered to Purchaser a preliminary commitment for title insurance dated July
22, 2004 (updated commitment no. 4) (File no. SLC04005160) (the “Title
Commitment”) covering the Land and the Improvements from Commonwealth Land Title
Insurance Company (the “Title Company”), and a copy of each document referenced
in the Title Commitment as an exception to title to the Real Property. Purchaser
shall deliver to Seller, within six (6) days after receipt by Purchaser, a copy
of any updates (each a “Title Update”) to the Title Commitment, together with a
written statement by Purchaser of all objections to title disclosed by any such
Title Update.

 

2.2 Survey. Seller has (a) obtained and delivered to Purchaser and the Title
Company, at Purchaser’s expense, from Brian Kangas Foulk, an ALTA survey of the
Real Property dated May 28, 2001 and certified June 4, 2001 (Job no. 970242.60)
(the “Survey”), and (b) engaged the surveyor to provide an update to the Survey
(“Updated Survey”) and instructed such surveyor to prepare and deliver the
Updated Survey prior to the Closing Date.

 

2.3 Title Updates; Cure of Title Objections.

 

(a) Subject to Section 2.3(b) and Section 2.4 below, the parties agree that the
Permitted Exceptions to the Title Policy (defined below) shall be as set forth
on Schedule 2.3.

 

(b) With respect to any Title Update delivered by Title Company after the
Effective Date and the Updated Survey, Purchaser shall have until the date which

 

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is six (6) days after receipt of such Title Update to notify Seller, in writing,
of such objections as Purchaser may have to anything contained in such Title
Update or Updated Survey (but only if, and to the extent, any new title
exceptions or survey matters materially and adversely impacts the value,
ownership or operation of the Property by Purchaser). Any item contained in a
Title Update or Updated Survey to which Purchaser does not object prior to the
end of the applicable 6-day period shall be deemed a Permitted Exception. In the
event Purchaser shall notify Seller, in writing, of objections to any new
exception to title shown on a Title Update or survey matter shown on the Updated
Survey prior to the expiration of the applicable 6-day period, Seller shall have
the right, but not the obligation, to cure such exception by taking such actions
as may be required by Title Company to either delete such exception from the
Title Policy (defined below) or issue an endorsement over such exception. Within
ten (10) days after receipt of Purchaser’s notice of objections in accordance
with this Section 2.3(b), Seller shall notify Purchaser in writing whether
Seller elects to attempt to cure any or all of such exceptions. If Seller elects
to attempt to cure any title exception, Seller shall have until the Outside
Closing Date to attempt to remove, satisfy or cure the same and for this purpose
Seller shall, at Seller’s election, be entitled to a reasonable adjournment of
the Closing if additional time is required, but in no event shall the
adjournment exceed sixty (60) days after the Outside Closing Date. If Seller
elects not to cure any objections specified in Purchaser’s notice, or if Seller
is unable to effect a cure of those objections which it elected to cure prior to
the Outside Closing Date (or any date to which the Closing has been adjourned)
and so notifies Purchaser in writing, or if Seller fails to respond to
Purchaser’s notice within said ten (10) day period, Purchaser shall have the
following options: (i) to accept a conveyance of the Property subject to the
Permitted Exceptions, specifically including any matter objected to by Purchaser
which Seller is unwilling or unable to cure, and without reduction of the
Purchase Price; or (ii) to terminate this Agreement by sending written notice
thereof to Seller, and upon delivery of such notice of termination, this
Agreement shall terminate and the Earnest Money shall be returned to Purchaser,
and thereafter neither party hereto shall have any further rights, obligations
or liabilities hereunder except to the extent that any right, obligation or
liability set forth herein expressly survives termination of this Agreement;
provided, however, that, Purchaser shall have the right to terminate this
Agreement pursuant to this Section 2.3(b) if, and only if, any uncured title
exception or survey matter materially and adversely impacts the value, ownership
or operation of the Property by Purchaser. If Seller notifies Purchaser that
Seller does not intend to attempt to cure any title objection or fails to
respond to Purchaser’s notice within said ten (10) day period; or if, having
commenced attempts to cure any objection, Seller later notifies Purchaser in
writing that Seller will be unable to effect a cure thereof; Purchaser shall,
within five (5) days after such notice has been given, notify Seller in writing
whether Purchaser shall elect to accept the conveyance under clause (i) or to
terminate this Agreement under clause (ii). Purchaser’s failure to notify Seller
of termination of

 

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this Agreement within such 5-day period shall be deemed to be an irrevocable
election under clause (i) to accept conveyance of the Property. Notwithstanding
any provision of this Agreement to the contrary, in no event shall Seller have
any obligation to cure any title matter objected to by Purchaser other than all
mortgages and deeds of trust encumbering the Real Property and other monetary
liens of a definite and ascertainable amount which have been created by Seller.

 

2.4 Conveyance of Title. At Closing, Seller shall convey and transfer to
Purchaser title to the Real Property subject to the Permitted Exceptions.
Notwithstanding anything contained herein to the contrary, the Real Property
shall be conveyed subject to the following matters, all of which shall be deemed
to be Permitted Exceptions:

 

(a) the lien of all ad valorem real estate taxes and assessments not yet due and
payable as of the date of Closing, subject to adjustment as herein provided;

 

(b) local, state and federal laws, ordinances or governmental regulations,
including but not limited to, building and zoning laws, ordinances and
regulations, now or hereafter in effect relating to the Property;

 

(c) items shown on Schedule 2.3 hereof;

 

(d) items first shown on any Title Updates or the Updated Survey, which are
either (i) not timely objected to by Purchaser in accordance with this
Agreement, or (ii) waived or deemed waived by Purchaser in accordance with
Section 2.3(b) hereof, or (iii) insured over by the Title Company in a manner
reasonably satisfactory to Purchaser;

 

(e) the rights of Manager under the Management Agreement and the Colony Club
Agreement;

 

(f) the rights of tenants under the Leases;

 

(g) the rights of Hotel guests which occupy the Hotel or have a reservation for
rooms, food and beverages, meetings and other customary Hotel uses relating to
periods subsequent to the Closing Date; and

 

(h) items recorded in connection with this Closing and any items appearing of
record as a result of Purchaser’s or its affiliates or its or their agents’,
employees’ or representatives’ acts or omissions.

 

2.5 Title Policy. At Closing, Purchaser and Seller request that Title Company
issue a ALTA owner’s title insurance policy (“Title Policy”), Form B-1970 if
available, in the amount of the Purchase Price, to Purchaser in accordance with
the Title Commitment, insuring Purchaser’s fee and leasehold title to the Real
Property as of the Closing Date, subject to the Permitted Exceptions.

 

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ARTICLE III

DUE DILIGENCE

 

3.1 Acceptance of Due Diligence Review. Purchaser acknowledges and agrees that
it has completed its diligence review of the Property and has approved the
condition and operations of the Property in all respects. Purchaser shall
continue to have the right to enter upon and inspect the Property, review books
and records of the Hotel and otherwise conduct diligence activities in
accordance with the terms and conditions of that certain Due Diligence and
Access Agreement dated as of June         , 2004 made by Strategic Hotel
Capital, Inc. in favor of Seller, but shall not have any right to terminate this
Agreement, modify the Purchase Price or otherwise modify the terms and
conditions of this Agreement in connection with any such inspections and in no
event shall any matters discovered by Purchaser give Purchaser a right to
terminate this Agreement or obtain a refund of the Earnest Money. In no event
shall Purchaser use any information obtained from Seller or otherwise obtained
by Purchaser in connection with the potential purchase of the Property for any
purpose other than evaluating the acquisition of the Hotel including, without
limitation, for any use in connection with the ownership or operation of any
other hotel property now or in the future owned in whole or in part by Purchaser
or a related party.

 

3.2 Seller Due Diligence Materials. PURCHASER ACKNOWLEDGES THAT (1) PURCHASER
HAS RECEIVED AND IS FAMILIAR WITH ALL ENVIRONMENTAL, ENGINEERING, SOILS AND
OTHER REPORTS REGARDING THE CONDITION OF THE PROPERTY LISTED ON SCHEDULE 3.2
ATTACHED HERETO, AND (2) ANY REPORTS DELIVERED OR TO BE DELIVERED BY SELLER OR
ITS AGENTS OR CONSULTANTS TO PURCHASER (COLLECTIVELY, THE “REPORTS”) ARE BEING
MADE AVAILABLE SOLELY AS AN ACCOMMODATION TO PURCHASER AND WITHOUT ANY
REPRESENTATION OR WARRANTY OF SELLER AS TO THEIR ACCURACY OR COMPLETENESS AND
THAT ANY RELIANCE BY PURCHASER ON SUCH REPORTS IN CONNECTION WITH THE PURCHASE
OF THE PROPERTY IS UNDERTAKEN AT PURCHASER’S SOLE RISK. PURCHASER HAS CONDUCTED
ITS OWN INVESTIGATION OF THE CONDITION OF THE PROPERTY TO THE EXTENT PURCHASER
DEEMS SUCH AN INVESTIGATION TO BE NECESSARY OR APPROPRIATE. For purposes of this
Agreement, the term “Seller Due Diligence Materials” shall mean the Reports, the
Property Information and all other documents and materials provided or otherwise
made available by Seller to Purchaser pursuant to Section 3.1 and the other
provisions of this Agreement or otherwise, together with any copies or
reproductions of such documents or materials, or any summaries, abstracts,
compilations, or other analyses made by Purchaser based on the information in
such documents or materials.

 

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3.3 Return of Information, Materials. If this Agreement terminates for any other
reason whatsoever, Purchaser shall promptly return all Property Information to
Seller. This provision shall survive the termination or expiration of this
Agreement.

 

ARTICLE IV

CLOSING

 

4.1 Time and Place. Subject to the provisions of Section 4.6 and 4.7 below, the
consummation of the transaction contemplated hereby (“Closing”), as evidenced by
the payment and release of the Purchase Price to Seller, shall occur on or
before August 24, 2004 (“Outside Closing Date”) (with the actual date of Closing
being referred to herein as the “Closing Date”). The Closing shall occur through
an escrow administered by Escrow Agent with the Purchase Price and all documents
(unless otherwise mutually agreed) shall be deposited with the Escrow Agent as
escrowee. If requested by either party, a pre-closing shall be held on the
business day preceding the scheduled Closing Date at the offices of Paul,
Hastings, Janofsky & Walker LLP, 515 South Flower Street, 25th Floor, Los
Angeles, California 90071. At Closing, Seller and Purchaser shall perform the
obligations set forth in, respectively, Section 4.2 and Section 4.3, the
performance of which obligations shall be concurrent conditions.

 

4.2 Seller’s Closing Obligations and Deliveries. At Closing, Land Company or
Operating Company, as applicable, shall, through Escrow Agent (provided that
such items shall be delivered to Escrow Agent not later than one (1) business
day prior to the scheduled Closing Date or, if applicable, at the pre-closing
described in Section 4.1 above):

 

(a) Deliver to Purchaser a duly executed grant deed (the “Deed”) in the form
attached hereto as Exhibit B and made a part hereof conveying Seller’s fee
interest in the Land and the Improvements, with a documentary transfer tax
affidavit attached thereto;

 

(b) Deliver to Purchaser a duly executed assignment of ground leases (the
“Ground Lease Assignment”) in the form attached hereto as Exhibit C and made a
part hereof conveying Seller’s leasehold interests under that certain (i) Ground
Lease dated as of August 15, 2002, by and between Clara K. Alves, Surviving
Trustee under the Ernest and Clara K. Alves Family Trust Agreement dated June
25, 1999; Clara K. Alves, Executor of the Estate of Ernest Alves; and Frank
Alves and Ruth C. Alves, Trustees of the Trust of Frank Alves and Ruth C. Alves
under Agreement dated January 13, 1992 and Land Company, and (ii) Ground Lease
dated January 1, 2003 between Land Company and the County of San Mateo, with a
documentary transfer tax affidavit attached thereto if applicable;

 

(c) Execute and deliver to Purchaser at least two (2) original counterparts of a
bill of sale in the form attached hereto as Exhibit D and made a part hereof
conveying the Personal Property and Consumable Inventory without warranty of
title or use

 

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and without warranty, expressed or implied, as to merchantability and fitness
for any purpose;

 

(d) Execute and deliver to Purchaser at least two (2) original counterparts of
an assignment of Operating Company’s interest in the Operating Agreements (to
the extent assignable), the Management Agreement, the Colony Club Agreement, the
Bookings and the other Intangibles (“Assignment of Contracts”) in the form
attached hereto as Exhibit E and made a part hereof;

 

(e) Execute and deliver to Purchaser at least two (2) original counterparts of
an assignment of Operating Company’s interest in the Leases in the form attached
hereto as Exhibit F and made a part hereof;

 

(f) Deliver to Purchaser a certificate, dated as of the date of Closing and
executed on behalf of Seller by a duly authorized officer thereof, stating that
the representations and warranties of Seller contained in this Agreement are
true and correct in all material respects as of the date of Closing (with
appropriate modifications of those representations and warranties made in
Section 5.1 hereof to reflect any changes therein which resulted from any change
that occurred between the Effective Date and the Closing Date or which becomes
known to Seller following the Effective Date including, without limitation, any
changes resulting from actions under Section 5.4 hereof) or identifying any
representation or warranty which is not, or no longer is, true and correct and
explaining the state of facts giving rise to the change which resulted from any
change that occurred between the Effective Date and the Closing Date or which
becomes known to Seller following the Effective Date. In no event shall Seller
be liable to Purchaser for, or be deemed to be in default hereunder by reason
of, any breach of representation or warranty which results from any change that
(i) occurs between the Effective Date and the date of Closing and (ii) is
expressly permitted under the terms of this Agreement or is beyond the
reasonable control of Seller to prevent; provided, however, that the occurrence
of a change which is not permitted hereunder or is beyond the reasonable control
of Seller to prevent shall, if materially adverse to Purchaser, constitute the
non-fulfillment of the condition set forth in Section 4.6(b). If, despite
changes or other matters described in such certificate, the Closing occurs,
Seller’s representations and warranties set forth in this Agreement shall be
deemed to have been modified by all statements made in such certificate;

 

(g) Deliver to Purchaser and the Title Company such evidence as the Title
Company may reasonably require as to the authority of the person or persons
executing documents on behalf of Seller;

 

(h) Deliver to Purchaser an affidavit duly executed by Land Company stating that
Land Company is not a “foreign person” as defined in the Federal Foreign

 

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Investment in Real Property Tax Act of 1980 and the 1984 Tax Reform Act in the
form attached hereto as Exhibit G and made a part hereof;

 

(i) If not already delivered to Purchaser, deliver to Purchaser, the Management
Agreement, the Colony Club Agreement, the Operating Agreements and the licenses
and permits, if any, in the possession of Seller or Seller’s agents, together
with such leasing and property files and records which are material in
connection with the continued operation, leasing and maintenance of the
Property. Purchaser shall cooperate with Seller for a period of seven (7) years
after Closing in case of Seller’s need in response to any legal requirement, a
tax audit, tax return preparation or litigation threatened or brought against
Seller, by allowing Seller and its agents or representatives access, upon
reasonable advance notice (which notice shall identify the nature of the
information sought by Seller), at all reasonable times to examine and make
copies of any and all instruments, files and records, which right shall survive
the Closing;

 

(j) Deliver to the Escrow Agent an executed closing statement (the “Closing
Statement”) consistent with this Agreement and in a customary form;

 

(k) Deliver two (2) original copies of the Designation Agreement (defined
below); and

 

(l) Deliver such additional documents as shall be reasonably required to
consummate the transaction expressly contemplated by this Agreement.

 

4.3 Purchaser’s Closing Obligations and Deliveries. At Closing, Purchaser shall,
through Escrow Agent (provided that such items shall be delivered to Escrow
Agent not later than one (1) business day prior to the scheduled Closing Date
or, if applicable, at the pre-closing described in Section 4.1 above):

 

(a) Pay to Seller the full amount of the Purchase Price, as increased or
decreased by prorations and adjustments as herein provided, in immediately
available wire transferred funds pursuant to Section 1.5 above, it being agreed
that at Closing the Earnest Money shall be delivered to Seller and applied
towards payment of the Purchase Price;

 

(b) Join Seller in execution of (or deliver original executed counterparts of)
the instruments described in clauses (b), (d), (e), (j) and (k) of Sections 4.2
above;

 

(c) Deliver to Seller a letter duly executed by Purchaser, confirming that
Purchaser is not acquiring the Property with the assets of an employee benefit
plan as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 (“ERISA”), and, in the event Purchaser is unable or unwilling to make
such a representation, Purchaser shall be deemed to be in default hereunder, and

 

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Seller shall have the right to terminate this Agreement and to receive and
retain the Earnest Money;

 

(d) Deliver to Seller a certificate, dated as of the date of Closing and
executed on behalf of Purchaser by a duly authorized officer thereof, stating
that the representations and warranties of Purchaser contained in this Agreement
are true and correct in all material respects as of the date of Closing;

 

(e) Deliver to Seller such evidence as Title Company may reasonably require as
to the authority of the person or persons executing documents on behalf of
Purchaser;

 

(f) Deliver such additional documents as shall be reasonably required to
consummate the transaction contemplated by this Agreement; and

 

(g) Deliver to Seller a Certificate of Resale certifying the items of Personal
Property purchased by Purchaser for resale after Closing.

 

4.4 Credits and Prorations.

 

(a) The following shall be apportioned with respect to the Property, as set
forth in greater detail in Section 4.4(b) below, as of 12:01 a.m., on the
Closing Date (the “Cut-Off Time”), as if Purchaser were vested with title to the
Property during the entire day upon which Closing occurs:

 

(i) taxes (including personal property taxes on the Personal Property) and
assessments levied against the Property;

 

(ii) payments under the Operating Agreements;

 

(iii) water, gas, electricity and other utility charges for which Seller is
liable, if any, such charges to be apportioned at Closing on the basis of the
most recent meter reading occurring prior to Closing (but subject to later
readjustment as set forth below);

 

(iv) all Receivables including, without limitation, receivables accrued in
connection with hotel reservations, the use of guest rooms, banquet and meeting
room receivables (including any cancellation fees due to Seller in connection
with any of the foregoing) as reflected on the city ledger, guest ledger or any
other receivable ledger shall be purchased by Purchaser at the Closing without
adjustment or allowance for uncollectable accounts; provided that, (A) Seller
shall receive a credit at Closing to the Purchase Price in an amount equal to
(1) 100% of all credit card Receivables outstanding as of the Closing Date, plus
(2) 95% of all other outstanding Receivables as of the Closing Date.
Notwithstanding any provision of this

 

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Agreement to the contrary, there shall not be any post-Closing true-up in
Receivables irrespective of the amount actually collected by Purchaser from and
after the Closing Date;

 

(v) All fixed monthly rent, additional rent, escalation rent, percentage rent
and other sums payable under any Lease or similar agreement for use of space at
the Hotel (collectively, “Rent”) in accordance with Section 4.4(b)(xi) below;

 

(vi) advance deposits;

 

(vii) management fees pursuant to the Management Agreement and the Colony Club
Agreement;

 

(viii) operational and/or occupancy taxes;

 

(ix) charges and fees paid or payable for licenses and permits transferred by
Seller to Purchaser;

 

(x) accounts payable of the Hotel; and

 

(xi) any other operating expenses or other items pertaining to the Property
which are customarily prorated between a purchaser and a seller for comparable
hotel properties including, without limitation, any prepaid expenses.

 

(b) Notwithstanding anything contained in the foregoing provisions:

 

(i) At Closing, Seller shall receive a credit for all refundable cash or other
deposits posted with utility companies serving the Property or any governmental
agencies or authorities or posted pursuant to any Operating Agreement, or, at
Seller’s option, Seller shall be entitled to receive and retain such refundable
cash and deposits.

 

(ii) Any taxes paid at or prior to Closing shall be prorated based upon the
amounts actually paid. If taxes and assessments for the current year have not
been paid before Closing, Seller shall be charged at Closing an amount equal to
that portion of such taxes and assessments which relates to the period before
Closing and Purchaser shall pay the taxes and assessments prior to their
becoming delinquent. Any such apportionment made with respect to a tax year for
which the tax rate or assessed valuation, or both, have not yet been fixed shall
be based upon the tax rate and/or assessed valuation last fixed. To the extent
that the actual taxes and assessments for the current year differ from the
amount apportioned at Closing, the parties shall make all necessary adjustments
by appropriate

 

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payments between themselves following Closing. All necessary adjustments shall
be made within fifteen (15) business days after the tax bill for the current
year is received. Seller retains the right to commence, continue and settle any
proceeding to contest any taxes for any taxable period which encompasses any
period prior to the date of the Closing, and shall be entitled to any refunds or
abatements of Taxes awarded in such proceedings.

 

(iii) Seller shall receive the entire advantage of any discounts for the
prepayment by it of any taxes, water rates or sewer rents.

 

(iv) As to gas, electricity and other utility charges referred to in Section
4.4(a)(iii) above, Seller may, on notice to Purchaser, elect to pay one or more
of all of said items accrued to the date hereinabove fixed for apportionment
directly to the person or entity entitled thereto, and to the extent Seller so
elects, such item shall not be apportioned hereunder, and Seller’s obligation to
pay such item directly in such case shall survive the Closing.

 

(v) At Closing, the Purchase Price shall be adjusted to provide Seller with a
credit equal to the sum of (1) the aggregate acquisition cost of all retail
inventory held as of the Closing Date for resale at the Hotel or any space
therein conducting retail sales including without limitation, the spa and the
gift shop, plus (2) the aggregate acquisition cost of all Unopened Inventory
(other than retail inventory described in (1) above) of the Hotel as of the
Closing Date. As of the date immediately prior to the date of Closing, Seller
and Purchaser shall jointly conduct or cause the Manager to conduct an inventory
of all applicable inventories at the Hotel and shall deliver a written report
thereon to Seller and Purchaser.

 

(vi) At Closing, Seller shall receive (or receive a credit in an amount equal
to) all revenue (after the settlement of applicable commissions and/or costs)
relating to vending machines in the Hotel up until the Cut-Off Time.

 

(vii) Revenues from the Hotel guest rooms (other than those set forth in clause
(x) below) occupied on the evening immediately preceding the date of Closing,
including any sales taxes, room taxes and other taxes charged to guests in such
rooms with respect to the evening immediately preceding the date of Closing
shall be divided equally between Seller and Purchaser (where a complete meeting
package (“CMP”) guest is staying on a CMP rate, the food and beverage revenues
shall be allocated based on whether the applicable meal or service occurred
before or after the Cut-Off Time); provided, however, that to the extent that
Manager records in the ordinary course the times at which food and beverage
sales, telephone, facsimile or

 

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data communication, in-room movie, laundry, and other services are ordered by
guests, then the same shall be allocated between Seller and Purchaser based on
when orders for the same were received, with orders originating prior to the
Cut-Off Time being allocable to Seller, and orders originating after the Cut-Off
Time being allocable to Purchaser. All revenues from restaurants and other
service operations conducted at the Property shall be allocated based on whether
the same accrued before or after the Cut-Off Time as described in the preceding
sentence, and Seller shall cause the Manager to separately record sales
occurring before and after the Cut-Off Time at the Property. The foregoing
amounts are referred to collectively as “Guest Revenues”. Notwithstanding the
foregoing, all revenues from any bars and lounges at the Property shall be
prorated based on the actual closing time for such bar or lounge. For example,
if such bar or lounge closes at 2 a.m. on the Closing Date, Seller shall retain
the revenues from such services and operations even such revenues were generated
two (2) hours after the Cut-Off Time.

 

(viii) Revenues from conferences, receptions, meetings, and other functions
occurring in any conference, banquet or meeting rooms in the Hotel, or in any
adjacent facilities owned or operated by Seller, including usage charges and
related taxes, food and beverage sales, valet parking charges, equipment
rentals, and telecommunications charges, shall be allocated between Seller and
Purchaser, based on when the function therein commenced, with (1) one-day
functions commencing prior to the Cut-Off Time being allocable to Seller, (2)
functions commencing after the Cut-Off Time being allocable to Purchaser, and
(3) multi-day functions being allocated between Seller and Purchaser according
to when the event commences and is scheduled to end. The foregoing amounts are
referred to collectively as “Conference Revenues.”

 

(ix) Purchaser shall receive a credit at Closing in an amount equal to one
hundred percent (100%) of all advance deposits that shall have been received by
or credited to Seller prior to the Cut-Off Time on account of reservations for
use or occupancy of the Property after the Cut-Off Time.

 

(x) To the extent not actually collected by Seller or Manager prior to the
Cut-Off Time, all Guest Revenues and Conference Revenues allocated to Seller
hereunder and not paid in cash prior to the Cut-Off Time, including the city
ledger, guest ledger and any other receivable ledgers, shall together constitute
Receivables hereunder and shall be purchased by Purchaser at Closing in their
entirety. On account of Purchaser’s purchase of the Receivables, Seller shall
receive a credit at Closing in an amount equal to the amount of the Receivables
based on the amount reflected in the books of the Manager, as apportioned
between Seller and Purchaser in

 

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accordance with this Section 4.4. After Closing, Purchaser shall have the
exclusive right to collect all Receivables, and Seller shall have no further
rights or interests therein. Purchaser shall have no right to any adjustment to
the prorations with respect to the Receivables on or after Closing, for
inability to collect outstanding Receivables or otherwise.

 

(xi) Rent shall be prorated as of the Closing Date.

 

(xii) Purchaser shall be entitled to a credit for all unapplied and refundable
security and other deposits retained by Seller as of the Closing Date with
respect to any Leases at the Hotel.

 

(xiii) Seller shall be responsible for all wages and other amounts owed to
Manager’s employees at the Property relating to the period prior to the Cut-Off
Time and Purchaser shall be responsible for all wages and other amounts due to
employees at the Property relating to the period after the Cut-Off Time. The
obligation to pay or reimburse the Manager for the wages, salaries, and other
benefits of employment of employees of Manager, together with applicable
employment and withholding taxes of such employees, shall be allocated between
Purchaser and Seller as follows:

 

  (1) Hourly Employees: (A) wages of hourly employees shall be allocated
according to hours worked during the current pay period before and after the
Cut-Off Time; (B) employment and withholding taxes for the current pay period
for such employees shall be allocated in the same manner as wages; (C) accrued
vacation and required contributions to health, pension and other benefit plans
for such employees shall be allocated on the basis used by Manager under the
Management Agreement for allocating such costs to particular accounting periods,
with such costs attributable to the accounting period in which the date of
Closing occurs to be allocated on a per diem basis according to the number of
days in the current period occurring before and after the Cut-Off Time; and (D)
Purchaser shall be responsible for all severance pay with respect to discharged
employees and all sick leave obligations.

 

  (2)

Salaried Employees: the salaries, employment and withholding taxes, accrued
vacation and other employment benefits for salaried employees shall be allocated
on the basis used by the Manager under the Management Agreement for allocating
such costs to particular

 

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accounting periods, with such costs during the accounting period in which the
date of Closing occurs to be allocated on a per diem basis according to the
number of days in the current period occurring before and after the Cut-Off
Time. However, Purchaser shall be responsible for all severance pay with respect
to discharged employees and all sick leave obligations.

 

Notwithstanding any provision of this Section 4.4 to the contrary, to the extent
required by applicable law, accrued wages, vacation pay, health & welfare
payments and other amounts accrued as of the Closing Date and due to employees
of the Hotel shall be paid at Closing by Seller and shall not be prorated.

 

(xiv) Those fees and other compensation payable to the Manager under the
Management Agreement and the Colony Club Agreement which are earned prior to the
Cut-Off Time shall be the responsibility of Seller, and the fees and other
compensation payable to the Manager under the Management Agreement and the
Colony Club Agreement which are earned after the Cut-Off Time shall be the
responsibility of Purchaser. The amount earned for such period shall be
determined based on the provisions of the Management Agreement and the Colony
Club Agreement in accordance with the allocations of revenue and expense items
under this Agreement. On the Closing Date, the parties shall estimate, and
Purchaser shall receive a credit for, Seller’s share of accrued but unpaid
management fees due under the Management Agreement and Colony Club Agreement and
reimbursable expenses as of the Closing Date.

 

(xv) The parties acknowledge that certain taxes accrue and are payable to the
various local governments by any business entity operating a hotel and its
related facilities. Included in those taxes may be business and occupation
taxes, retail sales taxes, gross receipts taxes, and other special lodging or
hotel taxes. For purposes of this Agreement, all of such taxes (expressly
excluding taxes and assessments covered elsewhere in this Section 4.4 or in
Section 4.5 or corporate franchise taxes, and federal, state and local income
taxes) shall be allocated between Seller and Purchaser such that those
attributable to the period prior to the Cut-Off Time shall be allocable to
Seller and those attributable to the period after the Cut-Off Time shall be
allocable to Purchaser (with the attribution of such taxes hereunder to be done
in a manner consistent with the attribution under this Agreement of the
applicable revenues on which such taxes may be based). Seller shall be solely
responsible for payment of such taxes with respect to the period prior to the
Cut-Off Time, and Purchaser shall be solely responsible for payment of such
taxes with respect to the period after the

 

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Cut-Off Time; provided, that, the parties may make an estimate of the amount of
Seller’s share of such taxes accrued but not paid up to the Cut-Off Time and
credit the amount so estimated to Purchaser at Closing, and in such case, to the
extent of such credit, Purchaser shall be responsible for the payment of such
taxes when due after the date of Closing and Seller shall not be liable for the
amount of such taxes so credited to Purchaser; and provided further, that to the
extent reasonably possible, the parties shall ascertain the amounts of such
taxes allocable to Seller within the 90-day period following the date of Closing
(concurrently with their determination of the amounts of the revenues allocable
to Seller pursuant to Section 4.4(b)(xi) hereof), and if the parties shall agree
on the amount thereof, Purchaser may deduct Seller’s share of such taxes from
the amounts of revenues payable to Seller (and Seller shall not be further
liable for the taxes so deducted) and, if the amount due Purchaser exceeds the
revenues payable to Seller, Seller shall promptly pay any excess to Purchaser.
If the parties are unable to agree on such amounts, the dispute thereon shall be
resolved by the Outside Accountant as provided in Section 4.4(e) below.

 

(xvi) Seller shall receive a credit at Closing in an amount equal to the balance
of the House Bank Funds as of the Cut-Off Time.

 

(xvii) Purchaser shall (A) honor all outstanding gift certificates, coupons,
vouchers or other writings issued by Seller that entitles the holder or bearer
thereof to a credit (whether in a specified dollar amount as for a specified
item, such as room night or meals) to be applied against the usual charge for
rooms, meals and/or goods and services at the Hotel (collectively, “Vouchers”)
and shall assume all liability, if any, for all outstanding Vouchers as of the
Closing Date regardless of any purported expiration, (B) receive a credit
against the Purchase Price payable at Closing as set forth in Schedule
4.4(b)(xvii) attached hereto and incorporated herein by this reference, as such
schedule is updated as of the Closing Date, and (C) indemnify, defend and hold
Seller harmless from and against all claims, liabilities, costs and expenses
arising out of the Vouchers from and after the Closing Date. The provisions of
this Section 4.4(b) (xvii) shall survive the Closing without limit.

 

(xviii) At Closing, pursuant to that certain Service Agreement for Audiovisual
Services by and between Operating Company and Audio Visual Services Group, Inc.
d/b/a Presentation Services (“PS”), dated January 1, 2003 (as amended, the “AV
Agreement”), Purchaser shall receive a credit in an amount equal to the
unreimbursed “Net Profit Threshold” (as such term is defined in the AV
Agreement) as of the Closing Date.

 

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(c) Apportionment Credit. In the event the apportionments to be made at the
Closing result in a credit balance (i) to Purchaser, such sum shall be paid (at
Seller’s option) at the Closing by giving Purchaser a credit against the
Purchase Price in the amount of such credit balance, or (ii) to Seller,
Purchaser shall pay the amount thereof to Escrow Agent, to be delivered to
Seller at Closing together with the net proceeds of the Purchase Price by wire
transfer of immediately available funds to the account or accounts to be
designated by Seller for the payment of the balance. Except as otherwise
expressly provided herein, in any case in which Purchaser receives a credit at
Closing on account of any obligation of Seller hereunder, Seller shall have no
further liability for such obligation to the extent of the credit so given, and
Purchaser shall pay and discharge the same.

 

(d) Closing Statement; Post-Closing Adjustments. The accounting staff of Seller
(“Seller’s Accountants”) and the accounting staff of Purchaser (“Purchaser’s
Accountants”) shall jointly make such inventories, examinations and audits of
the Property, and of the books and records pertaining to the Property, as
Seller’s Accountants and Purchaser’s Accountants may deem necessary to make the
adjustments and prorations required under this Section 4.4, or under any other
provisions of this Agreement. All such adjustments and prorations shall be made
in accordance with the provisions of this Agreement and, to the extent not in
conflict with the express provisions of this Agreement, otherwise in accordance
with generally accepted accounting principles (“GAAP”). Based upon the results
thereof, Seller will prepare and deliver to Purchaser for its review and
approval prior to Closing a statement of prorations (the “Prorations Statement”)
which shall (i) contain the best estimate of Seller’s Accountants of the amounts
of the items requiring the prorations and adjustments in accordance with this
Agreement and (ii) following approval by Purchaser’s Accountants, be the basis
upon which the prorations and adjustments provided for herein shall be made at
the Closing. The Prorations Statement shall be binding and conclusive on all
parties hereto to the extent of the items covered by the Prorations Statement,
except (A) where this Agreement expressly provides for further adjustment of
such amounts after Closing, and (B) as otherwise provided in Section 4.4(e)
below.

 

(e) Delayed Adjustment; Disputes. Except for prorations for real estate taxes
and other assessments, which shall be adjusted within fifteen business (15) days
of receipt of the tax bill for the tax year in which the Closing occurs,
Purchaser and Seller shall make a one time post-Closing adjustment of any item
of income and expense subject to adjustment as provided above which was either
incomplete or incorrect (whether as a result of an error in calculation or a
lack of complete and accurate information) as of the Closing, and the party in
whose favor the original incorrect adjustment or error was made (“Adjusting
Party”) shall promptly pay to the other party (“Requesting Party”) the sum
necessary to correct such prior incorrect adjustment or error. Notwithstanding
any provision of this Agreement to the contrary, all items required to be
adjusted pursuant to this Section 4.4 shall

 

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be adjusted within sixty (60) days of Closing (except real estate taxes, which
shall be re-adjusted within the period set forth above), and such adjustment
shall be final and no further adjustment to the prorations or the Purchase Price
shall be made.

 

(f) Resolution of Disputes. Within ten (10) business days after receipt of
written notice of any such adjustment from the Requesting Party to the Adjusting
Party, the Adjusting Party shall either (i) pay to the Requesting Party the
amount of such excess credit, or (ii) notify the Requesting Party in writing
that it disputes the adjustment being claimed. In the case of a dispute, the
parties shall attempt to resolve such dispute, but if for any reason such
dispute is not resolved by the date that is (x) thirty (30) days after the
delivery of the original notice of the claimed adjustment by Purchaser or Seller
or (y) fifteen (15) days after the Manager shall have delivered to Seller its
annual financial statements for the final “Fiscal Year” under the Management
Agreement, whichever is later but not to exceed sixty (60) days after Closing,
then the parties shall submit such dispute to Deloitte & Touche, LLP (“Outside
Accountants”), and the determination of the Outside Accountants, which shall be
made within a period of fifteen (15) days after such submittal by the parties,
shall be conclusive. The fees and expenses of the Outside Accountants shall be
paid equally by Purchaser and Seller. At such time as the amount of any
adjustment or dispute shall be determined (either by agreement or by
determination of the Outside Accountants), any amount that shall be payable by
the Requesting Party to the Adjusting Party as a result of such adjustment or
determination shall be paid within ten (10) business days after the date on
which such agreement or determination shall have been made.

 

(g) The provisions of this Section 4.4 shall survive Closing.

 

4.5 Closing Costs. Seller shall pay (a) the fees of any counsel representing it
in connection with this transaction, (b) the premium for the Title Policy
attributable to the CLTA portion of such policy, (c) the documentary transfer
tax payable by reason of the transfer of the Real Property, (d) the fees for
recording the Deed and the Assignment of Ground Leases, (e) all sales tax on the
sale of the Personal Property (or any part thereof), (f) the cost of the Updated
Survey, and (g) one-half (½) of any escrow fee which may be charged by the
Escrow Agent. Purchaser shall pay (i) the fees of any counsel representing
Purchaser in connection with this transaction, (ii) the premium for the Title
Policy attributable to the ALTA coverage in excess of the premium for a CLTA
policy, plus (A) 100% of the cost of any endorsements to the Title Policy, and
(B) the cost of any title insurance provided to Purchaser’s’ lender, and (iii)
one-half (½) of any escrow fees charged by the Escrow Agent. All other costs and
expenses incident to this transaction and the closing thereof shall be paid in a
manner consistent with custom for similar transactions in San Mateo County,
California. Notwithstanding the foregoing, in the event that this Agreement is
terminated as a result of a party’s default, such defaulting

 

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party shall pay all escrow and title cancellation fees charged in connection
with such cancellation.

 

4.6 Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser
to consummate the transaction hereunder shall be subject to the fulfillment on
or before the date of Closing of all of the following conditions, any or all of
which may be waived by Purchaser in its sole discretion:

 

(a) Seller shall have delivered to Purchaser or deposited with Escrow Agent all
of the items required to be delivered to Purchaser or deposited with Escrow
Agent pursuant to the terms of this Agreement, including but not limited to,
those provided for in Section 4.2.

 

(b) All of the representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects as of the date of
Closing (with appropriate modifications permitted under this Agreement or not
materially adverse to Purchaser).

 

(c) Seller shall have performed and observed, in all material respects, all
covenants and agreements of this Agreement to be performed and observed by
Seller as of the date of Closing.

 

(d) [Intentionally Omitted]

 

(e) The Title Company shall be committed (through written closing instructions
or otherwise) to issue the Title Policy to Purchaser.

 

(f) Purchaser shall have received estoppels from each party to the Operating
Agreements listed on Schedule 4.6(f) as “Required Estoppel” (each such estoppel
being a “Required Estoppel”). For purposes of this Section 4.6(f), any Required
Estoppel to be received shall satisfy the requirement set forth above if such
estoppel discloses no material adverse matters (excluding any matters actually
known to any Purchaser Knowledge Party (defined below) as of the Effective Date)
and (A) is in substantially the form attached to the applicable Operating
Agreement or otherwise satisfies the estoppel requirements under such agreement,
or (B) is in substantially the form attached as Exhibit I. With respect to the
Other Estoppels listed on Schedule 4.6(f), Seller shall use commercially
reasonable efforts to obtain such estoppels prior to the Outside Closing Date.
The receipt of any estoppel other than the Required Estoppels shall not be a
condition to Purchaser’s obligation to purchase the Property under this
Agreement.

 

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4.7 Conditions Precedent to Obligation of Seller. The obligation of Seller to
consummate the transaction hereunder shall be subject to the fulfillment on or
before the date of Closing of all of the following conditions, any or all of
which may be waived by Seller in its sole discretion:

 

(a) Seller shall have received the Purchase Price as adjusted pursuant to and
payable in the manner provided for in this Agreement.

 

(b) Purchaser shall have delivered to Seller all of the items required to be
delivered to Seller pursuant to the terms of this Agreement, including but not
limited to, those provided for in Section 4.3.

 

(c) All of the representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects as of the date of
Closing.

 

(d) Purchaser shall have performed and observed, in all material respects, all
covenants and agreements of this Agreement to be performed and observed by
Purchaser as of the date of Closing.

 

4.8 Failure of Waiver of Conditions Precedent. In the event any of the
conditions set forth in Sections 4.6 or 4.7 are not fulfilled or waived on or
before the Outside Closing Date, the party benefited by such conditions may, by
written notice to the other party, terminate this Agreement, whereupon all
rights and obligations hereunder of each party shall be at an end except those
that expressly survive any termination. Either party benefited by a condition
set forth in Sections 4.6 and 4.7 above may, at its election, at any time or
times on or before the date specified for the satisfaction of the condition,
waive in writing the benefit of such condition. Purchaser’s consent to the close
of escrow pursuant to this Agreement shall waive any remaining unfulfilled
conditions, and any liability on the part of Seller for breaches of
representations and warranties of which Purchaser had knowledge as of the
Closing.

 

4.9 Designation Agreement. On or before the Closing Date, Seller and Purchaser
shall each execute an original counterpart of a Designation Agreement,
substantially in the form of Exhibit H attached hereto, which Designation
Agreement names the Title Company as the “Reporting Person” under Section
6045(e) of the Internal Revenue Code (the “Designation Agreement”).

 

4.10 Disbursements and Other Actions by Escrow Agent. Upon the Closing, Escrow
Agent shall promptly undertake all of the following in the following order and
manner:

 

(a) Cause the Deed, the Assignment of Ground Leases and any other documents
which the parties hereto may mutually direct to be recorded in the Real Property
Records of San Mateo County, California;

 

(b) Disburse to Seller from funds deposited by Purchaser with Escrow Agent
towards payment of all items (including, without limitation, the Purchase Price)
chargeable to the account of Purchaser;

 

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(c) Deliver to Seller a fully executed original of the instruments described in
clauses (d), (e), (j), (k), and (l) of Section 4.2 above and clauses (c), (d),
(e) and (f) of Section 4.3 and a conformed copy of the recorded Deed and
Assignment of Ground Leases;

 

(d) Deliver to Purchaser a fully executed original of the instruments described
in clauses (c), (d), (e), (f), (g), (h), (j), (k), and (l) of Section 4.2 above
and a conformed copy of the recorded Deed and Assignment of Ground Leases;

 

(e) Direct the Title Company to issue the Title Policy to Purchaser; and

 

(f) File the Designation Agreement.

 

ARTICLE V

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

5.1 Representations and Warranties of Seller. Seller hereby makes the following
representations and warranties to Purchaser as of the Effective Date:

 

(a) Organization and Authority; No Conflict. Each of Land Company and Operating
Company has been duly organized and is validly existing under the laws of
Delaware. Seller has the full right and authority to enter into this Agreement
and to transfer all of the Property to be conveyed by Seller pursuant hereto and
to consummate or cause to be consummated the transactions contemplated herein to
be made by Seller. The person signing this Agreement on behalf of Seller is
authorized to do so. The execution and delivery of and the performance by Seller
of its obligations under this Agreement do not and will not contravene, or
constitute a default under Seller’s organizational documents or any agreement,
judgment, injunction, order, decree or other instrument binding upon Seller.

 

(b) Pending Actions. To Seller’s knowledge, there is no action, suit,
arbitration, unsatisfied order or judgment, government investigation or
proceeding pending against Seller or threatened in writing to Seller which, if
adversely determined, (i) could individually or in the aggregate materially
interfere with the consummation of the transaction contemplated by this
Agreement, or (ii) would have a material adverse effect on the operation of the
Hotel.

 

(c) Management Agreement. To Seller’s knowledge, (i) the Management Agreement is
in full force and effect, and (ii) Seller is not in default beyond any
applicable grace period in any monetary obligation or any material non-monetary
obligation under the Management Agreement and Seller knows of no material
default on the part of the Manager thereunder.

 

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(d) No Violations. To Seller’s knowledge, Seller has not received prior to the
Effective Date any written notification from any governmental or public
authority (i) that the Hotel is in violation of any applicable fire, health,
building, use, occupancy or zoning laws where such violation remains outstanding
and, if unaddressed, would have a material adverse effect on the use of the
Property as currently owned and operated or (ii) that any work is required to be
done upon or in connection with the Property, where such work remains
outstanding and, if unaddressed, would have a material adverse effect on the use
of the Property as currently owned and operated. To Seller’s knowledge, Seller
has not received prior to the Effective Date any written notification from any
third party which is not a governmental or public authority that the Hotel is in
material violation of any applicable material environmental or other law where
such violation remains outstanding and, if unaddressed, would have a material
adverse effect on the use of the Property as currently owned and operated.

 

(e) Condemnation. To Seller’s knowledge, no condemnation proceedings relating to
the Real Property are pending.

 

(f) Environmental Matters. Except as set forth in the Seller Due Diligence
Materials (including the Reports) or as otherwise disclosed to Purchaser, to
Seller’s knowledge, Seller has received no written notification that any
governmental or quasi-governmental authority has determined that there are any
material violations of environmental statutes, ordinances or regulations
affecting the Property.

 

(g) Title to Personal Property. Seller holds good and marketable title to the
Personal Property free and clear of all mortgages, options, liens, charges,
claims, restrictions or other encumbrances of any kind or nature, and all items
of Personal Property have been fully paid for, to the extent that normal
business practice permits, except those items identified on Schedule 5.1(g)
which are subject to installment payments and with respect to which there are no
installments due which are currently delinquent.

 

(h) Leases. Except as otherwise disclosed in the Seller Due Diligence Materials,
the list of Leases attached hereto as Schedule 1.1(h) is accurate in all
material respects and lists all Leases currently affecting the Hotel, and Seller
has delivered (or otherwise made available to Purchaser) a true and correct copy
of such Leases.

 

(i) Documents. To Seller’s knowledge, after inquiry of Manager, (i) Schedule
5.1(i) lists all written contracts and agreements which have a material impact
on the ownership or operation of the Hotel and which remain in effect following
the Closing Date, (ii) all documents listed on Schedule 5.1(i) attached hereto
and delivered to Purchaser by or on behalf of Seller are true and correct copies
of the originals in all material respects, and (iii) neither Seller nor any
other party to

 

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such documents is currently in default of any material provision of such
documents after expiration of any applicable notice and cure periods.

 

(j) Employees. Except as set forth on Schedule 5.1(j) attached hereto, there are
no employment contracts to which Seller is a party and no union is presently
serving as collective bargaining agent for any employees.

 

5.2 Knowledge Defined. For purposes of this Agreement, “knowledge” means (a)
with respect to Seller, the actual knowledge of Jill Johnson (the person with
primary day to day asset management on behalf of Yarmouth Capital Partners L.P.
II) and Mark Hillis (provided that, in no event shall any such person(s) have
any personal liability arising under this Agreement), without any duty of
inquiry or investigation, and expressly excluding the knowledge of any other
shareholder, partner, member, trustee, beneficiary, director, officer, manager,
employee, agent or representative of Seller or any of its affiliates, and (b)
with respect to Purchaser, (i) the actual knowledge of Steve Kisielica, Cody
Warning, Laurence Geller and Rich Moreau (each a “Purchaser Knowledge
Party”)(provided that, in no event shall any such person(s) have any personal
liability arising under this Agreement) and expressly excluding the knowledge of
any other shareholder, partner, member, trustee, beneficiary, director, officer,
manager, employee, agent or representative of Purchaser or any of its
Affiliates, (ii) any matter disclosed in any exhibits or schedules to this
Agreement, and (iii) any matter disclosed by Purchaser’s inspections or
investigations of the Property. For the purposes of this definition, the term
“actual knowledge” means, with respect to any person, the conscious awareness of
such person at the time in question, and expressly excludes any constructive or
implied knowledge of such person.

 

5.3 Survival of Seller’s Representations and Warranties. The representations and
warranties of Seller set forth in Section 5.1 as updated by the certificate of
Seller to be delivered to Purchaser at Closing in accordance with Section 4.2(e)
hereof, shall survive Closing for a period of one (1) year. No claim for a
breach of any representation or warranty of Seller under this Agreement shall be
actionable or payable unless each of the following are satisfied: (a) the breach
in question results from or is based on a condition, state of facts or other
matter which was not known to Purchaser prior to Closing, (b) the valid claims
for all such breaches, if any, collectively aggregate more than One Hundred
Thousand Dollars ($100,000), in which event the full amount of such claims shall
be actionable, and (c) written notice containing a description of the specific
nature of such breach shall have been given by Purchaser to Seller prior to the
expiration of said one (1) year period and an action shall have been commenced
by Purchaser against Seller within thirty (30) days after the termination of the
survival period provided for above in this Section 5.3 (except that if Purchaser
is seeking recovery from any third party as provided in the following sentence,
Purchaser shall only be required to provide written notice to Seller within the
one (1) year period and shall not be required to commence an action against
Seller to preserve its claims). Purchaser agrees to first seek recovery under
any insurance/title policies, and the Operating Agreements (including, without
limitation, the

 

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Management Agreement) prior to seeking recovery from Seller, and Seller shall
not be liable to Purchaser if Purchaser’s claim is satisfied from such insurance
policies or agreements. As used herein, the term “Cap” shall mean the total
aggregate amount of Two Million Dollars ($2,000,000). In no event shall (i)
Seller’s aggregate liability to Purchaser with respect to (A) any breach of any
representation or warranty of Seller in this Agreement (as modified by any
certificate to be delivered by Seller at Closing pursuant to Section 4.2(e)
hereof), or (B) or any other claim whatsoever by Purchaser against Seller hereof
exceed the amount of the Cap, or (ii) Seller be liable for any consequential or
punitive damages.

 

5.4 Covenants of Seller. Seller hereby covenants with Purchaser as follows:

 

(a) From the Effective Date hereof until the Closing or earlier termination of
this Agreement, Seller shall use reasonable efforts to operate and maintain the
Hotel in a manner generally consistent with the manner in which Seller has
operated and maintained the Hotel prior to the date hereof; provided, however,
that Purchaser acknowledges that Seller’s ability to control the operation of
the Hotel is limited by the terms of the Management Agreement.

 

(b) From the Effective Date hereof until Closing or the earlier termination of
this Agreement, Seller shall use commercially reasonable efforts to perform its
material obligations under the Management Agreement, the Operating Agreements
and other agreements that may affect the Property.

 

(c) Seller shall deliver to each party other than Seller under the Operating
Agreements listed on Schedule 4.6(f), an estoppel certificate in the form
attached to or otherwise provided in the applicable agreement or, if no form is
required, substantially the form of Exhibit I attached hereto, and shall request
that such parties complete and sign the applicable estoppel and return them to
Seller. Seller shall pursue such estoppels with commercially reasonable
diligence and shall deliver copies of estoppels to Purchaser as Seller receives
them (whether received before or after Closing). Notwithstanding any provision
of this Agreement to the contrary (other than as set forth in Section 4.6(f)
above), Purchaser’s receipt of any estoppels is not a condition to Purchaser’s
obligation to close and to acquire the Property and the failure to obtain
estoppel certificates from all or any of the required parties shall not (i)
constitute a default by Seller hereunder or (ii) permit Purchaser to terminate
this Agreement or obtain the return of the Earnest Money. The provisions of this
Section 5.4(c) shall survive Closing.

 

(d) Seller shall deliver written notice to Ocean Colony Association of the sale
of the Hotel to Purchaser in accordance with the terms of the Hotel Agreement
between Ocean Colony Association and Seller.

 

(e) Seller shall undertake the work (“OCA Work”) described in the letter
attached as Schedule 5.4(e) hereto in a good and workmanlike manner. In the
event that

 

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the OCA Work is not completed by the Closing Date, Seller and Purchaser shall
mutually agree upon a reasonable estimate of the cost to complete such work and
Purchaser shall (i) receive a credit towards the Purchase Price at Closing in
the amount of such estimated cost of completion, and (ii) assume all
responsibility for completion of the OCA Work after Closing and payment of the
cost of any remaining work.

 

(f) From the Effective Date hereof until the Closing or earlier termination of
this Agreement, Seller will reasonably cooperate with a third-party consultant
to be engaged by Purchaser to prepare a cost segregation study of the Property
including, without limitation, providing such consultant with such documents and
information as may be in Seller’s possession or control and are reasonably
requested by Purchaser or such consultant in connection with the preparation of
such study.

 

5.5 Representations and Warranties of Purchaser. Purchaser hereby represents and
warrants to Seller:

 

(a) ERISA. Purchaser is not acquiring the Property with the assets of an
employee benefit plan as defined in Section 3(3) of ERISA.

 

(b) Organization and Authority. Purchaser has been duly organized and is validly
existing under the laws of Delaware. Purchaser has the full right, power and
authority to purchase the Property as provided in this Agreement and to carry
out Purchaser’s obligations hereunder, and all requisite action necessary to
authorize Purchaser to enter into this Agreement and to carry out its
obligations hereunder have been, or by the Closing will have been, taken. The
person signing this Agreement on behalf of Purchaser is authorized to do so, and
this Agreement is enforceable against Purchaser in accordance with its terms,
subject to bankruptcy, insolvency and similar laws. The execution and delivery
of and the performance by Purchaser of its obligations under this Agreement do
not and will not contravene, or constitute a default under Purchaser’s
organizational documents or any agreement, judgment, injunction, order, decree
or other instrument binding upon Purchaser.

 

(c) Pending Actions. There is no action, suit, arbitration, unsatisfied order or
judgment, government investigation or proceeding pending against Purchaser
which, if adversely determined, could individually or in the aggregate
materially interfere with the consummation of the transaction contemplated by
this Agreement.

 

(d) Patriot Act Compliance. Neither Purchaser nor any individual or entity
having an interest in Purchaser is a person or entity described by Section 1 of
the Executive Order (No. 13,224) Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism, 66 Fed.

 

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Reg. 49,079 (September 24, 2001), and does not engage in any dealings or
transactions, and is not otherwise associated, with any such persons or
entities.

 

5.6 Survival of Purchaser’s Representations and Warranties. The representations
and warranties of Purchaser set forth in Section 5.5(a) shall survive Closing
and shall be a continuing representation and warranty without limitation. All
other representations and warranties of Purchaser shall survive Closing for a
period of one (1) year.

 

5.7 Covenants of Purchaser.

 

(a) Purchaser hereby covenants with Seller that Purchaser has inspected the Real
Property for the presence of Hazardous Substances (as defined below) in
connection with its investigation of the Property prior to the execution hereof.
Upon Seller’s request, Purchaser shall furnish to Seller copies of any reports
received by Purchaser in connection with any such inspection. Purchaser hereby
assumes full responsibility for such inspections and irrevocably waives any
claim against Seller and releases Seller from all liability arising from the
presence of Hazardous Substances on the Property. Purchaser shall also furnish
to Seller copies of any other reports received by Purchaser relating to any
other inspections of the Property conducted on Purchaser’s behalf, if any
(including, specifically, without limitation, any reports analyzing compliance
of the Property with the provisions of the Americans with Disabilities Act
(“ADA”), 42 U.S.C. §12101, et seq., if applicable). As used herein, “Hazardous
Substances” means all hazardous or toxic materials, substances, pollutants,
contaminants, or wastes currently identified as a hazardous substance or waste
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (commonly known as “CERCLA”), as amended, the Superfund Amendments and
Reauthorization Act (commonly known as “SARA”), the Resource Conservation and
Recovery Act (commonly known as “RCRA”), or any other federal, state or local
legislation or ordinances applicable to the Property.

 

(b) From and after the Closing, Purchaser shall indemnify, defend and hold
harmless Seller (and its partners, consultants, representatives, employees and
affiliates) from and against any and all losses, liabilities, claims and damages
arising from (i) the failure of Manager and/or Seller to pay any and all
obligations with respect to payment of accrued employees wages and benefits (to
the extent Purchaser receives a credit for such amounts pursuant to Section
4.4(b)(xiv) above), and (ii) any breach of the requirements of the Worker
Adjustment and Retraining Notification Act (the “WARN Act”) or any other similar
law, arising from the sale of the Hotel or the actions of Purchaser or Manager
from and after the Closing Date (including, without limitation, any closure of
the Hotel after the Closing Date or any post-Closing reduction in the work force
at the Hotel).

 

(c) All baggage or other property of guests of the Hotel which has been checked
with or left in the care of Seller and remains in Seller’s care as of the Cutoff
Time

 

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shall be inventoried and tagged jointly by Seller and Purchaser. Purchaser
hereby agrees to defend, indemnify and hold harmless the Seller against any
claims, losses or liabilities in connection with such baggage and property
arising out of the acts or omissions of Purchaser from and after the Closing
Date. Seller hereby agrees to defend, indemnify and hold harmless Purchaser
against all claims, losses and liabilities with respect to such baggage and
property arising out of the acts or omissions of the Seller prior to the Closing
Date.

 

(d) As of the Closing Date, Seller shall deliver to Purchaser a list of all
guests of the Hotel maintaining items in safe deposit boxes. Purchaser hereby
agrees to defend, indemnify and hold harmless the Seller against any claims,
losses or liabilities in connection with such safe deposit boxes arising out of
the acts or omissions of Purchaser from and after the Closing Date. Seller
hereby agrees to defend, indemnify and hold harmless Purchaser against all
claims, losses and liabilities with respect to such safe deposit boxes arising
out of the acts or omissions of the Seller prior to the Closing Date.

 

(e) Purchaser shall honor (and shall cause the Manager to honor) all
reservations at the Hotel, or for any related conference, banquet, or meeting
space or any other facilities, made through or in connection with the Hotel
prior to the Cut-Off Time for periods on or after the date of Closing.

 

(f) The provisions of this Section 5.7 shall survive Closing.

 

ARTICLE VI

DEFAULT

 

6.1 Default by Purchaser. If Purchaser defaults under this Agreement, Seller
shall be entitled, as its sole remedy (without limiting Seller’s rights under
Section 10.20 below), to terminate this Agreement and receive the Earnest Money
as liquidated damages for the breach of this Agreement, it being agreed between
the parties hereto that the actual damages to Seller in the event of such breach
are impractical to ascertain and the amount of the Earnest Money is a reasonable
estimate thereof. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE EARNEST MONEY AND ANY INTEREST THEREON HAS BEEN AGREED
UPON, AFTER NEGOTIATION, AS THE PARTIES’ REASONABLE ESTIMATE OF SELLER’S DAMAGES
AND AS SELLER’S EXCLUSIVE REMEDY AGAINST PURCHASER, AT LAW OR IN EQUITY, IN THE
EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF PURCHASER. THE PARTIES
ACKNOWLEDGE THAT THE PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A
FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO
SELLER.

 

INITIALS:            Seller    _______            Purchaser     _______

 

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Nothing contained in this Section 6.1 shall limit or prevent Seller from (a)
asserting any legal or equitable claims against Purchaser with respect to any
indemnification of Seller under this Agreement or obligation to pay attorneys’
fees and other amounts under Section 10.20, or (b) enforcing any indemnity
obligation of Purchaser under this Agreement or preclude Seller from obtaining a
damage award in connection therewith, or (c) enforcing Purchaser’s other
obligations and liabilities which survive a termination of this Agreement.

 

6.2 Default by Seller. In the event that Seller fails to consummate this
Agreement for any reason other than Purchaser’s default or the permitted
termination of this Agreement by Seller or Purchaser as herein expressly
provided, Purchaser shall be entitled, as its sole remedy, either (a) to receive
the return of the Earnest Money, which return shall operate to terminate this
Agreement and release Seller from any and all liability hereunder, or (b) to
enforce specific performance of Seller’s obligation to execute the documents
required to convey the Property to Purchaser, it being understood and agreed
that the remedy of specific performance shall not be available to enforce any
other obligation of Seller hereunder. Purchaser expressly waives its rights to
seek damages in the event of Seller’s default hereunder. Purchaser shall be
deemed to have elected to terminate this Agreement and receive back the Earnest
Money if Purchaser fails to file suit for specific performance against Seller in
a court having jurisdiction in the county and state in which the Property is
located, on or before thirty (30) days following the date upon which Closing was
to have occurred.

 

6.3 Seller’s Right to Cure Defaults. Notwithstanding anything to the contrary in
this Agreement, Purchaser shall not have the right to exercise its remedies
under Section 6.2 for a Seller default unless Purchaser has provided written
notice to the Seller specifying in reasonable detail the nature of the Seller
default, and the Seller has not cured the same within thirty (30) days after the
Seller’s receipt of such notice (the “Seller Cure Period”), in which case the
Closing shall be postponed until the date which is five (5) business days after
the expiration of the Seller Cure Period.

 

ARTICLE VII

RISK OF LOSS

 

7.1 Minor Damage. In the event of loss or damage to the Property or any portion
thereof which is not “major” (as hereinafter defined), this Agreement shall
remain in full force and effect provided Seller performs any necessary repairs
or, at Seller’s option, assigns to Purchaser all of Seller’s right, title and
interest to any claims and proceeds Seller may have with respect to any casualty
insurance policies (excluding any business interruption insurance proceeds
attributable to the period prior to Closing) or condemnation awards relating to
the premises in question. In the event that Seller elects to perform repairs
upon the Property, Seller shall use reasonable efforts to complete such repairs
promptly and the date of Closing shall be extended a reasonable time in order to
allow for the completion of such repairs. If Seller elects to assign a casualty
claim to

 

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Purchaser, the Purchase Price shall be reduced by an amount equal to the
deductible amount under Seller’s insurance policy. Upon Closing, full risk of
loss with respect to the Property shall pass to Purchaser.

 

7.2 Major Damage. In the event of a “major” loss or damage, Purchaser may
terminate this Agreement by written notice to Seller and Escrow Agent, in which
event the Earnest Money shall be returned to Purchaser. If Purchaser fails to
deliver notice of termination of this Agreement within ten (10) days after
Seller sends Purchaser written notice of the occurrence of major loss or damage,
Purchaser shall be deemed to have elected to proceed with Closing, in which
event Seller shall, at Seller’s option, either (a) perform any necessary
repairs, or (b) assign to Purchaser all of Seller’s right, title and interest to
any claims and proceeds Seller may have with respect to any casualty insurance
policies (excluding any business interruption insurance proceeds attributable to
the period prior to Closing) or condemnation awards relating to the premises in
question. In the event that Seller elects to perform repairs upon the Property,
Seller shall use reasonable efforts to complete such repairs promptly and the
date of Closing shall be extended a reasonable time in order to allow for the
completion of such repairs. If Seller elects to assign a casualty claim to
Purchaser, the Purchase Price shall be reduced by an amount equal to the
deductible amount under Seller’s insurance policy. Upon Closing, full risk of
loss with respect to the Property shall pass to Purchaser.

 

7.3 Definition of “Major” Loss or Damage. For purposes of Sections 7.1 and 7.2,
“major” loss or damage refers to the following: (i) loss or damage to the
Property or any portion thereof such that the cost of repairing or restoring the
premises in question to a condition substantially identical to that of the
premises in question prior to the event of damage would be, in the opinion of an
architect selected by Seller and reasonably approved by Purchaser, equal to or
greater than Five Million Dollars ($5,000,000), and (ii) any loss due to a
condemnation which permanently and materially impairs the current use of the
Property. If Purchaser does not give notice to Seller of Purchaser’s reasons for
disapproving an architect within five (5) business days after receipt of notice
of the proposed architect, Purchaser shall be deemed to have approved the
architect selected by Seller.

 

ARTICLE VIII

COMMISSIONS

 

8.1 Brokerage Commissions. Each party agrees that should any claim be made for
brokerage commissions or finder’s fees by any broker or finder through or on
account of any acts of said party or its representatives, said party will
indemnify and hold the other party free and harmless from and against any and
all loss, liability, cost, damage and expense in connection therewith. Without
limiting the foregoing, Seller shall pay all brokerage commissions and other
amounts due to Hodges Ward Elliott in connection with the sale of the Property
pursuant to this Agreement pursuant to the terms of a

 

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separate agreement between such parties. The provisions of this paragraph shall
survive Closing or earlier termination of this Agreement.

 

ARTICLE IX

DISCLAIMERS AND WAIVERS

 

9.1 No Reliance on Documents. Seller makes no representation or warranty as to
the truth, accuracy or completeness of any materials, data or information
delivered by Seller to Purchaser in connection with the transaction contemplated
hereby including. Purchaser acknowledges and agrees that all materials, data and
information delivered by Seller to Purchaser in connection with the transaction
contemplated hereby are provided to Purchaser as a convenience only and that any
reliance on or use of such materials, data or information by Purchaser shall be
at the sole risk of Purchaser, except as otherwise expressly stated herein.
Without limiting the generality of the foregoing provisions, Purchaser
acknowledges and agrees that (a) any environmental or other report with respect
to the Property which is delivered by Seller to Purchaser shall be for general
informational purposes only, (b) Purchaser shall not have any right to rely on
any such report delivered by Seller to Purchaser, but rather will rely on its
own inspections and investigations of the Property and any reports commissioned
by Purchaser with respect thereto, and (c) neither Seller, any affiliate of
Seller nor the person or entity which prepared any such report delivered by
Seller to Purchaser shall have any liability to Purchaser for any inaccuracy in
or omission from any such report.

 

9.2 DISCLAIMERS. IT IS UNDERSTOOD AND AGREED THAT, EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY
WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED,
WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR
REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, TITLE, ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL OR
ENVIRONMENTAL CONDITION (INCLUDING, WITHOUT LIMITATION, THE PRESENCE OF ANY
LANDFILL), UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL
APPROVALS, THE COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL LAWS, THE TRUTH,
ACCURACY OR COMPLETENESS OF THE PROPERTY DOCUMENTS OR ANY OTHER INFORMATION
PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING
REGARDING THE PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING
SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE
PROPERTY “AS IS, WHERE IS, WITH ALL FAULTS”, SUBJECT TO ANY EXPRESS
REPRESENTATION OR WARRANTY SET FORTH IN THIS AGREEMENT. PURCHASER HAS NOT RELIED
AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESSED OR
IMPLIED

 

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WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO
THE PROPERTY OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION,
PROPERTY INFORMATION PACKAGES DISTRIBUTED WITH RESPECT TO THE PROPERTY) MADE OR
FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, OR ANY REAL ESTATE BROKER OR
AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN,
DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN
THIS AGREEMENT. PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS CONDUCTED SUCH
INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF
AS TO THE CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR
CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON
OR DISCHARGED FROM THE PROPERTY, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY
INFORMATION PROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH
RESPECT THERETO, OTHER THAN SUCH REPRESENTATIONS, WARRANTIES AND COVENANTS OF
SELLER AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. UPON CLOSING, PURCHASER
SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO,
CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT
HAVE BEEN REVEALED BY PURCHASER’S INVESTIGATIONS, AND PURCHASER, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, UPON CLOSING, SHALL BE DEEMED TO HAVE
WAIVED, RELINQUISHED AND RELEASED SELLER (AND SELLER’S OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES,
LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES AND COURT COSTS) OF
ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE
ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER’S OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF
ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, VIOLATIONS OF
ANY APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL LAWS) AND
ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING
THE PROPERTY. PURCHASER AGREES THAT SHOULD ANY CLEANUP, REMEDIATION OR REMOVAL
OF HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE
REQUIRED AFTER THE DATE OF CLOSING, SUCH CLEAN-UP, REMOVAL OR REMEDIATION SHALL
BE THE RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF
PURCHASER.

 

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The waivers and releases set forth in Section 5.7(a) and in the immediately
preceding paragraph include claims of which Purchaser is presently unaware or
which Purchaser does not presently suspect to exist which, if known by
Purchaser, would materially affect Purchaser’s waiver or release of Seller.
Purchaser specifically waives the provision of California Civil Code Section
1542, which provides as follows:

 

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

 

INITIALS: Purchaser _________

 

9.3 Repairs, Reserves, and Capital Expenditures. Purchaser acknowledges that and
agrees that (a) except as set forth Section 5.4(e) above, Seller shall have no
obligation to make any repairs, replacements, improvements or alterations to the
Property or to expend any funds therefore, including, without limitation, any
reserves that may be held for such purpose, and (b) Purchaser shall not be
entitled to a credit to the Purchaser Price at Closing in the event capital
expenditures actually made at the Hotel for 2004 are less than the budgeted
amount as of the date of the Closing.

 

9.4 Effect and Survival of Disclaimers. Seller and Purchaser agree that the
provisions of this Article IX shall survive Closing.

 

ARTICLE X

MISCELLANEOUS

 

10.1 Confidentiality. Prior to Closing, except as may be required by law, (a)
each of Seller and Purchaser agrees to maintain the confidentiality of the terms
and provisions of this Agreement and (b) Purchaser agrees to maintain the
confidentiality of all information respecting the Property (including the terms
and provisions of this Agreement) received from Seller, Seller’s employees or
agents or from Purchaser’s inspections; provided, however, that Purchaser shall
be permitted to disclose such information to its employees, consultants,
attorneys and/or agents, partners, lenders, and others retained in connection
with this transaction provided such third parties agree to similarly maintain
the confidentiality of such information. After the Closing, except as required
by law, neither Seller nor Purchaser shall not make any general public
statements or news releases, or any statements that may become public, regarding
this transaction except with the prior written consent of the other party, such
consent not to be unreasonably withheld or delayed. Purchaser’s and Seller’s
obligations under this Section shall survive Closing or the earlier termination
of this Agreement.

 

10.2 Discharge of Obligations. The acceptance of the Deed by Purchaser shall be
deemed to be a full performance and discharge of every representation and
warranty made by Seller herein and every agreement and obligation on the part of
Seller to be

 

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performed pursuant to the provisions of this Agreement, except those which are
herein specifically stated to survive Closing.

 

10.3 Assignment. Purchaser may not assign its rights under this Agreement
without first obtaining Seller’s written approval which may be given or withheld
in Seller’s sole discretion; provided that, Purchaser may assign its rights
under this Agreement to any entity which controls, is controlled by, or under
common control with, Strategic Hotel Capital, Inc. Without limiting the
foregoing, in no event shall Purchaser assign this Agreement to any assignee
which, in the reasonable judgment of Seller, will cause the transaction
contemplated hereby or any party thereto to violate the requirements of ERISA.

 

10.4 Notices. Any notice pursuant to this Agreement shall be given in writing by
(a) personal delivery, or (b) reputable overnight delivery service with proof of
delivery, or (c) United States Mail, postage prepaid, registered or certified
mail, return receipt requested, or (d) legible facsimile transmission sent to
the intended addressee at the address set forth below, or to such other address
or to the attention of such other person as the addressee shall have designated
by written notice sent in accordance herewith, and shall be deemed to have been
given either at the time of personal delivery, or, in the case of expedited
delivery service or mail, as of the date of first attempted delivery at the
address and in the manner provided herein, or, in the case of facsimile
transmission, as of the date of the facsimile transmission provided that an
original of such facsimile is also sent to the intended addressee by means
described in clauses (a), (b) or (c) above. Unless changed in accordance with
the preceding sentence, the addresses for notices given pursuant to this
Agreement shall be as follows:

 

If to Seller:

 

Yarmouth Capital Partners LP II

c/o Morgan Stanley

3424 Peachtree Rd., Suite 800

Atlanta, GA 30326-1118

Attention: Carroll A. Reddic, IV

Facsimile No.: (404) 846-1476

 

With a copy to:

 

Morgan Stanley US RE Investing Division

440 South LaSalle Street

One Financial Place, Floor 37

Chicago, IL 60605

Facsimile No.: (312) 706-4876

Attention: Jill Johnson

 

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With a copy to:

 

Paul, Hastings, Janofsky & Walker LLP

515 South Flower Street, 25th Floor

Los Angeles, California 90071

Attention: Alan Weakland, Esq.

Facsimile no. (213) 996-3241

 

If to Purchaser:

 

Strategic Hotel Capital, Inc.

77 West Wacker, Suite 4600

Chicago, Illinois 60601

Attention: Steven N. Kisielica

Facsimile no. (312) 658-5799

 

With a copy to:

 

Perkins Coie LLP

131 South Dearborn Street, Suite 1700

Chicago, Illinois 60603-5559

Attention: Phillip Gordon, Esq.

Facsimile no. (312) 324-9400

 

10.5 Modifications. This Agreement cannot be changed orally, and no executory
agreement shall be effective to waive, change, modify or discharge it in whole
or in part unless such executory agreement is in writing and is signed by the
parties against whom enforcement of any waiver, change, modification or
discharge is sought.

 

10.6 Calculation of Time Periods; Time is of the Essence. Unless otherwise
specified, in computing any period of time described in this Agreement, the day
of the act or event after which the designated period of time begins to run is
not to be included and the last day of the period so computed is to be included,
unless such last day is a Saturday, Sunday or legal holiday under the laws of
the State in which the Property is located, in which event the period shall run
until the end of the next day which is neither a Saturday, Sunday or legal
holiday. The final day of any such period shall be deemed to end at 5 p.m.,
local time where the Real Property is located. Time is of the essence of this
Agreement.

 

10.7 Successors and Assigns. The terms and provisions of this Agreement are to
apply to and bind the permitted successors and assigns of the parties hereto.

 

10.8 Entire Agreement. This Agreement, including the Exhibits, the Schedules and
any confidentiality agreement executed by Purchaser contain the entire agreement
between the parties pertaining to the subject matter hereof and fully supersedes
all prior

 

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written or oral agreements and understandings between the parties pertaining to
such subject matter.

 

10.9 Further Assurances. Each party agrees that it will without further
consideration execute and deliver such other documents and take such other
action, whether prior or subsequent to Closing, as may be reasonably requested
by the other party to consummate more effectively the purposes or subject matter
of this Agreement. Without limiting the generality of the foregoing, Purchaser
shall, if requested by Seller, execute acknowledgments of receipt with respect
to any materials delivered by Seller to Purchaser with respect to the Property.
The provisions of this Section 10.9 shall survive Closing.

 

10.10 Counterparts; Facsimile Signatures. This Agreement may be executed in
counterparts, and all such executed counterparts shall constitute the same
agreement. It shall be necessary to account for only one such counterpart in
proving this Agreement. In order to expedite the transaction contemplated
herein, telecopied or facsimile signatures may be used in place of original
signatures on this Agreement. Seller and Purchaser intend to be bound by the
signatures on the telecopied document, are aware that the other party will rely
on the telecopied signatures, and hereby waive any defenses to the enforcement
of the terms of this Agreement based on the form of signature.

 

10.11 Severability. If any provision of this Agreement is determined by a court
of competent jurisdiction to be invalid or unenforceable, the remainder of this
Agreement shall nonetheless remain in full force and effect.

 

10.12 Applicable Law. THIS AGREEMENT IS PERFORMABLE IN THE STATE IN WHICH THE
LAND IS LOCATED AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE SUBSTANTIVE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS
OF SUCH STATE. SELLER AND PURCHASER HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE IN WHICH THE
LAND IS LOCATED IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING SHALL BE HEARD AND DETERMINED IN A STATE OR FEDERAL COURT SITTING
IN THE STATE IN WHICH THE LAND IS LOCATED. PURCHASER AND SELLER AGREE THAT THE
PROVISIONS OF THIS SECTION 10.12 SHALL SURVIVE THE CLOSING OF THE TRANSACTION
CONTEMPLATED BY THIS AGREEMENT.

 

10.13 No Third Party Beneficiary. The provisions of this Agreement and of the
documents to be executed and delivered at Closing are and will be for the
benefit of Seller and Purchaser only and are not for the benefit of any third
party, and accordingly, no third party shall have the right to enforce the
provisions of this Agreement or of the documents to be executed and delivered at
Closing.

 

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10.14 Exhibits and Schedules. The following schedules or exhibits attached
hereto shall be deemed to be an integral part of this Agreement:

 

Exhibit A-1

   –    Legal Description of the Fee Land

Exhibit A-2

   –    Legal Description of the Leasehold Land

Exhibit B

   –    Grant Deed

Exhibit C

   –    Assignment of Ground Leases

Exhibit D

   –    Bill of Sale

Exhibit E

   –    Assignment and Assumption of Operating Agreements and Intangibles

Exhibit F

   –    Assignment of Leases

Exhibit G

   –    FIRPTA Certificate

Exhibit H

   –    Designation Agreement

Exhibit I

   –    Form of Estoppel

Schedule 1.1(h)

   –    List of Leases

Schedule 2.3

   –    Permitted Exceptions

Schedule 3.2

   –    List of Reports

Schedule 4.4(b)(xvii)

   –    Gift Certificates

Schedule 4.6(f)

   –    Delivery of Estoppels

Schedule 5.1(g)

   –    List of Encumbrances on Personal Property

Schedule 5.1(i)

   –    List of Documents

Schedule 5.1(j)

   –    Employment Agreements

Section 5.4(e)

   –    Description of OCA Work

 

10.15 Captions. The section headings appearing in this Agreement are for
convenience of reference only and are not intended, to any extent and for any
purpose, to limit or define the text of any section or any subsection hereof.

 

10.16 Construction. The parties acknowledge that the parties and their counsel
have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto. Singular words shall connote the plural as
well as the singular, and plural words shall connote the singular as well as the
plural, and the masculine shall include the feminine and the neuter, as the
context may require.

 

10.17 Termination of Agreement. It is understood and agreed that if either
Purchaser or Seller terminates this Agreement pursuant to a right of termination
granted hereunder, such termination shall operate to relieve Seller and
Purchaser from all obligations under this Agreement, except for such obligations
as are specifically stated herein to survive the termination of this Agreement.

 

10.18 Attorneys Fees. If any action or proceeding is commenced by either party
to enforce their rights under this Agreement or to collect damages as a result
of the breach

 

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of any of the provisions of this Agreement, the prevailing party in such action
or proceeding, including any bankruptcy, insolvency or appellate proceedings,
shall be entitled to recover all reasonable costs and expenses, including,
without limitation, reasonable attorneys’ fees and court costs, in addition to
any other relief awarded by the court.

 

10.19 Waiver of Jury Trial. Seller and Purchaser, to the extent they may legally
do so, hereby expressly waive any right to trial by jury of any claim, demand,
action, cause of action, or proceeding arising under or with respect to this
Agreement, or in any way connected with, or related to, or incidental to, the
dealings of the parties hereto with respect to this Agreement or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and irrespective of whether sounding in contract, tort, or
otherwise. To the extent they may legally do so, Seller and Purchaser hereby
agree that any such claim, demand, action, cause of action, or proceeding shall
be decided by a court trial without a jury and that any party hereto may file an
original counterpart or a copy of this Section with any court as written
evidence of the consent of the other party or parties hereto to waiver of its or
their right to trial by jury.

 

10.20 No Waiver. Failure of either party at any time to require performance of
any provision of this Agreement shall not limit the party’s right to enforce the
provision. Waiver of any breach of any provision shall not be a waiver of any
succeeding breach of the provision or a waiver of the provision itself or any
other provision.

 

10.21 No Reservation of Property. The preparation and/or delivery of unsigned
drafts of this Agreement shall not create any legally binding rights in the
Property and/or obligations of the parties, and Purchaser and Seller acknowledge
that this Agreement shall be of no effect until it is duly executed by both
Purchaser and Seller. Purchaser understands and agrees that Seller shall have
the right to continue to market the Property and/or to negotiate with other
potential purchasers of the Property until the satisfaction or waiver in writing
of all conditions to the obligations of Purchaser under this Agreement.

 

10.22 No Recordation. Purchaser shall not record this Agreement, nor any
memorandum or other notice of this Agreement, in any public records.

 

10.23 Liability under Deed. Purchaser agrees that if Purchaser has any right or
claim against Seller pursuant to the warranties in the Deed, Purchaser shall
exhaust all of its rights and remedies against the Title Company pursuant to the
Title Policy prior to bringing any claim or action against Seller in respect of
such warranties.

 

10.24 Like-Kind Exchange. Notwithstanding anything to the contrary in this
Agreement, Purchaser acknowledges and agrees that Seller shall have the right at
Closing, in lieu of receiving the Purchase Price for the sale of the Property,
to exchange the Property (the “Tax-Free Exchange”) in a transaction intended to
qualify as a tax-free exchange under Section 1031 of the Internal Revenue Code
of 1986, as amended from time to time, and any regulations, rulings and guidance
issued by the Internal Revenue

 

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Service (collectively, the “Code”). If Seller elects to effect a Tax-Free
Exchange pursuant to this Section 10.24, Seller shall provide written notice to
Purchaser prior to Closing, in which case Seller shall enter into an exchange
agreement and other exchange documents with a “qualified intermediary” (as
defined in Treas. Reg. § 1.1031(k)-1(g)(4) of the Code) (the “Exchange Party”),
pursuant to which Seller shall assign all of its right, title and interest under
this Agreement to the Exchange Party. Purchaser shall execute and deliver such
documents as may be required to complete the transactions contemplated by the
Tax-Free Exchange which are in form and substance reasonably acceptable to
Purchaser, and otherwise cooperate with Seller in all reasonable respects to
effect the Tax-Free Exchange. Purchaser agrees that if Seller elects to effect a
Tax-Free Exchange pursuant to this Section 10.24, at Closing, Purchaser shall
pay the Purchase Price to the Exchange Party and direct Escrow Agent to disburse
the Earnest Money to the Exchange Party. Notwithstanding the foregoing in this
Section 10.24, the Tax-Free Exchange shall not diminish Purchaser’s rights, nor
increase Purchaser’s liabilities or obligations, under this Agreement. Seller
shall pay for all fees, costs and expenses in connection with the Tax-Free
Exchange.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the Effective Date.

 

SELLER:    

VESTAR-ATHENS/YCP II HALF MOON BAY, L.L.C.,

a Delaware limited liability company

By:

 

Vestar-Athens, L.L.C.,

an Arizona limited liability company

   

By:

 

Athens HMB, L.L.C.,

an Arizona limited liability company

       

By:

 

/s/ Lee T. Hanley

       

Its:

 

Managing Member

By:

 

Yarmouth Capital Partners, L.P. II,

a Delaware limited partnership

   

By:

 

MSREA LL Holdings, LLC,

a Delaware limited liability company,

its General Partner

       

By:

 

MSREA Holdings, LLC,

a Delaware limited liability company,

its Managing Member

           

By:

 

/s/ J. Mark Hillis

           

Its:

 

Vice President

 

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VESTAR-ATHENS/YCP II HMB OPERATING COMPANY, L.L.C., a Delaware limited liability
company

By:

 

Vestar-Athens, L.L.C.,

an Arizona limited liability company

   

By:

 

Athens HMB, L.L.C.,

an Arizona limited liability company

       

By:

 

/s/ Lee T. Hanley

       

Its:

 

Managing Member

By:

 

YCP HMB Operator, Inc.,

a Delaware corporation

   

By:

     

/s/ J. Mark Hillis

   

Its:

     

Vice President

 

[Purchaser’s signature on next page]

 

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PURCHASER

SHC HALF MOON BAY, LLC,

a Delaware limited liability company

By:

 

/s/ Steve Kisielica

   

Steve Kisielica

   

Senior Vice President

 

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ACCEPTANCE BY ESCROW AGENT:

 

Partners Title Company hereby acknowledges that it has received a fully executed
original or original executed counterparts of the foregoing Purchase and Sale
Agreement and Joint Escrow Instructions and agrees to act as Escrow Agent
thereunder and to be bound by and strictly perform the terms thereof as such
terms apply to Escrow Agent.

 

Dated: July 23, 2004

      PARTNERS TITLE COMPANY            

By:

 

/s/ Reno Hartfiel

--------------------------------------------------------------------------------

           

Name:

 

Reno Hartfiel

           

Title:

 

Executive Vice President & General Counsel

 

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