**PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS**     THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this “Agreement”) ismade as of October 13, 2010 (the “Effective Date”), by and between REGIS PROPERTIES,L.L.C., a Delaware limited partnership (“Seller”), and BLUE DEVILS OWNER LLC, a Delawarelimited liability company (“Buyer”).W I T N E S S E T H:     A. Seller is the owner of the Property (defined below). The Property is located in the Countyof Los Angeles, State of California.     B. Seller desires to sell the Property and Buyer desires to purchase the Property, on theterms and conditions set forth in this Agreement.     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which ishereby acknowledged by the parties, Buyer and Seller agree as follows:**ARTICLE I****PURCHASE AND SALE**1.1 Agreement of Purchase and Sale. Subject to the terms and conditions hereinafter setforth, Seller agrees to sell and convey and Buyer agrees to purchase, all of the (and as tothe Collective Bargaining Agreement (as defined below), Manager’s (as defined below)) right,title and interest in and to the following:(a) the fee simple interest in the land situated in Los Angeles, California moreparticularly described on Schedule 1.1(a) attached hereto and made a part hereof,together with all and singular the rights and appurtenances of Seller pertaining to suchproperty, including any right, title and interest of Seller in and to adjacent streets,alleys or rights-of-way (the property described in clause (a) of this Section 1.1being herein referred to collectively as the “Land”);(b) the buildings, structures, garages, fixtures and other improvements on the Land,including specifically, without limitation, that certain hotel commonly known as “SheratonDelfina” (the “Hotel”) and the restaurants, food and beverage, meeting and fitnessfacilities located therein or thereon (the property described in this clause (b) of thisSection 1.1 being herein referred to collectively as the “Improvements”);(c) all tangible personal property owned by Seller and located upon the Land or within theImprovements and used solely in connection with the operation of the Land and Improvements,including specifically, without limitation, appliances, furniture, furnishings, artwork,equipment, carpeting, draperies and curtains, tools and supplies, decorations, china,glassware, linens, silver, utensils, all vehicles (if any), and other items of personalproperty (excluding cash and deposit accounts) in all cases subject to depletion, resupply,substitution, replacement and disposition in the ordinary course of business, such propertybeing herein referred to collectively as the “Personal Property”);
 

 
(d) subject to Section 4.4 below, all contracts or reservations for the use of guestrooms, ballroom, banquet and restaurant facilities, conference facilities, meeting rooms orother facilities of the Hotel or located within the Improvements (“Bookings”);(e) all assignable contracts and agreements (collectively, the “OperatingAgreements”) relating to the upkeep, repair, maintenance or operation of the Land, theImprovements or the Personal Property or other property used in connection with theoperation of the Hotel not rejected by Buyer in accordance with the terms hereof, includingwithout limitation (i) the agreements listed on Schedule 1.1(e)(i) attached hereto,(ii) all equipment leases listed on Schedule 1.1(e)(ii), and (iii) the CollectiveBargaining Agreement between Manager (and an affiliate thereof), and UNITE — HERE, Local 11(“Local 11”) (the “Collective Bargaining Agreement”), but excluding (A) theManagement Agreement (defined below) and (B) the License Agreements (as defined below);(f) (i) all assignable existing warranties and guaranties (expressed or implied) issued toSeller in connection with the Improvements or the Personal Property; (ii) all transferablenames, marks, logos, websites, domain names and designs, used in the operation or ownershipof the Land, the Improvements or the Personal Property or any part thereof, if any; and(iii) all transferable licenses, franchises and permits owned by Seller and used in orrelating to the ownership, occupancy or operation of the Land, the Improvements or thePersonal Property or any part thereof (the property described in this clause (f) of thisSection 1.1 being herein referred to collectively as the “Intangibles”);(g) (i) all food and beverages (except the Alcoholic Beverage Inventory, which shall beconveyed in accordance with Section 4.9, below); (ii) inventory held for sale toHotel guests and others in the ordinary course of business including all opened and unopenedretail inventory in any Hotel gift shop or any other area at the Hotel conducting retailsales (collectively, “Retail Inventory”); (iii) engineering, maintenance andhousekeeping supplies, including soap and cleaning materials, fuel and materials; stationeryand printing items and supplies; and (iv) other supplies of all kinds, whether used, unusedor held in reserve storage for future use in connection with the maintenance and operationof the Land, the Improvements or the Personal Property, in each case to the extent locatedat the Hotel, together with any additions thereto prior to Closing (defined below) andsubject to depletion, resupply, substitution, replacement and disposition in the ordinarycourse of business (all of the foregoing being referred to herein as the “ConsumableInventory” and, to the extent contained in unopened boxes, bottles, jars or containersof any type as of the Closing Date, shall collectively be referred to, together withunopened packages of china, glass, silver and linens, as the “Unopened Inventory”);(h) all leases for the lease and occupancy of space at the Hotel (collectively, the“Leases”) listed and described on Schedule 1.1(h) attached hereto and made apart hereof, including any deposits called for under such Leases and not applied to thetenants’ obligations as of the Closing Date. For purposes of this Agreement, “Leases” donot include Bookings; and(i) subject to Section 4.4.9 hereof, Seller’s interest in the funds contained in“house banks” for the Hotel as of the Cut-Off Time (defined in Section 4.4.10below), whether held in the name of Seller, the Hotel or Manager and owned by Seller(collectively, the “House Bank Funds”). Buyer expressly acknowledges and agreesthat the Property to be transferred to
 

 
Buyer pursuant to this Agreement does not include any reserve or other accounts created ormaintained by Seller or Manager in connection with the ownership or operation of the Hotel.1.2 Property Defined.(a) The Land and the Improvements are sometimes collectively referred to herein as the“Real Property” and the Real Property, the Personal Property, the Bookings, theOperating Agreements, the Intangibles, the Consumable Inventory (including the UnopenedInventory), the Leases and the House Bank Funds are hereinafter sometimes referred tocollectively as the “Property”; provided that, the Purchase Price does not include,and shall be adjusted with respect to, the House Bank Funds and the other adjustment itemsdescribed in Section 4.4 below.(b) Notwithstanding anything to the contrary in Section 1.1 or Section1.2(a) above, the following items are expressly excluded from the Property:(i) All cash on hand or on deposit in any operating account or other account orreserve, except for security deposits held by Seller as landlord with respect to anyLease and the House Bank Funds which are to be transferred at Closing subject to theterms of this Agreement;(ii) All accounts receivable of the Hotel and all related operations with respect toperiods prior to Closing (collectively, the “Receivables”); and(iii) Any tangible or intangible property (including, without limitations, fixtures,personal property or intellectual property) identified on Schedule 1.2hereto, owned by (A) the supplier, vendor, licensor, lessor or other party under anyOperating Agreements, (B) the tenants under any Leases, (C) Manager, (D) anyemployees, (E) any guests or customers of the Hotel, or (F) any other third party.1.3 Permitted Exceptions. The Real Property shall be conveyed subject to all matterswhich are, or are deemed to be, Permitted Exceptions pursuant to Article II hereof(collectively, the “Permitted Exceptions”). 1.4 Purchase Price. Seller is to sell and Buyer is to purchase the Property for a totalof One Hundred Two Million Seven Hundred Fifty Thousand and No/100 Dollars ($102,750,000.00)(the “Purchase Price”). 1.5 Payment of Purchase Price.(a) On the Closing Date (defined below), Buyer shall deliver to Escrow Agent (defined below)by wire transfer an amount equal to the Purchase Price, as increased or decreased byprorations and adjustments as herein provided, less the Earnest Money (defined below)previously delivered to Escrow Agent.(b) The Purchase Price, as increased or decreased by prorations and adjustments as hereinprovided, shall be payable in full at Closing in cash by wire transfer of immediatelyavailable federal funds to an escrow account designated by Seller in writing to Buyer andEscrow Agent prior to the Closing.
 

 
1.6 Earnest Money.(a) Within one (1) business day after the full execution and delivery of this Agreement,Buyer shall deposit with Chicago Title Company (“Escrow Agent”) having its office at700 South Flower Street, Suite 800, Los Angeles, California 90017, Attention: PatriciaSchlageck, Facsimile: (213) 612-4138, the sum of Five Million and No/100 Dollars($5,000,000.00) (together with all interest earned on such sum, the “Earnest Money”)in good funds by federal wire transfer.(b) Upon the delivery (or required delivery) of all or any portion of the Earnest Money byBuyer to Escrow Agent, the Earnest Money (including any portion thereof that is required tobe delivered but has not been delivered by Buyer) shall be fully earned by Seller andnon-refundable to Buyer for any reason whatsoever, except that Buyer shall be entitled to areturn of the Earnest Money in the event this Agreement is timely terminated as a result ofBuyer’s election to terminate or is otherwise deemed terminated strictly in accordance withand pursuant to (i) Section 3.5 below, (ii) Section 4.8 below, (iii)Section 6.2 below, or (iv) Section 7.2 below.(c) Escrow Agent shall hold the Earnest Money in an interest-bearing account in accordancewith the terms and conditions of this Agreement. All interest accruing on such sums shallbecome a part of the Earnest Money and shall be distributed as Earnest Money in accordancewith the terms of this Agreement. Notwithstanding any provision of this Agreement to thecontrary, in no event shall Seller have any responsibility or liability to Buyer inconnection with the accrual or payment of interest on any portion of the Earnest Money.(d) Time is of the essence for the delivery of Earnest Money under this Agreement and thefailure of Buyer to timely deliver any portion of the Earnest Money shall be a materialdefault, and shall entitle Seller, at Seller’s sole option, to terminate this Agreementimmediately and to pursue all remedies available to Seller under this Agreement andapplicable law.1.7 Escrow Instructions. The terms and conditions set forth in this Agreement shallconstitute both an agreement between Seller and Buyer and escrow instructions for EscrowAgent. Seller and Buyer shall promptly execute and deliver to Escrow Agent any separate oradditional escrow instructions requested by Escrow Agent that are consistent with the terms ofthis Agreement. Any separate or additional instructions shall not modify or amend thisAgreement unless expressly set forth by the mutual consent of Seller and Buyer and to theextent of any conflict between this Agreement and any such separate/additional instructions,the provisions of this Agreement shall control. 1.8 Management Agreement and License Agreements.(a) Buyer acknowledges that (i) the Hotel is being operated and managed by KHM Delfina, LLC,a Delaware limited liability company (or an affiliate thereof) (the “Manager”),pursuant to that certain Hotel Management Agreement dated as of April 28, 2003, by andbetween Seller and Manager (or their predecessors-in-interest) (collectively, as amended,the
 

 
“Management Agreement”), and (ii) Seller shall cause the Management Agreement to beterminated concurrently with the Closing.(b) Buyer acknowledges that the Property is subject to that certain Sheraton Hotel LicenseAgreement (the “Sheraton Agreement”) dated on or about January 31, 2003, by andbetween The Sheraton Corporation (“Sheraton”) and Seller (the Sheraton Agreement,together with any other license agreements related to the Property, the “LicenseAgreements”). Seller shall terminate the Sheraton Agreement effective as of the ClosingDate and Buyer shall pay at Closing any termination or transfer fees associated with suchtermination, if applicable, unless such fees are related to a default by Seller under theSheraton Agreement. Buyer shall attempt to enter into a replacement license agreement(s)with Sheraton (on the same terms as the Sheraton Agreement, for the remainder of the termthereof or on such other terms as are acceptable to Buyer in its sole discretion (providedsuch other terms do not result in a termination fee to be payable by Seller)) which willbecome effective as of the Closing (the “New License Agreement”); provided, howeverthat in the event that Buyer fails to enter into a New License Agreement and is required topay a termination fee to Sheraton, Buyer shall receive at Closing a credit against thePurchase Price in the amount of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00).(c) Buyer shall, within five (5) days after the Effective Date, subject to applicablewaiting periods and timelines dictated by Sheraton, deliver a written application toSheraton requesting that Sheraton approve Buyer as a licensee and requesting preparation anddelivery of a New License Agreement (“Sheraton’s Consent”). Buyer shall use goodfaith, diligent, commercially reasonable efforts to reach agreement with Sheraton on theform of the New License Agreement (provided that Buyer shall accept all terms that are thesame as the terms of the existing Sheraton Agreement, and a term that runs for the remainderof the term thereof). Buyer shall pay all application fees, consent fees, termination feesand other costs and expenses related to the License Agreements or the New License Agreement.(d) Notwithstanding any provision of this Agreement to the contrary, Seller shall not beliable or responsible for the performance by Sheraton under the Sheraton Agreement, to theextent such obligations are required to be performed after the Closing.1.9 Assumed Liabilities. At Closing, solely to the extent either (a) arising on or afterthe Closing or (b) Buyer receives a credit to the Purchase Price with respect to suchLiabilities (as defined below) at Closing, unless otherwise stated in this Agreement, Buyershall assume all liability, obligation, damage, loss, diminution in value, cost or expense ofany kind or nature whatsoever, whether accrued or unaccrued, actual or contingent, known orunknown, foreseen or unforeseen (collectively, “Liabilities”) arising from, relatingto, or in connection with the Property or the Hotel, including, without limitation, allLiabilities with respect to the condition of the Property (including, without limitation, thedesign, construction, engineering, maintenance and repair or environmental condition of theProperty, but subject to Seller’s express representations and warranties in Section5.1). In addition, at Closing Buyer shall assume all obligations to pay for, and noproration shall be made or credit given for, any Consumable Inventory ordered in the ordinarycourse of business by Seller or Manager but which has not been delivered to the Hotel or paidfor as of the Closing Date. The parties’ rights and obligations under this Section1.9 shall survive the Closing.
 

 
1.10 Balconies/Artwork. At Buyer’s request, Seller has made a request to obtain writtenconfirmation from the City of Santa Monica that the Property is in compliance with the“artwork” requirement set forth in Section 9H of the Development Agreement (defined below) andthe “balcony landscaping” requirement set forth in Exhibit D of the Development Agreement (the“Certificate of Compliance”) and shall continue to use good faith efforts to obtainand deliver the Certificate of Compliance to Buyer on or before Closing. In the event Selleris unable to obtain the Certificate of Compliance prior to Closing, Buyer and Seller shallexecute a Balconies/Artwork Holdback Agreement materially in the form attached hereto asExhibit H which shall, among other things, require Escrow Agent to hold back fromSeller’s proceeds due at Closing the sum of Fifty Thousand Dollars ($50,000) to be held inescrow for release in accordance with the terms of the Balconies/Artwork Holdback Agreement. 1.11 Parking. Buyer and Seller shall execute a Parking Holdback Agreement materially inthe form attached hereto as Exhibit I which shall, among other things, require EscrowAgent to hold back from Seller’s proceeds due at Closing the sum of One Million Five HundredThousand Dollars ($1,500,000) to be held in escrow for release in accordance with the terms ofthe Parking Holdback Agreement.**ARTICLE II****TITLE AND SURVEY**2.1 Commitment for Title Insurance. Seller has obtained and delivered to Buyer, apreliminary commitment for title insurance dated August 6, 2010 (Order No. 106744376-X49) (the“Title Report”) covering the Land and the Improvements from Chicago Title Company(Title Agent: Mike Slinger) (the “Title Company”), and a copy of each documentreferenced in the Title Report as an exception to title to the Real Property. Buyer shalldeliver to Seller, within five (5) days after receipt by Buyer, a copy of any updates (each a“Title Update”) to the Title Report, together with a written statement by Buyer of allobjections to title disclosed by any such Title Update.2.2 Survey. Seller has delivered to Buyer an ALTA survey of the Real Property preparedby O.K.O. Engineering Inc., dated March 5, 2008 (Job No. 2008-55) (the “Seller’sSurvey”). Buyer shall, at its own cost and expense, obtain any update it deems necessaryor desirable for Buyer’s review and inspection of the Land and Improvements. Seller’s Survey,as may be updated pursuant to the foregoing, shall be deemed the “Survey” for thepurposes of this Agreement.2.3 Title and Survey Examination. Buyer shall have until the day immediately prior tothe Effective Date to notify Seller, in writing, of such objections as Buyer may have toanything contained in the Title Report, a Title Update or the Survey. Any item contained inthe Title Report, any Title Update or any matter shown on the Survey to which Buyer does notobject in writing prior to the Effective Date shall automatically and irrevocably be deemed aPermitted Exception. In the event Buyer shall notify Seller, in writing, of objections totitle or to matters shown on the Survey prior to the Effective Date, Seller shall have theright, but not the obligation, to cure such objections. Within five (5) days after receipt ofBuyer’s notice of objections, Seller shall notify Buyer in writing whether Seller elects toattempt to
 

 
  cure any or all of such objections. If Seller elects to attempt to cure, Seller shall havethe right to attempt to remove, satisfy or cure the same and for this purpose Seller shall,at Seller’s election, be entitled to a reasonable adjournment of the Closing if additionaltime is required, but in no event shall the adjournment exceed sixty (60) days after theOutside Closing Date. If Seller elects not to cure any objections specified in Buyer’snotice, or if Seller is unable to effect a cure of those objections which it elected to cureprior to the Closing (or any date to which the Closing has been adjourned) and so notifiesBuyer in writing, or if Seller fails to respond to Buyer’s notice within said five (5) dayperiod, Buyer shall accept a conveyance of the Property subject to the Permitted Exceptionsand any matter objected to by Buyer which Seller is unwilling or unable to cure (each ofwhich shall also be deemed to be Permitted Exceptions), and without reduction of thePurchase Price. Notwithstanding any provision of this Agreement to the contrary (i) in noevent shall Seller have any obligation to cure any title matter objected to by Buyer otherthan liens of a liquidated and ascertainable amount caused by Seller or its agents,including Manager, including any mortgage or other financing secured by the Property or anyportion thereof, and (ii) any proposed cure of a title objection to be effected by Sellerthrough an inducement to the Title Company to issue affirmative title coverage byendorsement or otherwise shall first be subject to Buyer’s approval in its sole and absolutediscretion.2.4 Conveyance of Title. At Closing, Seller shall convey and transfer to Buyer title tothe Real Property subject to the Permitted Exceptions. Notwithstanding anything containedherein to the contrary, the Real Property shall be conveyed subject to the following matters,all of which shall be deemed to be Permitted Exceptions:(a) the lien of all ad valorem real estate taxes and assessments not yet due and payable asof the Closing Date, subject to adjustment as herein provided;(b) local, state and federal laws, ordinances or governmental regulations, including but notlimited to, building and zoning laws, ordinances and regulations, now or hereafter in effectrelating to the Real Property;(c) items appearing of record or shown on the Survey and, in either case, not objected to byBuyer or waived or deemed waived by Buyer in accordance with Section 2.3 hereof; and(d) the rights of the tenants under the Leases.2.5 Title Policy. As an express condition precedent to Buyer’s obligations to close thetransaction contemplated hereby, Title Company shall irrevocably commit to issue at Closing anALTA owner’s title insurance policy to Buyer in accordance with the Title Report, insuringBuyer’s title to the Real Property as of the time and date of Closing, in the amount of thePurchase Price, subject only to the Permitted Exceptions (“Title Policy”).**ARTICLE III****INSPECTION PERIOD**3.1 Right of Inspection. Prior to the Effective Date, Seller has delivered to Buyer,those documents, reports, agreements and other information listed on Schedule 3.1hereof (collectively, “Seller’s Documents”). At all times prior to the Closing Date(hereinafter
 

 
  referred to as the “Inspection Period”), Buyer shall, subject to the rights of theManager under the Management Agreement, guests of the Hotel and the tenants under theLeases, have the right to make a physical inspection of the Real Property and to examine atsuch place or places at the Hotel or elsewhere as the same may be located, any operatingfiles maintained by or for the benefit of Seller in connection with the leasing, currentmaintenance and/or management of the Property (“Property Information”), including,without limitation, the Management Agreement, the Leases, the Operating Agreements,insurance policies, bills, invoices, receipts and other general records relating to theincome and expenses of the Hotel, correspondence, surveys, plans and specifications,warranties for services and materials provided to the Hotel, environmental audits,engineering and building inspection reports and similar materials, but excluding materialsnot directly related to the current maintenance and/or management of the Property which arereasonably deemed to be of a proprietary nature. Buyer shall keep all Property Informationand Seller’s Documents strictly confidential, provided that Buyer may deliver copies of thesame to its attorneys, accountants and other advisors in connection with the acquisition ofthe Property and to current and prospective lenders, investors and partners provided thatsuch parties agree to maintain the confidentiality of such Property Information inaccordance with the requirements of Section 10.1 below, subject to any reportingrequirements to which Buyer is otherwise subject under applicable securities and other laws,rules and regulations. Buyer understands and agrees that any on-site inspections of theProperty shall be conducted upon at least twenty-four (24) hours’ prior notice (viatelephone or e-mail, anything herein contained to the contrary notwithstanding) to Sellerand in the presence of Seller and, at Seller’s option, Manager, or their respectiverepresentatives. Such physical inspection shall not materially disturb Hotel guests ortenants under the Leases nor unreasonably interfere with the use of the Property by Selleror Manager, or damage the Property in any respect. Such physical inspection shall not beinvasive in any respect (unless Buyer obtains Seller’s prior written consent, which may bewithheld in Seller’s sole and absolute discretion), and in any event shall be conducted inaccordance with standards customarily employed in the industry and in compliance with allgovernmental laws, rules and regulations. Following each entry by Buyer with respect toinspections and/or tests on the Real Property, Buyer shall repair any damage caused to theProperty on account of any such inspections and/or tests to a condition which is as near tothe condition as existed prior to any such inspections and/or tests, at Buyer’s sole costand expense. Seller shall reasonably cooperate with Buyer in its due diligence but shallnot be obligated to incur any liability or expense in connection therewith. Buyer shall notdisrupt Seller’s or Manager’s or any tenant’s or guest’s activities on the Real Property andshall not contact any of Manager’s employees, or any other employees working at the Hotel,any guests of the Property, any party to an Operating Agreement, any tenants under theLeases or any governmental employee or authority without (a) providing reasonable advancenotice in writing to Seller or Manager (via e-mail or telephone, anything herein containedto the contrary notwithstanding) describing the timing, nature, subject and means of anydesired communication, and (b) in each instance obtaining Seller’s or Manager’s priorconsent (via e-mail or telephonically), and (c) irrespective of whether Buyer delivers suchnotice, providing Seller with the option to either attend or participate in any meetings,conversations or communications between Buyer and such party or expressly waiving its rightto do so in writing and Buyer shall not communicate in any manner with any such partywithout satisfying the foregoing, provided that (i) Buyer shall have the right to make suchinquiries and have such communications with governmental authorities and entities as shallreasonably be required in connection with
 

 
its environmental, engineering, zoning and land use investigation of the Real Propertywithout obtaining Seller’s consent so long as Buyer provides Seller not less thantwenty-four (24) hours prior written notice (via e-mail or telephone, anything hereincontained to the contrary notwithstanding) and allows Seller the opportunity to attend orparticipate in any such meetings, conversations or communications, and (ii) Buyer shall havethe right to conduct such interviews with the Hotel General Manager, Director of Sales,Revenue Manager, Controller and Chief Engineer as Buyer shall reasonably require and Sellerand Manager shall cause all of the same to cooperate in connection therewith. Buyer agreesto indemnify against, defend, protect and hold Seller harmless from and against any claimfor liabilities, losses, costs, expenses (including reasonable attorneys’ fees actuallyincurred), damages or injuries arising out of or resulting from or in connection with theinspection of the Property by Buyer or its agents, employees, representatives, consultantsor contractors (provided that Buyer shall have no such obligation with respect topre-existing conditions that are merely discovered as a result of Buyer’s inspections) andnotwithstanding anything to the contrary in this Agreement, such obligation to indemnify,defend, protect and hold harmless Seller shall survive Closing or any termination of thisAgreement. All inspections shall occur at reasonable times agreed upon by Seller and Buyer.Buyer agrees (i) that prior to entering the Property to conduct any inspection, Buyer shallobtain and maintain, and shall cause each of its contractors and agents to maintain (andshall deliver evidence satisfactory to Seller thereof), at no cost or expense to Seller,commercial general liability insurance from an insurer reasonably acceptable to Seller inthe amount of Two Million Dollars ($2,000,000) with combined single limit coverage forpersonal injury or property damage per occurrence, such policies to name Seller as anadditional insured party, which insurance shall provide coverage against any claim forpersonal injury or property damage caused by Buyer or its agents, representatives orconsultants in connection with any such tests and investigations, and (ii) to keep theProperty free from all liens and encumbrances caused by its inspections of the RealProperty. Buyer’s insurance may not be canceled or amended except upon thirty (30) days’prior written notice to Seller.3.2 Seller Due Diligence Materials. BUYER ACKNOWLEDGES THAT (1) BUYER HAS RECEIVEDCOPIES OF THE ENVIRONMENTAL, ENGINEERING, SOILS AND OTHER REPORTS REGARDING THE CONDITION OFTHE PROPERTY (COLLECTIVELY, THE “REPORTS”) LISTED ON SCHEDULE 3.2 ATTACHEDHERETO, (2) IF SELLER DELIVERS ANY ADDITIONAL REPORTS OR OTHER DOCUMENTS TO BUYER, BUYER WILLACKNOWLEDGE IN WRITING THAT IT HAS RECEIVED SUCH REPORTS OR OTHER DOCUMENTS PROMPTLY UPONRECEIPT THEREOF, AND (3) ANY REPORTS OR OTHER DOCUMENTS DELIVERED OR TO BE DELIVERED BY SELLEROR ITS AGENTS OR CONSULTANTS TO BUYER ARE BEING MADE AVAILABLE SOLELY AS AN ACCOMMODATION TOBUYER AND WITHOUT ANY REPRESENTATION OR WARRANTY OF SELLER AS TO THEIR ACCURACY ORCOMPLETENESS OF FACTS OR OPINIONS SET FORTH THEREIN AND THAT ANY RELIANCE BY BUYER ON SUCHREPORTS OR OTHER DOCUMENTS IN CONNECTION WITH THE PURCHASE OF THE PROPERTY IS UNDERTAKEN ATBUYER’S SOLE RISK. BUYER AGREES THAT SELLER SHALL HAVE NO LIABILITY OR OBLIGATION WHATSOEVERFOR ANY INACCURACY IN OR OMISSION FROM THE OFFERING MATERIALS PREPARED IN CONNECTION WITH THESALE OF THE PROPERTY OR ANY REPORT OR OTHER DOCUMENTS MADE AVAILABLE TO BUYER OR
 

 
  ITS REPRESENTATIVES. BUYER HAS CONDUCTED, ORWILL CONDUCT PRIOR TO THE EXPIRATION OF THEINSPECTION PERIOD, ITS OWN INVESTIGATION OF THECONDITION OF THE PROPERTY TO THE EXTENT BUYERDEEMS SUCH AN INVESTIGATION TO BE NECESSARY ORAPPROPRIATE. For purposes of this Agreement,the term “Seller Due Diligence Materials” shallmean (i) the Reports, the Property Informationand all other documents and materials providedor otherwise made available by Seller to Buyerpursuant to Section 3.1 and the otherprovisions of this Agreement or otherwise,together with any copies or reproductions ofsuch documents or materials, or any summaries,abstracts, compilations, and (ii) allinformation set forth in this Agreement and theexhibits and schedules attached hereto andhereby made a part hereof. 3.3 Intentionally omitted.3.4 On or prior to the date immediately prior to the Effective Date, Buyer shall have the rightto notify Seller in writing of those Operating Agreements that it rejects and thereforerequires be terminated by Seller prior to Closing. 3.5 Buyer shall have the right, upon written notice to Seller, to be given, if at all, on orbefore October 26, 2010 (the “Board Approval Deadline”), to terminate this Agreementin the event Buyer has not obtained internal board of trustee approval for the transactioncontemplated herein, by giving written notice thereof to Seller on or before the BoardApproval Deadline. If Buyer gives such notice of termination on or before the Board ApprovalDeadline, this Agreement shall terminate, the Earnest Money shall be returned to Buyer andneither party shall have any further rights, obligations or liabilities hereunder except tothe extent that any right, obligation or liability set forth herein expressly survivestermination of this Agreement. Time is of the essence with respect to the provisions of thisSection 3.5. If Buyer fails to give Seller a notice of termination on or before theBoard Approval Deadline, Buyer shall no longer have any right to terminate this Agreementunder this Section 3.5 and shall be bound to proceed to Closing and consummate thetransaction contemplated hereby pursuant and subject to the terms of this Agreement..**ARTICLE IV****CLOSING**4.1 Time and Place. Subject to the provisions of Section 4.6 and 4.7 below, theconsummation of the transaction contemplated hereby (“Closing”), as evidenced by thepayment and release of the Purchase Price to Seller, shall occur on or before noon (local timeat the Real Property) on the date that is ten (10) days after the later of (i) the date Buyerhas obtained notice from Sheraton of Sheraton’s Consent or (ii) the date Buyer and Sheratonhave reached final agreement on an execution form of New License Agreement, provided that inno event shall such date be later than November 30, 2010 (“Outside Closing Date”)(with the actual date of Closing being referred to herein as the “Closing Date”) suchthat if Buyer does not send written notice identifying the proposed Closing Date on or priorto that date which is three (3) business days prior to the Outside Closing Date, then, subjectto the provisions of Section 4.6 and 4.7 below, the Closing shall occur on the OutsideClosing Date. Notwithstanding the foregoing, Buyer shall have the right, upon delivery ofwritten notice to Seller, to be given, if at all, on or before November 23, 2010, to extendthe Outside
 

 
  Closing Date to December 30, 2010 in the event that Buyer has not obtained Sheraton’sConsent and Buyer and Sheraton have not reached final agreement on an execution form of NewLicense Agreement prior to the date of such notice. The Closing shall occur through anescrow administered by Escrow Agent with the Purchase Price and all documents (unlessotherwise mutually agreed) shall be deposited with the Escrow Agent as escrowee. AtClosing, Seller and Buyer shall perform the obligations set forth in, respectively,Section 4.2 and Section 4.3, the performance of which obligations shall beconcurrent conditions.4.2 Seller’s Closing Obligations and Deliveries. At Closing, Seller shall through EscrowAgent make the following deliveries and take the following actions (with each item to bedelivered to Escrow Agent not later than one (1) business day prior to the scheduled ClosingDate):(a) Deliver to Buyer a duly executed grant deed (the “Deed”) in the form attachedhereto as Exhibit A and made a part hereof, conveying the Land and the Improvements,subject only to the Permitted Exceptions, together with any required real estate transfertax declarations or any similar documentation required to evidence the payment of any taximposed by the State of California, County of Los Angeles and/or City of Santa Monica on thetransaction contemplated hereby;(b) Execute and deliver to Buyer two (2) original counterparts of a bill of sale in the formattached hereto as Exhibit B and made a part hereof, conveying the Personal Propertyand Consumable Inventory without warranty of title (except as provided herein) or use andwithout warranty, expressed or implied, as to merchantability and fitness for any purpose;(c) Execute and deliver to Buyer two (2) original counterparts of an assignment of Seller’sinterest in the Operating Agreements (and cause Manager to assign its interest in theCollective Bargaining Agreement), the Bookings and the other Intangibles (in each case tothe extent assignable) (“Assignment of Contracts”) in the form attached hereto asExhibit C and made a part hereof;(d) Execute and deliver to Buyer two (2) original counterparts of an assignment of Seller’sinterest in the Leases in the form attached hereto as Exhibit D and made a parthereof;(e) Deliver to Buyer a certificate, dated as of the Closing Date and executed on behalf ofSeller by a duly authorized officer thereof, stating that the representations and warrantiesof Seller contained in this Agreement are true and correct in all material respects as ofthe Closing Date (with appropriate modifications of those representations and warrantiesmade in Section 5.1 hereof to reflect any changes therein including withoutlimitation any changes resulting from actions under Section 5.4 hereof) oridentifying any representation or warranty which is not, or no longer is, true and correctand explaining the state of facts giving rise to the change. In no event shall Seller beliable to Buyer for, or be deemed to be in default hereunder by reason of, any breach ofrepresentation or warranty which results from any change that (i) occurs between theEffective Date and the Closing Date and (ii) is permitted under the terms of this Agreementor is beyond the reasonable control of Seller to prevent; *provided, however*, that theoccurrence of a change which is not permitted hereunder or is beyond the reasonable controlof Seller to prevent shall, if materially adverse to Buyer, constitute the non-fulfillmentof the condition set forth in Section 4.6(b). If, despite changes or other mattersdescribed in such certificate, the Closing occurs, Seller’s
 

 
representations and warranties set forth in this Agreement shall be deemed to have beenmodified by all statements made in such certificate;(f) Deliver to Buyer and the Title Company such evidence as the Title Company may reasonablyrequire as to the authority of the person or persons executing documents on behalf ofSeller;(g) Deliver to Buyer an affidavit duly executed by Seller stating (i) that Seller is not a“foreign person” as defined in the Federal Foreign Investment in Real Property Tax Act of1980 and the 1984 Tax Reform Act, and (ii) addressing any similar California law disclosurerequirements, in the form attached hereto as Exhibit E and made a part hereof;(h) If not already delivered to Buyer, deliver to Buyer, the Leases, the licenses andpermits, if any, in the possession of Seller or Seller’s agents, together with such leasingand property files and records that are material in connection with the continued operation,leasing and maintenance of the Property; provided that any such items shall be deemed tohave been delivered by Seller to Buyer if Seller leaves such items at the Property and/or ifManager has possession of such items. Buyer shall cooperate with Seller for a period ofseven (7) years after Closing in case of Seller’s need in response to any legal requirement,a tax audit, tax return preparation or litigation threatened or brought against Seller, byallowing Seller and its agents or representatives access, upon reasonable advance notice(which notice shall identify the nature of the information sought by Seller), at allreasonable times to examine and make copies of any relevant instruments, files and records,which right shall survive the Closing;(i) Deliver to the Escrow Agent an executed closing statement consistent with this Agreementand in a customary form;(j) Deliver evidence of the termination of the License Agreements;(k) Deliver the certificates/registrations of title for any vehicles owned by Seller andused in connection with the Property;(l) Deliver notices addressed to all interested parties, including tenants under the Leases,that the Property has been conveyed to Buyer and directing all payments and inquiries toBuyer at its address;(m) Execute and deliver two (2) original counterparts of the Balconies/Artwork HoldbackAgreement;(n) Execute and deliver two (2) original counterparts of the Parking Holdback Agreement; and(o) Deliver such additional documents as shall be reasonably required to consummate thetransaction expressly contemplated by this Agreement, provided that none of the same shallincrease the burdens upon or decrease the benefits to Seller hereunder.
 

 
4.3 Buyer’s Closing Obligations and Deliveries. At Closing, Buyer shall through EscrowAgent make the following deliveries and take the following actions on the Closing Date:(a) Pay to the Escrow Agent the full amount of the Purchase Price, as increased or decreasedby prorations and adjustments as herein provided, in immediately available wire transferredfunds pursuant to Section 1.5 above, it being agreed that at Closing the EarnestMoney shall be applied towards payment of the Purchase Price;(b) Join Seller in execution of (or deliver original executed counterparts of) theinstruments described in clauses (c), (d), (i), (m) and (n) of Section 4.2 above;(c) Deliver a letter duly executed by Buyer, in the form attached hereto as ExhibitF, confirming that Buyer is not acquiring the Property with the assets of an employeebenefit plan as defined in Section 3(3) of the Employee Retirement Income SecurityAct of 1974 (“ERISA”), and, in the event Buyer is unable or unwilling to make such arepresentation, Buyer shall be deemed to be in default hereunder, and Seller shall have theright to terminate this Agreement and to receive and retain the Earnest Money;(d) Deliver a certificate, dated as of the Closing Date and executed on behalf of Buyer by aduly authorized officer thereof, stating that the representations and warranties of Buyercontained in this Agreement are true and correct in all material respects as of the ClosingDate;(e) Deliver to Title Company such evidence as Title Company may reasonably require as to theauthority of the person or persons executing documents on behalf of Buyer;(f) Buyer hereby covenants and agrees to (i) obtain a sales tax license or permit for theHotel from each of the applicable jurisdictions and provide an exemption or resalecertificate (each, a “Resale Certificate”) to Seller not less than two (2) businessdays prior to Closing (it being the express intention of the parties hereto that no SalesTax shall be due and payable by Seller (or any Affiliate of Seller) in connection withBuyer’s inability or failure to obtain such Resale Certificates;(g) Execute or cause its post-Closing Hotel manager to execute an assumption of theCollective Bargaining Agreement unless Buyer has executed a new management agreement withManager prior to Closing;(h) Execute the New License Agreement, if applicable; and(i) Deliver such additional documents as shall be reasonably required to consummate thetransaction contemplated by this Agreement, provided that none of the same shall increasethe burdens upon or decrease the benefits to Buyer hereunder.4.4 Prorations, Credits and Other Adjustments. At Closing, Buyer and Seller shallprorate all items of income and expense which are customarily prorated between a buyer andseller for hotel properties comparable to the Hotel including, without limitation, theprorations and other adjustments provided below and in Section 1.8(b), Section1.10 and Section 1.11, and the net amount consequently owing to Seller or Buyershall be added to or subtracted from the proceeds of the Purchase Price payable to Seller atClosing. Beginning as close to the
 

 
  anticipated Closing Date as practicable, Seller shall, in consultation with Buyer and withBuyer’s reasonable cooperation, cause to be prepared a prorations and credit statement (the“Preliminary Statement”) which shall reflect all of the prorations, credits andother adjustments to the Purchase Price at Closing required under this Section 4.4,Section 1.8(b), Section 1.10 and Section 1.11, or under any otherprovision of this Agreement. As soon as Buyer and Seller have agreed upon the PreliminaryStatement, they shall jointly deliver a mutually signed copy thereof to Escrow Agent.     4.4.1 Proration of Taxes. All real estate advalorem taxes,general assessments and special assessments and all personal property advalorem taxes assessed against the Hotel (generically, “Taxes”) and payableduring the tax year in which Closing occurs and which are then due and payable shall be paidby Seller at or before Closing, and all of the same payable during the tax year in whichClosing occurs shall be prorated between Buyer and Seller as of the Closing Date inaccordance with local custom for the proration of taxes in commercial real estatetransactions in Santa Monica, California. Taxes which become due and payable and applicableto any following tax year, shall be the responsibility of Buyer. Seller retains the rightto commence, continue and settle any proceeding to contest any taxes for any taxable periodwhich encompasses any period prior to the date of the Closing, and shall be entitled to anyrefunds or abatements of Taxes awarded in such proceedings, provided that, to the extent thesame are prorated hereunder, Buyer shall be entitled to its prorated share thereof.     4.4.2 General Proration of Expenses.(a) The following items of expense with respect to any portion or aspect of the Hotelshall be prorated between Seller and Buyer as of the Closing Date:(i) All charges and expenses under any Operating Agreements.(ii) All utility charges (but excluding any utility deposits). To the extentreasonably practicable, though, in lieu of prorating the charges for anymetered utility service, Buyer and Seller shall endeavor to have the utilityread the meter as early as possible on the Closing Date, render a final billto Seller based on such reading and bill all subsequent service to Buyer.(iii) Prepaid expenses of the Hotel, but including without limitation, (1)the expense of all licenses and permits obtained in connection with theoperation of the Hotel, and (2) the expense of all insurance obtained bySeller or Manager for the Hotel and transferred to and assumed by Buyer.(iv) Fees, compensation and all other amounts payable under the LicenseAgreements prior to the termination thereof shall be the responsibility ofSeller (other than termination fees under the Sheraton Agreement, if any),and the fees, compensation and all other amounts payable under the NewLicense Agreement (if applicable) together with termination fees under theSheraton Agreement, if any, shall be the responsibility of Buyer.(v) All other Hotel operating expenses, other than employment expenses (whichare covered by Section 4.4.3 below).
 

 
     4.4.3 Employment Expenses.(a) Seller shall be responsible for all wages and other amounts owed to employees ofManager and/or Seller at the Property relating to the period prior to the Cut-OffTime, and Buyer shall be responsible for all wages and other amounts due to employeesat the Property relating to the period after the Cut-Off Time. The obligation to payor reimburse the Manager for the wages, salaries and other benefits of employment ofemployees of Manager and/or Seller, together with applicable employment andwithholding taxes of such employees, shall be allocated between Buyer and Seller asset forth in this Section 4.4.3.(i) With respect to hourly employees, (a) wages of hourly employees shall beallocated according to hours worked during the current pay period before andafter the Cut-Off Time; (b) employment and withholding taxes for the currentpay period for such employees shall be allocated in the same manner as wages;(c) accrued vacation and required contributions to health, pension and otherbenefit plans for such employees shall be allocated on the basis used byManager under the Management Agreement for allocating such costs toparticular accounting periods, with such costs attributable to the accountingperiod in which the Closing Date occurs to be allocated on a per diem basisaccording to the number of days in the current period occurring before andafter the Cut-Off Time.(ii) With respect to salaried employees, salaries, employment and withholdingtaxes, accrued vacation and other employment benefits for salaried employeesshall be allocated on the basis used by the Manager under the ManagementAgreement for allocating such costs to particular accounting periods, withsuch costs during the accounting period in which the Closing Date occurs tobe allocated on a per diem basis according to the number of days in thecurrent period occurring before and after the Cut-Off Time.(iii) Pension expenses for eligible employees shall be prorated at Closingbased on actual payroll amounts as reflected in Manager’s books as of theClosing Date.(b) Notwithstanding any provision of this Agreement to the contrary, Seller shall payout as of Closing all (i) severance or separation payments, (ii) sick pay, and (iii)“hospitalization pay”, if any, existing as of the Closing Date.(c) Seller shall be responsible for all pension plan payments payable to theRetirement Plan (as defined in Section 5.8(d) below), which is Local 11’smulti-employer plan under the Collective Bargaining Agreement to the extent relatingto the period prior to the Cut-Off Time. Buyer shall be responsible for all pensionplan payments payable to the Retirement Plan under the Collective BargainingAgreement to the extent relating to the period on or after the Cut-Off Time.(d) To the extent required by applicable law, accrued wages, vacation pay, health andwelfare benefit plan payments and other amounts accrued as of the Closing Date
 

 
and due to employees of the Hotel shall be paid at Closing by Seller and shall not beprorated unless Seller obtains consent from employees to allow accrued vacationand/or other benefits to be carried over to their employment with Buyer.4.4.4 Hotel Revenues.(a) At Closing, Seller and Buyer shall share equally all revenues from the Hotelguest rooms and facilities occupied on the evening immediately preceding the ClosingDate, including any sales taxes, room taxes, occupancy taxes and other taxes chargedto guests in such rooms, all parking charges, sales from mini-bars, in-room food andbeverage, telephone, facsimile and data communications, in-room movie, laundry, andother service charges allocable to such rooms with respect to the evening immediatelypreceding the Closing Date. All revenues from restaurants, lounges, vending machinesand other service operations conducted at the Property shall be allocated based onwhether the same accrued before or after the Cut-Off Time as described in thepreceding sentence, and Seller shall cause the Manager to separately record salesoccurring before and after the Cut-Off Time at the Property. The foregoing amountsare referred to collectively as “Guest Revenues”. Notwithstanding theforegoing, all revenues from any bars and lounges at the Property shall be proratedbased on the actual closing time for such bar or lounge. For example, if such bar orlounge closes at 2:00 a.m. on the Closing Date, Seller shall retain the revenues fromsuch services and operations even though such revenues were generated two (2) hoursafter the Cut-Off Time.(b) Revenues from conferences, receptions, meetings, and other functions occurring inany conference, banquet or meeting rooms in the Hotel, or in any adjacent facilitiesowned or operated by Seller, including usage charges and related taxes, food andbeverage sales, valet parking charges, equipment rentals, and telecommunicationscharges, shall be allocated between Seller and Buyer, based on when the functiontherein commenced, with (i) one-day functions commencing prior to the Cut-Off Timebeing allocable to Seller, (ii) functions commencing after the Cut-Off Time beingallocable to Buyer, and (ii) multi-day functions being allocated between Seller andBuyer according to when the event commences and is scheduled to end. The foregoingamounts are referred to collectively as “Conference Revenues.”(c) At Closing, the right to collect all Receivables not actually collected by Selleror Manager prior to the Cut-Off Time shall be retained by Seller. Buyer shall, at nomore than *di minimis*third party out-of-pocket costs to Buyer, reasonably cooperatewith Seller and Manager in connection with Seller’s collection efforts after Closingand, to the extent any Receivables are paid to Buyer or Buyer’s agents after Closing,Buyer shall cause all such Receivables to be promptly remitted to Seller.(d) Any operating revenues not otherwise provided for in this Section 4.4,shall be prorated between Buyer and Seller as of Closing.4.4.5 Rent. Rent and other payments payable by tenants, licensees,concessionaires, and other persons using or occupying the Real Property or any part thereof
 

 
under a Lease or otherwise, if any, for or in connection with such use or occupancy,including, without limitation, fixed monthly rentals, additional rentals, percentagerentals, escalation rentals, retroactive rentals, operating cost pass-throughs, common areamaintenance charges, HVAC charges, payments of taxes and insurance expenses,promotional/marketing charges, construction receivables and other sums and charges payableby the tenants under the Leases (collectively, “Rent”) shall be prorated as of theClosing such that Seller will be entitled to Rent attributable to periods prior to theClosing and Buyer will be entitled to Rent attributable to periods from and after theClosing, all as more particularly set forth below:(a) All Rent, other than Percentage Rent (as defined below), collected bySeller, prior to Closing, under the Leases for the month in which the Closingoccurs (“Current Rent”) shall be prorated as of the Closing Date.(b) All Rent other than Current Rent (“Rent Arrears”) shall not beprorated at Closing. In the event that either Buyer or Seller receives Rentfrom a tenant after the Closing Date, such Rent shall be applied in thefollowing order of priority (after deduction of actual out-of-pocket costs ofcollection paid by Buyer to third parties): (a) first to current rent due toBuyer, (b) second to delinquent rent due to Buyer, and (c) thereafter to RentArrears due to Seller from such tenant. Any sums owed to Seller pursuant tothe foregoing shall be paid by Buyer within ten (10) days following receiptby Buyer. Buyer shall pursue all Rent Arrears in a commercially reasonablemanner and shall have the right to negotiate settlements with tenants whohave Rent Arrears as it may determine in good faith; provided that, (x)Seller shall have the unrestricted right to pursue collection from any tenantnot in possession of its space as of the Closing Date in Seller’s solediscretion including, without limitation, initiating and prosecuting alawsuit against the applicable tenant (other than a lawsuit seekingeviction), and (y) in the event that after Closing Buyer evicts or otherwiseterminates the possession of any tenant with Rent Arrears, if Buyer hasneither released the tenant nor pursued eviction to judgment, Seller shallhave the unrestricted right to pursue collection from such tenant in Seller’ssole discretion including, without limitation, initiating and prosecuting alawsuit against the applicable tenant.(c) Percentage rent or overage rent (referred to herein as “PercentageRent”) under the Leases shall be prorated between Buyer and Seller on aLease-by-Lease basis with Seller entitled to the portion of total PercentageRent paid under each Lease for the portion of the current Lease Year (asdefined below) in which the Closing occurs (the “Subject Lease Year”)occurring prior to the Closing Date and Buyer being entitled to the balanceof Percentage Rent for the remainder of the Subject Lease Year, based on themonthly accruals of Percentage Rents under the Leases for the period throughthe month in which the Closing Date occurs, with an adjustment to be madepost-closing to account for any Percentage Rent attributable to the month inwhich the Closing Date occurs. As used herein, the term “Lease Year”means the twelve (12) month period (or, as to tenants for which the Closing
 

 
occurs during a partial Lease Year, such applicable shorter period) as towhich annual Percentage Rent is owed under each Lease.     4.4.6 Hotel Payables. At Closing, Buyer shall receive a proration credit equalto the excess of (a) the aggregate estimated amount of all outstanding accounts payable forthe Hotel as of the Closing Date (“Hotel Payables”) in the Preliminary Statementover (b) Buyer’s prorated share of such Hotel Payables under Section 4.4.2, andBuyer shall assume the obligation to satisfy all Hotel Payables. After Closing, beforepaying any amount invoiced or otherwise claimed by a third party due with respect to theHotel operations prior to Closing which is not included on such schedule (or is claimed inan amount larger than that shown on such schedule), Buyer shall first submit such invoice orclaim to Seller. Unless Seller, within fifteen (15) days after receiving such submission,objects to such invoice or claim (thereby making it a “Seller Disputed Payable”),Buyer may pay the same and take a credit for such payment on the Final Statement.Notwithstanding the foregoing, upon Closing, Buyer shall assume all obligations of Seller topay for any (i) consumables or other items ordered by or for the benefit of Seller in theordinary course of business but which are not yet received as of the Closing Date, and (ii)items or services listed on a purchase order log prepared by Manager, which list shall beupdated by Manager immediately prior to Closing; provided that, there shall not be anyadjustment to the Purchase Price in connection with Buyer’s assumption of the liabilitiesdescribed in clauses (i) and (ii) of this sentence.     4.4.7 Credit for Certain Inventories. As of the date immediately prior to theClosing Date, Seller and Buyer shall jointly conduct or cause the Manager to conduct aninventory of all (a) Unopened Inventory, and (b) all Retail Inventory in any Hotel gift shopor any other area at the Hotel conducting retail sales, and shall deliver a written reportthereon to Seller and Buyer. Such report shall reflect the value of the Unopened Inventoryand the Retail Inventory at the acquisition cost thereof. Inasmuch as the UnopenedInventory and the Retail Inventory shall be deemed included in the Purchase Price, neitherparty shall receive a credit with respect to the Unopened Inventory and the RetailInventory.     4.4.8 Credit for Reservation Deposits. Buyer shall receive a proration creditequal to the aggregate amount of advance deposits that shall have been received by Sellerprior to the Cut-Off Time on account of reservations for use or occupancy of the Propertyafter the Cut-Off Time.     4.4.9 Credit for Cash Banks. Seller shall receive a credit at Closing in anamount equal to all House Bank Funds.     4.4.10 Regarding Hotel Prorations Generally. Unless this Section 4.4expressly provides otherwise: (A) all prorations hereunder with respect to the Hotelshall be made as of 12:00:01 a.m., Los Angeles time (for the Hotel) (“Cut-Off Time”)on the Closing Date, (B) all prorations shall be made on an actual daily basis, and (C) forpurposes of such prorations, all items of revenue and expense with respect to the Hotel’soperations shall be classified and determined in accordance with the Uniform System ofAccounts, as reasonably modified by Manager for use at the Hotel and otherwise in accordancewith generally accepted accounting principles; provided, however, with respect to food andbeverage services at bars, restaurants or lounges, the Cut-Off Time means 2:00 a.m. local
 

 
time on the Closing Date. Except as otherwise expressly provided herein, in any casein which Buyer receives a credit at Closing on account of any obligation of Sellerhereunder, Seller shall have no further liability for such obligation to the extent of thecredit so given, and Buyer shall pay and discharge the same.     4.4.11 Vouchers. Buyer shall (a) honor all outstanding unexpired giftcertificates, coupons or other writings issued by Seller as set forth in Schedule4.4.11 attached hereto that entitles the holder or bearer thereof to a credit (whetherin a specified dollar amount as for a specified item, such as room night or meals) to beapplied against the usual charge for rooms, meals and/or goods and services at the Hotel(collectively, “Vouchers”) and shall assume all liability, if any, for alloutstanding Vouchers as of the Closing Date regardless of any purported expiration, (b)receive a credit against the Purchase Price payable at Closing equal to seventy percent(70%) of the face value (or seventy percent (70%) of the rack rate if no face value is givenor if only a maximum value is given) of those Vouchers set forth in Schedule 4.4.11attached hereto and incorporated herein by this reference, as updated as of the ClosingDate, and (c) indemnify, defend and hold Seller harmless from and against all claims,liabilities, costs and expenses arising out of the Vouchers from and after the Closing Date.     4.4.12 Air Condition Unit Installation. Seller has ordered new airconditioning units (the “AC Units”) as required pursuant to that certain defaultnotice dated August 17, 2010 from Sheraton (the “Sheraton Letter”) and shall pay forthe AC Units prior to Closing. Seller shall also endeavor to begin installation of the ACUnits at the Property prior to Closing. In the event no AC Units are installed prior toClosing, Buyer shall receive a credit against the Purchase Price in the amount of TwentyThousand and No/100 Dollars ($20,000) at Closing (the “AC Credit”) and Buyer shallassume all responsibility for the installation of all the AC Units. In the event, however,that some of the AC Units have been installed prior to Closing (each an “Installed ACUnit”), Buyer shall receive a pro rata share of the AC Credit for any AC Units remainingto be installed, and Buyer shall assume all responsibility for the installation of theremaining uninstalled AC Units.     4.4.13 Utility and Other Deposits.               (a) At Closing, Seller shall receive a credit for all refundable cash or other depositsposted with utility companies serving the Property or any governmental agencies orauthorities or posted pursuant to any Operating Agreement, and Seller shall assign to Buyerall right, title and interest in and to such refundable cash or other deposits, or, atSeller’s option, Seller shall be entitled to receive and retain such refundable cash anddeposits.               (b) Buyer shall be entitled to a credit for all unapplied and refundable security andother deposits retained by Seller as of the Closing Date with respect to any Leases at theHotel.     4.4.14 Final Statement; Post-Closing Adjustments. Except for prorations forreal estate taxes and other assessments, which shall be adjusted as of the Closing Date,and, if necessary, re-adjusted within fifteen (15) business days of receipt of the tax billfor the tax year in which the Closing occurs if such tax bill was not issued as of theClosing Date,
 

 
Buyer and Seller shall make a one-time post-Closing adjustment of any item of incomeand expense subject to adjustment as provided above which was either incomplete or incorrect(whether as a result of an error in calculation or a lack of complete and accurateinformation) as of the Closing. Buyer will prepare and deliver to Seller for its review andapproval a statement of prorations (the “Final Statement”) within sixty (60) daysfollowing the Closing Date, and the party in whose favor the original incorrect adjustmentor error was made (“Adjusting Party”) shall pay to the other party (“RequestingParty”) the sum necessary to correct such prior incorrect adjustment or error within ten(10) days after delivery of the Final Statement. Notwithstanding any provision of thisAgreement to the contrary, all items required to be adjusted pursuant to this Section4.4 shall be adjusted within 75 days of Closing (except real estate taxes, which shallbe re-adjusted within the period set forth above), and such adjustment shall be final and nofurther adjustment to the prorations or the Purchase Price shall be made.     4.4.15 Resolution of Disputes. In the case of a dispute, the parties shallattempt to resolve such dispute, but if for any reason such dispute is not resolved by thedate that is thirty (30) days after the delivery of the original notice of the claimedadjustment by Buyer or Seller, but not to exceed 75 days after Closing, then the partiesshall submit such dispute to Deloitte & Touche (“Outside Accountants”), and thedetermination of the Outside Accountants, which shall be made within a period of fifteen(15) days after such submittal by the parties, shall be conclusive. The fees and expensesof the Outside Accountants shall be paid equally by Buyer and Seller. At such time as theamount of any adjustment or dispute shall be determined (either by agreement or bydetermination of the Outside Accountants), any amount that shall be payable by theRequesting Party to the Adjusting Party as a result of such adjustment or determinationshall be paid within ten (10) business days after the date on which such agreement ordetermination shall have been made.     4.4.16 Survival. The provisions of this Section 4.4 shall surviveClosing.4.5 Closing Costs. Seller shall pay (a) the fees of any counsel representing it inconnection with this transaction; (b) the premium for the Title Policy including any premiumfor extended coverage (i.e., ALTA 2006 coverage), but not the premium for any endorsements(other than curative endorsements accepted by Buyer as a cure to a title objection, as setforth above); (c) all County and City documentary transfer taxes or conveyance taxes payableby reason of the transfer of the Real Property; (d) the fees for recording the Deed; and (e)one-half (1/2) of any escrow fee which may be charged by the Escrow Agent. Buyer shall pay (i)the fees of any counsel representing Buyer in connection with this transaction; (ii) 100% ofthe (A) cost of any endorsements to the Title Policy other than curative endorsements acceptedby Buyer as a cure to a title objection which cost of such curative endorsements shall be paidby Seller, and (B) cost of any title insurance provided to Buyer’s lender; (iii) the cost ofthe updated Survey; (iv) all bulk sales taxes and any sales tax on the sale of the PersonalProperty (or any part thereof); and (v) one-half (1/2) of any escrow fees charged by the EscrowAgent. All other costs and expenses incident to this transaction and the closing thereofshall be paid in a manner consistent with custom for similar transactions in Los Angeles,California. Notwithstanding the foregoing, in the event that this Agreement is terminated asa result of a party’s default, such defaulting party shall pay all escrow and titlecancellation fees charged in connection with such cancellation.
 

 
4.6 Conditions Precedent to Obligation of Buyer. The obligation of Buyer to consummatethe transaction hereunder shall be subject to the fulfillment on or before the Closing Date ofall of the following conditions, any or all of which may be waived by Buyer in its solediscretion:(a) Seller shall have delivered to Buyer or deposited with Escrow Agent all of the itemsrequired to be delivered to Buyer or deposited with Escrow Agent pursuant to the terms ofthis Agreement, including but not limited to, those provided for in Section 4.2.(b) All of the representations and warranties of Seller contained in this Agreement shall betrue and correct in all material respects as of the Closing Date (with appropriatemodifications permitted under this Agreement or not materially adverse to Buyer).(c) Seller shall have performed and observed, in all material respects, all covenants andagreements of this Agreement to be performed and observed by Seller as of the Closing Date.(d) Seller shall have delivered to Buyer reasonable evidence of completion and payment infull of the capital improvements required pursuant to the Sheraton Letter; provided,however, that for the AC Units, Seller shall instead deliver to Buyer reasonable evidencethat all of the AC Units have been purchased (and paid for in full) and, to the extentapplicable, reasonable evidence that the Installed AC Units have been installed.(e) Seller shall have obtained and delivered to Buyer a “tax clearance” letter from theCalifornia Board of Equalization showing that all sales and other taxes with respect to theHotel to be paid by Seller to the State of California have been paid or that none are owing.(f) The Closing of the Liquor Escrow or the execution and delivery of a mutually acceptableinterim management agreement allowing for the operation of the Hotel by Buyer or its managerand the operation of the Existing Liquor License post Closing by the holder of the ExistingLiquor License.(g) The Title Company shall be irrevocably committed to issuance of the Title Policy as ofClosing.(h) The Management Agreement shall have been terminated as of Closing.4.7 Conditions Precedent to Obligation of Seller. The obligation of Seller to consummatethe transaction hereunder shall be subject to the fulfillment on or before the of Closing Dateof all of the following conditions, any or all of which may be waived by Seller in writing inits sole discretion:(a) Escrow Holder shall have received the Purchase Price, as adjusted pursuant to thisAgreement and shall be irrevocably committed to deliver the Purchase Price to Seller in themanner provided for in this Agreement.
 

 
(b) Buyer shall have delivered to Seller all of the items required to be delivered to Sellerpursuant to the terms of this Agreement, including but not limited to, those provided for inSection 4.3, other than delivery of the Purchase Price which shall be delivered toEscrow Holder.(c) All of the representations and warranties of Buyer contained in this Agreement shall betrue and correct in all material respects as of the Closing Date.(d) Buyer shall have performed and observed, in all material respects, all covenants andagreements of this Agreement to be performed and observed by Buyer as of the Closing Date.(e) The Sheraton Agreement shall have been terminated as of Closing without any cost orpenalty to Seller.4.8 Failure or Waiver of Conditions Precedent. In the event any of the conditions setforth in Sections 4.6 or 4.7 are not fulfilled or waived on or before theOutside Closing Date, the party benefited by such conditions may, by written notice to theother party, terminate this Agreement, whereupon all rights and obligations hereunder of eachparty shall end except those that expressly survive any termination. Either party benefitedby a condition set forth in Sections 4.6 and 4.7 above may, at its election,at any time or times on or before the date specified for the satisfaction of the condition,waive in writing the benefit of such condition. Buyer’s consent to the Closing pursuant tothis Agreement shall waive any remaining unfulfilled conditions, and any liability on the partof Seller for breaches of representations and warranties of which Buyer had knowledge as ofthe Closing.4.9 Alcoholic Beverage License and Inventory.(a) Buyer shall use diligent, good faith efforts, and Seller shallcooperate with Buyer, to file any and all paperwork necessary for the transfer of the Type47 Liquor License (No. 389701) issued to KOR Hotels, LLC with respect to the Hotel (the“Liquor License”), to Buyer on or after the Closing Date; provided that, suchtransfer and cooperation of Seller (i) shall not create any potential liability for Sellerand (ii) be at no cost or expense to Seller. Buyer agrees to pay all fees, charges, andrelated costs in connection with the transfer of the Liquor License. Within thirty (30)days of the parties’ execution of this Purchase and Sale Agreement, Buyer shall submit withthe California Department of Alcoholic Beverage Control (“CABC”) all necessary paperwork totransfer the Liquor License to Buyer. Buyer specifically acknowledges and agrees that thetransfer of the Liquor License to Buyer on the Closing Date shall not be a condition toBuyer’s obligation to close the transaction contemplated under this Agreement, provided,that, in the event such transfer shall not have occurred upon the Closing Date, the Food andBeverage Management Agreement referenced in subsection (c), below, shall be executed anddelivered as of Closing. In no event shall Seller be required to transfer to Buyer theLiquor License or any alcoholic beverage inventory which is located at or held for use inthe Hotel unless and until the CABC has approved the transfer of the Liquor License toBuyer.(b) Cooperation by Seller shall include the opening of a “LiquorLicense Escrow”, at an escrow company of Buyer’s designation, as required by applicable lawfor the transfer of the
 

 
Liquor License, and the associated transfer of any unopened containers of alcoholicbeverages (“Alcoholic Beverage Inventory”). The Liquor License Escrow arrangementsshall include the following(i) the conveyance to Buyer of all unopened, and unexpiredcontainers of alcoholic beverages upon the approval by the CABC of the transfer ofthe Liquor License to Buyer;(ii) a purchase price of Sixty Thousand and No/100 Dollars($60,000.00) for the existing Liquor License and the unopened alcoholic beverageinventory to be transferred by Seller to Buyer. The aforementioned amount of depositis included in the Purchase Price (and is not in addition to the Purchase Price) andsaid payment shall be credited to Buyer at Closing. Any and all funds remaining inthe Liquor License Escrow after the payment of claims by Seller’s creditors, if any,shall be remitted to Seller by the escrow company upon the approval by the CABC ofthe transfer of the Liquor License to Buyer; and(c) If the Liquor License has not been transferred to Buyereffective as of the Closing Date, then Buyer’s obligation to close the purchase of the Hotelshall not be excused or delayed or in any other way be affected thereby, the Purchase Pricefor the Property shall not be reduced, Buyer’s obligation to pay the Liquor License Pricepursuant to subparagraph (ii) above shall not be excused or reduced, and Seller shall haveno additional obligation as a result thereof; Seller shall, for a period of one hundred andeighty days (180) following the Closing, cooperate and assist in Buyer’s efforts to have theLiquor License transferred to Buyer in accordance with the terms of this Section (itbeing the sole responsibility of Buyer to arrange for such transfer or issuance of a newalcoholic beverage license) by executing and delivering to Buyer a Food and BeverageManagement Agreement, in the form attached as Exhibit G hereto, same to have a termof 90 days plus one 90 day extension exercisable by Buyer in the event issuance of theLiquor License has not occurred prior to expiration of the original term thereof.4.10 Disbursements and Other Actions by Escrow Agent. Upon the Closing, Escrow Agentshall promptly undertake all of the following in the following order and manner:(a) Cause the Deed and any other documents which the parties hereto may mutually direct tobe recorded in the Official Records of Los Angeles County, California in the order directedby the parties;(b) Disburse to Seller from funds deposited by Buyer with Escrow Agent towards payment ofall items (including, without limitation, the Purchase Price) chargeable to the account ofBuyer;(c) Deliver to Seller a fully executed original of the instruments described in clauses (c),(d), (i), and (j) of Section 4.2 above and clauses (c), (d) and (f) of Section4.3 above and a conformed copy of the Deed;(d) Deliver to Buyer a fully executed original of the instruments described in clauses (b),(c), (d), (e), (g), (i), and (j) of Section 4.2 above and a conformed copy of theDeed; and(e) Direct the Title Company to issue the Title Policy to Buyer.
 

 
**ARTICLE V****REPRESENTATIONS, WARRANTIES AND COVENANTS**5.1 Representations and Warranties of Seller. Seller hereby makes the followingrepresentations and warranties to Buyer as of the Effective Date, subject to thequalifications and exceptions set forth below:(a) Organization and Authority. Seller has been duly organized and is validlyexisting and in good standing under the laws of Delaware. Seller has the full right andauthority to enter into this Agreement and to transfer all of the Property to be conveyed bySeller pursuant hereto and to consummate or cause to be consummated the transactionscontemplated herein to be made by Seller. The person signing this Agreement on behalf ofSeller is authorized to do so.(b) No Breach. To Seller’s knowledge, the execution, delivery and performance ofthis Agreement by Seller and the consummation of the transaction contemplated herein willnot: (i) result in a breach or acceleration of or constitute a default or event oftermination under the provisions of any agreement or instrument by which the Property isbound or affected which would have a material adverse impact on the ownership and operationof the Property by Buyer; (ii) result in the creation or imposition of any lien, charge orencumbrance, against the Property or any portion thereof; or (iii) constitute or result inthe violation or breach by Seller of any judgment, order, writ, injunction or decree issuedagainst or imposed upon Seller or result in the violation of any applicable law, rule orregulation of any governmental authority which, with respect to any of the foregoing, wouldhave a material adverse impact on the ownership or operation of the Property by Buyer.(c) Litigation/Condemnation. Except as set forth on Schedule 5.1(c)attached hereto, Seller has not received written notice of any, and there is no, litigationwhich has been filed (and that is pending) against Seller that arises out of the ownershipof the Property and that would materially and adversely affect the Property or use thereofor Seller’s ability to perform its obligations hereunder, nor has Seller received writtennotice of any eminent domain, condemnation or similar proceedings relating to the RealProperty. To Seller’s knowledge, there is no threatened litigation that arises out of theownership of the Property and that would materially and adversely affect the Property or usethereof or Seller’s ability to perform its obligations hereunder.(d) Leases. To Seller’s knowledge, the list of Leases attached hereto asSchedule 1.1(h) is accurate and lists all Leases currently affecting the Hotel, andSeller has delivered (or otherwise made available to Buyer) a true and correct copy of suchLeases and no uncured notice of default has been delivered by Seller or received by Sellerwith respect to any Leases and there are no oral understandings or side agreements with anytenant of the Property that has not been reduced to a writing and which is not set forthamong the Leases.(e) No Violations. Except as set forth on Schedule 5.1(e) attached hereto,to Seller’s knowledge, Seller has not received prior to the Effective Date any writtennotification from
 

 
any governmental or public authority that the Property is in violation of any applicablefire, health, building, use, occupancy or zoning laws or other statute, ordinance, law orcode (including without limitation Environmental Laws, the Americans with Disabilities Act,as amended, and the Development Agreement) bearing on the construction, operation or use ofthe Property or any part thereof where such violation remains outstanding and, ifunaddressed, would have a material adverse effect on the use of the Property as currentlyowned and operated.(f) Operating Agreements and Equipment Leases. To Seller’s knowledge, there are noOperating Agreements or Equipment Leases which will affect the Property after the ClosingDate except as set forth on the Schedule 1.1(e)-1 and Schedule 1.1(e)-2,respectively, and no Operating Agreements or Equipment Leases have been amended except asset forth in said Schedules and there are no oral understandings or side agreements withrespect to the rental of any equipment that has not been reduced to a writing and which isnot set forth on said Schedules and there are no oral understandings or side agreements withrespect to any service or equipment that has not been reduced to a writing and which is notset forth among said Schedules. To Seller’s knowledge, no uncured written notice ofmaterial default has been delivered by Seller or received by Seller with respect to anyOperating Agreements or Equipment Leases. To Seller’s knowledge, the copies of OperatingAgreements and Equipment Leases delivered or made available to Buyer by Seller are true andcomplete.(g) Personal Property. To Seller’s knowledge, Seller owns the Personal Property,other than any leased Personal Property under the Equipment Leases, and upon its delivery toBuyer at Closing, the Personal Property shall be free of all liens and encumbrances.(h) No Consents. No consent, approval or action of, filing with or notice to anygovernmental or regulatory authority or any other person or entity on the part of Seller isrequired in connection with the execution, delivery and performance of Agreement or theconsummation of the transactions contemplated.(i) Patriot Act Compliance. Neither Seller nor any individual or entity having aninterest in Seller is a person or entity either (i) is listed on the Specially DesignatedNationals and Blocked Persons List maintained by the Office of Foreign Assets Control,Department of the Treasury (“OFAC”) pursuant to Executive Order No. 133224, 66 Fed.Reg. 49079 (September 25, 2001) (the “Order”) and/or on any other list of terroristsor terrorist organizations maintained pursuant to any of the rules and regulations of OFACor pursuant to any other applicable orders (such lists are collectively referred to as the“Lists”); (ii) is a person or entity who has been determined by competent authorityto be subject to the prohibitions contained in the Orders; or (iii) is owned or controlledby, or acts for or on behalf of, any person or entity on the Lists or any other person orentity who has been determined by competent authority to be subject to the prohibitionscontained in the Order.(j) Compliance with Laws. Seller has not received prior to the Effective Date anywritten notice of default under that certain Development Agreement dated June 29, 1983 (the“Development Agreement”) that remains uncured and, if unaddressed, would have amaterial adverse effect on the use of the Property as currently owned and operated and/orthe size of the Improvements. To Seller’s knowledge, the Development Agreement is in fullforce and effect.
 

 
(k) Environmental Reports. Seller has delivered true and correct copies of allwritten studies and reports in Seller’s possession or control that were prepared byenvironmental consultants for Seller regarding the presence of hazardous waste in, on orunder the Real Property.(l) Financial Information. The financial information provided by Seller to Buyerthrough Broker, including without limitation, the operating statements, general ledger andreconciliations, are true, correct and complete and, to Seller’s knowledge, the auditedfinancial statements fairly and accurately represent Seller’s and the Property’s financialposition for the periods covered thereby.(m) Sale of All Assets in One Transaction. The sale of the Hotel pursuant to thisAgreement is the sale of all or substantially all Seller’s assets and is not one in a seriesof three or more sales of assets by Seller within a 12 month period and Seller does not holdor use the property being sold pursuant to this Agreement in activities requiring a“seller’s permit” under California Code of Regulations 1595(b).(n) Pending Actions. Except as set forth in Schedule 5.1(c), Seller has received nonotice of any litigation or other adverse proceeding to be commenced against Manager andthere is no action, suit, arbitration, unsatisfied order or judgment, governmentinvestigation or proceeding pending against Manager which, if adversely determined, couldindividually or in the aggregate materially interfere with or affect the consummation of thetransaction contemplated by this Agreement.Notwithstanding the foregoing, if Buyer has knowledge of a breach of any representation orwarranty made by Seller in this Agreement and Buyer nevertheless proceeds to close thepurchase of the Property, such representation or warranty by Seller shall be deemed to bequalified or modified to reflect Buyer’s knowledge of such breach and Seller shall have noliability whatsoever respecting the same.5.2 Knowledge Defined. For purposes of this Agreement, “knowledge” means (a)with respect to Seller, the actual knowledge of Brad Korzen, the President of Bronze Corp.(the sole owner of the Managing Member of the sole owner of the Seller) (provided that, in noevent shall such person have any personal liability arising under this Agreement), without anyduty of inquiry or investigation, and expressly excluding the knowledge of any othershareholder, partner, member, trustee, beneficiary, director, officer, manager, employee,agent or representative of Seller or any of its affiliates, and (b) with respect to Buyer, (i)the actual knowledge of Thomas Fisher (provided that, in no event shall such person have anypersonal liability arising under this Agreement), (ii) any matter disclosed in any exhibits orschedules to this Agreement, (iii) any matter disclosed in any of the Seller Due DiligenceMaterials or any other documents or materials provided or made available by Seller or itsagents to Buyer prior to Closing, and (iv) any matter disclosed by Buyer’s inspections orinvestigations of the Property. For the purposes of this definition, the term “actual knowledge” means, with respect to any person, the conscious awareness of such personat the time in question without any duty of inquiry or investigation, and expressly excludesany constructive or implied knowledge of such person.
 

 
5.3 Survival of Seller’s Representations and Warranties. The representations andwarranties of Seller set forth in Section 5.1 as updated by the certificate of Sellerto be delivered to Buyer at Closing in accordance with Section 4.2(e) hereof, shallsurvive Closing for a period of two hundred seventy (270) days. No claim for a breach of anyrepresentation or warranty of Seller shall be actionable or payable unless each of thefollowing conditions is satisfied: (a) the breach in question results from or is based on acondition, state of facts or other matter as to which Buyer did not have knowledge prior toClosing, (b) the valid claims for all such breaches, if any, collectively aggregate more than$100,000, in which event the full amount of such claims shall be actionable, and (c) writtennotice containing a description of the specific nature of such breach shall have been given byBuyer to Seller prior to the expiration of said two hundred seventy (270) day period and anaction shall have been commenced by Buyer against Seller within thirty (30) days after thetermination of the survival period provided for above in this Section 5.3. Buyeragrees to first seek recovery under any insurance policies, the Title Policy, the New LicenseAgreement (to the extent of one) and the Operating Agreements prior to seeking recovery fromSeller, and Seller shall not be liable to Buyer if Buyer’s claim is satisfied from suchinsurance policies, title policies or agreements. As used herein, the term “Cap”shall mean the total aggregate amount of Two Million and No/100 Dollars ($2,000,000.00).Notwithstanding any provision of this Agreement to the contrary, in no event shall (i)Seller’s aggregate liability to Buyer for breach of any representation or warranty of Sellerin this Agreement or the certificate to be delivered by Seller at Closing pursuant toSection 4.2(e) hereof, taken in the aggregate with any other claims by Buyer againstSeller (including any indemnification obligations), exceed the amount of the Cap, or (ii)Seller be liable for any consequential damages of Buyer or any punitive damages.5.4 Covenants of Seller. Seller hereby covenants with Buyer as follows:(a) From the Effective Date hereof until the Closing or earlier termination of thisAgreement, Seller shall use reasonable efforts to cause Manager to operate and maintain theHotel in a manner generally consistent with the manner in which Seller has operated andmaintained the Hotel prior to the date hereof; provided, however, that Buyer acknowledgesthat Seller’s ability to control the operation of the Hotel is limited by the terms of theManagement Agreement.(b) From the Effective Date hereof until Closing or the earlier termination of thisAgreement, Seller shall use commercially reasonable efforts to perform its materialobligations under the Operating Agreements. Notwithstanding any of provision of thisAgreement to the contrary, Buyer acknowledges and agrees that pursuant to the ManagementAgreement, Manager is vested with decision making authority over the Hotel and thereforeSeller’s ability to control the management and operation of the Hotel is circumscribed byand must be exercised in accordance with, the Management Agreement.(c) Prior to the Closing Date, Seller shall provide Buyer with: (i) a copy of eachparticipation agreement (or similar contract) with, and the current contributions rateschedule for, the Retirement Plan and any other retirement, health, welfare or other fringebenefit fund or plan (each a “Taft-Hartley Plans”) to which Seller or Manager has acontribution obligation or other liability with respect to Any Employee (as defined below);(ii) an itemized and accurate contribution base units history for the Retirement Plan (as
 

 
defined below) for the Seller’s and/or Manager’s Local 11 bargaining unit employees for thecurrent Retirement Plan plan year to most recent month end preceding the Closing Date andfor each of the prior Retirement Plan plan years (up to but not in excess of three priorRetirement Plan years); (iii) a copy of any notice received by the Seller or the Managerprior to the Closing Date from the Retirement Plan of any determination that the RetirementPlan is in endangered or critical status as determined under the applicable provisions ofthe Pension Protection Act of 2006; and (iv) the name, street address, telephone number, faxnumber, and e-mail address of the board of trustees and, if separate, the plan administratorof the Retirement Plan and each other Taft-Hartley Plan.(d) From and after the Effective Date, Seller shall not enter into any new managementagreement or Operating Agreements or other agreements or encumbrances with respect to theProperty, nor shall Seller enter into any agreements modifying the Operating Agreements,Permitted Exceptions or Leases unless (i) any such agreement or modification will not bindBuyer or the Property after the Closing Date or is subject to termination on not more thanthirty (30) days’ notice without penalty, or (ii) Seller has obtained Buyer’s prior writtenconsent to such agreement or modification, same to be granted or denied in Buyer’s solediscretion. Seller agrees to cancel and terminate effective as of the Closing Date anyOperating Agreements requested in writing by Buyer to the extent permissible under the termsof such Operating Agreements, provided any fee or penalty for such cancellation shall bepaid for by Buyer.(e) From the Effective Date until the Closing or earlier termination of this Agreement,Seller shall conduct the business of the Property in the ordinary course, and will not: (i)transfer or convey the Property or any interest in Seller, or enter into any agreement to doso; (ii) create or agree to any easements, liens, mortgages, encumbrances or other intereststhat would affect the Property or Seller’s ability to comply with this Agreement; (iii) failto maintain and repair the Property in at least the manner that Seller has done previously;(iv) change Seller’s existing policies of public liability and hazard and extended coverageinsurance insuring the Property; (v) fail to comply promptly with any notices of violationof laws or municipal ordinances, regulations, orders or requirements of departments ofhousing, building, fire, labor, health, or other state, city or municipal departments orother governmental authorities having jurisdiction against or affecting the Property or theuse or operation thereof, without the prior written consent of Buyer, which consent may begranted or denied in Buyer’s sole discretion; and/or (vi) terminate any tax appeals,condemnation awards proceedings, zoning changes, public roadway and/or traffic realignmentnegotiations with public authorities or the like, and/or storm water management agreements,and the like benefiting the Property.(f) Seller shall, within five days after the Effective Date, apply to the California StateBoard of Equalization for a “tax clearance” letter showing that all sales and other taxeswith respect to the Hotel to be paid by Seller to the State of California have been paid orthat none are owing and Seller shall thereafter diligently pursue obtaining the same andSeller shall deliver the same to Buyer prior to Closing.(g) From and after the Effective Date through Closing, Seller shall promptly deliver toBuyer copies of any written communication sent or received by Seller or sent or received bythe general manager or controller of the Hotel (i) which constitutes proper “notice” under
 

 
any of the Leases or Operating Agreements (but shall not be obligated to deliver otherwritten communications not defined as a notice under the applicable agreement (*e.g.*, email))and (ii) in connection with governmental rules and regulations impacting the Property (tothe extent that such communications involve matters which would have a material and adverseimpact on the ownership and operation of the Property).5.5 Representations and Warranties of Buyer. Buyer hereby represents and warrants toSeller:(a) ERISA. Buyer is not acquiring the Property with the assets of an employeebenefit plan as defined in Section 3(3) of ERISA.(b) Organization and Authority. Buyer has been duly organized and is validlyexisting and in good standing under the laws of Delaware and is authorized to do business inCalifornia. Buyer has the full right, power and authority to purchase the Property asprovided in this Agreement and to carry out Buyer’s obligations hereunder, and all requisiteaction necessary to authorize Buyer to enter into this Agreement and to carry out itsobligations hereunder have been, or by the Closing will have been, taken. The personsigning this Agreement on behalf of Buyer is authorized to do so, and this Agreement isenforceable against Buyer in accordance with its terms, subject to bankruptcy, insolvencyand similar laws.(c) No Breach. To Buyer’s knowledge, the execution, delivery and performance ofthis Agreement by Buyer and the consummation of the transaction contemplated herein willnot: (i) result in a breach or acceleration of or constitute a default under any agreementor instrument by which Buyer is bound or affected which would have a material adverse impacton the ability of Buyer to timely close the acquisition of the Property pursuant to theterms of this Agreement; or (ii) constitute or result in the violation or breach by Buyer ofany judgment, order, writ, injunction or decree issued against or imposed upon Buyer orresult in the violation of any applicable law, rule or regulation of any governmentalauthority which, with respect to any of the foregoing, would have a material adverse impacton the ability of Buyer to timely complete the acquisition of the Property pursuant to thisAgreement.(d) Pending Actions. There is no action, suit, arbitration, unsatisfied order orjudgment, government investigation or proceeding pending against Buyer which, if adverselydetermined, could individually or in the aggregate materially interfere with theconsummation of the transaction contemplated by this Agreement.(e) Patriot Act Compliance. Neither Buyer nor any person, group, entity or nationthat Buyer is acting, directly or indirectly for, or on behalf of, is named by any ExecutiveOrder (including the September 24, 2001, Executive Order Blocking Property and ProhibitingTransactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or theUnited States Treasury Department as a terrorist, “Specially Designated National and BlockedPerson,” or is otherwise a banned or blocked person, group, entity, or nation pursuant toany law that is enforced or administered by the Office of Foreign Assets Control, and Buyeris not engaging in the transaction contemplated herein, directly or indirectly, on behalfof, or instigating or facilitating the transaction contemplated herein, directly orindirectly, on behalf of, any such person, group, entity or nation. Buyer is not engagingin the transaction contemplated herein, directly or indirectly, in violation of any lawsrelating
 

 
to drug trafficking, money laundering or predicate crimes to money laundering. None of thefunds of Buyer have been or will be derived from any unlawful activity with the result thatthe investment of direct or indirect equity owners in Buyer is prohibited by law or that thetransaction contemplated herein or this Agreement is or will be in violation of law. Buyerhas and will continue to implement procedures, and has consistently and will continue toconsistently apply those procedures, to ensure the foregoing representations and warrantiesremain true and correct at all times prior to Closing.5.6 Survival of Buyer’s Representations and Warranties. The representations andwarranties of Buyer set forth in Sections 5.5(a) and (e) shall survive Closingand shall be continuing representations and warranties without limitation. All otherrepresentations and warranties of Buyer shall survive Closing for a period of two hundredseventy (270) days.5.7 Covenants of Buyer.(a) In connection with its investigation of the Property during the Inspection Period andthrough Closing, Buyer may at its election (but subject to the limitations of Section3.1 above), inspect the Property for the presence of Hazardous Substances (as definedbelow), and, at Seller’s request, shall furnish to Seller copies of any reports received byBuyer in connection with any such inspection. Buyer hereby assumes full responsibility forsuch inspections and irrevocably waives any claim against Seller and releases Seller fromall liability arising from the presence of Hazardous Substances on the Property. Buyershall also furnish to Seller copies of any other reports received by Buyer relating to anyother inspections of the Property conducted on Buyer’s behalf, if any (including,specifically, without limitation, any reports analyzing compliance of the Property with theprovisions of the Americans with Disabilities Act (“ADA”), 42 U.S.C. §12101,etseq., if applicable. As used herein, “Hazardous Substances”means all hazardous or toxic materials, substances, pollutants, contaminants, or wastescurrently identified as a hazardous substance or waste in the Comprehensive EnvironmentalResponse, Compensation and Liability Act of 1980 (commonly known as “CERCLA”), as amended,the Superfund Amendments and Reauthorization Act (commonly known as “SARA”), the ResourceConservation and Recovery Act (commonly known as “RCRA”), or any other federal, state orlocal legislation or ordinances applicable to the Property (collectively, “EnvironmentalLaws”). The provisions of this Section 5.7(a) shall survive Closing or anytermination of this Agreement.(b) Without limiting anything herein to the contrary, Buyer waives any right of contributionwith respect to, any matter arising from, or relating to the existence of, HazardousSubstances or the violation or enforcement of Environmental Laws in connection with theProperty or operation thereof. Except as otherwise set forth in this Agreement, Sellermakes no representations or warranties as to whether the Property or any portion thereofcontains asbestos, harmful or toxic substances or other Hazardous Substances or is incompliance with Environmental Laws. The provisions of this Section 5.7(b) shallsurvive Closing or any termination of this Agreement.(c) Not later than two (2) days prior to the Closing, Seller shall send, or cause theManager to send, written notice to guests or other persons who have safe deposit boxes atthe Hotel advising of the sale of the Hotel and requesting verification or removal of thecontents within five (5) days. The safe deposit boxes of guests or other persons notresponding to
 

 
said written notice shall be opened only in the presence of the Manager or representativesof both Seller and Buyer. The contents of all boxes opened as aforesaid shall be listed atthe time such boxes are opened and each such list shall be signed by or on behalf of theManager or by or on behalf of Seller and Buyer, and Buyer shall not be liable or responsiblefor any items claimed to have been in said boxes unless such items are included in suchlist. Seller agrees to indemnify, defend and hold Buyer harmless from and against anyliability or responsibility for any items claimed to have been in said boxes but notincluded on such list and Buyer agrees to indemnify, defend and hold Seller harmless fromand against any liability or responsibility for items claimed to have been in said boxes andincluded in such list and all claims, losses and liabilities with respect thereto arisingout of the acts or omissions of Buyer after the Closing Date. The provisions of thisSection 5.7(c) shall survive Closing.(d) All baggage or other property of guests of the Hotel which has been checked with or leftin the care of Seller and remains in Seller’s care as of the Cut-Off Time shall beinventoried and tagged jointly by Seller and Buyer. Buyer hereby agrees to defend,indemnify and hold harmless Seller against any claims, losses or liabilities in connectionwith such baggage and property arising out of the acts or omissions of Buyer from and afterthe Closing Date. Seller hereby agrees to defend, indemnify and hold harmless Buyer againstall claims, losses and liabilities with respect to such baggage and property arising out ofthe acts or omissions of Seller prior to the Closing Date. This Section 5.7(d)shall survive Closing.(e) Buyer shall honor all reservations at the Hotel (including honoring the rates at whichsuch reservations were made, including reservations made on a wholesale, reward pointsredemption, or other basis), or for any related conference, banquet, or meeting space or anyother facilities in connection with the Hotel made by Seller on or prior to the Cut-Off Timefor periods on or after the Closing Date. The provisions of this Section 5.7(e)shall survive Closing.(f) Buyer shall be liable, and shall indemnify and hold Seller harmless, for any claims anyState, city or county taxing authority may make (including costs, penalties and interestassociated therewith) as a result of Buyer’s allocation of the Purchase Price or inconnection with (i) any bulk sales taxes applicable to the sale of the Property, and (ii)any taxes to be assumed by Buyer in accordance with Section 4.4 above. Seller shallbe liable, and shall indemnify and hold Buyer harmless, for any claims any State, city orcounty taxing authority may make (including costs, penalties and interest associatedtherewith) attributable to (A) or levied upon the net income of Seller whether attributableto the period prior to, on or after Closing, or (B) any assets of Seller other than theProperty. The provisions of this Section 5.7(f) shall survive Closing.5.8 Employees.(a) Buyer shall not take or omit to take any act the effect of which may cause Seller orManager to incur any liability under 29 USC §2101 et seq., the Worker Adjustment andRetraining Notification Act, or any state law analogue (collectively, the “**WARN Act**”).Buyer acknowledges that the personnel employed to manage, operate and work at the Hotel arethe employees of Manager, or an affiliate of Manager, and not of Seller. At Closing, Sellershall cause Manager to terminate all Current Employees. Buyer acknowledges that
 

 
neither Seller nor Manager is giving any notice under the WARN Act, and Buyer agrees toindemnify “Indemnified Parties” (as defined below) and hold each of them harmless againstany and all costs and expenses (including, without limitation, reasonable attorneys’ fees)incurred by Seller and/or Manager as a result of Buyer’s failure to comply with thisSection 5.8, including, but not limited to, any liability of Seller to Managerarising under the Management Agreement, unless such costs, expenses, or liability is caused,directly or indirectly, by Seller or Manager’s own acts or omissions in a mannerinconsistent with the terms of this Section 5.8, in which case Seller shall remainsolely liable for such costs, expenses, and liabilities; provided, however, that Buyer shallhave no indemnification obligation to any Indemnified Party for any withdrawal liabilityrelating to the Retirement Plan that is incurred by Manager or Seller as a result of any“complete withdrawal” or “partial withdrawal” as defined under ERISA of the Manager orSeller from the Retirement Plan as a result of the asset sale transaction contemplated bythis Agreement if Section 4204 of ERISA does not apply to Seller (for example, becauseSeller is not a “seller” within the meaning Section 4204 of ERISA) or because the provisionsof this Agreement do not comply with the requirements under Section 4204 of ERISA. Buyershall offer or cause to be offered employment as of the Closing Date to a sufficient numberof Current Employees (defined below) so that notices under the WARN Act or any state lawanalogue is not required, and such offers shall provide (i) employment at the Hotel, (ii)base pay levels and other compensation substantially similar to those currently provided tosuch Current Employees prior to the Closing, and (iii) total compensation and benefitscomparable to those currently provided to such Current Employees prior to the Closing.Buyer shall not within ninety-one (91) days following the Closing terminate any of theCurrent Employees (and shall instruct any manager not to terminate) without a documentedreason to terminate such employee for cause; provided, however, that nothing in thisAgreement requires Buyer to offer anything other than at-will employment to CurrentEmployees unless any such employee is covered by a Collective Bargaining Agreement to thecontrary prior to the Closing Date. For purposes of this Agreement, (A) “CurrentEmployees” means all individuals employed at the Hotel by Manager and/or Seller as ofthe day immediately prior to the Closing Date, irrespective of whether such individuals areactive or on leave of absence or otherwise inactive, and (B) “All Employees” meansany and all individuals employed at the Hotel by anyone at any time, whether or not theindividuals are hired by Buyer at or after the Closing.(b) Buyer shall ensure that service with Seller by Current Employees who are hired by Buyer(or any manager with respect to the Hotel) within 90 days of the Closing Date shall bedeemed to have been in service with Buyer for purposes of any length of servicerequirements, waiting periods, vesting periods, or differential benefits based on length ofservice in any benefit plan established or maintained by or on behalf of Buyer for whichsuch Current Employees may be eligible after the Closing, such that Seller shall not haveany COBRA obligations for All Employees hired by Buyer. Buyer shall ensure that anypre-existing conditions, restrictions or waiting periods under any benefit plan establishedprior to the Effective Date by or on behalf of Buyer providing medical, dental, vision, orprescription drug coverage or benefits are waived to the extent necessary to provideimmediate coverage for Current Employees who are hired for the Hotel following terminationof such Current Employees’ coverage under the benefit plans maintained by or on behalf ofSeller, such that Seller shall not have COBRA continuation of group health plan coverageobligations (“COBRA”) for any such Current Employees who are hired by Buyer
 

 
(or any manager with respect to the Hotel). Buyer shall indemnify, defend and hold Sellerharmless from and against all loss, expense (including reasonable attorneys’ fees anddisbursements incurred to enforce this indemnity), damage and liability resulting from anyCOBRA claims or obligations arising in respect of All Employees and any claims or disputeswith All Employees regarding employee benefits arising from and after the Closing Date,unless such loss, expense (including reasonable attorneys’ fees and disbursements incurredto enforce this indemnity), damage or liability is caused, directly or indirectly, by Selleror Manager’s own acts or omissions in a manner inconsistent with the terms of this Section5.8, in which case Seller shall remain solely liable for such loss, expense, damage, orliability. Except where such payments are required by applicable law to be made by Selleror Manager at Closing, as further indicated in Section 4.4.3(d) of this Agreement, Buyershall: (i) be responsible for all payments for unused vacation days due and payable to AllEmployees as of the Closing if, and to the extent, such amounts are not paid at Closing andBuyer receives a credit against the Purchase Price pursuant to this Agreement; and (ii)indemnify, defend and hold Indemnified Parties (defined below) harmless from and against allloss, expense (including reasonable attorneys’ fees and disbursements incurred to enforcethis indemnity), damage and liability resulting from claims or disputes with All Employeesregarding all accrued vacation and payments for unused vacation upon termination fromemployment irrespective of when the service relating to such benefits was performed. Buyeracknowledges that certain information relating to the Employees may be or be deemed to beproprietary to Manager or may otherwise not be disclosed by Manager, including, but notlimited to, insurance records, health records, and employment and disciplinary history.Buyer shall also assume the Collective Bargaining Agreement as required above.(c) Buyer shall indemnify, defend and hold the Indemnified Parties harmless from and againstall claims, actions, liabilities (including, without limitation, severance/separationpayments) or losses arising out of (i) any employment decisions made or actions takenbefore, on, or after the Closing by Buyer or any of its agents, respecting All Employees;(ii) Buyer’s or its manager’s failure to offer comparable employment to a sufficient numberof Current Employees to avoid obligation under the WARN Act or any state law analogue; (iii)employment of All Employees by or on behalf of Buyer, to the extent such employees becomeemployed by Buyer or Buyer’s manager, and (iv) any breach by Buyer of this Section 5.8.For purposes of this Agreement, “Indemnified Parties” shall mean Seller, Manager andtheir respective employees, officers, directors and shareholders, and each of theirrespective successors and assigns, and each direct and indirect parent, subsidiary, memberand other affiliated entity of each of the foregoing, and their respective employees,officers, directors, shareholder and members.(d) Seller shall indemnify, defend and hold Buyer, and its respective employees, officersdirectors and shareholders, and each of their respective successors and assigns, and eachdirect and indirect parent, subsidiary, member and other affiliated entity of each of theforegoing, and their respective employees, officers, directors, shareholder and members,harmless from and against all claims, actions, liabilities (including, without limitation,severance/separation payments) or losses arising out of any employment decisions made,actions taken, or a failure to act before or on the Closing by Seller, Manager or theiragents in a manner inconsistent with the terms of this Section 5.8, respecting AllEmployees.
 

 
(e) Buyer acknowledges receipt of all pertinent information relating to the Santa MonicaHotel Employees and Restaurant Employees Retirement Fund (“Retirement Plan”) andagrees that Buyer shall: (i) adopt the Retirement Plan as a contributing employer withrespect to all employees of the Hotel that are or become eligible to participate in theRetirement Plan; (ii) assume and shall pay, perform, and discharge all liabilities, debts,obligations, and responsibilities under the terms of the Retirement Plan that areattributable to service rendered by All Employees from and after the Closing Date if thereare any accrued but unpaid contributions; and (iii) indemnify, defend, and hold Sellerharmless against any claim or liability with respect to contributions or other amounts(including, but not limited to, withdrawal liability) payable to, or benefits payable under,the Retirement Plan that are attributable to service rendered by All Employees from andafter the Closing Date. In addition, with respect to the Retirement Plan:(i) from and after the Closing Date, Buyer shall contribute substantially the samenumber of contribution base units for which Seller had an obligation to contributeunder the Collective Bargaining Agreement immediately prior to the date of theClosing.(ii) If Seller determines within 60 days after the Closing Date that transactionsdescribed in this Section 5.8(d)(ii) are required in order to assurecompliance with Section 4204 of ERISA and regulations and interpretations promulgatedthereunder, so that the transactions contemplated by this Agreement do not result ina “complete withdrawal” or “partial withdrawal” as defined under ERISA by Seller fromthe Retirement Plan, Seller shall so notify Buyer in writing no later than 60 daysafter the Closing Date, and Buyer shall be required to follow the procedures setforth herein. During the period commencing on the first day of the plan yearfollowing the Closing and ending on the expiration of the fifth (5th) such plan year(the “Contribution Period”), Buyer shall provide the Retirement Plan witheither a bond or an escrow in an amount and manner meeting the requirements ofSection 4204 of ERISA, to the extent not otherwise waived or modified by theRetirement Plan pursuant to a variance approved by the Retirement Plan. Buyer shallpromptly, after receiving Seller’s notice of a determination that the proceduresdescribed in this Section 5.8(d)(ii) are required in order to assurecompliance with Section 4204 of ERISA, notify the Retirement Plan of the transactionscontemplated by this Agreement, and, if Section 4204 of ERISA is applicable, satisfythe Retirement Plan that this transaction complies with the terms of Section 4204 ofERISA. Any proposed notice or communication to the Retirement Plan pursuant to thisSection or subsection (iii) below shall be provided to Seller at least ten (10) daysbefore such notice is provided to the Retirement Plan, and the form of such noticeand communication shall be subject to Seller’s written approval, which approval shallnot be unreasonably withheld. Any notice from the Retirement Plan, including, butnot limited to, any notice of withdrawal liability, shall be provided to Sellerwithin ten (10) business days of the time it is provided to Buyer.(iii) If Buyer withdraws from the Retirement Plan in a complete withdrawal or partialwithdrawal with respect to any employees covered by the Collective BargainingAgreement during the period from the Closing through the end of the ContributionPeriod, Buyer shall notify Seller in writing (and shall provide Seller
 

 
with any and all information relevant to the obligations of Buyer and Seller withrespect thereto) and shall cause any resulting withdrawal liability to be timelypaid, and if such withdrawal occurs during the Contribution Period and Buyer fails topay such withdrawal liability in a timely manner to the Retirement Plan, Selleragrees it will be secondarily liable for any withdrawal liability it would have hadto the Retirement Plan with respect to the operations (but for Section 4204 ofERISA). Buyer shall indemnify, defend, protect and hold harmless Seller for anywithdrawal liability payments Seller is required to make on account of thissubsection (iii).(iv) If at any time after the Closing and during the Contribution Period, a bond,escrow or letter of credit is required for the Retirement Plan pursuant to Section4204(a)(3) of ERISA, Buyer shall, at its sole cost and expense, post such bond,escrow or letter of credit in an amount, for the period of time, and in a form thatcomplies with Section 4204(a)(3) (or obtain a variance from such bonding, escrow orletter of credit requirement from the Retirement Plan or the Pension Benefit GuarantyCorporation) and furnish proof of such compliance to Seller.(f) Buyer’s obligations under this Section 5.8 shall survive the Closing.**ARTICLE VI****DEFAULT**6.1 Default by Buyer. If Buyer defaults under this Agreement, Seller shall be entitled,as its sole remedy (without limiting Seller’s rights with respect to any indemnificationobligations of Buyer under this Agreement or under Section 10.19 below), to terminatethis Agreement and receive the Earnest Money as liquidated damages, it being agreed betweenthe parties hereto that the actual damages to Seller in the event of such breach areimpractical to ascertain and the amount of the Earnest Money is a reasonable estimate thereof.THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEYHAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES’ REASONABLE ESTIMATE OF SELLER’SDAMAGES AND AS SELLER’S EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE EVENT OF ADEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER. THE PARTIES ACKNOWLEDGE THAT THE PAYMENTOF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OFCALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGESTO SELLERS PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677.     Initials:           Seller                                        Buyer    T.C.F.Nothing contained in this Section 6.1 shall limit or prevent Seller from (a)asserting any legal or equitable claims against Buyer for Buyer’s obligations with respectto any indemnification of Seller under this Agreement or obligation to pay attorneys’ feesand other amounts under Section 10.19, or (b) enforcing any indemnity obligation ofBuyer under this Agreement or preclude Seller from obtaining a damage award in connectiontherewith, or
 

 
(c) enforcing Buyer’s other obligations and liabilities which survive a termination of thisAgreement.6.2 Default by Seller. In the event that Seller fails to consummate this Agreement forany reason other than Buyer’s default or the permitted termination of this Agreement by Selleror Buyer as herein expressly provided, Buyer shall be entitled, as its sole remedy, either (a)to receive the return of the Earnest Money, which return shall operate to terminate thisAgreement and release Seller from any and all liability hereunder, or (b) to enforce specificperformance of Seller’s obligation to execute the documents required to convey the Property toBuyer, it being understood and agreed that the remedy of specific performance shall not beavailable to enforce any other obligation of Seller hereunder. Buyer expressly waives itsrights to seek damages in the event of Seller’s default hereunder. Buyer shall be deemed tohave elected to terminate this Agreement and receive back the Earnest Money if Buyer fails tofile suit for specific performance against Seller in a court having jurisdiction in the countyand state in which the Property is located, on or before 30 days following the date upon whichClosing was to have occurred. Notwithstanding the foregoing, (a) nothing contained in thisSection 6.3 shall limit or prevent Buyer from (i) asserting any legal or equitableclaims against Seller for Buyer’s obligation to pay attorneys’ fees and other amounts underSection 10.19, or (ii) enforcing any indemnity obligation of Seller under thisAgreement or preclude Buyer from obtaining a damage award in connection therewith, or (iii)enforcing Seller’s other obligations and liabilities which survive Closing or a termination ofthis Agreement, and (b) in the event that any such failure by Seller is of such a nature thatspecific performance as a remedy is not available as a matter of law, then, Buyer shall havethe right, anything herein contained to the contrary notwithstanding, to damages againstSeller on account of such failure to compensate Buyer for all of its third party out of pocketcosts and expenses incurred in connection with the transaction contemplated hereby and thisAgreement, but not in excess of the sum of One Hundred Thousand and No/100 Dollars($100,000.00) and Buyer shall have the right to pursue an action for such damages in a courtof competent jurisdiction.6.3 Seller’s Right to Cure Defaults. Notwithstanding anything to the contrary in thisAgreement, Buyer shall not have the right to exercise its remedies under Section 6.2for a Seller default unless Buyer has provided written notice to Seller specifying inreasonable detail the nature of the Seller default, and Seller has not cured the same withinthirty (30) days after Seller’s receipt of such notice (the “Seller Cure Period”), inwhich case the Closing shall be postponed until the date which is five (5) business days afterthe expiration of the Seller Cure Period.6.4 Buyer’s Right to Cure Certain Defaults. Notwithstanding anything to the contrarycontained in this Agreement, with respect to any default under this Agreement by Buyer otherthan a default in Buyer’s obligation to close the transaction contemplated hereunder on theClosing Date, Seller shall not have the right to exercise its remedies under Section 6.1 forany such Buyer default unless Seller has provided written notice to Buyer specifying inreasonable detail the nature of the Buyer default, and Buyer has not cured the same within 10days after Buyer’s receipt of such notice. It is expressly understood and agreed that thereshall be no cure period afforded Buyer and no need for Seller to provide any notice, writtenor otherwise, with respect to a default by Buyer in its obligation to close the transaction onthe Closing Date, and in the event of such a default, Seller shall have the immediate right toexercise its remedies on account thereof provided in Section 6.1 above.
 

 
**ARTICLE VII****RISK OF LOSS**7.1 Minor Damage. In the event of loss or damage to the Real Property or any portionthereof which is not “major” (as hereinafter defined), this Agreement shall remain in fullforce and effect provided Seller, at Seller’s option, performs any necessary repairs orassigns to Buyer all of Seller’s right, title and interest to any claims and proceeds Sellermay have with respect to any casualty insurance policies or condemnation awards relating tothe premises in question. In the event that Seller elects to perform repairs upon the RealProperty, Seller shall use reasonable efforts to complete such repairs promptly and theClosing Date shall be extended a reasonable time in order to allow for the completion of suchrepairs. If Seller elects to assign a casualty claim to Buyer, the Purchase Price shall bereduced by an amount equal to the deductible amount under Seller’s insurance policy. UponClosing, full risk of loss with respect to the Property shall pass to Buyer.7.2 Major Damage. In the event of a “major” loss or damage to the Real Property, Buyermay terminate this Agreement by written notice to Seller, in which event the Earnest Moneyshall be returned to Buyer. If Buyer fails for any reason to deliver written notice oftermination to Seller within ten (10) days after Seller sends Buyer written notice of theoccurrence of major loss or damage, then Buyer shall be deemed to have elected to proceed withClosing, in which event Seller shall, at Seller’s option, either (a) perform any necessaryrepairs, or (b) assign to Buyer all of Seller’s right, title and interest to any claims andproceeds Seller may have with respect to any casualty insurance policies or condemnationawards relating to the premises in question. In the event that Seller elects to performrepairs upon the Real Property, Seller shall use reasonable efforts to complete such repairspromptly and the Outside Closing Date shall be extended a reasonable time in order to allowfor the completion of such repairs. If Seller elects to assign a casualty claim to Buyer, thePurchase Price shall be reduced by an amount equal to the deductible amount under Seller’sinsurance policy and Seller shall assign all of its rights to proceeds under the applicablepolicy with respect to any claim for the applicable loss. Upon Closing, full risk of losswith respect to the Property shall pass to Buyer.7.3 Definition of “Major” Loss or Damage. For purposes of Sections 7.1 and7.2, “major” loss or damage refers to the following: (a) loss or damage to the RealProperty or any portion thereof such that the cost of repairing or restoring the premises inquestion to a condition substantially identical to that of the premises in question prior tothe event of damage would be, in the opinion of an architect selected by Seller and reasonablyapproved by Buyer, equal to or greater than $2,500,000.00, and (b) any loss due to acondemnation which permanently and materially impairs the current use of the Real Property.If Buyer does not give notice to Seller of Buyer’s reasons for disapproving an architectwithin five (5) business days after receipt of notice of the proposed architect, Buyer shallbe deemed to have approved the architect selected by Seller.
 

 
**ARTICLE VIII****COMMISSIONS**8.1 Brokerage Commissions. Buyer acknowledges that Seller has procured the services ofEastdil Secured and Citigroup Global Markets Inc. (collectively, “Broker”) pursuant toa separate written agreement between Seller and Broker. Each party agrees that should anyclaim be made for brokerage commissions or finder’s fees by any broker or finder other thanthe Broker by, through or on account of any act or alleged act of said party or itsrepresentatives, said party will indemnify, defend, protect and hold the other party free andharmless from and against any and all loss, liability, cost, damage and expense in connectiontherewith. The provisions of this Section 8.1 shall survive Closing or earliertermination of this Agreement.**ARTICLE IX****DISCLAIMERS AND WAIVERS**9.1 No Reliance on Documents. Except as expressly set forth in Section 5.1above, Seller makes no representation or warranty as to the truth, accuracy or completeness ofany materials, data or information delivered by or on behalf of Seller or its brokers to Buyerin connection with the transaction contemplated hereby including, without limitation, theReports and other Seller Due Diligence Materials. Buyer acknowledges and agrees that allmaterials, data and information delivered by Seller to Buyer in connection with thetransaction contemplated hereby are provided to Buyer as a convenience only and that anyreliance on or use of such materials, data or information by Buyer shall be at the sole riskof Buyer, except as otherwise expressly stated herein. Without limiting the generality of theforegoing provisions, Buyer acknowledges and agrees that (a) any environmental or other reportwith respect to the Property that is delivered by Seller to Buyer shall be for generalinformational purposes only, (b) Buyer shall not have any right to rely on any such reportdelivered by Seller to Buyer, but rather will rely on its own inspections and investigationsof the Property and any reports commissioned by Buyer with respect thereto, and (c) neitherSeller nor any affiliate of Seller nor the person or entity which prepared any such reportdelivered by Seller to Buyer shall have any liability to Buyer for any inaccuracy in oromission from any such report or other materials provide to Buyer in connection with thisAgreement.9.2 DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 5.1 OF THIS AGREEMENT,IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANYWARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TOTHE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TOHABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ZONING, TAXCONSEQUENCES, LATENT OR PATENT PHYSICAL OR ENVIRONMENTAL CONDITION, UTILITIES, OPERATINGHISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PROPERTY WITHGOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE PROPERTY DOCUMENTS OR ANY
 

 
  OTHER INFORMATION PROVIDED BY OR ON BEHALF OF SELLER TO BUYER, OR ANY OTHER MATTER OR THINGREGARDING THE PROPERTY. BUYER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELLAND CONVEY TO BUYER AND BUYER SHALL ACCEPT THE PROPERTY “AS IS, WHERE IS, WITH ALL FAULTS”,EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT. BUYER HAS NOT RELIEDAND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIEDWARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THEPROPERTY OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, PROPERTYINFORMATION PACKAGES DISTRIBUTED WITH RESPECT TO THE PROPERTY AND ANY ACTUAL OR PROPOSEDBUDGETS FOR THE REAL PROPERTY) MADE OR FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, ORANY REAL ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVERMADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTHIN THIS AGREEMENT. BUYER REPRESENTS TO SELLER THAT BUYER IS A SOPHISTICATED INSTITUTIONALINVESTOR WITH SUBSTANTIAL EXPERIENCE AND EXPERTISE WITH HOTEL INVESTMENTS AND HAS CONDUCTED,OR WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOTLIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS BUYER DEEMS NECESSARY TOSATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE ORCURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON ORDISCHARGED FROM THE PROPERTY, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATIONPROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHERTHAN SUCH REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH INTHIS AGREEMENT. UPON CLOSING, SUBJECT TO THE REPRESENTATIONS AND WARRANTIES OF SELLER SETFORTH HEREIN AND IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, BUYER SHALL ASSUME THE RISKTHAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSEPHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY BUYER’S INVESTIGATIONS,AND BUYER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER(AND SELLER’S OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANYAND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES,DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES AND COURT COSTS) OF ANYAND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH BUYER MIGHT HAVE ASSERTED OR ALLEGEDAGAINST SELLER (AND SELLER’S OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANYTIME BY REASON OF OR ARISING OUT OF ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICALCONDITIONS, VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, ANYENVIRONMENTAL LAWS) AND ANY AND ALL OTHER ACTS, OMISSIONS,
 

 
EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY. BUYER AGREES THAT SHOULD ANYCLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ONTHE PROPERTY BE REQUIRED AFTER THE CLOSING DATE, SUCH CLEAN-UP, REMOVAL OR REMEDIATION SHALLBE THE RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF BUYER.     The waivers and releases set forth in Sections 5.7(a) and (b) and inthe immediately preceding paragraph include claims of which Buyer is presently unaware orwhich Buyer does not presently suspect to exist which, if known by Buyer, would materiallyaffect Buyer’s waiver or release of Seller and the other parties referenced in this Section.Buyer specifically waives the provision of California Civil Code Section 1542, whichprovides as follows:     “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR EXPECTTO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM ORHER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”     Initials:                Buyer T.C.F.9.3 Repairs, Reserves, and Capital Expenditures. Buyer acknowledges and agrees thatexcept as provided in Section 5.4 of this Agreement, (a) Seller shall have no obligation tomake any repairs, replacements, improvements or alterations to the Property or to expend anyfunds therefor, including, without limitation, any reserves that may be held for such purpose,and (b) Buyer shall not be entitled to a credit to the Purchase Price at Closing in the eventcapital expenditures actually made at the Hotel for any year are less than the budgeted amountas of the date of the Closing.9.4 Effect and Survival of Disclaimers. Seller and Buyer acknowledge that thecompensation to be paid to Seller for the Property takes into account that the Property isbeing sold subject to the provisions of this Article IX. Seller and Buyer agree thatthe provisions of this Article IX shall survive Closing.**ARTICLE X****MISCELLANEOUS**10.1 Confidentiality. Subject to Section 10.2 below, this Agreement, the terms hereof andthe Property Information shall be treated in accordance with that certain ConfidentialityAgreement dated July 21, 2010 executed by Buyer in favor of Seller (the “ConfidentialityAgreement”). The provisions of this Section 10.1 shall survive the Closing.10.2 Public Disclosure. Prior to Closing, any release to the public of information withrespect to the sale contemplated herein or any matters set forth in this Agreement will bemade only in the form approved by Buyer and Seller and their respective counsel. Upon theClosing, Seller and Buyer shall issue a joint press release announcing the Closing, in a formto be mutually agreed upon by Seller and Buyer. The provisions of this Section 10.2shall survive
 

 
  the Closing. Notwithstanding the foregoing, at any time following the Effective Date, Buyermay file with the United States Securities Exchange Commission (“SEC”) informationregarding the transaction contemplated by this Agreement (including a copy of thisAgreement) to the extent required by law.10.3 Discharge of Obligations. The acceptance of the Deed by Buyer shall be deemed to bea full performance and discharge of every representation and warranty made by Seller hereinand every agreement and obligation on the part of Seller to be performed pursuant to theprovisions of this Agreement, except those which are herein specifically stated to surviveClosing.10.4 Assignment. Buyer may not assign its rights under this Agreement without firstobtaining Seller’s written approval which may be given or withheld in Seller’s solediscretion; provided, however, that Buyer may assign this Agreement to an Affiliate (asdefined below), provided that Buyer remains primarily liable for all obligations of Buyerhereunder assigned to such Affiliate by Buyer. As used herein, “Affiliate” meanswith respect to a party or other entity any entity controlling, controlled by or under commoncontrol with such party or other entity or an owner of such party or other entity.10.5 Notices. Any notice pursuant to this Agreement shall be given in writing by (a)personal delivery, or (b) reputable overnight delivery service with proof of delivery, or (c)United States Mail, postage prepaid, registered or certified mail, return receipt requested,or (d) legible facsimile or e-mail transmission completed before 5:00 P.M. (local time at theReal Property) on a business day sent to the intended addressee at the address set forthbelow, or to such other address or to the attention of such other person as the addresseeshall have designated by written notice sent in accordance herewith, and shall be deemed tohave been given either at the time of personal delivery, or, in the case of expedited deliveryservice or mail, as of the date of first attempted delivery at the address and in the mannerprovided herein, or, in the case of facsimile or e-mail transmission, as of the date of thefacsimile or e-mail transmission provided that an original of such facsimile or e-mail is alsosent to the intended addressee by means described in clauses (a), (b) or (c) above. Unlesschanged in accordance with the preceding sentence, the addresses for notices given pursuant tothis Agreement shall be as follows:If to Seller:Regis Properties, L.L.C.