Exhibit 10.22

AGREEMENT FOR SALE AND PURCHASE OF HOTEL

LE MERIDIEN SAN FRANCISCO

SAN FRANCISCO, CALIFORNIA

By and Between

HEI SAN FRANCISCO LLC

a Delaware limited liability company

(“Seller”)

and

CHSP SAN FRANCISCO LLC

a Delaware limited liability company

(“Purchaser”)

December 7, 2010

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AGREEMENT FOR SALE AND PURCHASE OF HOTEL

Table of Contents

 

        Page   ARTICLE I DEFINITIONS AND REFERENCES     1   

1.01

  Definitions     1   

1.02

  References     9    ARTICLE II SALE AND PURCHASE; “AS IS,” “WHERE IS” SALE    
9   

2.01

  Sale and Purchase     9   

2.02

  As is, Where is     9    ARTICLE III PURCHASE PRICE     13   

3.01

  Purchase Price     13   

3.02

  Application of Deposit     14    ARTICLE IV DILIGENCE MATTERS     15   

4.01

  Inspection Period     15   

4.02

  Review and Inspection     15   

4.03

  Testing     15   

4.04

  Acceptance or Rejection     15   

4.05

  Confidentiality     16   

4.06

  Indemnification; Restoration; Insurance     16   

4.07

  Title and Survey     17   

4.08

  Space Leases, Hotel Contracts and Equipment Leases     18   

4.09

  Franchise Agreement     18   

4.10

  Natural Hazard Disclosures     19    ARTICLE V REPRESENTATIONS AND WARRANTIES
    20   

5.01

  Representations and Warranties of Seller     20   

5.02

  Representations and Warranties of Purchaser     23   

5.03

  Duration of Representations and Warranties and Covenants; Limitations on
Liability     24   

5.04

  Indemnities     25   

5.05

  Procedure for Indemnification with Respect to Third Party Claims     26   
ARTICLE VI CLOSING AND CLOSING DELIVERIES     26   

6.01

  Closing     26   

6.02

  Escrow     27   

6.03

  Seller’s Deliveries     27   

6.04

  Purchaser’s Deliveries     28   

6.05

  Expenses     28   

6.06

  Concurrent Transactions     29   

6.07

  Possession     29   

 

(i)

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ARTICLE VII ADJUSTMENTS AND PRORATIONS CLOSING STATEMENTS

    29   

7.01

  Adjustments and Prorations     29   

7.02

  Payment     32   

7.03

  Cash and Accounts     32   

ARTICLE VIII CONDITIONS TO SELLER’S OBLIGATIONS

    32   

8.01

  Conditions     32   

ARTICLE IX CONDITIONS TO PURCHASER’S OBLIGATIONS

    33   

9.01

  Conditions     33   

ARTICLE X ACTIONS AND OPERATIONS PENDING CLOSING

    34   

10.01

  Actions and Operations Pending Closing     34   

ARTICLE XI CASUALTIES AND TAKINGS

    35   

11.01

  Casualties     35   

11.02

  Takings     36   

ARTICLE XII EMPLOYEES

    37   

12.01

  Employees     37   

ARTICLE XIII NOTICES

    38   

13.01

  Notices     38   

ARTICLE XIV ADDITIONAL COVENANTS

    40   

14.01

  Additional Covenants     40   

ARTICLE XV DEFAULTS AND REMEDIES; EFFECT OF TERMINATION

    42   

15.01

  Purchaser Default/Seller’s Remedies     42   

15.02

  Seller Default/Purchaser’s Remedies     44   

15.03

  Attorneys’ Fees     44   

15.04

  No Reservation of Property     44   

ARTICLE XVI IRS FORM 1099-S DESIGNATION

    44   

16.01

  Designee     44   

ARTICLE XVII MISCELLANEOUS PROVISIONS

    45   

17.01

  Construction     45   

17.02

  Severability     45   

17.03

  Publicity     46   

17.04

  Assignment     46   

17.05

  Business Days     47   

17.06

  Counterparts     47   

17.07

  Recitals, Exhibits and Schedules     47   

17.08

  Entirety     47   

17.09

  Amendments to Agreement     47   

17.10

  Governing Law     47   

17.11

  Jurisdiction     47   

 

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17.12

  Jury Trial Waiver     47   

17.13

  Successors and Assigns     47   

ARTICLE XVIII GENERAL ESCROW PROVISIONS

    48   

18.01

  General Escrow Provisions     48   

 

(iii)

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Exhibit A:   Excluded Assets   A-1 Exhibit B:   Land   B-1 Exhibit C:   Pending
or Threatened Litigation   C-1 Exhibit D:   Notices of Violation   D-1 Exhibit
E:   Schedule of Leases   E-1 Exhibit F:   Leased or 3rd Party Owned Fixtures
and Tangible Personal Property   F-1 Exhibit G:   Hotel Contracts and related
matters   G-1 Exhibit H:   Form of Deed   H-1 Exhibit I:   Form of Bill of Sale
  I-1 Exhibit J:   Form of Assignment and Assumption Agreement   J-1 Exhibit K:
  Form of Certification of Non-Foreign Status   K-1 Exhibit L:   Form of 1099-S
  L-1 Exhibit M:   Allocation of Transaction Costs and Expenses   M-1 Exhibit N:
  ADA Related Contracts   N-1

 

(iv)

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AGREEMENT FOR SALE AND PURCHASE OF HOTEL

THIS AGREEMENT FOR SALE AND PURCHASE OF HOTEL (this “Agreement”), dated as of
December 7, 2010, is entered into by and between HEI SAN FRANCISCO LLC, a
Delaware limited liability company (“Seller”), and CHSP SAN FRANCISCO LLC, a
Delaware limited liability company (“Purchaser”).

RECITALS:

A. Seller is the owner of the Land and the Improvements commonly referred to as
the Le Meridien San Francisco and located in San Francisco, California, the
Hotel, the Fixtures and Tangible Personal Property, Operating Equipment,
Consumables, Inventory and Miscellaneous Hotel Assets (each as hereinafter
defined).

B. Seller desires to sell, and Purchaser desires to purchase, the Property (as
hereinafter defined) upon and subject to the terms and conditions hereinafter
set forth.

AGREEMENTS:

NOW, THEREFORE, in consideration of the representations, warranties, agreements,
covenants and conditions contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser agree as follows:

ARTICLE I

DEFINITIONS AND REFERENCES

1.01 Definitions.

Account Cash: The balances of all cash and securities and other instruments held
by Seller or by Manager or for the benefit of Seller or the Property and
deposited, held or contained in any account, bank or vault, except for Cash On
Hand and/or any reserve for the replacement of fixtures, furnishings and
equipment, as well as any other reserves held by any Lender on the Property or
the Franchisor, all of which are owned and to be retained by Seller or any
Affiliate of Seller.

Accounts Receivable: All accounts receivable with regard to the Hotel.

Accrued Vacation Pay: The monetary value of any vacation days, sick-leave or
other paid time-off earned and accrued by the Employees as of the time in
question (computed by reference to, as applicable, the rate of the salaries and
wages earned by such Employees as of the time in question), under Manager’s
employment policies (including all employment taxes with respect thereto).

ADA Capital Improvements: Shall have the meaning given to it in
Section 14.01(h).

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ADA Contracts: Shall have the meaning given to it in Section 14.01(h).

Affiliate: With respect to a specific entity, any natural person or any firm,
corporation, partnership, association, trust or other entity which, directly or
indirectly, controls or is under common control with the subject entity, and
with respect to any specific entity or person, any firm, corporation,
partnership, association, trust or other entity which is controlled by the
subject entity or person. For purposes hereof, the term “control” or “controlled
by” shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of any such entity or the
power to veto major policy decisions of any such entity, whether through the
ownership of voting securities, by contract, or otherwise.

Agreement: This Agreement for Sale and Purchase of Hotel, including the exhibits
attached hereto and made a part hereof.

Allocation: Shall have the meaning given to it in Section 3.01.

Anti-Terrorism Order: Shall have the meaning given to it in Section 5.01(o).

Assignment and Assumption Agreement: Shall have the meaning given to it in
Section 6.03(c).

Bill of Sale: Shall have the meaning given to it in Section 6.03(b).

Bookings: Agreements for the use or occupancy of guest rooms or meeting and
banquet facilities or other facilities of the Hotel, including any agreements
for any off-site catering by the Hotel, in each case, for any time after the
Cut-Off Time, including all deposits held by or on behalf of Seller with respect
thereto.

Books and Records: All material books, records and files relating to the
Property owned by the Seller and in its or its Manager’s possession, including,
but not limited to, plans, specifications, drawings, blueprints, surveys and
environmental reports; excluding, however, appraisals, internal valuations and
projections, attorney-client communications and other reports, records and files
that customarily would be considered confidential or privileged as well as any
confidential or proprietary books, records, files or materials of Manager,
including, but not limited to, guest histories, profiles and other similar data
developed and maintained by Manager.

Breach Notice: Shall have the meaning given to it in Section 5.03.

Broker: Shall have the meaning given to it in Section 14.01(b).

Business Day: All days of the year except Saturdays, Sundays and holidays
recognized by the Federal Reserve Bank of New York.

California Natural Hazard Area: Shall have the meaning given to it in
Section 4.10.

California NHDS: Shall have the meaning given to it in Section 4.10.

California Natural Hazards Laws: Shall have the meaning given to it in
Section 4.10.

 

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California Natural Hazard Report: Shall have the meaning given to it in
Section 4.10.

Cash On Hand: Any and all till money and house banks, and all checks, travelers’
checks, and bank drafts paid by guests of the Hotel and located at the Property,
specifically excluding, however, all Account Cash.

Closing: The consummation of the transaction contemplated by this Agreement.

Closing Date: December 15, 2010.

Closing Statements: Shall have the meaning given to it in Section 7.01(l).

Compensation: All salaries and wages which the Employees are entitled to receive
at the time in question, together with all employment taxes with respect
thereto, including, without limitation, any withholding or employer
contributions under the Federal Insurance Contribution Act and Federal
Unemployment Taxes Act, and all other compensation accrued and payable to the
Employees, including, without limitation, any (i) bonus or incentive
compensation and (ii) any health, welfare and other benefits provided to the
Employees under the Employee Benefit Plans, and employer contributions to, and
amounts paid or accrued under, the Employee Benefit Plans for the benefit of the
Employees.

Consumables: All of the following now located at the Real Property: food and
beverages (alcoholic, to the extent transferable under applicable law, and non
alcoholic); engineering, maintenance, guestroom and housekeeping supplies,
including soap, shampoo, cleaning materials and matches; stationery and printing
supplies; and other consumable supplies of all kinds, in each case whether
partially used, unused, or held in reserve storage for future use in connection
with the maintenance and operation of the Hotel, subject to such depletion and
restocking as shall occur and be made in the normal course of business,
excluding, however, (i) Operating Equipment and (ii) all items of personal
property owned by Space Lessees, Manager, guests, Employees or persons
furnishing food or services to the Hotel (other than Seller, unless denominated
as an Excluded Asset under this Agreement).

Cut Off Time: 12:01 A.M. San Francisco, CA Time on the date of the Closing Date.

Deductible: Shall have the meaning given to it in Section 5.03.

Deed: Shall have the meaning given to it in Section 6.03(a).

Deposit: Shall have the meaning given to it in Section 3.01(b).

Designee: Shall have the meaning given to it in Section 16.01.

Due Diligence: Shall have the meaning given to it in Section 4.01.

Employee(s): Prior to the Closing Date, all persons employed by Manager and from
and after the Closing Date, all persons employed by Purchaser or its designee or
management company, for the purpose of operating the Hotel, pursuant to the
Management Agreement or Employment Contracts or otherwise.

 

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Employee Benefit Plans: All employee benefit plans, as that term is defined in
ERISA, and each other employee benefit plan or program maintained or contributed
to by Seller or Manager on behalf of any of the Employees.

Employment Contract(s): Those contracts and agreements, oral or written, with
all or any of the Employees of Manager or any Affiliate of Manager for work in
or in connection with the Hotel including, but not limited to, individual
employment agreements, union agreements and employee handbooks.

Environmental Laws: Any federal, state and local laws, statutes, ordinances,
rules, regulations (including, but not limited to, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended from
time to time (42 U.S.C. § 9601 et seq.) and the applicable provisions of all
applicable state and local statutes, as amended from time to time, and rules and
regulations promulgated thereunder), authorizations, judgments, decrees,
administrative orders, concessions, grants, franchises, agreements and other
governmental restrictions and requirements relating to the environment.

Equipment Leases: All leases, agreements, financings or other arrangements
pursuant to which Seller leases or rents certain equipment, machinery, tools,
devices or other such items for use in connection with its ownership and
operation of the Hotel, to the extent such leases, agreements, financings or
other arrangements are transferable and/or the parties obtain any consent
necessary to effectuate such transfer.

ERISA: The Employee Retirement Income Security Act of 1974, as amended.

Escrow: The escrow, if any, created for the purpose of facilitating the
transactions contemplated by this Agreement.

Escrow Company: Title Associates, a division of Stewart Title Insurance Company.

Excluded Assets: Those assets, if any, listed on Exhibit A to this Agreement,
the Account Cash and any reserve for the replacement of fixtures, furnishings
and equipment, as well as any other reserves held by any lender of Seller or
related to the Property or the Franchisor, all of which are owned and to be
retained by Seller or any Affiliate of Seller.

Final Closing Statement: Shall have the meaning given to it in Section 7.01(l).

Fixtures and Tangible Personal Property: All fixtures, furniture, furnishings,
fittings, equipment, cars, trucks, machinery, apparatus, signage, appliances,
draperies, carpeting, keys, and other articles of personal property now located
on the Real Property and used or usable in connection with any part of the
Hotel, subject to such depletions, resupplies, substitutions, and replacements
as shall occur and be made in the normal course of business, excluding, however:
(i) Consumables and Inventory; (ii) Operating Equipment;(iii) equipment subject
to Equipment Leases; (iv) property owned by Space Lessees, Manager, guests,
employees, or other persons furnishing goods or services to the Hotel (other
than Seller, unless denominated as an Excluded Asset); (v) Improvements and
(vi) Excluded Assets.

 

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Franchise Agreement: That certain Conversion License Agreement dated April 25,
2006 between Seller and Franchisor, as amended.

Franchisor: Starwood (M) International, Inc., a Delaware corporation.

Hazardous Substances: Any substance, chemical, waste or material that is or
becomes regulated by any federal, state or local governmental authority because
of its toxicity, infectiousness, radioactivity, explosiveness, ignitability,
corrosiveness or reactivity, including, without limitation, asbestos or any
substance containing more than 0.1 percent asbestos, the group of compounds
known as polychlorinated biphenyls, flammable explosives, oil, petroleum or any
refined petroleum product.

Hotel: The hotel known as the Le Meridien San Francisco, including 360 guest
rooms, approximately 13,107 square feet of meeting/ballroom space and all
related facilities and the lodging, food and beverage, and other businesses and
activities related thereto and conducted at such hotel.

Hotel Contracts: All service contracts, maintenance contracts, purchase orders,
Equipment Leases, and other contracts or agreements and any amendments thereto,
with respect to the ownership, maintenance, operation, provisioning or equipping
of the Hotel, or any of the Property, as well as written warranties and
guaranties relating thereto, if any, including, but not limited to, those
relating to heating and cooling equipment and/or mechanical equipment, to the
extent such contracts are transferable and/or the parties obtain any consent
necessary to effectuate such transfer, but exclusive, however, of (i) insurance
policies, (ii) the Bookings, (iii) the Employment Contracts, (iv) the Employee
Benefit Plans, (v) the Franchise Agreement and (vi) the Management Agreement.

Improvements: The buildings, structures (surface and sub surface) and other
improvements located on the Land, including such fixtures as shall constitute
real property, except to the extent such fixtures constitute Excluded Assets.

Indemnified Party: Shall have the meaning given to it in Section 5.05.

Indemnitees: A party’s or its Affiliates’ partners, trustees, officers,
directors, employees, beneficiaries, shareholders, members, managers, advisors,
attorneys and other agents and their respective partners, trustees,
beneficiaries, employees, officers, directors, members, managers, advisors and
other agents and shareholders.

Indemnitor: Shall have the meaning given to it in Section 5.05.

Initial Deposit: Shall have the meaning given to it in Section 3.01(a).

Inspection Period: Shall have the meaning given to it in Section 4.01.

Inventory: All articles of personal property now located at the Real Property
and held for resale to customers in the ordinary course of business including,
without limitation, any inventory held for resale in any gift shop, newsstand or
similar retail outlet in the Hotel that is operated by Manager, subject to such
depletions, resupplies, substitutions and replacements as

 

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shall occur and be made in the normal course of business, excluding, however:
(i) Fixtures and Tangible Personal Property; (ii) Consumables; (iii) Operating
Equipment; (iv) equipment subject to Equipment Leases; (v) any property owned by
Manager, guests, employees, Space Lessees or other persons furnishing goods or
services to the Hotel (other than Seller or any Affiliate of Seller, unless
denominated as an Excluded Asset); and (vi) Improvements.

IRS: Shall have the meaning given to it in Section 16.01.

IT Systems: All computer hardware, telecommunications and information technology
systems located at the Hotel, and all computer software used at the Hotel
(subject to the terms of any applicable third party license agreement), to the
extent such equipment and systems are transferable if they are the subject of a
third party license agreement or the parties obtain any consent necessary to
effectuate such transfer.

Land: The parcel of real estate owned by Seller, which parcel is described in
Exhibit B, together with all rights, title, and interest, if any, of Seller in
and to all land lying in any street, alley, road or avenue, open or proposed, in
front of or adjoining said Land, to the centerline thereof, and all right,
title, and interest, if any, of Seller in and to any award made or to be made in
lieu thereof.

Legal Requirements: All laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all governments and governmental
authorities having jurisdiction over the Hotel or the Property, or the operation
of the Hotel or Property.

Liabilities: Any and all liabilities, demands, liens, interest, claims, actions
or causes of action, assessments, losses, fines, penalties, costs (including,
without limitation, response and/or remedial costs), damages and expenses
including, without limitation, those asserted by any Federal, state or local
governmental or quasi-governmental agency or any third party, and any and all
reasonable attorneys’, consultants’ and expert witness fees and expenses.

Liquor License: Any and all licenses and permits held by Seller or any Affiliate
of Seller or of Manager required by any applicable governmental authorities for
the sale and consumption of alcoholic beverages at the Hotel.

Management Agreement: That certain Hotel Management Agreement, dated as of
May 9, 2006, by and between Seller and Manager, as amended, pursuant to which
Manager manages and operates the Hotel.

Manager: Merritt Hospitality LLC, a Delaware limited liability company.

Miscellaneous Hotel Assets: All contract rights, leases, concessions,
trademarks, logos, copyrights, goodwill, assignable warranties, and other items
of intangible personal property relating to the ownership or operation of Hotel
to the extent transferable and/or the parties obtain any consent necessary to
effectuate such transfer, but such term shall not include: (i) Bookings;
(ii) Hotel Contracts; (iii) the Management Agreement, (iv) the Franchise
Agreement; (v) Space Leases; (vi) Permits; (vii) Cash On Hand; (viii) Books and
Records; (ix) Accounts Receivable; (x) refunds, rebates or other claims, or any
interest thereon, for periods or events occurring prior

 

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to the Cut Off Time; (xi) utility and similar deposits; (xii) prepaid insurance
or other prepaid items; or (xiii) prepaid fees for Permits; except, in the case
of clauses (x) through (xiii) (inclusive), only to the extent that Seller
receives a credit on the Closing Statement for any such item or matter.

Notice and Notices: Shall have the meanings given to them in Section 13.01.

Objection Letter: Shall have the meaning given to it in Section 4.07.

Operating Equipment: All china, glassware, linens, silverware, uniforms and
other similar items used in connection with the operation of the Hotel, whether
in use or held in reserve storage for future use, which are located at the Real
Property as of the date of this Agreement, subject to such depletion and
restocking as shall be made in the normal course of business.

Party(ies): Purchaser and/or Seller, as applicable.

Permits: All licenses, permits, certificates of occupancy, authorizations and
approvals used in or relating to the ownership, occupancy or operation of any
part of the Hotel, including, without limitation, those necessary for the sale
and on premises consumption of food, liquor and other alcoholic beverages, to
the extent transferable and/or the parties obtain any consent necessary to
effectuate such transfer.

Permitted Exceptions: Shall have the meaning given to it in Section 4.07.

Personal Property: Collectively, the Fixtures and Tangible Personal Property,
Consumables, Inventory, Operating Equipment, IT Systems, and Cash-On-Hand, but
excluding the Excluded Assets.

Preliminary Closing Statement: Shall have the meaning given to it in
Section 7.01(l).

Present Standards: The standards to which Seller and Manager have generally
operated and maintained the Hotel during the most recent six months prior to the
execution of this Agreement.

Property: The Hotel, including without limitation, collectively the (i) Real
Property: (ii) Fixtures and Tangible Personal Property; (iii) Operating
Equipment; (iv) Consumables; (v) transferable right, title, and interest of
Seller in, to and under the Hotel Contracts and the Space Leases; (vi) Bookings;
(vii) Permits (to the extent assignable); (viii) Cash-On-Hand; (ix) IT Systems;
(x) Inventory; (xi) Warranties; (xii) Books and Records; and
(xiii) Miscellaneous Hotel Assets; provided, however, that the Property shall
not include the Excluded Assets.

Purchase Price: Shall have the meaning given to it in Section 3.01.

Purchaser: Shall have the meaning given to it in the Introductory Paragraph.

Purchaser’s Employee Obligations: Shall have the meaning given to it in
Section 12.01(b).

 

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Purchaser Party/ies: Shall have the meaning given to it in Section 4.05.

Real Property: The Land together with the Improvements located on the Land.

Seller: Shall have the meaning given to it in the Introductory Paragraph.

Seller Default: Shall have the meaning given to in Section 15.02.

Seller Encumbrances: Shall have the meaning given to in Section 4.07.

Seller Release Parties: Shall have the meaning given to it in Section 2.02(f).

Seller’s Knowledge: Shall have the meaning given to it in Section 5.01.

Seller’s Representative: Shall have the meaning given to it in Section 5.01.

Seller’s Response Notice: Shall have the meaning given to it in Section 4.07.

Seller’s Response Period: Shall have the meaning given to it in Section 4.07.

Settlement: Shall have the meaning given to it in Section 14.01(h).

Space Leases: All leases, licenses, concessions, and other occupancy agreements
for the use or occupancy of any portion of the Improvements and any amendments
thereto, excluding, however, Bookings, to the extent such leases, licenses,
concessions, and other occupancy agreements are transferable and/or the parties
obtain any consent necessary to effectuate such transfer.

Space Lessee: Any person or entity entitled to occupancy of any portion of the
Real Property under a Space Lease.

Survey: Shall have the meaning given to it in Section 4.07.

Termination Notice: Shall have the meaning given to it in Section 4.04.

Title Company: Stewart Title Insurance Company.

Title Policy: A 2006-ALTA Extended Coverage Owner’s Title Insurance Policy
issued by the Title Company pursuant to the Title Commitment, in favor of
Purchaser and in the amount of the portion of the Purchase Price allocated to
the Real Property, showing good and marketable title in the Real Property to be
vested in Purchaser, subject to only the Permitted Exceptions.

Title Commitment: Shall have the meaning given to it in Section 4.07.

Transfer: Shall have the meaning given to it in Section 17.04.

Unopened Consumables: Consumables which are in unopened cases, boxes, crates or
containers (other than single-use containers, such as individual guestroom
shampoo containers and the like).

 

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WARN Act: Shall have the meaning given to it in Section 12.01(a).

Warranties: All of Seller’s right, title and interest in and to all presently
effective and assignable warranties, guaranties, representations or covenants
given to or made in favor of Seller in connection with the acquisition,
development, construction, maintenance, repair, renovation or inspection of any
of the Property, including any made under any roof warranties, any construction
contracts and any service or maintenance contracts.

1.02 References. Except as otherwise specifically indicated, all references to
Section and Subsection numbers refer to Sections and Subsections of this
Agreement, and all references to Exhibits refer to the Exhibits attached to this
Agreement. The words “hereby,” “hereof,” “herein,” “hereto,” “hereunder,”
“hereinafter,” and words of similar import refer to this Agreement as a whole
and not to any particular section or subsection of this Agreement. Captions are
for convenience only and shall not be used to construe the meaning of any part
of this Agreement.

ARTICLE II

SALE AND PURCHASE; “AS IS,” “WHERE IS” SALE

2.01 Sale and Purchase. Seller hereby agrees to sell to Purchaser, and Purchaser
hereby agrees to purchase from Seller, all of Seller’s right, title and interest
in and to the Property on the terms and subject to the conditions of this
Agreement.

2.02 As is, Where is.

(a) Purchaser represents that by reason of its business and financial
experience, and the business and financial experience of those persons retained
by Purchaser to advise it with respect to its investment in the Property,
Purchaser has sufficient knowledge, sophistication and experience in business
and financial matters to evaluate the merits and risks of the prospective
investment and is able to bear the economic risk of such investment. Purchaser
has had and will have during the Inspection Period adequate opportunity and time
to review and analyze the risks attendant to the transactions contemplated in
this Agreement with the assistance and guidance of competent professionals. In
addition, Purchaser acknowledges that it has had and will have during the
Inspection Period a sufficient period of time to inspect, examine and
investigate the Property (and to review survey and title matters relating to the
Property) including, but not limited to, the Books and Records provided or made
available by Seller. Purchaser represents, warrants and agrees that, except for
the Seller’s representations and warranties expressly set forth herein,
Purchaser is relying solely on its own inspections, examinations and
investigations in making the decision to purchase the Property. Purchaser hereby
acknowledges and agrees that it shall not have the right to terminate this
Agreement and obtain a refund of the Deposit as a result of its dissatisfaction
with any aspect of its investigation of the Property after the expiration of the
Inspection Period.

(b) Except for the representations and warranties expressly set forth in
Section 5.01 and Section 14.01(b), Purchaser has not relied, and is not relying,
upon any information, documents, sales brochures, other literature, maps or
sketches, projections, pro formas,

 

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statements, representations or warranties (whether express or implied, oral or
written, material or immaterial) that may have been given or made by or on
behalf of Seller.

(c) Except for the representations and warranties expressly set forth in
Section 5.01 and Section 14.01(b), Purchaser is not relying and has not relied
on Seller or any of its Affiliates, or any of their respective officers,
members, partners, directors, shareholders, agents, attorneys, employees or
representatives as to (i) the quality, nature, adequacy or physical condition of
the Property including, but not limited to, the structural elements,
foundations, roofs, appurtenances, access, landscaping, parking facilities,
electrical, mechanical, HVAC, plumbing, sewage or utility systems, facilities or
appliances at the Property or any portion of the Property, (ii) the quality,
nature, adequacy or physical condition of soils or ground water at the Property,
(iii) the existence, quality, nature, adequacy or physical condition of any
utility serving the Property, (iv) the ad valorem taxes now or hereafter payable
on the Property or the valuation of the Property for ad valorem tax purposes,
(v) the development potential of the Property or the habitability,
merchantability, fitness, suitability or adequacy of the Property or any portion
of the Property for any particular use or purpose, (vi) the zoning or other
legal status of the Real Property, (vii) the compliance by the Property or any
portion of the Property, or of the operations conducted on or at the Property,
with any Legal Requirements or other covenants, conditions or restrictions,
(viii) the quality of any labor or materials relating in any manner to the
Property or (ix) except as otherwise expressly provided in this Agreement, the
condition of title to the Property or the nature, status, and extent of any
right of way, lease, right of redemption, possession, lien, encumbrance,
license, reservation, covenant, condition, restriction or any other matter
affecting title to the Property.

(d) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN SECTION
5.01 AND SECTION 14.01(b), THE SALE AND CONVEYANCE BY SELLER TO PURCHASER OF ALL
RIGHT, TITLE AND INTEREST OF SELLER IN AND TO THE PROPERTY WILL BE MADE WITHOUT
ANY WARRANTY OR RECOURSE WHATSOEVER, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
OF TITLE (EXCEPT AS TO ACTS OF SELLER), ABSENCE OF DEFECTS (WHETHER APPARENT OR
LATENT, KNOWN OR UNKNOWN, EASILY DISCOVERABLE OR HIDDEN), FITNESS FOR ANY
ORDINARY USE, OR FITNESS FOR ANY INTENDED USE OR PARTICULAR PURPOSE, EVEN FOR
THE RETURN OR REDUCTION OF THE PURCHASE PRICE OR OTHERWISE, THE SOLE PERIL AND
RISK OF EVICTION TO BE ASSUMED BY PURCHASER, BUT WITH FULL SUBSTITUTION AND
SUBROGATION IN AND TO ALL OF THE RIGHTS AND ACTIONS OF WARRANTY WHICH SELLER HAS
OR MAY HAVE AGAINST ALL PRECEDING OWNERS OR SELLERS; IT BEING UNDERSTOOD THAT
PURCHASER WILL TAKE THE PROPERTY “AS IS” AND “WHERE IS”, PURCHASER HEREBY
ACKNOWLEDGING RELIANCE SOLELY ON ITS OWN TITLE EXAMINATION AND INSPECTION OF THE
PROPERTY, AND NOT ON ANY WARRANTIES OR REPRESENTATIONS FROM SELLER, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT.

(e) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN SECTION
5.01 AND SECTION 14.01(b), WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
PURCHASER ACKNOWLEDGES

 

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THAT SELLER HAS MADE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND OR CHARACTER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY INCLUDING, WITHOUT LIMITATION,
ANY WARRANTIES OR REPRESENTATIONS AS TO TITLE (EXCEPT AS TO ACTS OF SELLER),
ABSENCE OF DEFECTS (WHETHER APPARENT OR LATENT, KNOWN OR UNKNOWN, EASILY
DISCOVERABLE OR HIDDEN), HABITABILITY, MERCHANTABILITY, FITNESS FOR ANY ORDINARY
USE, FITNESS FOR ANY INTENDED USE OR PARTICULAR PURPOSE, ZONING, TAX
CONSEQUENCES, PHYSICAL CONDITION, UTILITIES, OPERATING HISTORY OR PROJECTIONS,
VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PROPERTY WITH LEGAL
REQUIREMENTS, INCLUDING WITHOUT LIMITATION THE AMERICANS WITH DISABILITIES ACT
OF 1990, 42 U.S.C. 12101, ET SEQ., THE TRUTH, ACCURACY, OR COMPLETENESS OF ANY
MATERIALS, DATA, OR THIRD-PARTY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER
TO PURCHASER, OR THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS
INCORPORATED INTO THE PROPERTY OR THE MANNER OF REPAIR, QUALITY, STATE OF REPAIR
OR LACK OF REPAIR OF THE PROPERTY OR ANY PORTION THEREOF. EXCEPT AS EXPRESSLY
PROVIDED IN SECTION 5.01 AND SECTION 14.01(b), ALL SUCH REPRESENTATIONS AND
WARRANTIES WITH RESPECT TO THE PROPERTY ARE HEREBY DISCLAIMED BY SELLER AND
EXPRESSLY WAIVED BY PURCHASER. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
EXPRESSLY SET FORTH IN SECTION 5.01 AND SECTION 14.01(b), PURCHASER HAS NOT
RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY
EXPRESS OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS, OR
INFORMATION PERTAINING OR RELATING TO THE PROPERTY MADE OR FURNISHED BY SELLER,
ANY PARTY ACTING OR PURPORTING TO ACT FOR SELLER, OR ANY REAL ESTATE BROKER OR
AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN,
DIRECTLY OR INDIRECTLY, VERBALLY OR IN WRITING. PURCHASER FURTHER HAS NOT RELIED
ON SELLER’S SKILL OR JUDGMENT IN SELECTING THE PROPERTY. EXCEPT AS EXPRESSLY
PROVIDED IN SECTION 5.01 AND SECTION 14.01(b), PURCHASER SHALL HAVE NO RIGHT OR
CAUSE OF ACTION IN WARRANTY OR OTHERWISE AGAINST SELLER IN ANY CONTROVERSY,
CLAIM, DEMAND, OR LITIGATION ARISING FROM OR IN CONNECTION WITH THE PROPERTY,
AND PURCHASER HEREBY WAIVES AND RELEASES SELLER FROM ANY SUCH RIGHT OR CAUSE OF
ACTION.

(f) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN SECTION
5.01 AND SECTION 14.01(b), SELLER HAS NOT, DOES NOT AND WILL NOT MAKE ANY
REPRESENTATIONS OR WARRANTIES WITH REGARD TO (A) COMPLIANCE WITH ANY
ENVIRONMENTAL LAWS OR LAND USE LAWS, RULES, REGULATIONS, ORDERS, OR REQUIREMENTS
INCLUDING, BUT NOT LIMITED TO, THOSE PERTAINING TO THE HANDLING, GENERATING,
TREATING, STORING OR DISPOSING OF ANY HAZARDOUS SUBSTANCES OR (B) ABSENCE OF ANY
CLAIMS, WHETHER ASSERTED OR UNASSERTED, WITH RESPECT TO COMPLIANCE WITH
ENVIRONMENTAL LAWS OR ENVIRONMENTAL CONDITIONS AT THE PROPERTY. AS A MATERIAL
PART OF THE CONSIDERATION TO SELLER FOR THE SALE OF THE HOTEL HEREUNDER,
PURCHASER HEREBY WAIVES AND

 

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RELINQUISHES, AND RELEASES SELLER, MANAGER AND ALL OF SELLER’S AND MANAGER’S
OFFICERS, DIRECTORS, SHAREHOLDERS, INVESTORS, MEMBERS, EMPLOYEES AND AGENTS
(COLLECTIVELY, “SELLER RELEASE PARTIES”) FROM ANY AND ALL CLAIMS AND REMEDIES
(INCLUDING, WITHOUT LIMITATION, ANY RIGHT OF RESCISSION) AGAINST SELLER RELEASE
PARTIES OR ANY OF THEM BASED DIRECTLY OR INDIRECTLY ON (A) ANY PAST, PRESENT OR
FUTURE CONDITION OF THE HOTEL, INCLUDING, WITHOUT LIMITATION, THE RELEASE OR
PRESENCE OF ANY HAZARDOUS SUBSTANCES OR (B) ANY NON-INTENTIONAL
MISREPRESENTATION, OR FAILURE TO DISCLOSE TO PURCHASER ANY INFORMATION REGARDING
THE HOTEL (INCLUDING, WITHOUT LIMITATION, ANY DEFECTIVE, HAZARDOUS OR UNLAWFUL
CONDITION OF WHICH SELLER SHOULD BE AWARE, WHETHER OR NOT SUCH CONDITION
REASONABLY COULD HAVE BEEN DISCOVERED BY PURCHASER THROUGH AN INSPECTION OF THE
HOTEL OR THE PROPERTY RECORDS). NOTWITHSTANDING ANYTHING STATED TO THE CONTRARY
IN THIS AGREEMENT, BUT SUBJECT TO ANY LIMITATIONS EXPRESSLY SET FORTH IN THIS
AGREEMENT INCLUDING, WITHOUT LIMITATION, IN SECTION 5.03, THE FOREGOING RELEASE
SHALL NOT EXTEND TO (AND SHALL EXPRESSLY EXCLUDE) CLAIMS ARISING FROM SELLER’S
FRAUD OR SELLER’S BREACH OF ITS EXPRESS REPRESENTATIONS AND WARRANTIES,
COVENANTS AND OBLIGATIONS (INCLUDING INDEMNITY OBLIGATIONS) SET FORTH IN THIS
AGREEMENT. PURCHASER UNDERSTANDS THAT SUCH WAIVER AND RELEASE INCLUDES STATUTORY
AS WELL AS “COMMON LAW” AND EQUITABLE RIGHTS AND REMEDIES AND THAT IT COVERS
POTENTIAL CLAIMS OF WHICH PURCHASER MAY BE CURRENTLY UNAWARE OR UNABLE TO
DISCOVER. PURCHASER ACKNOWLEDGES THAT THE FOREGOING WAIVER AND RELEASE IS OF
MATERIAL CONSIDERATION TO SELLER IN ENTERING INTO THIS AGREEMENT, THAT
PURCHASER’S COUNSEL HAS ADVISED PURCHASER OF THE POSSIBLE LEGAL CONSEQUENCES OF
MAKING SUCH WAIVER AND RELEASE AND THAT PURCHASER HAS TAKEN INTO ACCOUNT, IN
AGREEING TO PURCHASE THE HOTEL AT THE PURCHASE PRICE SPECIFIED HEREIN, SELLER’S
DISCLAIMER OF ANY WARRANTIES AND REPRESENTATIONS REGARDING THE HOTEL OTHER THAN
THOSE EXPRESSLY SET FORTH HEREIN. NOTHING HEREIN, HOWEVER, SHALL RELEASE SELLER
FROM ANY LIABILITY IN CONNECTION WITH ANY FRAUD OR FOR A BREACH OF A
REPRESENTATION SET FORTH IN SECTION 5.01 AND SECTION 14.01(b), SUBJECT TO THE
TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT.

Purchaser further agrees and acknowledges that, in giving the foregoing waiver
and release, it has with its legal counsel, considered any statute or other law
that might apply to and limit the effect of Purchaser’s waiver and release
herein and hereby knowingly waives the benefits of any such law and intends that
it not be applicable here, including, but not limited to the provisions of
California Civil Code Section 1542, which provides as follows:

 

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

 

   

 

    Purchaser’s Initials

(g) NEITHER SELLER NOR MANAGER SHALL BE LIABLE TO PURCHASER OR ANY OF ITS
AFFILIATES FOR ANY PROSPECTIVE OR SPECULATIVE PROFITS, OR SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHETHER BASED UPON CONTRACT, TORT OR
NEGLIGENCE OR IN ANY OTHER MANNER ARISING FROM THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

(h) PURCHASER FURTHER DECLARES AND ACKNOWLEDGES THAT THE FOREGOING WAIVERS HAVE
BEEN BROUGHT TO THE ATTENTION OF PURCHASER AND REVIEWED WITH LEGAL COUNSEL OF
ITS CHOOSING AND EXPLAINED TO IT IN DETAIL BY SUCH LEGAL COUNSEL AND THAT
PURCHASER HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO THE FOREGOING WAIVER.

(i) PURCHASER AND SELLER ACKNOWLEDGE THAT NOTHING HEREIN IS INTENDED TO RELIEVE
SELLER OF ANY UNWAIVABLE DISCLOSURE OBLIGATIONS EXPRESSLY REQUIRED BY APPLICABLE
LAW.

ARTICLE III

PURCHASE PRICE

3.01 Purchase Price. The purchase price (the “Purchase Price”) to be paid by
Purchaser to Seller at the Closing shall be One Hundred Forty Three Million
Dollars ($143,000,000), subject to the prorations and adjustments as provided in
this Agreement. Seller and Purchaser agree that the Purchase Price shall be
allocated among (i) the Land, (ii) the Improvements, and (iii) the Personal
Property as may be determined by agreement of Seller and Purchaser prior to the
Closing for federal, state and local tax purposes in accordance with
Section 1060 of the Code. During the Inspection Period, Purchaser shall deliver
to Seller for its review a proposed allocation of the Purchase Price (and any
other items that are required for federal income tax purposes to be treated as
part of the Purchase Price) among the assets to be purchased by Purchaser (the
“Allocation”). Seller shall review such Allocation and provide any objections to
Purchaser within 10 days after receipt thereof. If Seller raises any objection
to the Allocation, the parties hereto will negotiate in good faith (provided
that failing to agree to an Allocation due to negative economic consequences
that will be incurred by a party as a result of doing so shall in no event be
considered a failure to negotiate in good faith) to resolve such objection(s).
The parties shall use their good faith efforts to agree to an Allocation prior
to the end of the Inspection Period. Upon reaching an agreement on such
Allocation, Purchaser and Seller shall

 

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(i) cooperate in the filing of any forms (including Form 8594 under Section 1060
of the Code) with respect to such allocation as finally resolved, including any
amendments to such forms required pursuant to this Agreement with respect to any
adjustment to the Purchase Price, and (ii) shall file all federal, state and
local tax returns and related tax documents consistent with such allocation, as
the same may be adjusted pursuant to any provisions of this Agreement.
Notwithstanding the foregoing, if the parties hereto are unable to agree on a
mutually satisfactory Allocation, each of Purchaser and Seller shall use its own
Allocation for purposes of this Section 3.01. The provisions of this
Section 3.01 shall survive the Closing without limitation. The Purchase Price
shall be payable by Purchaser as follows:

(a) No later than one (1) Business Day after the execution and delivery of this
Agreement by Seller and Purchaser, Purchaser shall deposit with the Escrow
Company, as escrow agent, the amount of Four Million and 00/100 Dollars
($4,000,000.00) by a wire transfer of immediately available United States of
America funds as an earnest money deposit (together with the interest earned
thereon, the “Initial Deposit”).

(b) No later than 5:00 P.M. on the date on which the Inspection Period expires,
if Purchaser shall not have terminated this Agreement in accordance with
Section 4.04, Purchaser shall make an additional deposit with the Escrow
Company, as escrow agent, in the amount of Four Million and 00/100 Dollars
($4,000,000.00) (together with the Initial Deposit and the interest earned
thereon, herein the “Deposit”).

(c) On the date of Closing, Purchaser shall pay the balance of the Purchase
Price, subject to the prorations and adjustments provided for in this Agreement,
in cash by certified check or wire transfer of immediately available United
States of America funds to the Escrow Company, as escrow agent, in accordance
with the terms and conditions of this Agreement. Purchaser shall be responsible
for any income taxes payable with respect to any interest and/or dividends
earned with respect to the Deposit. For those purposes, Purchaser’s federal
taxpayer identification number is 27-4010510. The terms of this Section 3.01(c)
shall survive the Closing or any termination of this Agreement.

(d) Contemporaneously with the execution of this Agreement, Purchaser shall
deliver to Seller a check in the amount of $1,000 (the “Independent Contract
Consideration”), which amount the parties bargained for and agreed to as
consideration for the Seller’s grant to Purchaser of Purchaser’s right to
purchase the Property pursuant to the terms hereof and for Seller’s execution,
delivery and performance of this Agreement. The Independent Contract
Consideration is in addition to and independent of any other consideration or
payment provided in this Agreement, is nonrefundable under any circumstances and
will be retained by Seller notwithstanding any other provisions of this
Agreement.

3.02 Application of Deposit. The Deposit shall be held and disbursed by the
Escrow Company acting as escrow agent. The Deposit shall be invested in a
federally issued or insured interest bearing instrument and any interest earned
on the Deposit shall be paid to the party to which the Deposit is paid pursuant
to the provisions of this Agreement; provided, however, Purchaser shall be
responsible for the payment of any and all taxes payable in connection with any
interest earned on the Deposit. If the sale of the Property is consummated in
accordance with the terms of this Agreement, the Deposit shall be applied to the
Purchase Price to be paid by

 

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Purchaser at the Closing. In the event of a default under this Agreement by
Purchaser or Seller, the Deposit shall be applied as provided in this Agreement.

ARTICLE IV

DILIGENCE MATTERS

4.01 Inspection Period. The “Inspection Period” shall be the period from the
date of this Agreement through 3:00 P.M. Eastern time on December 10, 2010.
Purchaser and its representatives shall be permitted to enter upon the Property
during the Inspection Period to examine, inspect and investigate the Property
including, but not limited to, all Books and Records located at the Property,
subject to Manager’s good faith compliance with Legal Requirements with respect
to access to any and all Employee records (collectively, “Due Diligence”);
provided, however, the Purchaser shall have no right to terminate this Agreement
based on such Due Diligence after the expiration of the Inspection Period.
Purchaser’s Due Diligence shall be subject to the terms, conditions and
limitations set forth in this Article IV, and Purchaser’s conduct shall be in
strict compliance with the covenants and agreements contained in this Article
IV.

4.02 Review and Inspection. Purchaser shall have a right to enter upon the
Property for the purpose of conducting its Due Diligence provided that in each
such instance (i) Purchaser notifies Seller in writing of its intent to enter
the Property to conduct its Due Diligence not less than forty-eight (48) hours
prior to such entry; (ii) the date and time period are scheduled with Seller;
and (iii) Purchaser is in full compliance with the insurance requirements set
forth in Section 4.06. At Seller’s election, a representative of Seller shall be
present during any entry by Purchaser or its representatives upon the Property
for Due Diligence. Purchaser shall take all necessary actions to ensure that
neither it nor any of its representatives unreasonably interfere with the guests
of the Hotel or ongoing operations occurring at the Property. Purchaser shall
not cause or permit any mechanic liens, materialmen’s liens or other liens to be
filed against the Property as a result of its Due Diligence.

4.03 Testing. Purchaser shall have the right to conduct, at its sole cost and
expense, any inspections, studies or tests that Purchaser deems appropriate in
determining the condition of the Property; provided, however, Purchaser is not
permitted to perform any sampling, boring, drilling or other physically
intrusive testing into the structures or ground constituting the Property,
including, without limitation, any so-called Phase II environmental assessment,
without the prior written consent of Seller for such testing to be provided in
Seller’s sole and absolute discretion. Notwithstanding the foregoing, Purchaser
shall have the right to conduct a non-intrusive Phase I environmental assessment
without obtaining Seller’s prior consent, provided that such Phase I shall not
include any sampling, boring, drilling or other physically intrusive testing
into the structures or ground constituting any portion of the Property.

4.04 Acceptance or Rejection. Purchaser shall have until the expiration of the
Inspection Period to conduct its Due Diligence and to determine whether the
Property is acceptable to Purchaser. If the Property is not acceptable to
Purchaser in its sole and absolute discretion, Purchaser may terminate this
Agreement by giving written notice of termination (the “Termination Notice”) to
Seller and the Escrow Company on or before the expiration of the

 

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Inspection Period. Upon receipt by Seller and the Escrow Company of such
Termination Notice, (i) this Agreement shall be terminated, (ii) the parties
shall have no further obligations to or recourse against each other (except for
any provisions of this Agreement which are expressly stated to survive the
termination of this Agreement, including, without limitation, the
indemnification obligation set forth in Section 4.06) and (iii) the Escrow
Company shall within one (1) Business Day of its confirmation of Seller’s
receipt of the Termination Notice return to Purchaser the Initial Deposit less
the amount of any damages allegedly payable to Seller pursuant to the
indemnification set forth in Section 4.06, if any, and specifically set forth in
a notice given by Seller to the Escrow Company and Purchaser prior to the Escrow
Company’s receipt of the Termination Notice which alleged damages shall be
retained by the Escrow Company until the resolution of such claim. If Purchaser
does not timely give a Termination Notice as aforesaid, Purchaser shall be
deemed to have fully and knowingly waived any right to terminate this Agreement
pursuant to this Article IV or otherwise in connection with its Due Diligence
and thereafter the Deposit shall be non-refundable to Purchaser except as
otherwise expressly provided in this Agreement.

4.05 Confidentiality. Purchaser agrees and covenants with Seller not to disclose
to any third party (other than its agents and employees, directors, trustees,
potential hotel managers, lenders, accountants, attorneys, and other
professionals and consultants engaged by Purchaser (collectively, “Purchaser
Parties”) in connection with the transaction contemplated in this Agreement who
shall also be obligated under this Section 4.05 not to disclose) without
Seller’s prior written consent any of the terms or conditions set forth in this
Agreement, the Books and Records or any of the reports or any other
documentation or information obtained by Purchaser or any Purchaser Parties
which relates to the Property, Seller or its Affiliates in any way, all of which
shall be used by Purchaser and the Purchaser Parties solely in connection with
the transaction contemplated by this Agreement, unless Purchaser or any
Purchaser Party is obligated by applicable law to make such a disclosure. If
such disclosure is required by applicable law or regulations, then Purchaser
shall notify Seller in writing of such obligation to ensure Seller has the
opportunity prevent any such disclosure. If this Agreement is terminated,
Purchaser agrees that all such information will continue to be held in strict
confidence and Purchaser shall return all copies of such information to Seller
and upon written request of Seller, copies of information that was prepared by
Purchaser excluding any correspondence or materials subject to the
attorney-client privilege or which Purchaser is contractually or legally not
permitted to disclose or any Purchaser Party if contractually permitted to do so
(provided that Purchaser shall use commercially reasonable efforts to be able to
disclose any non-attorney-client privileged materials) or if consented to by
Seller in its reasonable discretion, Purchaser shall destroy all copies of such
information in its possession or control and certify in writing to Seller of the
destruction of such information. Except as set forth in Sections 5.01 and
14.01(b), Seller makes no representation or warranty to the completeness or
accuracy of such confidential information and Purchaser shall indemnify Seller
for any costs incurred as a result of Purchaser’s or any Purchaser Party’s use
of such information in violation of this Section 4.05. The provisions of this
Section 4.05 shall survive the Closing or any termination of this Agreement.

4.06 Indemnification; Restoration; Insurance. Purchaser agrees to save, protect,
defend, indemnify and hold Seller, Manager and each of their Indemnitees
harmless from and against any and all Liabilities suffered or incurred by any of
Seller, Manager or any of their Indemnitees as a result of or in connection with
any activities of Purchaser (including activities

 

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of any of Purchaser’s employees, consultants, contractors or other agents)
relating to its inspection of the Property, including, without limitation,
mechanics’ liens, damage to the Property, injury to persons or property
resulting from such activities in connection therewith, except to the extent
resulting from Seller’s gross negligence or intentional misconduct or a
violation of the confidentiality provisions of this Agreement. Notwithstanding
the foregoing, Purchaser’s indemnification obligations hereunder shall not
include any obligation or duty whatsoever with respect to any such claims
(including claims that the Real Property has declined in value) to the extent
arising out of or resulting from the mere discovery or presence of any
pre-existing Hazardous Substances or other property condition. If the Property
is damaged in any material respect as result of such activities, Purchaser, at
its sole cost and expense, shall promptly repair such damage to the Property to
the reasonable satisfaction of Seller. Furthermore, Purchaser agrees to maintain
and cause any of its representatives or agents conducting any Due Diligence to
maintain and have in effect commercial general liability insurance with limits
of not less than Two Million Dollars ($2,000,000) for personal injury, including
bodily injury and death, and property damage, naming Seller and Manager as an
additional insured parties, and containing a waiver of subrogation. Purchaser
shall deliver to Seller a copy of the certificate of insurance effectuating the
insurance required under this Section 4.06, which certificate shall provide that
such insurance shall not be terminated or modified without at least thirty
(30) days’ prior written notice to Seller. The provisions of this Section 4.06
shall survive the Closing or any termination of this Agreement.

4.07 Title and Survey. Seller will cause the Title Company to deliver to
Purchaser an updated title commitment (the “Title Commitment”) on the Property,
and Seller has previously delivered to Purchaser an ALTA survey (the “Survey”)
of the Land and Improvements. If Purchaser, in its sole discretion, objects to
the Survey or any of the exceptions shown in the Title Commitment or any other
matter affecting title to the Real Property, Purchaser shall provide Seller with
a written notice of such objections (the “Objection Letter”), which notice shall
contain a reasonably detailed explanation of such objections, no later than 5:00
P.M. Eastern Time on December 7, 2010. If Purchaser does not deliver an
Objection Letter by 5:00 P.M. Eastern time on such date, Purchaser shall be
deemed to have accepted all exceptions contained in the Title Commitment (other
than the Seller Encumbrances), the form and substance of the Survey and all
matters shown thereon. All such exceptions and matters and any exceptions or
matters caused by or through Purchaser shall be “Permitted Exceptions”. In the
event any such objections are timely made by Purchaser, Seller shall have the
right, but not the obligation, exercisable by delivery of a notice to Purchaser
(the “Seller’s Response Notice”) no later than 5:00 P.M. Eastern Time on that
date which is two (2) Business Days after Seller’s receipt of the Objection
Letter (the “Seller’s Response Period”) to cure (by removal, endorsement or
otherwise) such objections in the manner specified in the Seller’s Response
Notice within the time periods provided herein. The procurement by the Seller of
a commitment for the issuance of a title policy or endorsement thereto by the
Title Company insuring Purchaser against the exception or other matter shall be
deemed a cure of such exception or matter as long as the Title Company agrees to
delete such exception or affirmatively insure over such exception. If there are
objections timely made by Purchaser that Seller elects or is deemed to have
elected not to cure, then Purchaser shall have the right, upon the earlier of
(i) receipt of Seller’s Response Notice or (ii) the expiration of the Seller’s
Response Period to either (a) terminate this Agreement (whereupon the Deposit
shall be returned to Purchaser less the amount of any damages allegedly payable
to Seller pursuant to the indemnification set forth in Section 4.06) or

 

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(b) be deemed to have agreed to accept title to the Real Property subject to all
exceptions to title set forth in the updated Title Commitment (other than the
Seller Encumbrances), as applicable, and all matters shown on the updated
Survey, as applicable, other than those which Seller has expressly agreed to
remedy in the manner set forth in Seller’s Response Notice and proceed to
Closing. If any such objections are not cured (or arrangements for such cure to
be effective as of the Closing are not made) by Seller by the expiration of the
Inspection Period in the manner provided in Seller’s Response Notice, then
Purchaser may as its only option, elect to either: (y) waive such objection(s)
and consummate the transaction contemplated by this Agreement without adjustment
to the Purchase Price or (z) terminate this Agreement, in which event the
Deposit shall be returned to Purchaser and neither party shall have any further
obligations to the other party except for the obligations in this Agreement that
expressly survive termination. Notwithstanding anything to the contrary herein,
Seller shall remove at Closing (i) any mortgage, deed of trust or similar
voluntary monetary lien affecting the Property and (ii) any mechanic’s or
similar liens for work performed at the Property at Seller’s request
(individually and collectively, the “Seller Encumbrances”). Seller shall be
permitted to use the Purchase Price to effect such removal at Closing.

4.08 Space Leases, Hotel Contracts and Equipment Leases. Purchaser agrees to
assume all obligations under the Space Leases and, to the extent assumable or
any requisite consent is obtained, the Hotel Contracts (including any Equipment
Leases), arising from and after the Closing Date and at its sole cost and
expenses, shall pay all of the actual out-of-pocket fees, costs and expenses
incurred in connection with assignment and assumption of the Space Leases and
the Hotel Contracts; provided that in no event shall Purchaser pay any
out-of-pocket expenses of Seller with respect to its internal costs or outside
legal expenses; and provided further the parties shall use commercially
reasonable efforts to obtain any required consents or satisfy any other
requirements in connection with the assignment and assumption of all Space
Leases and Hotel Contracts. Purchaser agrees to save, protect, defend, indemnify
and hold Seller, Manager and each of their Indemnitees harmless from and against
any cost, expense, claim or Liability arising from and after the Closing Date in
connection with the assignment and assumption of the Space Leases and the Hotels
Contracts or the termination of any assumable (whether by its terms or based on
the receipt of any requisite consent) Hotel Contract that Purchaser elects to
terminate or not to assume; provided, however, that Seller shall bear any
termination fee, penalty or other cost or expense under any Hotel Contract that
is not assumable by Purchaser and as to which a requisite consent to assumption
by Purchaser is not obtained. The provisions of this Section 4.08 shall survive
the Closing.

4.09 Franchise Agreement. It shall be a condition to Purchaser’s obligation to
Closing that Franchisor shall have agreed that Purchaser or its designee may
assume the Franchise Agreement on the same material economic terms and
conditions set forth in the Franchise Agreement, which terms and conditions
shall include the same franchise fees, termination rights and area of protection
set forth in the Franchise Agreement (the “Material Franchise Terms”) or that
Franchisor shall have entered into a new hotel franchise agreement with
Purchaser or its designee on the form included in Franchisor’s current Uniform
Franchise Offering Circular (“UFOC”) containing the Material Franchise Terms.
Purchaser expressly acknowledges that Seller has entered into this Agreement on
the basis that no termination fees or liquidated damages shall be payable by
Seller as a result of the sale of the Property to Purchaser as a result of
Purchaser or its designee (at Purchaser’s sole cost and expense) either (i) so

 

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assuming the Franchise Agreement and obtaining any required consent of
Franchisor in connection therewith or (ii) so entering into a new hotel
franchise agreement with Franchisor for the Hotel and, in either instance,
Seller receiving a written release from Franchisor of any obligations under the
Franchise Agreement arising after Closing (including pursuant to any guaranties
from Seller or any of its Affiliates pursuant to the Franchise Agreement). If
Closing occurs and Purchaser or its designee has not so assumed the Franchise
Agreement and Seller shall not have obtained a release of Seller as set forth
above or so entered into a new hotel franchise agreement with Franchisor set
forth above, in each case such that no termination fees, liquidated damages or
similar fees and penalties are payable by Seller or any of its Affiliates
(including Seller or any entity owning a beneficial interest in Seller in its
capacity as a guarantor or otherwise) as a result of the sale of the Property to
Purchaser, then Purchaser shall be responsible for, and shall save, protect,
defend, indemnify and hold Seller (and any Affiliate of Seller) harmless from
any such termination fees, liquidated damages or similar fees and penalties (and
any other Liabilities that Seller would not bear if the Franchise Agreement was
not terminated pursuant to the sale of the Property to Purchaser) in connection
with the termination of the Franchise Agreement as of the Closing. Purchaser and
Seller shall cooperate with one another and each use its reasonable best efforts
to obtain either (x) Franchisor’s written consent to the assumption of the
Franchise Agreement as set forth above as of Closing or (ii) Franchisor’s
written commitment to enter into a new franchise agreement with Franchisor as
set forth above, in each case prior to the expiration of the Inspection Period,
and to provide a copy of such consent or commitment for deposit with Escrow
Company (with a conforming copy provided to Seller). The provisions of this
Section 4.09 shall survive the Closing or any termination of this Agreement.

4.10 Natural Hazard Disclosures. As used herein, the term “California Natural
Hazard Area” shall mean those areas identified as natural hazard areas or
natural hazards in the Natural Hazard Disclosure Act, California Government Code
Sections 8589.3, 8589.4 and 51183.5, and California Public Resources Code
Sections 2621.9, 2694 and 4136, and any successor statutes or laws (collectively
the “California Natural Hazard Laws”). Purchaser hereby acknowledges that, prior
to the date of this Agreement, Seller has provided Purchaser with a Natural
Hazard Disclosure Statement (the “California NHDS”) in a form required by the
California Natural Hazard Laws. Purchaser acknowledges that Seller retained the
services of The Planning & Zoning Resource Corporation to examine the maps and
other information made available to the public by government agencies for the
purpose of enabling Seller to fulfill its disclosure obligations with respect to
the California Natural Hazard Laws and to prepare the written report of the
result of its examination (the “California Natural Hazard Report”). Purchaser
acknowledges that the California Natural Hazard Report fully and completely
discharges Seller from its disclosure obligations under the California Natural
Hazard Laws and under California Civil Code Sections 1102 through 1102.17.
Purchaser acknowledges and agrees that nothing contained in the California NHDS
releases Purchaser from its obligation to fully investigate and satisfy itself
with the condition of the Property during the Inspection Period, including,
without limitation, whether the Property is located in any California Natural
Hazard Area. Purchaser further acknowledges and agrees that the matters set
forth in the California NHDS or California Natural Hazard Report may change on
or prior to the Closing and that Seller has no obligation to update, modify or
supplement the California NHDS or California Natural Hazard Report. Purchaser is
solely responsible for preparing and delivering its own California NHDS to
subsequent prospective purchasers of the Property.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES

5.01 Representations and Warranties of Seller. Seller hereby represents and
warrants the following matters to Purchaser as of the date hereof (or such other
time as provided herein). Whenever a representation or warranty or other
reference is made in this Agreement on the basis of the knowledge, actual
knowledge, best knowledge or otherwise with reference to the knowledge of Seller
(any such reference, “Seller’s Knowledge”), such representation, warranty or
reference is made solely on the basis of the actual, as distinguished from
implied, imputed and constructive, knowledge, on the date that such
representation or warranty is made, of Anthony Rutledge and/or Clark Hanrattie
(together, “Seller’s Representative”), without inquiry or investigation or duty.
In addition to the foregoing, the representations and warranties of Seller
herein shall be deemed modified to reflect any facts disclosed to or otherwise
known by Purchaser, its representatives, employees, Affiliates, or Purchaser’s
counsel, advisors, consultants, contractors and agents involved in conducting
Due Diligence.

(a) Due Organization. Seller is a limited liability company duly formed, validly
existing and in good standing under the laws of Delaware. Seller has full power
and authority, and has taken all corporate and other action necessary to
authorize Seller to make, execute, deliver and perform this Agreement and the
transaction contemplated by this Agreement or at the time of Closing will be.
The person executing this Agreement on behalf of Seller has been duly authorized
to do so. This Agreement is a binding and legal agreement of Seller, enforceable
against Seller in accordance with its terms, subject to the effect of applicable
bankruptcy or insolvency and general principles of equity.

(b) No Conflict. The execution and delivery of this Agreement and the closing
documents to be executed in connection herewith and the consummation of the
transactions contemplated hereby and thereby, except as otherwise provided
herein, do not require the consent or approval of any governmental authority,
nor shall such execution and delivery result in a breach or violation of any
Legal Requirement, or conflict with, breach, result in a default (or an event
which with notice or passage of time or both will constitute a default) under or
violate any contract or agreement to which Seller is a party or by which it or
the Property is bound.

(c) Pending Litigation. Except as described in Exhibit C, there are no actions,
suits or other legal proceedings filed or served against Seller, Manager,
Merritt Beverage LLC or affecting any of Seller’s rights, in each case, with
respect to the Property, which is reasonably expected to result in any order,
injunction, decree or judgment having a material adverse effect on the ownership
or operation of the Property or the Hotel. To Seller’s Knowledge, except as
noted in Exhibit D, Seller has not received any written notice from any
governmental authority of any violation of a Legal Requirement by Seller in
connection with the use, operation or condition of the Property which would have
a material adverse impact on the operations of the Hotel and which has not been
corrected.

(d) Condemnation. There are no pending, or to Seller’s Knowledge, threatened,
condemnation proceedings, or condemnation actions against the Property. Seller
has

 

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not received any written notice of any pending condemnation or other proceedings
in eminent domain with respect to the Property.

(e) Employees. All Employees are employed by Manager. No union is presently
serving as collective bargaining agent for any Employees. To Seller’s Knowledge,
no labor organization currently is engaged in a campaign to organize any group
of Employees of Manager and no question concerning representation currently is
pending before the National Labor Relations Board, although UNITE HERE Local 2
has at various times requested that Manager agree to allow the union to organize
the Employees by entering into a card-check and neutrality agreement, as it
requested of the previous operator of the Property, but Manager has not agreed
to any such request.

(f) Licenses and Permits. Seller has not received any written notice from any
governmental or quasi governmental agency having jurisdiction over the Property
of any uncured violation or default of any material Permit of which the failure
to cure would reasonably be expected to materially and adversely affect the use,
operation or value of the Property.

(g) Notice of Assessment. Seller has not received written notice of any special
assessments or taxes against the Property from any governmental agency which
relate to any planned public improvements with respect to the Property.

(h) Environmental Notice. Seller has not received any written notices from any
governmental authority or third party of any uncured violation of any
Environmental Laws regarding any environmental conditions at the Hotel or of any
release of Hazardous Substances from the Real Property.

(i) Space Leases. Seller has delivered or made available to Purchaser prior to
the date of this Agreement complete copies of all Space Leases, and there are no
Space Leases except as set forth on the list attached hereto as Exhibit E.
Except as disclosed in Exhibit E: (i) to Seller’s Knowledge, each Space Lease is
in full force and effect; (ii) Seller has not received any written notice from
any Space Lessee claiming that Seller is currently in default in its obligations
as landlord under any Space Lease; (iii) no Space Lessee is in default in any
material monetary obligation or, to Seller’s Knowledge, any material
non-monetary obligation, under its Space Lease; and (iv) to Seller’s Knowledge,
no rent has been paid by any Space Lessee more than one month in advance and no
Space Lessee security deposits have been applied to perform Space Lessee
obligations.

(j) Fixtures and Tangible Personal Property. All of the Fixtures and Tangible
Personal Property shall be owned by the Seller on the Closing Date, free and
clear of all liens, encumbrances and security interests. Except as set forth in
Exhibit F attached hereto, none of the Fixtures and Tangible Personal Property
required for the operation, repair or maintenance of the Property is leased from
or owned by third-parties.

(k) Bankruptcy. Seller has not filed any petition in bankruptcy or other
insolvency proceedings or proceedings for reorganization of Seller or for the
appointment of a receiver or trustee for all or any substantial part of Seller’s
property, nor has Seller made any assignment for the benefit of its creditors or
filed a petition for an arrangement, or entered into an

 

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arrangement with creditors or filed a petition for an arrangement with creditors
or otherwise admitted in writing its inability to pay its debts as they become
due.

(l) Tax Abatement Proceedings. To Seller’s Knowledge, there is no currently
pending appeal or abatement proceeding with respect to the real estate taxes
assessed on the Real Property.

(m) Hotel Contracts. Attached as Exhibit G is a list of all of the Hotel
Contracts, including any Equipment Leases. If Seller has inadvertently omitted a
Hotel Contract from Exhibit G, Purchaser hereby acknowledges and agrees that it
shall not have any right to terminate this Agreement pursuant to the terms
hereof, but shall not be obligated to assume such Hotel Contract. Except as
noted on Exhibit G, Seller has provided a true, accurate and complete copy of
each such Hotel Contract to Purchaser. Seller has neither given nor received
written notice of any default under any such Hotel Contract which has not been
fully cured and, to Seller’s Knowledge, neither Seller nor any other party to a
Hotel Contract is otherwise in default of its obligations thereunder. Each Hotel
Contract is in full force and effect with respect to Seller and, to Seller’s
Knowledge, as to the other party thereto.

(n) Non-Foreign Person. Seller is a “United States person” (as defined in
Section 7701(a)(30)(B) or (C) of the Code) for the purposes of the provisions of
Section 1445(a) of the Code.

(o) OFAC. Seller has not engaged in any dealings or transactions, directly or
indirectly, (i) in contravention of any U.S., international or other money
laundering regulations or conventions, including, without limitation, the United
States Bank Secrecy Act, the United States Money Laundering Control Act of 1986,
the United States International Money Laundering Abatement and Anti Terrorist
Financing Act of 2001, Trading with the Enemy Act (50 U.S.C. §1 et seq., as
amended), or any foreign asset control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto (collectively, “OFAC
Regulations”), or (ii) in contravention of Executive Order No. 13224 dated
September 24, 2001 issued by the President of the United States (Executive Order
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism), as may be amended or supplemented from time to
time (“Anti Terrorism Order”) or on behalf of terrorists or terrorist
organizations, including those persons or entities that are included on any
relevant lists maintained pursuant to any of the rules and regulations of OFAC
or pursuant to any other applicable orders. To Seller’s Knowledge, Seller (i) is
not and will not be conducting any business or engaging in any transaction with
any person appearing on the U.S. Treasury Department’s Office of Foreign Assets
Control list of restrictions and prohibited persons, or (ii) is not a person
described in Section 1 of the Anti Terrorism Order, and Seller has not engaged
in any dealings or transactions, or otherwise been associated, with any such
person.

(p) Brokers. Except with respect to Broker, which will be compensated solely by
Seller pursuant to a separate agreement between them, Seller has not dealt with
any person who has acted, directly or indirectly, as a broker, finder or agent
in connection with the transaction contemplated by this Agreement in a manner
which would entitle such person to any fee or

 

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commission in connection with this Agreement or the transaction contemplated in
this Agreement.

(q) Legal Requirements. Seller has not received any written notice of any
violation of any Legal Requirements with respect to the Hotel or the Property
which has not been cured or dismissed.

(r) Taxes. All federal, state, local and other tax returns, reports and
declarations of every nature required to be filed by or on behalf of Seller
(either separately or as part of a consolidated group) prior to the Closing Date
with respect to the Property (other than federal, state and local income tax
returns of Seller, but including in any event all rooms, sales, use, occupancy,
food and beverage and similar tax returns, reports and declarations) have been
timely filed (subject to any extensions that may be permitted by law) and such
returns, reports and declarations as so filed are complete and accurate and
disclose all taxes required to be paid for the periods covered thereby. All such
taxes and all deficiency assessments, penalties and interest relating to any
period ending prior to the Closing Date with respect to the Property have been
or shall be paid by Seller if due as of or prior to the Closing Date.

5.02 Representations and Warranties of Purchaser. Purchaser hereby represents
and warrants the following to Seller:

(a) Due Organization. Purchaser is a limited liability company duly formed,
validly existing and in good standing under the laws of Delaware and on the
Closing Date shall be qualified to do business in California. Purchaser has full
power and authority to enter into and perform this Agreement and the
transactions contemplated by this Agreement, and Purchaser has taken all
corporate and other action necessary to authorize Purchaser to make, execute,
deliver and perform this Agreement and the transactions contemplated by this
Agreement. The person executing this Agreement on behalf of Purchaser has been
duly authorized to do so. This Agreement is a binding and legal agreement of
Purchaser, enforceable against Purchaser in accordance with its terms, subject
to the effect of applicable bankruptcy or insolvency and general principles of
equity.

(b) No Conflict. The execution and delivery of this Agreement and the closing
documents to be executed in connection herewith and the consummation of the
transactions contemplated hereby and thereby, except as otherwise provided
herein, do not require the consent or approval of any governmental authority,
nor shall such execution and delivery result in a breach or violation of any
Legal Requirement or conflict with, breach, result in a default (or an event
which with notice or passage of time or both will constitute a default) under or
violate any contract or agreement to which Purchaser or an Affiliate of
Purchaser is a party or by which it or its property is bound.

(c) OFAC. Neither Purchaser nor any of its Affiliates have engaged in any
dealings or transactions, directly or indirectly, (i) in contravention of any
U.S., international or other money laundering regulations or conventions,
including, without limitation, the OFAC Regulations, or (ii) in contravention of
the Anti Terrorism Order or on behalf of terrorists or terrorist organizations,
including those persons or entities that are included on any relevant lists
maintained pursuant to any of the rules and regulations of OFAC or pursuant to
any other

 

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applicable orders. Neither Purchaser nor any of its Affiliates (i) are or will
be conducting any business or engaging in any transaction with any person
appearing on the U.S. Treasury Department’s Office of Foreign Assets Control
list of restrictions and prohibited persons, or (ii) are a person described in
Section 1 of the Anti-Terrorism Order, and to the best of Purchaser’s knowledge
neither Purchaser nor any of its Affiliates have engaged in any dealings or
transactions, or otherwise been associated, with any such person. If at any time
this representation becomes false then it shall be considered a default under
this Agreement and Seller shall have the right to exercise all of the remedies
set forth in this Agreement in the event of a default or to terminate this
Agreement immediately.

(d) As-is, Where-is. Purchaser understands that subject to the provisions of
this Agreement it will take the Property “as-is” and “where-is” and hereby
reaffirms the waivers contained in Section 2.02.

5.03 Duration of Representations and Warranties and Covenants; Limitations on
Liability. All representations and warranties contained in this Agreement,
liability for breach of any covenant of Seller set forth in Article X and the
Seller indemnities set forth in Section 5.04(b) shall survive the Closing for a
period of nine (9) months and shall not merge into any of the documents
delivered at Closing; provided, however, that no person, firm, or entity shall
have any Liability or obligation with respect to any breach of representation or
warranty contained in this Agreement or, with respect to Seller, breach of any
covenant set forth in Article X or its indemnification obligations under
Section 5.04(b) unless (1) on or prior to the date that is nine (9) months
following the Closing Date, the party seeking to assert liability under such
representation or warranty or, with respect to Seller, covenant or
indemnification obligation shall have notified the other party in writing
setting forth specifically the allegedly breached together with a detailed
description of thereof (the “Breach Notice”) and (2) such alleging party shall
have filed a complaint commencing a legal proceeding asserting a default in a
court with competent jurisdiction within thirty (30) days following the delivery
of the Breach Notice. Notwithstanding the foregoing, Purchaser acknowledges and
agrees that Seller shall have no liability for, and Purchaser shall not make any
claim on account of, any breach of any representation or warranty set forth in
Section 5.01 or any covenant of Seller set forth in Article X or any of Seller’s
indemnification obligations under Section 5.04(b) except to the extent the
aggregate measure of such claims exceeds Two Hundred Thousand Dollars ($200,000)
(the “Deductible”), in which event, only the amount of such losses over and
above the Deductible shall be actionable. In no event shall the aggregate
liability of Seller to Purchaser for any (and all) breach of any representation
or warranty set forth in Section 5.01, any Seller covenant set forth in Article
X or any of Seller’s indemnification obligations under Section 5.04(b) exceed
Two Million Dollars ($2,000,000) collectively. The limitations set forth in this
Section 5.03 shall not apply to Sections 7.01(a) (with respect to trade payables
to be paid by Seller only), 7.01(l), 7.02, 12.01(b) (with respect to Liabilities
related to Employees or former Employees that remain with Seller pursuant to the
first sentence of such Section 12.01(b) only), 14.01(b) and 14.01(h).
Notwithstanding anything to the contrary contained in this Agreement, if
Purchaser obtains at any time, whether before or after Closing, an estoppel from
a tenant under a Space Lease or any other party, which estoppel confirms any of
the representations and warranties made by Seller in Section 5.01, then Seller
shall have no further obligation under this Agreement with respect to each such
representation and warranty made in Section 5.01 that is so confirmed, provided
that nothing herein shall obligate Seller to obtain an such estoppel from a
Space Lessee

 

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or make the delivery of such an estoppel a condition to either party’s
obligation to consummate the transactions contemplated in this Agreement.

5.04 Indemnities.

(a) Purchaser’s Indemnity. Purchaser hereby agrees to save, protect, defend,
indemnify and hold harmless Seller and Seller’s Indemnitees from and against any
and all loss, damage, claim, cause of action, cost or expense or any other
Liabilities incurred by Seller or its Indemnitees by reason of, or with respect
to (i) any material breach of any of the representations, warranties or
covenants made by Purchaser in the Agreement, (ii) the non-performance of any
covenant or obligation required to be performed by Purchaser hereunder which
expressly survive the termination of this Agreement or Closing (iii) events,
contractual obligations, acts or omissions of Purchaser that occur or accrue
after Closing in connection with the ownership or operation of the Property;
(iv) damage to property or injury to or death of any person or any claims for
any debt or obligations occurring on or about or in connection with the Property
or any portion thereof or with respect to the Property’s operations at any time
or times after Closing; (v) any termination fees, liquidated damages or similar
fees and penalties (and any other Liabilities that Seller would not bear if the
Franchise Agreement was not terminated pursuant to the sale of the Property to
Purchaser) incurred by Seller or its Affiliates in connection with the
termination of the Franchise Agreement as described in Section 4.09, or (vi) the
assumption of any of the Hotel Contracts, Permits and/or Space Leases or the
termination of any assumable (whether by its terms or based on the receipt of
any requisite consent) Hotel Contract that Purchaser elects to terminate or not
to assume as of Closing.

(b) Seller’s Indemnity. Seller hereby agrees to save, protect, defend, indemnify
and hold harmless Purchaser and Purchaser’s Indemnitees from and against any and
all loss, damage, claim, cause of action, cost or expense or any other
Liabilities, incurred by Purchaser or its Indemnitees by reason of (i) any
material breach of any of the representations and warranties made by Seller in
this Agreement or Seller’s covenants in Article X, subject in each instance, to
the terms of this Agreement, including, but not limited to, the provisions of
Section 5.03, (ii) subject to the terms and conditions of Article XII and
Sections 7.01(g) and (h), any Liability imposed upon Purchaser or its
Indemnitees relating to the employment of the Employees by Manager for the
period prior to the Closing Date, except to the extent arising out of or
relating to the Purchaser’s or any of its Indemnitees’ breach of the terms,
conditions and obligations of Article XII or Sections 7.01(g) or (h),
(iii) events, contractual obligations, acts or omissions of Seller that occur or
accrue prior to Closing in connection with the ownership of the Property,
including without limitation, debts, obligations and/or Liabilities of Seller,
its Affiliates or Manager which may exist with respect to the employment or
termination of any Employees that arise prior to the Closing, or which are
attributable to the termination of such Employees by Seller, its Affiliates or
Manager at or prior to Closing, except to the extent that such debts,
obligations and/or Liabilities are covered by a credit against the Purchase
Price, (iv) damage to property or injury to or death of any person or any claims
for any debt or obligations occurring on or about or in connection with the
Property or any portion thereof or with respect to the Property’s operations at
any time or times prior to Closing, but specifically excluding (w) any
Liabilities caused by breaches of covenants of Purchaser which, by the terms of
this Agreement, survive Closing, (x) any Liabilities consisting of liabilities
or obligations for which Purchaser received a credit at Closing, (y) any
Liabilities consisting of contractual liabilities or obligations

 

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which Purchaser expressly assumed at Closing and (z) any Liabilities incurred in
relation to the physical condition of the Property (including without
limitation, the environmental condition of the Real Property) other than
Liabilities resulting from injury to or death of any person prior to Closing
resulting from the physical condition (but not environmental condition) of the
Property, and (v) as set forth in the indemnification provisions in Article XIV.

(c) Survival. This Section 5.04 shall survive the Closing and shall not be
deemed merged into the Deed or any conveyance document delivered at Closing.

5.05 Procedure for Indemnification with Respect to Third Party Claims. If a
claim by a third party is made against a party hereunder or its Indemnitees (the
“Indemnified Party”) and if such Indemnified Party intends to seek indemnity
with respect thereto under Section 5.04 and/or this Section 5.05, against the
other party hereto (the “Indemnitor”) the Indemnified Party shall promptly
notify the Indemnitor of such claim. The Indemnitor shall have thirty (30) days
after receipt of the above-referenced notice to undertake, conduct and control,
through counsel of its own choosing (subject to the consent of the Indemnified
Party, such consent not to be unreasonably withheld or delayed) and at its
expense, the settlement or defense therefor, and the Indemnified Party shall
reasonably cooperate with it in connection therewith, provided that: (i) the
Indemnitor shall permit the Indemnified Party to participate in such settlement
or defense through counsel chosen by the Indemnified Party, provided that the
fees and expenses of such counsel shall be borne by the Indemnified Party; and
(ii) the Indemnitor shall agree promptly to reimburse the Indemnified Party for
the full amount of any loss resulting from such claim and all related expenses
incurred by the Indemnified Party within the limits of Section 5.04 and/or this
Section 5.05. As long as the Indemnitor is reasonably contesting any such claim
in good faith, the Indemnified Party shall not pay or settle any such claim.
Notwithstanding the foregoing, the Indemnified Party shall have the right to pay
or settle any such claim, provided that in such event such party shall waive any
right to indemnity therefor by the Indemnitor. If the Indemnitor does not notify
the Indemnified Party within thirty (30) days after receipt of the Indemnified
Party’s notice of a claim of indemnity hereunder that it elects to undertake the
defense thereof, the Indemnified Party shall have the right to contest, settle
or compromise the claim in the exercise of its exclusive discretion at the
expense of the Indemnitor. This Section 5.05 shall survive the Closing and shall
not be deemed merged into the Deed or any conveyance document delivered at
Closing.

ARTICLE VI

CLOSING AND CLOSING DELIVERIES

6.01 Closing. The Closing shall take place at the offices of Escrow Company on
the Closing Date, or through customary closing escrow arrangements reasonably
acceptable to Seller and Purchaser by the delivery of documents and funds to
Escrow Company on or prior to the Closing Date. Each of Purchaser and Seller
acknowledges that its respective undertakings to close this transaction promptly
on the Closing Date is a material inducement to the other to execute this
Agreement, that time is of the essence and that neither party shall have any
obligation or right to extend, postpone or reschedule the Closing, except as
expressly set forth herein.

 

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6.02 Escrow. This Agreement shall not be merged into any separately delivered
escrow instructions, but any such escrow instructions shall be deemed auxiliary
to this Agreement and, as between Purchaser and Seller, the provisions of this
Agreement shall govern and control.

6.03 Seller’s Deliveries. Prior to Closing, Seller shall execute (to the extent
required) and deliver, or cause to be delivered, to Purchaser or the Escrow
Company as appropriate:

(a) a recordable grant deed (“Deed”) of all of Seller’s right, title and
interest in and to the Land and Improvements subject to only the Permitted
Exceptions in the form attached to this Agreement as Exhibit H;

(b) a Bill of Sale (“Bill of Sale”) transferring to Purchaser all of Seller’s
right, title and interest in and to each and every item of Personal Property to
be transferred in the form attached to this Agreement as Exhibit I;

(c) an assignment and assumption agreement (“Assignment and Assumption
Agreement”), to the extent assignable, of all of Seller’s right, title and
interest in, to and under the Bookings, Hotel Contracts, Space Leases, Permits,
Books and Records, Warranties and Miscellaneous Hotel Assets in the form of
Exhibit J;

(d) the certificate referred to in Section 9.01(c);

(e) an affidavit of Seller stating that Seller is not a “foreign person” within
the meaning of Section 1445 of the Internal Revenue Code of 1986, as amended, in
the form of Exhibit K and any corresponding state or local form required,
including, but not limited to, a California 593-C Withholding Certificate;

(f) the Closing Statement;

(g) a preliminary change of ownership report and any reasonably required real
estate transfer tax declarations or similar documentation required to evidence
the payment of any tax imposed by any state, county or municipality together
with any change of ownership statements required of sellers of real property
under applicable law;

(h) a certificate or registration of title for any owned motor vehicle or other
Personal Property which requires such certification or registration, conveying
such vehicle or such other Personal Property to Purchaser;

(i) to the extent not previously delivered to Purchaser, all originals (or
copies if originals are not available) of the Hotel Contracts, Space Leases, and
Permits and all key codes, access codes and combinations to locks to the extent
known by, or in the possession of, Seller or Manager;

(j) such agreements, affidavits, evidence of Seller’s organization,
authorization, power and authority, and other documents as may be reasonably
required by the Title Company from the Seller to issue the Title Policy,
including, without limitation, a title

 

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insurance affidavit in customary form and substance reasonably acceptable to
Seller and Title Company to allow the Title Company to delete the standard
printed title exceptions;

(k) evidence of the termination of the Management Agreement; and

(l) such other documents and instruments as may be reasonably requested by
Purchaser in order to consummate or better effectuate the transaction expressly
contemplated in this Agreement

6.04 Purchaser’s Deliveries. Prior to Closing, Purchaser shall execute (to the
extent required) and deliver, or cause to be delivered, to Seller or the Escrow
Company as appropriate:

(a) the balance of the Purchase Price, to be paid in accordance with
Section 3.01;

(b) the Bill of Sale;

(c) the Assignment and Assumption Agreement;

(d) the certificate referred to in Section 8.01(c);

(e) the Closing Statement;

(f) copies of such documents relating to Purchaser as Seller or the Title
Company shall reasonably require in connection with this transaction;

(g) any required real estate transfer tax declarations or similar documentation
required to evidence the payment of any tax imposed by any state, county or
municipality together with any change of ownership statements required of a
purchaser of real property under applicable law and a sales tax license or
permit for the Hotel from each of the applicable jurisdictions and exemption or
resale certificate; and

(h) Such other documents and instruments as may be reasonably requested by
Seller in order to consummate or better effectuate the transaction expressly
contemplated in this Agreement.

6.05 Expenses.

(a) Seller and Purchaser shall each pay the transactions costs and expenses as
set forth on Exhibit M attached hereto.

(b) Any other ordinary and usual closing costs and expenses, except as expressly
provided in this Agreement, in connection with the sale of the Property shall be
allocated between Purchaser and Seller in accordance with the customary practice
in the county where the Property is located.

The provisions of this Section 6.05 shall survive Closing or any termination of
this Agreement.

 

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6.06 Concurrent Transactions. All documents or other deliveries required to be
made by Purchaser or Seller at Closing, and all transactions required to be
consummated concurrently with Closing, shall be deemed to have been delivered
and to have been consummated simultaneously with all other transactions and all
other deliveries, and no delivery shall be deemed to have been made, and no
transaction shall be deemed to have been consummated, until all deliveries
required by Purchaser and Seller shall have been made, and all concurrent or
other transactions shall have been consummated.

6.07 Possession. Possession of the Property shall be delivered at Closing,
provided the transaction closes. Excluded Assets shall be removed from the Hotel
by Seller, at its sole cost and expense, on, or within thirty (30) days after,
the Closing Date; provided that such removal shall be conducted during normal
business hours and not unreasonably interfere with the guests of the Hotel or
ongoing operations occurring at the Property. Seller, at its sole cost and
expense, shall make all repairs necessitated by such removal to the reasonable
satisfaction of Purchaser but shall have no obligation to replace any Excluded
Asset so removed.

ARTICLE VII

ADJUSTMENTS AND PRORATIONS CLOSING STATEMENTS

7.01 Adjustments and Prorations. THE FOLLOWING MATTERS AND ITEMS SHALL BE
APPORTIONED BETWEEN THE PARTIES OR, WHERE APPROPRIATE, CREDITED IN TOTAL TO A
PARTICULAR PARTY, AS OF THE CUT OFF TIME AS PROVIDED BELOW:

(a) Accounts Receivable; Trade Accounts Payable. Accounts Receivable and trade
accounts payable shall be identified as of the Cut Off Time. Purchaser shall
purchase the Accounts Receivable at par, subject to a reasonable bad debt
reserve to be agreed upon by the Parties prior to the end of the Inspection
Period and Seller shall receive a credit at the Closing for the aggregate amount
of all such Accounts Receivable as of the Cut Off Time. Seller shall pay all
trade accounts payable as of the Cut Off Time that relate to matters arising or
accruing prior to the Closing Date (including, without limitation, for any work
performed or materials delivered prior to Closing in connection with any capital
expenditures at the Property, but subject to Section 14.01(h)) in the ordinary
course when due and Purchaser shall be responsible for all such trade accounts
payable from and after the Closing. Revenue from room rentals (including food
and beverage receivables charged to guest room accounts) shall belong to Seller
to the extent attributable to any period prior to the Closing Date; provided,
however, room charges (less third party collection costs, including, but not
limited to, credit card fees, travel agent fees or commissions and other similar
charges) for the night immediately preceding the Closing Date shall be divided
equally between Purchaser and Seller. Revenue from the Hotel attributable to
food and beverages (including alcoholic beverages) and other sales or services
through the close of business for such food and beverage outlets or such other
sales or service centers on the night (whether prior to or after the Cut Off
Time) immediately preceding the Closing Date shall belong to Seller (such
revenue to be determined based on completion of the night auditor’s run on the
Closing Date). Thereafter, revenue from the Hotel attributable to food and
beverage and other sales or services shall belong to Purchaser. Each of
Purchaser and Seller shall be responsible for

 

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the payment of any sales and/or hotel/motel occupancy taxes collected or
otherwise due and payable in connection with the revenue allocated to such party
under this Section 7.01(a).

(b) Taxes and Assessments. Real estate (ad valorem) and personal property taxes
and assessments with respect to the Property shall be adjusted and prorated
based on (a) the periods of ownership of Seller and Purchaser with respect to
the applicable tax period, and (b) the most current official real property tax
information available from the assessor’s office where the Property is located
or other assessing authorities. If real property tax and assessment figures for
the taxes or assessments to be apportioned between Purchaser and Seller pursuant
to this Section 7.01(b) are not available, real property taxes shall be prorated
based on the most recent assessment, subject to further and final adjustment
when the tax rate and/or assessed valuation for such taxes and assessments for
the Property is fixed. In the event that the Property or any part thereof shall
be or shall have been affected by an assessment or assessments, whether or not
the same become payable in annual installments, Seller shall, at the Closing, be
responsible for any such assessment (or any installments or portions thereof)
due prior to the Closing and Purchaser shall be responsible for any such
assessment (or any installments or portions thereof) due on or after the
Closing.

(c) Utility Contracts. All utility services (including, without limitation,
electricity, gas, water, sewer and telecommunication) shall be prorated as of
the Cut-Off Time between Purchaser and Seller. To the extent practicable,
readings shall be obtained for all utilities as of the Cut-Off Time. If not
practicable, the cost of such utilities shall be prorated between Seller and
Purchaser by estimating such cost on the basis of the most recent bill for such
service; provided, however, that after the Closing, Seller and Purchaser shall
reprorate the amount for such utilities and pay any deficiency in the original
proration to the other Party promptly upon receipt of the actual bill for the
relevant billing period. Seller shall receive a credit for all fuel stored at
the Hotel based on Seller’s actual cost for such fuel. Seller shall receive a
credit for all deposits transferred to Purchaser or which remain on deposit for
the benefit of Purchaser with respect to such utility contracts.

(d) Hotel Contracts. Any amounts prepaid or payable under any Hotel Contracts
shall be prorated as of the Cut Off Time, with Seller receiving a credit for
each deposit, if any, made by Seller as security under any such Hotel Contract
if the same is transferable or the appropriate consent has been obtained and
provided such deposit remains on deposit for the benefit of Purchaser. If any
such deposit cannot be transferred to Purchaser, Seller shall be paid any such
deposit and Purchaser shall make such deposit as may be required.

(e) License Fees. Fees paid or payable for Permits shall be prorated as of the
Cut Off Time. Seller shall receive a credit for all deposits made by Seller
under the Permits which are transferred to Purchaser or which remain on deposit
for the benefit of Purchaser.

(f) Hotel Matters. Purchaser shall receive a credit for: (i) advance payments,
if any, under Bookings for Hotel facilities that remain in effect as of Closing;
(ii) a prorata share, based on the period each party owned or will own the
Hotel, of any upfront fees or payments made to Seller or the Hotel pursuant to
an agreement for audio-visual services at the Hotel, based on the remaining term
of any such agreement and (iii) commissions due to credit and referral
organizations for any Bookings related to the period prior to Closing. Seller
shall receive a

 

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credit for (x) coin machine, telephone, washroom and checkroom income relating
to the period prior to the Cut-Off Time and (y) commissions paid by Seller to
any travel agent or other referral organization prior to Closing with respect to
any Bookings related to the period after Closing. Purchaser shall assume all
ordinary course purchase orders for Consumables and Inventory to be delivered
after Closing and credit Seller for any prepayments thereunder.

(g) Accrued Vacation. Accrued Vacation. Purchaser shall receive a credit in an
amount equal to one hundred percent (100%) of the Accrued Vacation Pay as of the
Cut-Off Time of all Employees. Purchaser shall (1) honor and credit each
Employee’s unused accrued or earned vacation, sick-time-off or other paid time
off of any Employee and (2) be responsible for the payment of such Accrued
Vacation Pay to the Employees when payable in accordance with applicable laws.
At Closing, Seller shall cause Manager shall pay to the Employees an amount
equal to the unpaid Accrued Vacation Pay for each applicable Employee, provided,
however, that if any of the Employees that are hired by Purchaser or its
designee or management company elect in writing certified to Seller to waive the
payment of their Accrued Vacation Pay Purchaser shall (1) honor and credit any
such Employee the unused accrued or earned vacation, sick-time-off or other paid
time off of any such Employee, (2) be responsible for the payment of such
Accrued Vacation Pay to such Employees when payable in accordance with
applicable laws and (3) receive a credit in the amount of such Accrued Vacation
Pay allocable to all such Employees.

(h) Compensation. All Compensation due and payable to Employees shall be
prorated as of the Cut-Off Time, other than severance pay and Accrued Vacation
Pay (which is addressed in Section 10.1(g) above).

(i) Unopened Consumables and Inventory. Seller shall receive a credit in an
amount equal to Seller’s actual cost of any Unopened Consumables and of any
Inventory as of the Cut-Off Time.

(j) Rents. All fixed and additional rentals under the Space Leases and other
tenant charges, in each case as and when actually received, shall be prorated as
of the Cut-Off Time. Seller shall deliver or provide a credit in an amount equal
to all prepaid rents for periods after the Closing Date. Rents which are
delinquent as of the Closing Date shall not be prorated on the Closing Date. To
the extent Purchaser receives rents (including operating expense, tax and
insurance charges payable by tenants) on or after the Closing Date, such
payments shall be applied first toward the payment in full of all delinquent
rents and other delinquent amounts due to Seller for periods prior to the
Closing (and Purchaser shall promptly deliver such amounts to Seller), then
allocated for the month of Closing (with Seller’s share thereof being promptly
delivered to Seller by Purchaser) and the balance to Purchaser with respect to
periods following Closing. Purchaser shall use commercially reasonable efforts
to collect any such delinquent rents. Any percentage rents under Space Leases
shall be prorated on the basis of the ratio of the number of days expired before
Closing to the number of days after Closing. In the event that the proration of
operating expenses, taxes, insurance charges and/or percentage rent cannot be
fully prorated because of the unavailability of information then such proration
will be tentatively prorated on the best available information and Seller and
Purchaser will make the appropriate final adjustments within ninety (90) days
following the end of the calendar year in which the Closing occurs. All such
adjustments will be paid in cash to the party entitled thereto. All

 

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security deposits shall be transferred to Purchaser and all obligations with
respect to such security deposits shall be assumed by Purchaser. This
Section 7.01(j) shall survive the Closing and shall not be deemed merged into
the Deed or any conveyance document delivered at Closing.

(k) Other Adjustments and Prorations. To the extent not inconsistent with any of
the foregoing, all other items of income and expense as are customarily adjusted
or prorated upon the sale and purchase of a hotel property similar to the Hotel
shall be adjusted and prorated between Seller and Purchaser accordingly.

(l) Re-Adjustment. Representatives of Seller and Purchaser shall make such
inventories, examinations and audits of Seller, and of the books and records of
Seller, as may be necessary to make the adjustments and prorations required
under this Agreement. Prior to the Closing, representatives of Purchaser and
Seller and Escrow Company shall jointly prepare a statement (the “Preliminary
Closing Statement”) based upon such preliminary inventories, audits and
examinations which will show the net amount due to Seller or Purchaser as the
result thereof and such net amount will be added to, or deducted from, the
Purchase Price. If Seller and Purchaser cannot agree upon the Closing Statement,
then Seller’s good faith estimate shall prevail for purposes of Closing and
pending the re-adjustment contemplated by this Section 7.01(l). Within ninety
(90) days following the Closing, representatives of Purchaser and Seller shall
prepare a revised statement (the “Final Closing Statement”, and together with
the Preliminary Closing Statement, collectively, the “Closing Statements”)
setting forth the final determination of all items to be included in the Closing
Statements, and any necessary payment shall be made to the other in cash within
five (5) days after completion of such Final Closing Statement. Any item that
cannot be finally prorated because of the unavailability of information shall be
tentatively prorated on the basis of the best data then available and
re-prorated when the information is available. The provisions of this
Section 7.01 shall survive the Closing and shall not be deemed merged into the
Deed or any other conveyance document delivered at the Closing.

7.02 Payment. Any net credit due to Seller as a result of the adjustments and
prorations under Section 7.01 shall be paid to Seller in cash at the time of the
Closing (except as contemplated by Subsections 7.01(b), (j) and/or (l)). Any net
credit due to Purchaser as a result of the adjustments and prorations under
Section 7.01 shall be credited against the Purchase Price at the time of the
Closing (except as contemplated by Subsections 7.01(b), (j) and/or (l)).

7.03 Cash and Accounts. At the Closing, Seller shall transfer to Purchaser all
Cash On Hand and Seller shall receive a credit at the Closing for such Cash On
Hand. All Account Cash is and shall remain the property of Seller and shall be
retained by Seller after the Closing.

ARTICLE VIII

CONDITIONS TO SELLER’S OBLIGATIONS

8.01 Conditions. Seller’s obligation to close the transaction contemplated by
this Agreement shall be subject to the occurrence of each of the following
conditions, any one or more of which may be waived by Seller in writing:

 

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(a) Purchaser’s Compliance with Obligations. Purchaser shall have complied with
all material obligations required by this Agreement to be complied with by
Purchaser.

(b) Documents. Purchaser shall have executed and delivered or caused to be
delivered at the Closing all documents and executed counterparts of documents
and instruments required by this Agreement to be executed and delivered by
Purchaser.

(c) Truth of Purchaser’s Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement were true in all material
respects when made, and are true in all material respects as if remade as of the
Closing Date, and Seller shall have received a certificate to that effect signed
by Purchaser. In the event any of Purchaser’s representations become untrue
during the term of the Agreement, Seller may terminate this Agreement without
thereby waiving any right or remedy.

(d) Franchise Agreement. Except for any franchise or other fees and amounts owed
by Seller or Manager to Licensor and accrued during the period prior to Closing,
Seller, Manager and their respective Affiliates shall be released from all
obligations and Liabilities under the Franchise Agreement and any other related
agreements between Seller or Manager and Franchisor relating to the Property and
accruing from and after Closing including, without limitation, any obligation to
pay any termination fees, transfer fees, liquidated damages or any similar
amount pursuant to the Franchise Agreement.

ARTICLE IX

CONDITIONS TO PURCHASER’S OBLIGATIONS

9.01 Conditions. Purchaser’s obligation to close the transaction contemplated by
this Agreement shall be subject to the occurrence of each of the following
conditions, any one or more of which may be waived by Purchaser in writing:

(a) Seller’s Compliance with Obligations. Seller shall have complied with all
material obligations required by this Agreement to be complied with by Seller.

(b) Documents. Seller shall have executed and delivered or caused to be
delivered at the Closing all documents and executed counterparts of documents
and instruments required by this Agreement to be executed and delivered by
Seller and shall have taken all other actions and fulfilled all other covenants
required of Seller under this Agreement.

(c) Truth of Seller’s Representations and Warranties. The representations and
warranties of Seller contained in this Agreement were true in all material
respects when made, and are true in all material respects on the Closing Date as
if remade on the Closing Date, and Purchaser shall have received a certificate
to that effect signed by Seller, provided that Seller’s representations and
warranties shall not be deemed inaccurate or breached due to transactions or
actions expressly permitted by this Agreement. In the event that one of Seller’s
representations and warranties shall be deemed inaccurate or breached due to
changes in fact

 

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after the date of this Agreement beyond Seller’s control that do not constitute
or result from a default by Seller of the covenants applicable to it under this
Agreement, including, without limitation, a default by any party other than
Seller or any of its Affiliates to any agreement relating to the Property,
changes in Bookings or the Employees, Seller shall have the right to cure such
breach or inaccuracy to Purchaser’s reasonable satisfaction and, if necessary to
allow such cure, the Closing Date shall be extended for up to sixty (60) days to
allow such cure as long as Seller agrees to use reasonable efforts to effect
such cure; provided that if Seller elects in writing not to cure or fails to
give Purchaser notice of its intent to cure, Purchaser may terminate this
Agreement. If, prior to the Closing, Purchaser obtains knowledge that any
representation or warranty of Seller is untrue or that Seller has not complied
with any of its covenants under this Agreement and Purchaser nonetheless
proceeds with the Closing, Seller shall have no liability for any such matter
regarding which Purchaser had knowledge prior to Closing.

(d) Management Agreement. The Management Agreement shall be terminated as of the
Closing Date at the sole cost and expense of Seller. In connection with
termination of the Management Agreement, subject to the provisions set forth in
Article XII, the Manager will terminate the employment of the Employees
effective upon the Closing unless Manager and Purchaser enter into a new
management agreement as of the Closing Date, in which event the employment of
the Employees shall not be terminated.

(e) Franchise Agreement. On or before the Closing Date, Franchisor shall have
either entered into (i) an assignment and assumption agreement with respect to
Franchise Agreement allowing Purchaser or its designee to assume the Franchise
Agreement on the same terms and conditions as Franchisor’s current UFOC (except
with respect to Material Franchise Terms) or (ii) a new hotel franchise
agreement with Franchisor for the on the same terms and conditions as
Franchisor’s current UFOC (except with respect to Material Franchise Terms).
Purchaser and Seller shall each cooperate with the other and each use its
reasonable best efforts to effectuate the Franchisor’s consent to the assignment
of the Franchise Agreement to Purchaser or its designee at Closing and in
connection with the foregoing, the Parties shall endeavor to cause Franchisor to
execute any consent or other agreement required in connection with the
assignment of the Franchise Agreement prior to the end of the Inspection Period,
with such executed consent and/or agreement to be held by the Escrow Agent, in
escrow, pending the consummation of the Closing.

ARTICLE X

ACTIONS AND OPERATIONS PENDING CLOSING

10.01 Actions and Operations Pending Closing. Seller agrees that at all times
prior to the Closing Date:

(a) Subject to conditions beyond Seller’s reasonable control, the Hotel will
continue to be operated and maintained in the ordinary course of business
substantially consistent with Present Standards.

 

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(b) After the end of the Inspection Period, Seller shall not enter into any new
Hotel Contract or Space Lease, or cancel, modify or renew any existing Hotel
Contract or Space Lease that is not cancelable upon thirty (30) days notice and
without payment of any penalty or termination fee, without the prior written
consent of Purchaser, which consent shall not be unreasonably withheld,
conditioned or delayed. If Purchaser fails to respond to a request for consent
within five (5) Business Days after receipt of such request, such consent shall
be deemed given.

(c) Seller shall have the right, without notice to or consent of Purchaser, to
make Bookings in the ordinary course of business, at no less than the Hotel’s
standard rates, including customary discounted rates.

(d) Seller shall use commercially reasonable efforts to preserve in force all
existing Permits and to cause all those expiring on or before the Closing Date
to be renewed prior to the Closing Date. If any such Permit shall be suspended
or revoked, Seller shall promptly notify Purchaser and shall take commercially
reasonable measures to cause the reinstatement of such Permit. Seller shall use
commercially reasonable efforts (at no cost or expense to Seller, other than any
de minimis cost or expense or any cost or expense which Purchaser agrees in
writing to reimburse) to cooperate with Purchaser to cause the Permits to be
transferred at Closing or new permits to be issued to Purchaser at Closing.

(e) Seller will maintain in effect all policies of casualty and liability
insurance, or similar policies of insurance, with the same limits of coverage
which it now carries with respect to the Hotel.

(f) Seller shall not remove any Fixtures and Tangible Personal Property or
Operating Equipment located, installed or used in the Hotel as of the date
hereof (except Excluded Assets, if applicable) other than in the ordinary course
of business.

(g) Seller shall provide copies of any written notices received by Seller from
any governmental or quasi governmental organizations regarding any violations of
Legal Requirements.

(h) Subject to Article IV and prior to the Closing, neither Purchaser nor any of
Purchaser’s representatives shall communicate concerning the Property with
Manager, any tenant, employee, guest or occupant of the Real Property or any
party to any Hotel Contract without the prior written approval of Seller, which
approval shall not be unreasonably withheld, conditioned or delayed.

ARTICLE XI

CASUALTIES AND TAKINGS

11.01 Casualties.

(a) If any damage to the Real Property shall occur prior to the Closing Date by
reason of fire, windstorm, earthquake, hail, explosion, hurricane or other
casualty, and if the cost of repairing such damage will equal or exceed Five
Million and 00/100 Dollars

 

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($5,000,000.00), Seller shall promptly notify Purchaser and Purchaser may then
elect to (i) terminate this Agreement by giving written notice to Seller in
which event the Deposit shall be returned to Purchaser (less the amount of any
damages payable to Seller pursuant to the indemnification set forth in
Section 4.06) and neither party shall have any further obligations or liability
whatsoever to the other hereunder except for such provisions of this Agreement
that expressly survive termination, or (ii) receive an assignment of all of
Seller’s rights to any insurance proceeds (excluding business interruption
proceeds for the period prior to Closing) relating to such damage and acquire
the Property with appropriate adjustments to the Purchase Price equal to the
deductible under the applicable insurance policy (to the extent such deductible
is not applied by Seller for repairs prior to Closing) and the reasonable costs
and expenses incurred by Seller to negotiate or settle any casualty claim with
an insurer and to stabilize the Property following such casualty.

(b) If the cost of repairing such damage is less than Five Million and 00/100
Dollars ($5,000,000.00), the transactions contemplated hereby shall close with
appropriate adjustments to the Purchase Price equal to the deductible under the
applicable insurance policy (to the extent such deductible is not applied by
Seller for repairs prior to the Closing) and the costs and expenses incurred by
Seller to negotiate or settle any casualty claim with an insurer and to
stabilize the Property following such casualty and Purchaser shall receive an
assignment of all of Seller’s rights to any insurance proceeds (excluding
business interruption proceeds for the period prior to Closing).

11.02 Takings. If, prior to the Closing Date, all or any portion of the Real
Property is taken by eminent domain or by an act of governmental authority, or
if an action for such taking is initiated or threatened, Seller shall promptly
give Purchaser written notice thereof, and the following shall apply:

(a) If a Material Part of the Real Property is taken, or is to be taken,
Purchaser may, within five (5) days after the delivery of Seller’s notice, by
written notice to Seller, elect to terminate this Agreement. In the event that
Purchaser shall so elect, this Agreement shall terminate and the Deposit shall
be returned to Purchaser (less the amount of any damages payable to Seller
pursuant to the indemnification set forth in Section 4.06) and neither party
hereto shall have any further obligations or liability whatsoever to the other
hereunder, except for such provisions of this Agreement that expressly survive
termination.

(b) If a Material Part of the Real Property is taken, or is to be taken, but
Purchaser does not elect to terminate this Agreement pursuant to paragraph
(a) above, or if an immaterial part of the Real Property is taken by an act of
governmental authority, Purchaser shall have no right to terminate this
Agreement, and the parties shall nonetheless proceed to the Closing in
accordance with this Agreement, without any abatement of the Purchase Price or
any liability or obligations on the part of Seller by reason of such taking;
provided, however, that Seller shall, at the Closing, (i) assign and turn over,
and Purchaser shall be entitled to receive and keep, the net proceeds of any
award or other proceeds of such taking which may have been collected by Seller
as a result of such taking, less any portion thereof applied to the cost of
repairs made by Seller prior to the Closing and less the reasonable costs and
expenses incurred by Seller in connection with obtaining payment of any award or
other proceeds, or (ii) if no award or other proceeds shall have been collected,
deliver to Purchaser an assignment of Seller’s

 

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right to any such award or other proceeds which may be payable to Seller as a
result of such taking, less an amount equal to the cost of any repairs made by
Seller prior to the Closing, which amount shall be paid to Seller by Purchaser
at the Closing. If all or any part of the payment proceeds are paid to the
holder of any mortgage or deed of trust or reversionary interest in the Real
Property, then, at the Closing, Seller shall credit such amount against the
Purchase Price.

(c) For the purposes hereof, a “Material Part” shall be deemed to mean any
taking (i) which causes a reduction in the size of any of the buildings
comprising the Real Property or materially interferes with the present use and
operation of any of the buildings comprising the Real Property, or (ii) which
results in the elimination of any required means of legal ingress and/or egress
from the Real Property to public roads, with no comparable, convenient, legal
substitute ingress and/or egress being available.

ARTICLE XII

EMPLOYEES

12.01 Employees.

(a) Unless Purchaser elects to retain Manager as the manager of the Hotel
(pursuant to a separate hotel management agreement executed by Purchaser and
Manager), Purchaser agrees that it shall offer to hire or cause to be offered to
be hired effective at and upon the Closing, and after the Closing shall maintain
or cause to be maintained the employment of, in each case upon terms and
conditions of employment substantially and sufficiently similar to the terms and
conditions of employment existing prior to Closing, a sufficient number of
Employees so that the Seller, its Affiliates or Manager shall not be required to
give any layoff, closing or other termination notices or otherwise incur any
liability pursuant to the provisions of the Federal Worker Adjustment and
Retraining Notification Act, 29 U.S.C. 2101 2109, or any similar applicable
state or local law (collectively, the “WARN Act”). Except to the extent
Purchaser elects to retain Manager as the manager of the Hotel pursuant to a
separate hotel management agreement executed by Purchaser and Manager, Seller
shall cause its Manager to cooperate reasonably with Purchaser or its designated
Hotel manager to facilitate Purchaser’s compliance with this Section 12.01. If
Purchaser, or any designee or management company engaged by Purchaser to employ
Hotel personnel, elects not to hire a particular Employee at Closing, or, if
following the Closing, Purchaser or such designee or management company desires
to terminate the employment of any Employee hired by Purchaser or its designee
or management company, Purchaser shall be solely responsible for complying or
causing compliance with all applicable provisions of federal, state and
municipal laws and regulations relating to such action, including without
limitation any applicable provisions of the WARN Act. It is agreed that the
number of Employees hired, the selection of which Employees are hired, and the
initial terms and conditions of employment for each Employee hired by Purchaser,
or its designee or management company engaged by Purchaser to employ Hotel
personnel, shall be solely determined by Purchaser or such designee or
management company, provided such terms and conditions of employment satisfy the
provisions of this Section 12.01(a).

(b) The Parties hereto agree that Purchaser will not be subject to any of the
debts, obligations and/or Liabilities of Seller, its Affiliates or Manager which
may exist with

 

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respect to the employment or termination of any Employees that arise prior to
the Closing, or which are attributable to the termination of such Employees by
Seller, its Affiliates or Manager at or prior to Closing, except to the extent
that such debts, obligations and/or Liabilities are expressly covered by a
credit against the Purchase Price specifically provided in this Agreement. In
the event any labor organization becomes the exclusive representative of any
group of Employees for purposes of collective bargaining in accordance with
federal labor law prior to the Closing, Purchaser agrees to enter into, or cause
its designee or management company to enter into, good faith negotiations with
such labor unions in accordance with the National Labor Relations Act. The
Parties hereto agree that Seller, its Affiliates and Manager shall not be
subject to any of the debts, obligations and/or Liabilities of Purchaser, or
Purchaser’s designee or management company, which are attributable to any
actions or omissions of Purchaser or such designee or management company, or any
agents or representatives thereof, in the process of the hiring any of the
Employees, including, without limitation, any claims arising out of or relating
to whether, and upon which terms and conditions, any such Employees are offered
employment by Purchaser or such designee or management company, or are hired (or
subsequently terminated) by Purchaser or such designee or management company, or
which may otherwise exist regarding the employment of employees at the Hotel by
Purchaser or such designee or management company from and after the Closing
(“Purchaser’s Employee Obligations”).

(c) Purchaser shall save, protect, defend, indemnify and hold Seller, Manager
and each of their Affiliates harmless from and against any Liabilities
(including, but not limited to, payments made to Manager as the employer of the
Employees) which may be incurred or suffered by any of them (i) under the WARN
Act arising out of, or relating to, any actions taken by Purchaser prior to, on
or after the Closing Date; (ii) in connection with any of Purchaser’s Employee
Obligations; (iii) by reason of Purchaser’s failure to comply with any of the
provisions of this Article XII; (iv) in connection with any employment taxes or
Accrued Vacation Pay that, pursuant to Sections 7.01(g) or (h), have become the
obligation of Purchaser to pay; (v) in connection with any Liability arising out
of Purchaser’s or its designee’s or management company’s employment policies,
practices or procedures on or after the Closing Date; or (vi) in connection with
Purchaser’s violation or noncompliance with any applicable federal or state
employment law, including, without limitation, COBRA, the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), ERISA, the Family and
Medical Leave Act of 1993 (FMLA), the Fair Labor Standards Act (FLSA) and the
Occupational Safety and Health Act (OSHA) on or after the Closing Date.

(d) The terms, conditions and indemnity obligations set forth in this
Section 12.01 shall survive the Closing.

ARTICLE XIII

NOTICES

13.01 Notices. Except as otherwise provided in this Agreement, all notices,
demands, requests, consents, approvals, and other communications (each a
“Notice”, collectively “Notices”) required or permitted to be given under this
Agreement, or which are to be given with respect to this Agreement, shall be in
writing and shall be personally delivered, transmitted by facsimile transmission
(as long as a copy is also sent on the same business day by overnight

 

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express courier as set forth below), or sent by registered or certified mail,
postage prepaid, return receipt requested, or by overnight express courier,
postage prepaid, addressed to the party as designated below:

If intended for Seller, to:

HEI San Francisco LLC

c/o HEI Hospitality, LLC

101 Merritt 7 Corporate Park, 1st Floor

Norwalk, Connecticut 06851

Attention: Anthony R. Rutledge

Fax: (203) 849-5918

with a copy to:

Goodwin Procter LLP

Exchange Place

Boston, MA 02109

Attention: Christopher B. Barker

Facsimile No.: (617) 227-8591

If intended for Purchaser, to:

c/o Chesapeake Lodging Trust

1997 Annapolis Exchange Parkway, Suite 410

Annapolis, MD 21401_

Attention: SVP and Chief Accounting Officer

Facsimile No.: (410) 972-4180

with a copy to:

c/o Chesapeake Lodging Trust

1997 Annapolis Exchange Parkway, Suite 410

Annapolis, MD 21401

Attention: SVP and Chief Investment Officer

Facsimile No.: (410) 972-4180

Notice mailed by registered or certified mail shall be deemed received by the
addressee three (3) days after mailing thereof. Notice personally delivered
shall be deemed received when delivered. Notice mailed by overnight express
courier shall be deemed received by the addressee on the next Business Day after
mailing thereof. Notice transmitted by facsimile shall be deemed received by the
addressee upon receipt (as long as a copy is also sent on the same business day
by overnight express courier as set forth below), and if not, then the next
Business Day. Either party may at any time change the address for notice to such
party by mailing a Notice as aforesaid.

 

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ARTICLE XIV

ADDITIONAL COVENANTS

14.01 Additional Covenants. In addition, the parties agree as follows:

(a) Liquor License. Purchaser shall use diligent, good faith efforts to effect
the transfer of any existing Liquor License held by Seller, Manager or their
applicable Affiliate to Purchaser or its designee or management company as of
the Closing Date or to permit Purchaser or its designee or management company to
obtain a new Liquor License for the Hotel. Purchaser agrees to pay all fees,
charges and related costs in connection with the transfer of the existing Liquor
License or to obtain a new Liquor License. Promptly following the full execution
and delivery of this Agreement, Purchaser shall, or shall cause its designee to,
complete, execute and file with the applicable liquor licensing authority all
necessary applications for transfer of the Liquor License or to obtain a new
Liquor License. In connection with Purchaser’s actions described in the
foregoing sentence, at the request of Purchaser, (i) Seller shall, or shall
cause the current holder of the Liquor License to, execute and deliver a liquor
escrow agreement in a form and on such terms as are reasonable and customary for
the transfer of a liquor license and liquor assets in the State of California
and (ii) the parties shall allocate a portion of the Purchase Price to the
Liquor License in accordance with the terms of Section 3.1, (provided, however,
the parties acknowledge that no portion of the cost of the liquor inventory
shall be allocated to the Purchase Price and such costs shall be paid to Seller
(or the current holder of the Liquor License) pursuant to the terms of
Section 7.01(i)). Purchaser specifically acknowledges and agrees that the
transfer of the Liquor License to Purchaser on the Closing Date (or the issuance
of a new Liquor License) shall not be a condition to Purchaser’s obligation to
close the transaction contemplated under this Agreement. If despite the exercise
of such efforts by Purchaser, Purchaser is unable to obtain a transfer of the
Liquor License or a new Liquor License on or before the Closing Date, then
Seller agrees that it shall cause Merritt Beverage, LLC, an Affiliate of Manager
and Seller that holds the Liquor License, to enter into a customary form interim
beverage services agreement or lease with Purchaser in form reasonably
satisfactory to Manager and Merritt Beverage, LLC, to the extent permitted by
applicable law, including without limitation, an indemnification from Purchaser
of Manager and Merritt Beverage, LLC with respect to any and all damages,
claims, losses, expenses, costs or other Liabilities arising during the term of
such services agreement for a period not to exceed one hundred eighty (180) days
following the Closing Date.

(b) Brokerage. Purchaser and Seller warrant and represent to each other that
they have not had any dealings with any broker, agent or finder relating to the
sale of the Property or the transactions contemplated hereby other than Eastdil
Secured, LLC (the “Broker”). Each Party agrees to indemnify and hold the other
Party and its Indemnitees harmless against and from any and all Liabilities
incurred arising out of or resulting from any claim for brokerage commissions,
compensation or fees by any broker, agent or finder acting on such Party’s
behalf other than the Broker, which Seller is compensating under a separate
agreement in connection with the sale of the Property. The provisions of this
Section 14.01(b) shall survive Closing or any termination of this Agreement.

 

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(c) Guest Baggage. All baggage of guests who are still in the Hotel on the
Closing Date, which has been checked with or left in the care of Seller or
Manager shall be inventoried, sealed and tagged jointly by Seller and Purchaser
on the Closing Date. Purchaser hereby agrees to save, protect, defend, indemnify
and hold Seller and its Indemnitees harmless against any Liabilities in
connection with such baggage arising out of the acts or omissions of Purchaser
or its Affiliates (or any of their employees or agents) after the Closing Date.

(d) Safe Deposits. Immediately after the Closing, Seller shall send written
notice to guests or tenants or other persons who have safe deposit boxes, if
any, advising of the sale of the Hotel to Purchaser and requesting immediate
removal of the contents thereof or the removal thereof and concurrent re deposit
of such contents pursuant to new safe deposit agreements with Purchaser. Seller
shall have a representative present when the boxes are opened, in the presence
of a representative of the Purchaser. Any property contained in the safe deposit
boxes after such re deposit shall be the responsibility of Purchaser, and
Purchaser agrees to save, protect, defend, indemnify and hold harmless Seller
and its Indemnitees from and against any Liabilities arising out of or with
respect to such property.

(e) Tax Appeal Proceedings. Seller shall be entitled to receive and retain the
proceeds from any tax appeals or protests for tax fiscal years prior to the tax
fiscal year in which the Closing Date occurs. In the event an application to
reduce real estate taxes is filed for the period during which Seller was the
owner of the Real Property, Seller shall be entitled to a re proration of real
estate taxes upon receipt of and based upon the reduction. Seller shall continue
to process any pending appeals or protests with respect to the tax fiscal year
in which the Closing Date occurs (and Purchaser shall reasonably cooperate in
connection therewith), and the net proceeds from any such proceedings, after
payment of reasonable attorneys’ fees and other costs associated with such
process, will be prorated between the parties, when received, as of the Closing
Date, which obligation shall survive the Closing.

(f) Books and Records. The transaction contemplated hereby includes the Books
and Records of Seller pertaining to the business of the Hotel. Purchaser
covenants and agrees that such Books and Records will remain in the Hotel for
examination and audit by Seller and its agents after the Closing as provided in
this Section 14.01(f). Books and Records not pertaining to the business of the
Hotel may be removed by Seller within a reasonable time after the Closing Date.
Purchaser agrees to preserve all Books and Records for at least five (5) years
after the Closing Date, and not to destroy or dispose of the same, for at least
five (5) years after the Closing Date. Purchaser agrees to provide access to
Seller and its representatives, to such books, records, files and correspondence
at all reasonable times during normal business hours and following reasonable
notice.

(g) Independent Audit. From and after the Effective Date until two (2) years
after the Closing, upon reasonable prior notice from Purchaser Seller shall make
the books and records from the operation of the Property for the years ended
December 31, 2010, 2009 and 2008 and interim periods as required by the rules
and regulations of the Securities and Exchange Commission (“SEC”) available to
Purchaser and Purchaser’s independent accountants for inspection, copying and
audit by Purchaser’s designated accountants at the expense of the Purchaser.
Upon request, Seller will provide the Purchaser’s independent accountants with a
management representation letter with respect to the audited historical
financial statements of the

 

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Property for the years ended December 31, 2010, 2009, and 2008 and any unaudited
interim period to the extent required by the rules and regulations of the SEC,
which management representation letter shall be in a form customary for such
letters and shall otherwise be in a form reasonably satisfactory to Seller. Upon
reasonable prior notice from Purchaser, Seller shall provide Purchaser, at
Purchaser’s sole expense, with copies of, or access to, such factual
information, accounting records and financial information as may be reasonably
requested by Purchaser or its auditors, and in the possession or control of
Seller, to enable Purchaser or its Affiliates to file reports or registration
statements in compliance with the rules and regulations of the SEC. This
Section 14.01(g) shall survive the Closing for two (2) years.

(h) Capital Expenditures. Exhibit N attached hereto sets forth the construction
and design related contracts (the “ADA Contracts”) entered into by Seller for
certain capital improvements at the Property (the “ADA Capital Improvements”) as
part of that certain Mutual Release and Settlement Agreement made by and between
Seller and Connie Arnold, an individual, dated on or about January 14, 2010 (the
“Settlement”). Purchaser hereby agrees and acknowledges that Seller previously
(i) delivered to Purchaser a copy of the Settlement and (ii) disclosed to
Purchaser the related ADA Capital Improvements. In connection with the ADA
Capital Improvements, Purchaser shall receive at Closing a credit against the
Purchase Price in an amount equal to the positive result, if any, of (x) One
Hundred Fifty Thousand Dollars ($150,000) less (y) any amounts paid by Seller
prior to Closing pursuant to the ADA Contracts for the ADA Capital Improvements.
At Closing, Purchaser shall assume all ADA Contracts and from and after Closing
shall be solely responsible for the payment of all costs and expenses of the ADA
Capital Improvements in accordance with the terms of the ADA Contracts and the
Settlement. Notwithstanding the foregoing, Seller shall indemnify, defend and
hold Purchaser harmless from any Liabilities incurred by Purchaser for any other
capital improvement projects or expenditures (whether construction-related or
supply-related contracts) accruing or arising prior to the Closing. The
foregoing indemnification shall not be subject to the Deductible.

(i) Survival. Subject to the terms of Section 5.03, the representations,
warranties, obligations, covenants, agreements, undertakings and
indemnifications of Seller and Purchaser contained in this Agreement and in any
closing documents delivered in connection with this Agreement, which are
intended and anticipated to survive Closing, shall survive the Closing.

ARTICLE XV

DEFAULTS AND REMEDIES; EFFECT OF TERMINATION

15.01 Purchaser Default/Seller’s Remedies. IF PURCHASER FAILS TO PERFORM ITS
OBLIGATIONS UNDER THIS AGREEMENT AND SELLER DOES NOT WAIVE SUCH FAILURE OF
PERFORMANCE IN WRITING AND CLOSING DOES NOT OCCUR AS A RESULT OF PURCHASER’S
DEFAULT, SELLER SHALL BE ENTITLED AS ITS SOLE REMEDY TO TERMINATE THIS AGREEMENT
AND RECOVER THE DEPOSIT UNDER THIS AGREEMENT AS LIQUIDATED DAMAGES AND NOT AS A
PENALTY, IN FULL SATISFACTION OF ANY CLAIMS AGAINST PURCHASER; PROVIDED,
HOWEVER, THAT THIS PROVISION SHALL NOT LIMIT SELLER’S RIGHTS TO

 

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RECEIVE REIMBURSEMENT FOR COSTS, FEES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS’ FEES AND COSTS) PURSUANT TO SECTION 15.03
BELOW IN ADDITION TO THE DEPOSIT IN THE EVENT OF A DISPUTE REGARDING THE
DISPOSITION OF THE DEPOSIT TO THE EXTENT SELLER PREVAILS IN SUCH DISPUTE, NOR
SHALL THIS PROVISION BE DEEMED TO WAIVE OR AFFECT SELLER’S RIGHTS AND
PURCHASER’S INDEMNITY OBLIGATIONS UNDER OTHER SECTIONS OF THIS AGREEMENT. SELLER
AND PURCHASER AGREE THAT SELLER’S DAMAGES RESULTING FROM SUCH A PURCHASER’S

 

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DEFAULT ARE DIFFICULT TO DETERMINE AND ASCERTAIN AND THE AMOUNT OF THE DEPOSIT
IS A FAIR ESTIMATE OF THOSE DAMAGES AND SUCH AMOUNT IS NOT INTENDED AS A
FORFEITURE OR PENALTY BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES. THE
PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR
PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT
IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA
CIVIL CODE SECTIONS 1671, 1676 AND 1677.

 

Seller’s Initials:

 

 

   

Purchaser’s Initials:

 

 

 

15.02 Seller Default/Purchaser’s Remedies. If Seller fails in any material
respect to perform its obligations under this Agreement, and Seller does not
cure such failure within ten (10) days after its receipt of written notice of
such failure from Purchaser (a “Seller Default”) then Purchaser may elect as its
sole and exclusive remedy (at law or in equity): (a) to terminate this Agreement
by giving Seller written notice of such election prior to Closing, in which case
the Deposit shall be returned to Purchaser; (b) to waive the Seller Default and
close; or (c) to seek specific performance of this Agreement against Seller.

15.03 Attorneys’ Fees. If any action or proceeding is commenced by either party
to enforce or interpret their rights under this Agreement or to collect damages
as a result of the breach 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,
court costs and fees of experts, in addition to any other relief awarded by the
court.

15.04 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.

ARTICLE XVI

IRS FORM 1099-S DESIGNATION

16.01 Designee. In order to comply with information reporting requirements of
Section 6045(e) of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations thereunder, the parties agree (i) to execute an IRS Form
1099-S Designation Agreement in the form attached hereto as Exhibit L at or
prior to the Closing to designate the Title Company (the “Designee”) as the
party who shall be responsible for reporting the contemplated sale of the
Property to the Internal Revenue Service (the “IRS”) on IRS Form 1099-S; (ii) to
provide the Designee with the information necessary to complete Form 1099-S;
(iii) that the Designee shall not be liable for the actions taken under this
Agreement, or for the consequences of those actions, except as they may be the
result of gross negligence or willful misconduct on the part of the Designee;
and (iv) that the Designee shall be indemnified by the parties for any costs or
expenses incurred as a result of the actions taken hereunder, except as they may
be the result of gross negligence or willful misconduct on the part of the
Designee. The Designee shall provide all

 

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parties to this transaction with copies of the IRS Form 1099-S filed with the
IRS and with any other documents used to complete IRS Form 1099-S.

ARTICLE XVII

MISCELLANEOUS PROVISIONS

17.01 Construction. The following rules shall apply to the construction and
interpretation of this Agreement:

(a) 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.

(b) All references in this Agreement to particular articles, sections,
subsections or clauses (whether in upper or lower case) are references to
articles, sections, subsections or clauses of this Agreement. All references in
this Agreement to particular exhibits or schedules (whether in upper or lower
case) are references to the exhibits and schedules attached to this Agreement,
unless otherwise expressly stated or clearly apparent from the context of such
reference.

(c) The headings contained herein are solely for convenience of reference and
shall not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.

(d) Each Party hereto and its counsel have reviewed and revised (or requested
revisions of) this Agreement and have participated in the preparation of this
Agreement, and therefore any usual rules of construction requiring that
ambiguities are to be resolved against any Party shall not be applicable in the
construction and interpretation of this Agreement or any exhibits hereto.

(e) The terms “hereby,” “hereof,” “hereto,” “herein,” “hereunder” and any
similar terms shall refer to this Agreement, and not solely to the provision in
which such term is used.

(f) The terms “include,” “including” and similar terms shall be construed as if
followed by the phrase “without limitation.”

(g) The term “sole discretion” with respect to any determination to be made a
Party under this Agreement shall mean the sole and absolute discretion of such
Party, without regard to any standard by which the determination of such Party
must be made.

17.02 Severability. If any term or provision of this Agreement is held to be or
rendered invalid or unenforceable at any time in any jurisdiction, such term or
provision shall not affect the validity or enforceability of any other terms or
provisions of this Agreement, or the validity or enforceability of such affected
terms or provisions at any other time or in any other jurisdiction.

 

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17.03 Publicity. All press releases and all other publicity concerning the
transactions contemplated by this Agreement shall be jointly planned and
coordinated by and between Purchaser and Seller. Neither party shall act
unilaterally in this regard without the prior written approval of the other;
provided, however, this approval shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, if Purchaser determines, after consultation with
counsel, that it is required by federal or state securities laws or regulations
to publicly disclose the existence or terms of this Agreement, before or after
Closing occurs, Purchaser shall allow Seller a reasonable period of time, not to
exceed three (3) Business Days, to review Purchaser’s proposed disclosure in
advance of Purchaser making such disclosure but, for the avoidance of doubt,
Purchaser shall be permitted to make such disclosure and shall not be required
to obtain the consent of Seller prior to making such disclosure.

17.04 Assignment. Neither all nor any portion of Purchaser’s interest under this
Agreement may be sold, assigned, encumbered, conveyed or otherwise transferred,
whether directly or indirectly, voluntarily or involuntarily, or by operation of
law or otherwise including, without limitation, by a transfer of interest in
Purchaser (collectively, a “Transfer”), without the prior written consent of
Seller, which consent may be granted or denied in Seller’s sole and absolute
discretion. Any attempted Transfer without Seller’s consent shall be null and
void. Any request by Purchaser for Seller’s consent to a Transfer shall set
forth in writing the details of the proposed Transfer, including, without
limitation, the name, ownership and financial condition of the prospective
transferee and the financial details of the proposed Transfer. Notwithstanding
the foregoing, Purchaser, upon prior written notice to Seller given not less
than five (5) Business Days prior to the Closing (which time period is agreed to
be material and is required to permit Seller properly to prepare, execute and
deliver the items required to be delivered by it pursuant to this Agreement),
which notice specifies the exact legal name, address and any other information
necessary for the preparation of the closing documents to be delivered under
this Agreement, may assign its rights and delegate is duties under this
Agreement to an entity that is owned or controlled, directly or indirectly, by
Purchaser for the purposes of closing on the transaction provided (i) only one
such assignment shall be made; (ii) such assignment shall not delay the Closing;
(iii) such assignment shall not require Seller to obtain any additional or
revised third party consents, certificates or approvals; provided, however,
Purchaser shall remain liable for Purchaser’s obligations hereunder until the
Closing has occurred notwithstanding such assignment. In the event Purchaser so
assigns and delegates its rights and duties under this Agreement, it shall
deliver to Seller at or prior to Closing an instrument of assignment and
assumption evidencing such assignment and delegation. In addition, Purchaser
shall provide Seller with copies of all Transfer documentation, certified by
Purchaser to be true, correct, and complete, and with all other information
which Seller may reasonably request. No Transfer, whether with or without
Seller’s consent: (i) shall operate to release Purchaser or alter Purchaser’s
primary liability to perform the obligations of Purchaser under this Agreement;
or (ii) shall cause Seller to incur any cost or other economic detriment in
connection with such Transfer. Purchaser shall pay any and all additional costs
and expenses (including, without limitation, reasonable attorneys’ fees,
charges, and disbursements) incurred by Seller that would not otherwise have
been incurred by Seller had Purchaser not caused a Transfer; provided, however
that Purchaser shall not be obligated to make such payment to the extent that
such Transfer was to an entity that is owned or controlled, directly or
indirectly, by Purchaser for the purposes of closing on the transaction.

 

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17.05 Business Days. Time is of the essence in the performance of the respective
obligations of Seller and Purchaser. If any deadline provided in this Agreement
falls on a day other than a Business Day, such deadline shall be extended until
the first Business Day thereafter.

17.06 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original but all of which, taken
together, shall constitute but one and the same instrument. This Agreement may
be executed by facsimile or other form of electronic communication.

17.07 Recitals, Exhibits and Schedules. The recitals to this Agreement, and all
exhibits and schedules (as amended and supplemented from time to time) referred
to in this Agreement are incorporated herein by such reference and made a part
of this Agreement. Any matter disclosed in any schedule to this Agreement shall
be deemed to be incorporated in all other schedules to this Agreement.

17.08 Entirety. This Agreement (including all exhibits) contains the entire
agreement between the parties with respect to the subject matter hereof,
supersedes all prior letters of intent, understandings or other agreements,
whether written or oral, if any, with respect thereto and may not be amended,
supplemented or terminated, nor shall any obligation hereunder or condition
hereof be deemed waived, except by a written instrument to such effect signed by
the party to be charged.

17.09 Amendments to Agreement. No amendment, supplement or other modification to
any terms of this Agreement (other than amendments, supplements and other
modifications to the representations and warranties and schedules made by Seller
that are expressly permitted or contemplated by this Agreement including,
without limitation, pursuant to Section 9.01(c)), or termination of this
Agreement (other than as expressly provided in this Agreement), shall be valid
unless in writing and executed and delivered by Seller and Purchaser.

17.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California.

17.11 Jurisdiction. Any action, suit or proceeding arising out of this Agreement
or the transactions contemplated by this Agreement shall be brought exclusively
in the United States District Court for the Northern District of California, and
Seller and Purchaser agree that such courts are the most convenient forum for
resolution of any such action and further agree to submit to the jurisdiction of
such courts and waive any right to object to venue in such courts.

17.12 Jury Trial Waiver. TO THE EXTENT PERMITTED BY APPLICABLE LAW FROM TIME TO
TIME, SELLER AND PURCHASER HEREBY WAIVE THEIR RIGHT TO A TRIAL BY JURY IN ANY
LITIGATION OR OTHER COURT PROCEEDING BY EITHER PARTY AGAINST THE OTHER PARTY
WITH RESPECT TO ANY MATTER ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT.

17.13 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns. The warranties, representations, agreements and undertakings contained
herein shall not be deemed

 

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to have been made for the benefit of any person or entity, other than the
parties hereto and their permitted successors and assigns.

ARTICLE XVIII

GENERAL ESCROW PROVISIONS

18.01 General Escrow Provisions. The obligations and rights of the Escrow
Company under this Agreement shall be subject to the following terms and
conditions:

(a) The duties and obligations of Escrow Company shall be determined solely by
the express provisions of this Agreement and no implied duties or obligations
shall be implied against Escrow Company. Further, Escrow Company shall be under
no obligation to refer to any other document between or among Purchaser and
Seller referred to in or related to this Agreement, unless Escrow Company is
provided with a copy of such document and consents thereto in writing.

(b) Escrow Company shall not be liable to anyone by reason of any error of
judgment, or for any act done or step taken or omitted by Escrow Company in good
faith, or for any mistake of fact or law, or for anything which Escrow Company
may do or refrain from doing in connection herewith, unless caused by or arising
out of Escrow Company’s actual and intentional misconduct or gross negligence.

(c) Escrow Company shall be entitled to rely, and shall be protected in acting
in reliance, upon any writing furnished to Escrow Company by either Purchaser or
Seller and shall be entitled to treat as genuine, and as the document it
purports to be, any letter, paper or other document furnished to Escrow Company.
Escrow Company may rely on any affidavit of either Purchaser or Seller or any
other person as to the existence of any facts stated therein to be known by the
affiant.

(d) If Seller shall become entitled to retain or receive the Deposit or other
amount paid under this Agreement, Escrow Company shall pay the same to Seller
together with all interest earned thereon and if Purchaser shall become entitled
to a return of the Deposit or other amount paid under this Agreement, Escrow
Company shall pay the same to Purchaser, including all interest earned thereon;
provided, however, that no disbursement pursuant to this subsection shall be
made by Escrow Company until the third (3rd) Business Day following the receipt
or deemed receipt of notice by Seller and Purchaser from Escrow Company of its
intention to so disburse, and disbursement made by Escrow Company after the
passage of such three (3) Business Day period shall relieve Escrow Company from
all liability in connection with such disbursement unless such disbursement is
proscribed by order of a court of competent jurisdiction or objected to in
writing by Seller or Purchaser. If such disbursement is objected to in writing
by Seller or Purchaser within such three (3) Business Day period, then Escrow
Company shall not make such disbursement until unanimously instructed in writing
by Purchaser and Seller, or is directed to make such disbursement by a court of
competent jurisdiction.

 

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(e) In the event of any disagreement between Purchaser and Seller resulting in
adverse claims and demands being made in connection with or against the funds
held in escrow, Escrow Company shall refuse to comply with the claims or demands
of either party until such disagreement is finally resolved (i) by a court of
competent jurisdiction (in proceedings which Escrow Company or any other party
may initiate, it being understood and agreed by Purchaser and Seller that Escrow
Company has authority (but not the obligation) to initiate such proceedings), or
(ii) by an arbitrator in the event that Purchaser and Seller mutually and
jointly determine to submit the dispute to arbitration pursuant to the rules and
under the jurisdiction of the American Arbitration Association, and in so doing
Escrow Company shall not be or become liable to a party, or (iii) by written
settlement between Purchaser and Seller.

(f) Purchaser and Seller each agree to jointly and severally indemnify and hold
harmless Escrow Company against any and all Liabilities incurred by Escrow
Company (except to the extent the Escrow Company willfully disregards any
provision of this Agreement to which it is bound) in connection with or as a
result of any disagreement between Purchaser and Seller under this Agreement or
otherwise incurred by Escrow Company in any way on account of its role as Escrow
Company.

(g) Escrow Company in its sole discretion shall have the right to resign as
Escrow Company under this Agreement, provided that it shall provide both
Purchaser and Seller with at least fifteen (15) days written notice of such
resignation pursuant to the notice provisions of this Agreement. Upon any such
resignation, Escrow Company shall transfer the Deposit and any other amounts
held by Escrow Company including any interest earned thereon to a successor
Escrow Company jointly approved by Purchaser and Seller, whereupon the original
Escrow Company shall have no further obligation or liability whatsoever as
Escrow Company under this Agreement.

(h) Escrow Company may pay the Deposit into a court of competent jurisdiction
upon commencement by the Escrow Company of an interpleader action in such court.
The reasonable out-of-pocket costs and attorneys’ fees of the Escrow Company for
such interpleader action shall be paid by the losing party in such interpleader
action.

(i) The rights and immunities of Escrow Company hereunder shall apply equally to
its partners, counsel, associates, employees, affiliates and agents.

(j) All of Escrow Company’s obligations under this Agreement shall automatically
terminate upon disbursing the Deposit and any other amounts held by Escrow
Company as set forth above.

[The signature page follows]

 

49

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IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to
be executed, all as of the day and year first above written.

 

SELLER:

HEI SAN FRANCISCO LLC,

a Delaware limited liability company

By:  

/s/ Clark W. Hanrattie

  Name: Clark W. Hanrattie   Title: Vice President

PURCHASER:

CHSP SAN FRANCISCO LLC,

a Delaware limited liability company

By:  

/s/ D. Rick Adams

  Name: D. Rick Adams   Title: Vice President

Signature Page to Le Meridien San Francisco P&S

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AGREEMENT OF ESCROW COMPANY

The undersigned has executed this Agreement solely to confirm its agreement to
(a) hold the Deposit in escrow in accordance with the provisions hereof and
(b) comply with the provisions of Article VI, Article XVIII and Section 3.02.

In witness whereof, the undersigned has executed this Agreement as of
December 6, 2010.

 

TITLE ASSOCIATES, A DIVISION OF STEWART TITLE INSURANCE COMPANY By:  

/s/ Stefanie Lally-Ardrey

Name:  

Stefanie Lally-Ardrey

Title:  

Counsel

Signature Page to Le Meridien San Francisco P&S

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JOINDER

By the signature below of its authorized signatories, HEI HOSPITALITY FUND II,
L.P. (“HEI Fund”), hereby agrees to be jointly and severally liable with Seller
for all of the obligations of Seller under Section 5.04(b) of this Agreement,
subject to the terms and conditions of this Agreement. The obligations of HEI
Fund pursuant to this joinder are of a continuing nature and shall survive the
Closing (subject to the terms and conditions of this Agreement, including,
without limitation, Section 5.03 of this Agreement) and shall not be deemed
merged into the deed or any other conveyance document delivered at the Closing.

 

HEI HOSPITALITY FUND II, L.P,

a Delaware limited partnership

By:  

/s/ Clark W. Hanrattie

  Name: Clark W. Hanrattie   Title: Vice President

Signature Page to Le Meridien San Francisco P&S

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EXHIBIT A

EXCLUDED ASSETS

 

Hardware    Juniper Firewall – Connectivity to HEI Corporate IT Licenses    MSP
Client – Network management monitoring tool Licenses    Symantec AntiVirus –
Software License Merritt Agreement    Avendra – Procurement services Merritt
Agreement    Life Fitness – Fitness equipment service agreement Merritt
Agreement    MessageLabs – Mail Filtering Merritt Agreement    PSAV – Audio
visual provider Merritt Agreement    Solutionary – Data Event Logging Merritt
Agreement    Stericycle – Waste management and training Merritt Agreement   
Steritech – Pest prevention Merritt Agreement    Tharaldson Energy Group –
Energy consultants Merritt Agreement    Universal Vending – Vending machines

 

A-1

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EXHIBIT B

LAND

The land referred to herein is situated in the State of California, County of
San Francisco, City of San Francisco, and described as follows:

Parcel A:

Commencing at a point of intersection of the southerly line of Clay Street, as
it now exists and the westerly line of Battery Street; running thence southerly
and along said line of Battery Street 94.50 feet to the northerly line of
Commercial Street; thence at a right angle westerly along said line of
Commercial Street 163.50 feet; thence at a right angle northerly 94.50 feet to
the southerly line of Clay Street, as it now exists; thence at a right angle
easterly along said line of Clay Street 163.50 feet to the point of
commencement.

Being part of Beach and Water Block No. 36.

Parcel B:

A non-exclusive easement for construction and maintenance on the terms and
conditions therein, as granted to One Embarcadero Center West, a California
Limited Partnership by an instrument recorded April 2, 1986, Series No. D785482,
Book E57, Official Records, Page 1546, and amended by document recorded
February 25, 1988, Book E537, Official Records, Page 1155, Series No. E134700,
over the land described as follows:

Beginning on the southerly line of Clay Street , as Clay Street now exists , at
a point distant thereon 109.50 feet easterly from the easterly line of Sansome
Street; thence easterly along said line of Clay Street 2.00 feet; thence at a
right angle southerly 94.50 feet to the northerly line of Commercial Street;
thence at a right angle westerly along said line of Commercial Street 2.00 feet;
thence at a right angle northerly 94.50 feet to the point of beginning.

Being a portion of 50 Vara Block No. 36

Parcel C:

Beginning on the southerly line of Clay Street, as Clay Street now exists, at a
point distant thereon 163.50 feet westerly from the westerly line of Battery
Street; thence westerly along said line of Clay Street 0.198 feet to a point
distant thereon 111.50 feet easterly from the easterly line of Sansome Street;
thence southerly at a right angle to said line of Clay Street 94.50 feet to the
northerly line of Commercial Street; thence at a right angle easterly along said
line of Commercial Street 0.198 feet to a point distant thereon 163.50 feet
westerly from the westerly line of Battery Street, thence northerly at a right
angle to said line of Commercial Street 94.50 feet to the point of beginning.

Being a portion of Beach and Water Block No. 36.

Parcel D:

 

B-1

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Non-exclusive easements as set forth in paragraphs 1,2,3,4,5 and 8 of that
certain Declaration 0f Reciprocal Covenants, Conditions and Restrictions with
Grant of Easements dated March 28, 1988 and recorded March 29, 1988, as Document
No. E149871, in Book E560, Page 784, Official Records , as set forth in
paragraph 9 thereof.

Assessor’s Lot 20, Block 229

(End of Legal Description)

 

2

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EXHIBIT C

PENDING OR THREATENED LITIGATION

PENDING OR THREATENED LITIGATION

ADA Lawsuit (January 13, 2010) Mutual Release and Settlement – Connie Arnold v
Starwood Hotels & Resorts Worldwide, Inc; Le Meridien San Francisco, HEI San
Francisco LLC Case No. C 08-05406 JSW

Slip and Fall (April 2007) Michael Kalish case, claim #GC2007252446 – Litigation
relating to a slip and fall case is continuing, responses to requests for
discovery are ongoing. Plaintiff has demanded the deposition of the front desk
manager by Dec 7, 2010

General Liability – Open Claim – 4/18/10 – Premises/Operations Liability
($1,250)

General Liability – Open Claim – 7/21/10 – Claimant fell on job site ($3,505)

Workers Comp – Open Claim – 1/1/08 – Strain ($1,500)

Workers Comp – Open Claim – 8/19/08 – Strain ($30,419)

Workers Comp – Open Claim – 2/3/09 – Sprain ($144,838)

Workers Comp – Open Claim – 11/1/08 – Strain ($18,968)

Workers Comp – Open Claim – 12/19/09 – Strain ($63,673)

 

C-1

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EXHIBIT D

NOTICES OF VIOLATION

None.

 

D-1

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EXHIBIT E

SCHEDULE OF LEASES AND RELATED MATTERS

None.

 

E-1

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EXHIBIT F

LEASED OR 3RD PARTY OWNED FIXTURES & TANGIBLE PERSONAL PROPERTY

 

1    ATM Leasing    ATM Systems Corporation 2    Mailing System    MailFinance 3
   Copiers    Xerox

 

F-1

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EXHIBIT G

HOTEL CONTRACTS AND RELATED MATTERS

 

1    Parking Lease    450 Sansome, LLC 2    Window Cleaning    Alert Building
Maintenance 3    Purchasing    Avendra 4    Purchasing - Beverage    Avendra
LLC/Pepsico 5    Kitchen Exhaust Cleaning    Chemical Exhaust 6    Minibar
Management Services    Club Minibar 7    Fire Alarm Service/Maintenance   
Detection Logic 8    Music Service    DMX Music 9    Armored Car    Dunbar
Armored 10    Valet Parking    Five Star Parking 11    General Janitorial
Services    GMG Janitorial Inc 12    Waste Disposal    Golden Gate Disposal
Company 13    Guest Limousine    Grand Limousine Inc. 14    Interior/Exterior
Landscaping    Greenscapes 15    High Speed Internet Access    Guesttek 16   
Dry-Cleaning/Laundry    InterCity Metro Cleaners 17    Fabric Chair Cleaning   
North American Chemdry 18    In-Room TV    On Command 19    Restaurant
Reservation System    Open Table 20    Elevator Agreement    Otis 21    Interior
Plants    Plant Domaine 22    AV Services    PSAV 23    Linen Laundry    Royal
Laundry 24    STAR Report    Smith Travel 25    Food Safety Kitchen Audits   
Steritech 26    Energy Consultants    Tharaldson Energy Group, Inc. 27   
Hotelligence Report    TravelClick

 

G-1

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EXHIBIT H

FORM OF DEED

STATEMENT OF TAX DUE AND REQUEST

THAT TAX DECLARATION NOT BE MADE A PART

OF THE PERMANENT RECORD

IN THE OFFICE OF THE COUNTY RECORDER

(PURSUANT TO CAL. REV. AND TAX CODE SECTION 11932)

 

To: Registrar – Recorder

City and County of San Francisco

Request is hereby made in accordance with the provision of the Documentary
Transfer Tax Act that the amount of tax due not be shown on the original
document which names:

HEI SAN FRANCISCO LLC,

a Delaware limited liability company

as Transferor

and

                                         ,

a                                         

as Transferee

The property described in the accompanying document is located in the City and
County of San Francisco, State of California.

The amount of tax due to the City and County of San Francisco on the
accompanying document is                      and No/100 Dollars
($            .00) and is computed on full value of the property conveyed.

 

TRANSFEROR:

HEI SAN FRANCISCO LLC,

a Delaware limited liability company

By:

 

 

 

Name:

 

Title:

 

H-1

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NOTE: After the permanent record is made, this form will be affixed to the
conveying document and returned with it.

 

H-2

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RECORDING REQUESTED BY

AND WHEN RECORDED RETURN TO:

 

 

 

 

 

 

Attention:

 

 

 

MAIL TAX STATEMENTS TO:

 

 

 

 

Attention:

 

 

 

 

 

SPACE ABOVE THIS LINE RESERVED FOR RECORDER’S USE

GRANT DEED

The undersigned grantor declares:

Documentary Transfer Tax is shown by an unrecorded separate affidavit pursuant
to Section 11932 of the Revenue and Taxation Code.

City and County of San Francisco

FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, HEI SAN
FRANCISCO LLC, a Delaware limited liability company (“Grantor”), hereby GRANTS
to                     , a                     , (“Grantee”), the following
described real property (“Property”) located in the City and County of San
Francisco, State of California.

See Exhibit “A” attached hereto and incorporated herein by this reference.

This conveyance is made subject to all matters of record, all matters which an
inspection or survey of the Property would disclose, real property taxes which
are a lien but not yet due and payable and all applicable laws and ordinances.

 

H-3

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IN WITNESS WHEREOF, this Grant Deed has been executed and delivered this     
day of                     , 2010.

 

GRANTOR:

HEI SAN FRANCISCO LLC,

a Delaware limited liability company

By:

 

 

 

Name:

 

Title:

ACKNOWLEDGEMENT

 

STATE OF

 

 

   )          )   ss.  

COUNTY OF

 

 

   )    

On                             , 2010, before me,
                                        
                                                                     , Notary
Public,

personally appeared                                         
                                         
                                         
                                           ,

who proved to me on the basis of satisfactory evidence to be the person whose
name is subscribed to the within instrument and acknowledged to me that she/he
executed the same in her/his authorized capacity, and that by her/his signature
on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of
                             that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

 

 

    

Signature of Notary Public

     Place Notary Seal Above

 

H-4

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EXHIBIT A

LEGAL DESCRIPTION

 

H-5

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EXHIBIT I

FORM OF BILL OF SALE

THIS BILL OF SALE (“Bill of Sale”) is made as of                     , 20     by
and between HEI SAN FRANCISCO LLC, a Delaware limited liability company
(“Seller”), and                     , a                     (“Purchaser”).

W I T N E S S E T H:

WHEREAS, Seller and Purchaser are parties to a certain Agreement for Sale and
Purchase of Hotel dated as of                     , 2010 (the “P&S”) with
respect to, inter alia, the sale and purchase of Seller’s interest in the
Fixtures and Tangible Personal Property, Consumables, Inventory, Operating
Equipment, IT Systems, and Cash-On-Hand, not including Excluded Assets and
subject in each case to the Permitted Exceptions (the “Personal Property”);

WHEREAS, under the P&S, Seller agreed to sell all of its right, title and
interest in and to the Personal Property to Purchaser; and

WHEREAS, all capitalized terms used herein but not defined herein shall have the
meanings given them in the P&S;

NOW THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the mutual receipt and legal sufficiency of which are hereby
acknowledged, Seller and Purchaser agree as follows:

1. Sale to Assignee. Seller does hereby sell, assign, transfer, grant, convey
and set over unto Purchaser all of its right, title, and interest in, to, and
under the Personal Property to have and to hold the same unto Purchaser, its
legal representatives, successors and assigns, forever.

2. Disclaimer. Seller makes no warranty (express or implied) as to the condition
of the Personal Property or its merchantability or fitness for a particular
purpose. In addition, and notwithstanding anything contained in this Bill of
Sale to the contrary, this Bill of Sale is subject to all disclaimers and
qualifications by Seller and all encumbrances set forth in the P&S with respect
to said Personal Property, including, without limitation, those set forth in
Section 2.02 and Section 5.03 and all such disclaimers, qualifications, and
encumbrances are hereby incorporated in this Bill of Sale by reference and made
a part of this Bill of Sale. By its acceptance of this Bill of Sale, Purchaser
acknowledges that it has fully inspected the Personal Property and accepts the
same in its present use and “AS IS” condition.

3. Miscellaneous. This Bill of Sale shall be binding upon and enforceable
against, and shall inure to the benefit of, Seller and Purchaser and their
respective successors and assigns. This Bill of Sale shall be governed by,
construed under, and interpreted and enforced in accordance with the laws of the
State of California. This Bill of Sale may be executed in several counterparts,
each of which will be deemed an original, and all of such counterparts together
shall constitute one and the same instrument.

 

I-1

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IN WITNESS WHEREOF, Seller has executed this Bill of Sale, as a sealed
instrument, as of the date first above written.

 

SELLER:

[SELLER SIGNATURE BLOCK]

PURCHASER:

[PURCHASER SIGNATURE BLOCK]

 

I-2

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EXHIBIT J

Assignment and Assumption Agreement

This Assignment and Assumption Agreement (this “Agreement”) is made as of
                    , 20     by and between HEI SAN FRANCISCO LLC, a Delaware
limited liability company (“Assignor”), and                     , a
                     (“Assignee”).

W I T N E S S E T H:

WHEREAS, Assignor and Assignee are parties to a certain Agreement for Sale and
Purchase of Hotel dated as of                     , 2010 (the “P&S”) with
respect to, inter alia, the sale and purchase of Assignor’s interest in, and to
the extent assignable, the Hotel Contracts, Space Leases, Bookings, Permits and
Miscellaneous Hotel Assets (collectively, the “Assigned Assets”);

WHEREAS, under the P&S, Assignor agreed to sell all of its right, title and
interest in and to the Assigned Assets to Assignee, and Assignee agreed to
assume prospectively all of Assignor’s obligations and liabilities with respect
to the Assigned Assets; and

WHEREAS, all capitalized terms used herein but not defined herein shall have the
meanings given them in the P&S;

NOW THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the mutual receipt and legal sufficiency of which are hereby
acknowledged, Assignor and Assignee agree as follows:

1. Assignment to Assignee. Effective as of the date hereof (the “Effective
Date”), Assignor does hereby sell, assign, transfer, grant, convey and set over
unto Assignee all of its right, title, and interest in, to and under the
Assigned Assets to have and to hold the same unto Assignee, its legal
representatives, successors and assigns, forever.

2. Assumption by Assignee. Assignee does hereby accept the sale, assignment,
transfer, grant and conveyance of the Assigned Assets and hereby assumes and
agrees to observe and perform all of Assignor’s obligations, terms, covenants
and conditions of the Assigned Assets accruing after the date hereof.

3. Disclaimer. Assignee acknowledges that Assignor has not made and does not
make any representations or warranties of any kind whatsoever, oral or written,
express or implied, with respect to any of the Assigned Assets, except as set
forth in the P&S. In addition, and notwithstanding anything contained in this
Assignment to the contrary, this Assignment is subject to all disclaimers and
qualifications by Assignor and all encumbrances set forth in the P&S with
respect to the Assigned Assets, including, without limitation, those set forth
in Sections 2.02 and 5.03 of the P&S, and all such disclaimers, qualifications,
and encumbrances are hereby incorporated into this Agreement by reference and
made a part of this Assignment.

 

J-1

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4. Indemnity. Assignor hereby agrees to protect, save, defend, indemnify and
hold harmless Assignee against and from any and all Liabilities arising out of
or relating to events occurring prior to the Effective Date and arising out of
the Assignor’s obligations as seller under the P&S. Assignee hereby agrees to
protect, save, defend, indemnify and hold harmless Assignor against and from any
and all Liabilities arising out of or relating to events occurring on or after
the Effective Date and arising out of Assignee’s obligations as buyer under the
P&S.

5. Miscellaneous. This Agreement shall be binding upon and enforceable against,
and shall inure to the benefit of, Assignor and Assignee and their respective
successors and assigns. This Agreement shall be governed by, construed under,
and interpreted and enforced in accordance with, the laws of the State of
California. This Agreement may be executed in several counterparts, each of
which will be deemed an original, and all of such counterparts together shall
constitute one and the same instrument.

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

 

SELLER:

[SELLER SIGNATURE BLOCK]

PURCHASER:

[PURCHASER SIGNATURE BLOCK]

 

J-2

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EXHIBIT K

CERTIFICATION OF NON FOREIGN STATUS

Section 1445 of the Internal Revenue Code provides that a transferee of a United
States real property interest must withhold the tax if the transferor is a
foreign person. For U.S. tax purposes (including Section 1445), the owner of a
disregarded entity (which has legal title to a U.S. real property interest under
local law) will be the transferor of the property and not the disregarded
entity. To inform the transferee,                     , a                     
(“Transferee”) that withholding of tax is not required upon the disposition of a
United States real property interest by HEI SAN FRANCISCO LLC, a Delaware
limited liability company (“Owner”) and with the knowledge that the Transferee
will rely upon the following statements, the undersigned hereby certifies the
following on behalf of HEI Hospitality Fund Holdings II, L.P., a Delaware
limited partnership (“Transferor”):

1. Transferor is not a foreign corporation, foreign partnership, foreign trust,
foreign estate, or foreign person (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);

2. Transferor is not a disregarded entity as defined in
Section 1.1.45(b)(2)(iii) of the Code;

3. Transferor’s United States employer identification number/social security
number is 20-4436211; and

4. Transferor’s office address is c/o HEI Hospitality LLC, 101 Merritt 7
Corporate Park, Third Floor, Norwalk, CT 06851.

Transferor understands that this certification may be disclosed to the Internal
Revenue Service by Transferee and that any false statement contained herein
could be punished by fine, imprisonment, or both.

Under penalties of perjury, I declare that I have examined this Certification
and to the best of my knowledge and belief it is true, correct and complete, and
I further declare that I have authority to sign this document on behalf of
Transferor.

Dated:                     , 2010

 

TRANSFEROR:

[TRANSFEROR SIGNATURE BLOCK]

 

K-1

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EXHIBIT L

1099 Designation

This AGREEMENT is made this              day of                     , 20     by
and between the TRANSFEROR, HEI SAN FRANCISCO LLC, a Delaware limited liability
company, with an address of c/o HEI Hospitality LLC, 101 Merritt 7 Corporate
Park, Third Floor, Norwalk, CT 06851, the TRANSFEREE,                     , a
                    , with an address of
                                        , and the DESIGNEE,
                    , a                     , with an address of
                                        .

The TRANSFEROR is the present Seller of certain property (the “Premises”) known
as the Embassy Suites Hotel located at 333 Battery Street, San Francisco, CA
94111, as more particularly described in that certain Agreement for Sale and
Purchase of Hotel (the “Agreement”) dated                     , by and between
the TRANSFEROR and the TRANSFEREE.

In order to comply with information reporting requirements provided by
Section 6045(e) of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations thereunder, the parties hereby agree as follows:

(i) to designate DESIGNEE as the party who shall be responsible for reporting to
the Internal Revenue Service (the “IRS”) the sale of the Premises on IRS form
1099-S;

(ii) to provide DESIGNEE with the information necessary to complete Form 1099-S;

(iii) that DESIGNEE shall provide all parties to this transaction with a copy of
the IRS Form 1099-S filed with the IRS and with any documentation used to
complete IRS Form 1099-S;

(iv) that DESIGNEE shall not be liable for the actions taken under this
Agreement or for the consequences of those actions, except as they may be the
result of gross negligence or willful misconduct on the part of the DESIGNEE;
and

(v) that all parties to this Agreement will retain this Agreement for four
(4) years following December 31 of the calendar year in which the date of
closing occurs.

 

[TRANSFEROR SIGNATURE BLOCK]

[TRANSFEREE SIGNATURE BLOCK]

[DESIGNEE SIGNATURE BLOCK]

 

L-1

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EXHIBIT M

ALLOCATION OF TRANSACTION COSTS AND EXPENSES

Purchaser

 

  1. 100% of all state, county and city transfer taxes; provided, however, that
if the Deed is recorded at any time after December 16, 2010, then each of
Purchaser and Seller shall pay 50% of the incremental increase, if any, then in
effect with respect to any such transfer taxes resulting from the recording of
the Deed after such date.

 

  2. 50% of all recording and filing charges, other than for the discharge of
Seller Encumbrances

 

  2. 50% of all escrow and closing charges

 

  3. The incremental premiums charged by the Title Company for the ALTA extended
coverage portion of the Title Policy and the cost of all endorsements

 

  4. All lenders’ fees related to any financing to be obtained or assumed by
Purchaser

 

  5. The cost of the Survey and any updates thereto

 

  6. 50% of all sales and use taxes due and payable in connection with the
transfer of the Personal Property

 

  7. The fees and expenses of its own attorneys and accountants

Seller

 

  1. 50% of all escrow and closing charges

 

  2. The premium charged by the Title Company for the CLTA standard coverage
portion of the Title Policy

 

  3. 50% of all recording and filing charges, and all recording and filing
charges for the discharge of Seller Encumbrances

 

  4. 50% of all sales and use taxes due and payable in connection with the
transfer of the Personal Property

 

  5. The fees and expenses of its own attorneys and accountants

 

M-1

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EXHIBIT N

ADA RELATED CONTRACTS

 

  •  

Tricorp/Hearn Construction, Inc. – Dated 9/30/2010; together with all change
orders

 

  •  

Louis H. Felthouse Architect, Inc. – Dated 4/8/2010, together with all change
orders

 

N-1