exv10w1






Exhibit 10.1




MONDRIAN LOS ANGELES




PURCHASE AND SALE AGREEMENT



BETWEEN



MONDRIAN HOLDINGS LLC,



A DELAWARE LIMITED LIABILITY COMPANY



AS SELLER



AND



WOLVERINES OWNER LLC,



A DELAWARE LIMITED LIABILITY COMPANY



AS PURCHASER



As of April 22, 2011








 









 








Table of Contents




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE I PURCHASE AND SALE	 	 	1	 
	1.1
	 	Agreement of Purchase and Sale	 	 	1	 
	1.2
	 	Property Defined	 	 	4	 
	1.3
	 	Permitted Exceptions	 	 	5	 
	1.4
	 	Purchase Price	 	 	5	 
	1.5
	 	Payment of Purchase Price	 	 	5	 
	1.6
	 	Earnest Money	 	 	5	 
	1.7
	 	Management Agreement	 	 	6	 
	ARTICLE II TITLE AND SURVEY	 	 	6	 
	2.1
	 	Title Report	 	 	6	 
	2.2
	 	Survey	 	 	6	 
	2.3
	 	Approval of Title	 	 	6	 
	2.4
	 	Conveyance of Title	 	 	8	 
	2.5
	 	Title Policy	 	 	8	 
	ARTICLE III INSPECTION	 	 	9	 
	3.1
	 	Right of Inspection	 	 	9	 
	3.2
	 	Seller Due Diligence Materials	 	 	10	 
	ARTICLE IV CLOSING	 	 	11	 
	4.1
	 	Time and Place; Pre-Closing	 	 	11	 
	4.2
	 	Seller’s Closing Obligations and Deliveries	 	 	11	 
	4.3
	 	Purchaser’s Closing Obligations and Deliveries	 	 	14	 
	4.4
	 	Prorations, Credits and Other Adjustments	 	 	14	 
	4.5
	 	Closing Costs	 	 	21	 
	4.6
	 	Conditions Precedent to Obligation of Purchaser	 	 	21	 
	4.7
	 	Conditions Precedent to Obligation of Seller	 	 	22	 
	4.8
	 	Failure or Waiver of Conditions Precedent	 	 	22	 
	ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS	 	 	24	 
	5.1
	 	Representations and Warranties of Seller	 	 	24	 
	5.2
	 	Knowledge Defined	 	 	26	 
	5.3
	 	Covenants of Seller	 	 	26	 
	5.4
	 	Representations and Warranties of Purchaser	 	 	27	 
	5.5
	 	Covenants of Purchaser and/or of Seller	 	 	29	 
	5.6
	 	Employees	 	 	30	 
	5.7
	 	Independent Audit	 	 	32	 
	ARTICLE VI DEFAULT	 	 	32	 
	6.1
	 	Default by Purchaser	 	 	32	 
	6.2
	 	Default by Seller	 	 	32	 
	6.3
	 	Seller’s Right to Cure Defaults	 	 	33	 
	6.4
	 	Purchaser’s Right to Cure Defaults	 	 	33	 
	ARTICLE VII SURVIVAL, INDEMNIFICATION, AND LIMITATIONS ON LIABILITY	 	 	33	 
	7.1
	 	Survival	 	 	33	 
	7.2
	 	Seller’s Indemnification	 	 	34	 
	7.3
	 	Purchaser’s Indemnification	 	 	34	 






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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	7.4
	 	Notice and Resolution of Claims	 	 	34	 
	7.5
	 	Limitations on Liability	 	 	36	 
	7.6
	 	Other Matters Regarding Indemnification	 	 	36	 
	ARTICLE VIII RISK OF LOSS	 	 	37	 
	8.1
	 	Minor Damage	 	 	37	 
	8.2
	 	Major Damage	 	 	37	 
	8.3
	 	Definition of “Major” Loss or Damage	 	 	38	 
	ARTICLE IX COMMISSIONS	 	 	38	 
	9.1
	 	Brokerage Commissions	 	 	38	 
	ARTICLE X DISCLAIMERS AND WAIVERS	 	 	38	 
	10.1
	 	No Reliance on Documents	 	 	38	 
	10.2
	 	DISCLAIMERS	 	 	39	 
	10.3
	 	Repairs, Reserves, and Capital Expenditures	 	 	40	 
	10.4
	 	Effect and Survival of Disclaimers	 	 	41	 
	ARTICLE XI MISCELLANEOUS	 	 	41	 
	11.1
	 	Confidentiality	 	 	41	 
	11.2
	 	Public Disclosure	 	 	41	 
	11.3
	 	Assignment	 	 	42	 
	11.4
	 	Notices	 	 	42	 
	11.5
	 	Modifications	 	 	43	 
	11.6
	 	Calculation of Time Periods; Time is of the Essence	 	 	43	 
	11.7
	 	Successors and Assigns	 	 	43	 
	11.8
	 	Entire Agreement	 	 	43	 
	11.9
	 	Further Assurances	 	 	44	 
	11.10
	 	Counterparts; Facsimile Signatures	 	 	44	 
	11.11
	 	Severability	 	 	44	 
	11.12
	 	Applicable Law	 	 	44	 
	11.13
	 	No Third Party Beneficiary	 	 	44	 
	11.14
	 	Exhibits and Schedules	 	 	44	 
	11.15
	 	Captions	 	 	45	 
	11.16
	 	Construction	 	 	45	 
	11.17
	 	Termination of Agreement	 	 	45	 
	11.18
	 	Attorneys Fees	 	 	45	 
	11.19
	 	No Waiver	 	 	46	 
	11.20
	 	No Reservation of Property	 	 	46	 
	11.21
	 	No Recordation	 	 	46	 











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PURCHASE AND SALE AGREEMENT




     THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of April 22, 2011 (the
“Effective Date”), by and between Mondrian Holdings LLC, a Delaware limited liability
company (“Seller”), and Wolverines Owner LLC, a Delaware limited liability company
(“Purchaser”). Unless otherwise noted, all capitalized terms set forth in this Agreement
shall have the meanings ascribed to them in Annex A attached hereto.



WITNESSETH:




     WHEREAS, Seller is the owner and holder of the fee simple estate in and to that certain plot,
piece and parcel of land located at 8440 Sunset Boulevard, West Hollywood, California, County of
Los Angeles and more particularly described in Schedule 1.1(a) attached hereto (the
“Land”), together with the 237 room hotel, restaurants, bars, spas, lounges, meeting rooms
and all other improvements and fixtures (collectively, the “Improvements”) located on the
Land (the Improvements and the Land are hereinafter sometimes collectively referred to as the
“Real Property”); and



          WHEREAS, Seller operates on the Real Property the hotel known as “Mondrian” (the
“Hotel”);




          WHEREAS, Seller desires to cause the sale, assignment and transfer of its interests in and to
the Property (as defined below) to Purchaser in accordance with the terms and provisions of this
Agreement, and Purchaser desires to purchase such interests from Seller and assume certain
liabilities related to the Property upon the terms more particularly set forth in this Agreement.




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




ARTICLE I

PURCHASE AND SALE




     1.1 Agreement of Purchase and Sale. Subject to the terms and conditions hereinafter set forth,
Seller agrees to sell and convey, and Purchaser agrees to purchase, all of the right, title and
interest of Seller or any affiliate of Seller (which shall not include 8440 LLC or Sunset
Restaurant LLC) in and to the following:



          (a) The Land as described in Schedule 1.1(a) attached hereto.




          (b) The Improvements.




 









 








          (c) All tangible personal property owned by Seller or any affiliate of Seller and located on
the Real Property, used solely in connection with the operation of the Real Property (including
appliances, furniture, fixtures (other than those which constitute Improvements), furnishings,
equipment, machinery, building systems, security systems, key cards (together with all devices for
coding and monogramming such key cards), vehicles, appliances, carpeting, draperies and curtains,
tools and supplies, decorations, china, glassware, linens, silver, utensils, computers, computer
equipment and manuals, computer software and programs, uniforms, works of art, materials, supplies
and other similar items of personal property) and that are located at the Hotel as of the Closing
Date, but specifically excluding the personal property listed on Schedule 1.1(c) attached
hereto (the “Excluded Personal Property”). The tangible personal property described in
this Section 1.1(c), exclusive of the Excluded Personal Property, is hereinafter referred
to collectively as the “Personal Property”).




          (d) All contracts or reservations for the use of spas, guest rooms, ballroom and banquet
facilities, conference facilities, meeting rooms or other facilities of the Hotel or located within
the Improvements, for the Closing Date and the period from and after the Closing Date
(collectively, the “Bookings”), and any deposits held by Seller in connection with the
Bookings and not previously applied as of the Closing Date.




          (e) All contracts, agreements and warranties to which Seller is a party that are assignable
without the consent of the counterparty thereto or additional costs or liability to Seller, or with
respect to which Seller obtains consent to an assignment hereunder from the applicable
counterparty, relating to the upkeep, repair, maintenance or operation of the Real Property or
the Personal Property, including all deposits and credits thereunder (to the extent the obligation
to apply or return such deposits or credits is assumed by Purchaser) (collectively, the
“Service Contracts”), including the contracts and agreements: (i) listed on Schedules
1.1(e)-1(a) attached hereto (which sets forth the Service Contracts assignable without the
consent of the counterparty thereto or additional costs or liability to Seller) and 1.1(e)-1(b)
attached hereto (which sets forth the Service Contracts in effect as of the Effective Date that
are not assignable without the consent of the counterparty thereto or additional costs or liability
to Seller) (but specifically excluding (A) Bookings, (B) Space Leases, (C) insurance policies, (D)
the Management Agreement, and (E) any contract or agreement listed on such Schedule
1.1(e)-1 which (1) is terminated on or before Closing pursuant to the terms of this Agreement,
(2) expires pursuant to its terms on or before the Closing Date or (3) is terminated by the
applicable counterparty thereto on or before the Closing Date); (ii) providing for the lease of
equipment or other personal property listed on
Schedule 1.1(e)-2(a) (which sets forth any
such leases assignable without the consent of the counterparty thereto or additional costs or
liability to Seller) and 1.1(e)-2(b) attached hereto (which sets forth any such leases in
effect as of the Effective Date that are not assignable without the consent of the counterparty
thereto or additional costs or liability to Seller) (collectively, the “Equipment Leases”,
but specifically excluding any contract or agreement listed on such Schedule 1.1(e)-2(a) or
Schedule 1.1(e)-2(b) which (A) is terminated on or before Closing pursuant to the terms of
this Agreement, (B) expires pursuant to its terms on or before the Closing Date or (C) is
terminated by the applicable counterparty thereto on or before the Closing Date); and (iii)
entered into after the Effective Date and which Seller is permitted to enter into under the terms
of this Agreement.





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          (f) All names, marks, logos and designs, used in the operation or ownership of the Property or
any part thereof listed on Schedule 1.1(f), provided that Purchaser expressly acknowledges
and agrees that the following items are specifically excluded and shall not be transferred
hereunder: (i) all right, title or interest of any kind or nature whatsoever in and to, and
intellectual property in any way relating to, the Manager’s Materials or Manager’s Tradenames (it
being understood that certain rights with respect to certain of the foregoing items shall be
granted to Purchaser pursuant to the Management Agreement); (ii) all websites and domains used for
the Hotel, including access to the FTP files of the websites; and (iii) any information or reports
that relate solely to the period prior to the Closing (all such items not to be transferred
hereunder being collectively referred to as the “Retained IP”).




          (g) To the extent the same are assignable as of the Closing Date without consent of a third
party or additional costs or liability to Seller and to the extent assumed by Purchaser, all
transferable licenses, franchises and permits owned by Seller and used in or relating to the
ownership, occupancy or operation of the Property or any part thereof as listed on Schedule
1.1(g), subject to Purchaser’s compliance with any limitations or restrictions on transfer or
assignment of any computer-related materials or software which are contained in any license or
similar agreement (collectively, the “Permits”), provided that the term Permits
specifically excludes any and all non-transferable permits and licenses held by Seller in
connection with the Property, including, without limitation, the liquor license and the permits and
approvals required for the preparation, sale and service of food and beverage (it being
acknowledged that the Existing Liquor License will be transferred pursuant to the Liquor Assets
Escrow Agreement) (collectively, such excluded Permits, the “Excluded Permits”).




          (h) To the extent the same are assignable as of the Closing Date without consent of a third
party or additional costs or liability to Seller, all assignable telephone numbers, TWX numbers,
post office boxes, signage rights, utility and development rights and privileges, site plans,
surveys, environmental and other physical reports, plans and specifications pertaining to the Real
Property and the Personal Property (all of the property described in clauses (f), (g), and (h) of
this Section 1.1 that is not specifically deemed excluded being herein referred to
collectively as the “Intangibles”).




          (i) All: (i) food and beverages (excluding alcoholic beverages) that are in the Hotel as of
the Closing Date; (ii) inventory held for sale by Seller to Hotel guests and others in the ordinary
course of business including all opened and unopened retail inventory in any area at the Hotel
conducting retail sales that is in the Hotel as of the Closing Date (collectively, “Retail
Inventory”); (iii) engineering, maintenance and housekeeping supplies (including soap and
cleaning materials, fuel and materials, stationery and printing items) that are in the Hotel as of
the Closing Date; and (iv) other supplies, whether used, unused or held in reserve storage for
future use in connection with the maintenance and operation of the Real Property or the Personal
Property that are in the Hotel as of the Closing Date (all of
the foregoing being referred to herein as the “Consumable Inventory” and, to the
extent contained in unopened boxes, bottles, jars or containers of any type as of the Closing Date,
shall collectively be referred to, together with unopened packages of china, glass, silver and
linens (but excluding any bottles of alcoholic beverages), as the “Unopened Inventory”).





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          (j) To the extent the same are in effect on the Closing Date, all leases or licenses for the
lease and occupancy of space at the Hotel listed and described on Schedule 1.1(j) attached
hereto (collectively, the “Space Leases”), including any deposits relating to such Space
Leases held by Seller and not applied to the tenant’s obligations as of the Closing Date. For
purposes of this Agreement, the term “Space Leases” does not include Bookings.




          (k) 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, whether held in the name of Seller, the Hotel
or Manager (defined below) and owned by Seller (collectively, the “House Bank Funds”).
Purchaser expressly acknowledges and agrees that the Property to be transferred to Purchaser
pursuant to this Agreement does not include any reserve or other accounts created or maintained by
or on behalf of Seller or Manager in connection with the ownership or operation of the Hotel.




          (l) Any deposits made by Seller with utility companies or governmental agencies or authorities
relating to the Real Property to the extent apportionment is made therefor pursuant to Section
4.4.




     1.2 Property Defined.



          (a) The Real Property, the Personal Property, the Permits, the Bookings, the Service
Contracts, the Intangibles, the Unopened Inventory, the Retail Inventory, the Consumable Inventory,
the Space Leases and the House Bank Funds are hereinafter sometimes referred to collectively as the
“Property”. The Purchase Price is generally subject to adjustment pursuant to Section
4.4, and specifically does not include payment for, and shall be adjusted with respect to
(among other things), the House Bank Funds, and certain of the Unopened Inventory and the Retail
Inventory, as described in Section 4.4 below.




          (b) Notwithstanding anything to the contrary in Section 1.1 or Section 1.2(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 or reserve,
except for security deposits held by Seller as landlord with respect to any Space Lease as of the
Closing Date, security deposits held by Seller with respect to any Booking as of the Closing Date,
utility and governmental agency deposits, deposits held by Seller in connection with any Service
Contract to be assumed by Purchaser and the House Bank Funds, all of which are to be transferred at
Closing subject to the terms of this Agreement.




          (ii) The Excluded Personal Property.




          (iii) The Retained IP.




          (iv) The Excluded Permits.




          (v) All accounts receivable of the Hotel and all related operations (collectively, the
“Receivables”).




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          (vi) Any tangible or intangible property (including, without limitations, fixtures, personal
property or intellectual property) owned by: (A) the supplier, vendor, licensor, lessor or other
party under any Service Contracts; (B) the tenants under any Space Leases; (C) Manager (but solely
with respect to the types of tangible and intangible property that Manager would retain upon
termination of the New Management Agreement); (D) any employees; (E) any guests or customers of
the Hotel; or (F) any other third party.




     1.3 Permitted Exceptions. The Property shall be conveyed subject only to the matters which are,
or are deemed to be, Permitted Exceptions pursuant to Article II below.



     1.4 Purchase Price. Seller is to sell and Purchaser is to purchase the Property for a total of
ONE HUNDRED THIRTY SEVEN MILLION AND NO/100 DOLLARS ($137,000,000.00) (the “Purchase
Price”).



     1.5 Payment of Purchase Price.



          (a) On the Closing Date, Purchaser shall deliver to Escrow Agent, by wire transfer of
immediately available federal funds to the bank account designated in the Escrow Agreement, an
amount equal to the Purchase Price, as increased or decreased by prorations and adjustments as
herein provided, less the Earnest Money previously delivered to Escrow Agent.




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




          (c) Seller and Purchaser agree that attached hereto as Schedule 1.5(c) is an
allocation of the Purchase Price among the Real Property and various items of personal
property (i.e., the Property other than the Real Property). Each party agrees to file federal,
state and local tax returns consistent with such allocations agreed upon between the parties.




     1.6 Earnest Money.



          (a) Within one (1) business day following the full execution and delivery of this Agreement by
Seller and Purchaser, Purchaser shall deposit with First American Title Insurance Company (“Escrow
Agent”) having its office at 633 Third Avenue, New York, NY 10017, Attention: Andrew Jaeger or
Anthony Ruggeri, the sum of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) (together with accrued
interest thereon, the “Earnest Money”) by wire transfer of immediately available federal
funds to the bank account designated in the Escrow Agreement. The full amount of the Earnest
Money is deemed earned by Seller when the Additional Earnest Money is delivered pursuant
hereto by Purchaser and is non-refundable to Purchaser except in the event that this Agreement is
timely terminated as a result of Purchaser’s election to terminate in accordance with and pursuant
to Section 2.3(b), Section 4.8, Section 6.2 or Section 8.2 below,
in which case the Escrow Agent shall be obligated to refund the full amount of the Earnest Money to
Purchaser pursuant to the terms of the Escrow Agreement.




5









 








          (b) Escrow Agent shall hold the Earnest Money in a segregated, interest-bearing account in
accordance with the terms and conditions of the Deposit Escrow Instructions attached hereto as
Exhibit G (the “Escrow Agreement”). All interest accruing on such sums shall become
a part of the Earnest Money and shall be distributed or applied as Earnest Money in accordance with
the terms of the Escrow Agreement.




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




     1.7 Management Agreement. Purchaser acknowledges that the Hotel is being operated and
managed by Morgans Hotel Group Management LLC, a Delaware limited liability company
(“Manager”) (formerly known as Ian Schrager Hotel Management LLC), pursuant to that certain
Property Management Agreement dated as of June 30, 1999, by and between Seller and Manager (the
“Management Agreement”). At Closing, the Management Agreement will be terminated effective
as of the Closing Date at Seller’s sole cost and expense and Purchaser and Manager will enter into
a hotel management agreement in the form agreed to by the parties prior to the Effective Date (the
“New Management Agreement”).



ARTICLE II

TITLE AND SURVEY




          2.1 Title Report. Seller has obtained and delivered to Purchaser, a title report dated March
14, 2011 (Title No. NCS — 48012 — NY) (the “Title Report”) covering the Real Property from
First American Title Insurance Company (the “Title Company”) and, has caused the Title
Company to deliver to Purchaser a copy of each document referenced in the Title Report as an
exception to title to the Real Property. Purchaser shall deliver to Seller, within five (5) days
after receipt by Purchaser, a copy of any updates (each a “Title Update”) to the Title
Report issued by the Title Company, provided that if Purchaser shall receive a Title Update less
than five (5) days prior to the then scheduled Closing Date, then Purchaser shall deliver same to
Seller prior to the Closing.




          2.2 Survey. Purchaser has obtained a survey of the Real Property prepared by Scott E. Ohana.
P.L.S. with a visual examination update April 15, 2011 (Reference No. J.N. 113-11) (as so updated,
the “Survey”).




          2.3 Approval of Title.




          (a) Purchaser has approved all title exceptions and survey matters set forth on Schedule
2.4(a) attached hereto.




          (b) Purchaser shall have five (5) business days after receipt of a Title Update, if any, to
notify Seller, in writing, of such objections as Purchaser may have to anything contained in such
Title Update other than Permitted Exceptions (and if Purchaser receives a Title Update less than
(5) days prior to a scheduled Closing Date, then Purchaser shall deliver such written notice to
Seller prior to the Closing). In the event Purchaser shall notify Seller, in writing, of




6









 







objections
to title or to matters shown on a Title Update, Seller shall have the right, but not the
obligation, to cure such objections. Within five (5) business days after receipt of Purchaser’s
notice of objections, Seller shall notify Purchaser in writing whether Seller elects to attempt to
cure any or all of such objections. If Seller elects to attempt to cure any or all of such
objections, Seller shall have the right to attempt to remove, satisfy or cure the same and for this
purpose Seller shall, at Seller’s election, be entitled to reasonable adjournments of the Closing
if additional time is required, but in no event shall the adjournments, in the aggregate, exceed
sixty (60) days after the Outside Closing Date. If Seller elects not to attempt to cure any
objections specified in Purchaser’s notice, or if Seller fails (despite using reasonable commercial
efforts) to effect a cure of those objections which it elected to attempt to cure prior to the
Closing (or any date to which the Closing has been adjourned) and so notifies Purchaser in writing,
or if Seller fails to respond to Purchaser’s notice within said five (5) business day period,
Purchaser shall have the following options: (i) to accept a conveyance of the Property subject to
the Permitted Exceptions and any matter objected to by Purchaser which Seller is unwilling or
unable to cure (each of which shall also be deemed to be Permitted Exceptions), without reduction
of the Purchase Price; or (ii) to terminate this Agreement by sending written notice thereof to
Seller, and upon delivery of such notice of termination, this Agreement shall terminate and the
Earnest Money shall be returned to Purchaser, and thereafter neither party hereto shall have any
further rights, obligations or liabilities hereunder except to the extent that any right,
obligation or liability set forth herein expressly survives termination of this Agreement. If: (A)
Seller notifies Purchaser that Seller does not intend to attempt to cure any title objection; (B)
Seller fails to respond to Purchaser’s notice within said five (5) business day period; or (C) if,
having commenced attempts to cure any objection, Seller later notifies Purchaser in writing that
Seller will not effect a cure thereof, then, in any such event, Purchaser shall, within five (5)
days after such notice has been given (or within five (5) days after Seller’s five (5) business day
period to respond to Purchaser’s objection notice has expired), notify Seller in writing whether
Purchaser shall elect to accept the conveyance under clause (i) of the immediately preceding
sentence or to terminate this Agreement under clause (ii) of the immediately preceding sentence.
Purchaser’s failure to notify Seller of termination of this Agreement within such five (5) business
day period shall be deemed to be an irrevocable election under clause (i) above to accept
conveyance of the Property without reduction of the Purchase Price.




          (c) Unless expressly agreed to by Seller, Seller have no responsibility or obligation of any
kind or nature whatsoever (express or implied) to cure any title matter objected to by Purchaser.
Notwithstanding the foregoing sentence, if any exceptions on the Title Report or any of the
objections set forth in a written notice from Purchaser consist of delinquent taxes,
mortgages, deeds of trust, security agreements, construction or mechanics’ liens, tax liens or
other liens or charges in a fixed sum (or capable of computation as a fixed sum) (collectively,
“Monetary Encumbrances”), then Seller shall be obligated to pay and discharge (or cause the
Title Company to insure over) such Monetary Encumbrances, provided that (1) Seller’s obligation to
incur costs and expenses in connection with paying and/or discharging all such Monetary
Encumbrances is limited to Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) in the
aggregate and (2) the foregoing aggregate limitation of Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00) shall not apply to any liens securing loans made to Seller and any other
Monetary Encumbrances that were caused, assumed, consented to or created by Seller.





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     2.4 Conveyance of Title. Notwithstanding anything contained herein to the contrary, at Closing,
Seller shall convey and transfer to Purchaser its interest in the Real Property subject to the
following exceptions to title (the “Permitted Exceptions”):



          (a) Those matters specifically set forth on Schedule 2.4(a) attached hereto and made a
part hereof.




          (b) Any state of facts shown on the Survey.




          (c) The lien of all ad valorem real estate taxes and assessments not yet due and payable as of
the Closing Date, subject to adjustment as herein provided.




          (d) All laws, ordinances, rules and regulations of the United States, the State of California,
any city or other subdivision or any agency, department, commission, bureau or instrumentality of
any of the foregoing having jurisdiction over the Real Property or the Hotel, as the same may now
exist or may be hereafter modified, supplemented or promulgated (collectively, the “Legal
Requirements”).




          (e) All presently existing and future liens of real estate taxes or assessments and water
rates, water meter charges, water frontage charges and sewer taxes, rents and charges, if any,
subject to apportionment as provided in this Agreement.




          (f) Any matters over which the Title Company is willing to insure to the reasonable
satisfaction of Purchaser at no additional cost (or, if there is additional cost, if Seller will
pay the cost).




          (g) Any matters against which the Title Company is willing to provide affirmative insurance to
the reasonable satisfaction of Purchaser at no additional cost (or, if there is additional cost, if
Seller will pay the cost).




          (h) Any other matter affecting title to the Real Property that was not objected to by
Purchaser or was waived or deemed waived by Purchaser in accordance with Section 2.3
hereof.




          (i) All violations of laws, rules, regulations, statutes, ordinances, orders or requirements
of law and/or conditions giving rise to the same;




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




          (k) The rights of the tenants under the Space Leases and any person claiming by, through or
under such tenants.




     2.5 Title Policy. At Closing, Seller and Purchaser shall direct the Title Company to issue an
ALTA Owner’s Policy 2006 (“Title Policy”) insuring Purchaser’s interest in and to the Real
Property as of the Closing Date, subject to the Permitted Exceptions.



8









 





ARTICLE III

INSPECTION




     3.1 Right of Inspection.



          (a) Purchaser shall, subject to the rights of guests of the Hotel and the tenants under the
Space Leases, have the right to make physical inspections of the Real Property and to examine at
such place or places at the Hotel or elsewhere as the same may be located, any operating files
maintained by or for the benefit of Seller in connection with the leasing, operation, current
maintenance and/or management of the Property (“Property Information”), including, without
limitation, the Space Leases, the Service Contracts, insurance policies, bills, invoices, receipts
and other general records relating to the income and expenses of the Hotel, correspondence,
surveys, plans and specifications, warranties for services and materials provided to the Hotel,
environmental audits and similar materials, materials related to Hotel Employees (as defined
below), to the extent Seller is not prohibited by applicable contracts or law from disclosing such
materials, and any other documents relating to the Property in Seller’s or Manager’s possession or
control, but excluding materials not directly related to the maintenance and/or management of the
Property such as, without limitation, Seller’s financial projections, forecasts, budgets,
appraisals, company tax records, internal memoranda, correspondence and reports and similar
proprietary or confidential information; provided, however that it is anticipated and Purchaser and
Seller agree that Manager will provide Purchaser with Manager’s forecasts and budgets with respect
to the future operation of the Property.




          (i) Subject to Section 11.2, Purchaser shall keep all Property Information strictly
confidential, provided that Purchaser may deliver copies of Property Information to its attorneys,
accountants and other advisors in connection with the acquisition of the Property and to current
and prospective lenders and partners provided that such parties agree to maintain the
confidentiality of such Property Information and that Purchaser is liable to Seller for any breach
by any such party of the confidentiality of such Property Information.




          (b) Purchaser understands and agrees that any on-site inspections of the Property shall only
be conducted during business hours with not less than two (2) business days prior notice to Seller.
Seller may have its respective representatives attend any such inspections. Such physical
inspection shall not disturb Hotel guests or tenants under the Space Leases nor unreasonably
interfere with the use of the Property by Seller or Manager. Such physical inspection shall not be
invasive in any respect, and in any event shall be conducted in accordance with standards
customarily employed in the industry and in compliance with all governmental laws, rules and
regulations. Following each entry by Purchaser with respect to inspections and/or tests on the Real
Property, Purchaser shall repair any damage to the Property caused by Purchaser or any of its
agents, consultants or representatives in connection with Purchaser’s diligence activities at the
Property, and restore the Property to the original condition as existed prior to any such
inspections and/or tests, at Purchaser’s sole cost and expense.




          (c) Seller shall reasonably cooperate with Purchaser in its due diligence but shall not be
obligated to incur any liability in connection therewith. Purchaser shall not disrupt Seller’s,
Manager’s or any tenant’s or guest’s activities on the Real Property and shall not contact
Manager’s on-site managers or on-site employees, or any other employees working at the Hotel,




9









 







any
guests of the Property, any party to a Service Contract, any tenants under the Space Leases, any
lender providing financing secured by the Real Property or any governmental authority without in
each instance obtaining Seller’s prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed.




          (d) Purchaser shall indemnify, defend, protect and hold Seller harmless from and against any
claim for liabilities, losses, costs, expenses (including reasonable attorneys’ fees actually
incurred), damages or injuries arising out of or resulting from or in connection with the
inspection of the Property by Purchaser or its agents, employees, representatives, consultants or
contractors and notwithstanding anything to the contrary in this Agreement, such obligation to
indemnify, defend, protect and hold harmless Seller shall survive Closing or any termination of
this Agreement. Purchaser agrees (i) that prior to entering the Property to conduct any
inspection, Purchaser shall obtain and maintain, and shall cause each of its consultants,
contractors and agents to maintain (and shall deliver evidence thereof in the form of a policy
certificate satisfactory to Seller thereof), at no cost or expense to Seller, commercial general
liability insurance from an insurer reasonably acceptable to Seller in the amount of Two Million
Dollars ($2,000,000) with combined single limit for personal injury or property damage per
occurrence, such policies to name Seller and Manager as additional insured parties, which insurance
shall provide coverage against any claim for personal injury or property damage caused by Purchaser
or its agents, employees, representatives or consultants in connection with any such tests and
investigations, and (ii) to keep the Property free from all liens and encumbrances on account of
any inspections and/or tests made by or for the benefit of Purchaser. Purchaser’s insurance may
not be canceled or amended prior to Closing except upon not less than thirty (30) days’ prior
written notice to Seller. Purchaser’s obligations under this Section 3.1 shall survive a
termination of this Agreement.




     3.2 Seller Due Diligence Materials. PURCHASER ACKNOWLEDGES THAT INFORMATION RELATED TO THE
PROPERTY CONTAINED IN THE SECURE WEBSITE (THE “E-ROOM”) TO WHICH PURCHASER HAS PREVIOUSLY
BEEN GRANTED
ACCESS HAS BEEN MADE AVAILABLE TO PURCHASER IN THE E-ROOM BY SELLER. BY EXECUTING THIS AGREEMENT,
PURCHASER ACKNOWLEDGES ITS RECEIPT THEREOF OR THE AVAILABILITY THEREOF AND THAT (1) PURCHASER HAS
RECEIVED COPIES OF THE ENVIRONMENTAL, ENGINEERING, SOILS AND OTHER REPORTS REGARDING THE CONDITION
OF THE PROPERTY (COLLECTIVELY, THE “REPORTS”) LISTED ON SCHEDULE 3.2 ATTACHED HERETO, AND (2) ANY
REPORTS OR OTHER DOCUMENTS DELIVERED OR TO BE DELIVERED BY SELLER OR ITS AGENTS OR CONSULTANTS TO
PURCHASER ARE BEING MADE AVAILABLE SOLELY AS AN ACCOMMODATION TO PURCHASER AND WITHOUT ANY
REPRESENTATION OR WARRANTY OF SELLER AS TO THEIR ACCURACY OR COMPLETENESS OF FACTS OR OPINIONS SET
FORTH THEREIN EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THAT ANY RELIANCE BY PURCHASER ON
SUCH REPORTS OR OTHER DOCUMENTS IN CONNECTION WITH THE PURCHASE OF THE PROPERTY IS UNDERTAKEN AT
PURCHASER’S SOLE RISK. PURCHASER AGREES THAT SELLER SHALL HAVE NO LIABILITY OR OBLIGATION
WHATSOEVER FOR ANY UNINTENTIONAL INACCURACY IN OR OMISSION FROM THE OFFERING MATERIALS PREPARED IN
CONNECTION WITH THE SALE OF THE



10









 







PROPERTY OR ANY REPORTS OR OTHER DOCUMENTS MADE AVAILABLE TO
PURCHASER OR ITS REPRESENTATIVES SUBJECT TO SELLER’S REPRESENTATIONS AND WARRANTIES SET FORTH IN
THIS AGREEMENT. PURCHASER HAS CONDUCTED ITS OWN INVESTIGATION OF THE CONDITION OF THE PROPERTY TO
THE EXTENT PURCHASER DEEMS SUCH AN INVESTIGATION TO BE NECESSARY OR APPROPRIATE. For purposes of
this Agreement, the term “Seller Due Diligence Materials” shall mean the Reports, the Property
Information and all other documents and materials provided or otherwise made available by Seller to
Purchaser in the E-Room or pursuant to Section 3.1 and the other provisions of this
Agreement or otherwise, together with any copies or reproductions of such documents or materials,
or any summaries, abstracts, compilations, or other analyses made by Purchaser based on the
information in such documents or materials.



ARTICLE IV

CLOSING




     4.1 Time and Place; Pre-Closing.



          (a) Subject to the provisions of Sections 4.6 and 4.7 below, the consummation
of the transaction contemplated hereby (“Closing”), as evidenced by the payment and release
of the Purchase Price to Seller and the release by Seller of the deed for recording, shall occur on
or before 4:00 p.m. (New York time) on May 3, 2011, as such date may be adjourned from time to time
in accordance with this Agreement (“Outside Closing Date”, with the actual date of Closing
being referred to herein as the “Closing Date”). The Closing shall occur through an escrow
administered by Escrow Agent and the Purchase Price and all documents (unless otherwise mutually
agreed) shall be deposited with Escrow Agent as escrowee. At Closing, Seller and Purchaser shall
perform the obligations set forth in, respectively, Section 4.2 and Section 4.3,
the performance of which obligations shall be concurrent conditions.




          (b) Notwithstanding anything herein to the contrary, the parties shall “pre-close” the sale of
the Property on the last business day immediately prior to the Closing Date (the “Pre-Closing
Date”). The term “pre-close” shall mean that each of the parties shall deliver to Escrow Agent
no later than 4:00 p.m. (New York time) on the Pre-Closing Date all of the documents and other
items (other than closing proceeds and other funds) required to be delivered by such party for
Closing, including all of the closing documents required pursuant to Sections 4.2 and
4.3 hereof. With respect to the closing adjustments to be made between the parties pursuant
to Section 4.4 hereof, the adjustments shall continue to be made effective as of the
Cut-Off Time, but on the closing statement executed by the parties on the Pre-Closing Date, the
parties shall in good faith estimate those adjustments which are not capable of being finalized
prior to the Cut-Off Time, and the parties shall reconcile said estimated adjustments pursuant to
Section 4.4.14 hereof.




     4.2 Seller’s Closing Obligations and Deliveries. At Closing, subject to Section 4.1
above, Seller shall through Escrow Agent make the following deliveries and take the following
actions:



11









 





          (a) Execute and deliver to Purchaser one (1) original counterpart of a grant deed
(“Deed”), in the form attached hereto as Exhibit A and made part hereof, conveying
the Real Property subject only to the Permitted Exceptions.




          (b) Execute and deliver to Purchaser two (2) original counterparts of a bill of sale in the
form attached hereto as Exhibit B and made a part hereof conveying all of Seller’s right
title and interest in and to the Personal Property, the Unopened Inventory, the Retail Inventory,
the Consumable Inventory without warranty of use and without warranty, expressed or implied, as to
merchantability and fitness for any purpose.




          (c) Execute and deliver to Purchaser two (2) original counterparts of an assignment and
assumption of Seller’s interest in the Service Contracts (including the Equipment Leases), the
Bookings the Permits and the other Intangibles (in each case to the extent assignable)
(“Assignment of Contracts”) in the form attached hereto as Exhibit C and made a
part hereof.




          (d) Execute and deliver to Purchaser two (2) original counterparts of an assignment and
assumption of Seller’s interest in the Space Leases (“Assignment of Space Leases”) in the
form attached hereto as Exhibit D and made a part hereof.




          (e) Deliver to Purchaser a certificate, dated as of the Closing Date and executed on behalf of
Seller by a duly authorized officer thereof, stating that, to the best knowledge of such duly
authorized officer, the representations and warranties of Seller contained in this Agreement are
true and correct in all material respects as of the Closing Date (with appropriate modifications of
those representations and warranties made in Section 5.1 hereof to reflect any changes
therein including without limitation any changes resulting from actions under Section 5.3
hereof) or identifying any representation or warranty which is not, or no longer is, true and
correct. Seller shall not be liable to Purchaser for, or be deemed to be in default hereunder by
reason of, any breach of representation or warranty which results from any change that (i)
occurs between the Effective Date and the Closing Date and (ii) is permitted under the terms
of this Agreement or is beyond the reasonable control of Seller; provided, however, that if any of
the foregoing changes are not permitted under the terms of this Agreement but are materially
adverse to Purchaser, then any such changes constitute the non-fulfillment of the condition set
forth in Section 4.6(a) and Purchaser may elect to terminate this Agreement pursuant to
Section 4.8. If, despite changes or other matters described in such certificate, the Closing
occurs, Seller’s representations and warranties set forth in this Agreement shall be deemed to have
been modified by all statements made in such certificate.




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




          (g) Deliver to Purchaser an affidavit duly executed by Seller stating that Seller is not a
“foreign person” as defined in the Federal Foreign Investment in Real Property Tax Act of 1980 and
the 1984 Tax Reform Act, in the form attached hereto as Exhibit E.




          (h) If not already delivered to Purchaser, deliver to Purchaser, originals, or, if
unavailable, copies of the Space Leases, the Service Contracts and the Permits, if any, in the





12









 







possession or control of Seller or Seller’s agents, together with such leasing and property files
and records which are (A) in the possession or control of Seller or Seller’s agents and (B)
material in connection with the continued operation, leasing and maintenance of the Property and
any keys to security deposit boxes. For a period of four (4) 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, Purchaser shall maintain the books and records for
the Property with respect to the period of Seller’s ownership (to the extent that such records were
provided to Purchaser and Seller did not retain copies thereof), at Purchaser’s expense, and allow
Seller and its agents or representatives reasonable access, upon reasonable advance notice (which
notice shall identify the nature of the information sought by Seller), at all reasonable times to
examine and make copies of any and all books and records at Seller’s cost and expense, which right
shall survive the Closing. The location of such items at the Hotel on the Closing Date shall
constitute delivery to Purchaser.




          (i) Deliver to Escrow Agent an executed counterpart closing statement consistent with this
Agreement and in a customary form.




          (j) Deliver a copy of the termination agreement executed by Seller and Manager, which has the
effect of terminating the Management Agreement effective as of the Closing Date.




          (k) Deliver to Title Company a title affidavit generally in the form attached hereto as
Exhibit F (the “Title Affidavit”).




          (l) Deliver to Purchaser the Intangibles in Seller’s possession or control. The location of
such items at the Hotel on the Closing Date shall constitute delivery to Purchaser.




          (m) Deliver to Purchaser two (2) original counterpart copies of the New Management Agreement
executed by the Manager.




          (n) Deliver to Purchaser a certificate or registration of title for any owned vehicle or other
Personal Property included in the Property which requires such certification or registration, duly
executed, conveying such vehicle or such other Personal Property to Purchaser.




          (o) Deliver any real estate transfer tax declaration (including, without limitation, a
Preliminary Change of Ownership Report) and all other documents required under Applicable Law in
connection with the conveyance of the Real Property.




          (p) Deliver to Purchaser (2) original executed counterpart copies of a Post-Closing F&B
Operations Agreement in the form agreed to by the parties prior to the Effective Date.




          (q) Deliver to Escrow Agent two (2) original executed counterpart copies of an agreement
regarding post-closing capital projects in the form agreed to by the parties prior to the Effective
Date (the “Capital Repairs Escrow Agreement”).





13









 








          (r) Deliver to Purchaser two (2) original executed counterpart copies of the Liquor Assets
Escrow Agreement executed by Liquor Seller.




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




     4.3 Purchaser’s Closing Obligations and Deliveries. At Closing, Purchaser shall through Escrow
Agent make the following deliveries and take the following actions:



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




          (b) Deliver a written direction to Escrow Agent to disburse the Earnest Money to Seller in
accordance with the Escrow Agreement.




          (c) Deliver the same number of original executed counterparts of the instruments described in
clauses (b), (c), (d), (i), (p), and (q) of Section 4.2 above to Seller or Escrow Agent, as
applicable.




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




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




          (f) Deliver to Seller, on behalf of Manager, two (2) original executed counterpart copies of
the New Management Agreement.




          (g) Deliver to Seller two (2) original executed counterpart copies of the Liquor Assets Escrow
Agreement executed by Wolverines Lessee.




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




     4.4 Prorations, Credits and Other Adjustments. At Closing, Purchaser and Seller shall prorate
all items of income and expense which are customarily prorated between a purchaser and seller for
hotel properties comparable to the Hotel, including, without limitation, the prorations and other
adjustments provided below, and the net amount consequently owing to Seller or Purchaser shall be
added to or subtracted from the proceeds of the Purchase Price payable to Seller at Closing.
Beginning as close to the anticipated Closing Date as practicable, Seller shall, in consultation
with Purchaser and with Purchaser’s reasonable cooperation, cause to be prepared a prorations and
credit statement (the “Preliminary Statement”) which shall reflect all of the



14









 







prorations,
credits and other adjustments to the Purchase Price at Closing required under this Section
4.4 or under any other provision of this Agreement. As soon as Purchaser and Seller have agreed
upon the Preliminary Statement, they shall jointly deliver a mutually signed copy thereof to Escrow
Agent. To the extent Purchaser and Seller are unable to agree by Closing on any item on the
Preliminary Statement, Seller’s estimation of such item shall be used and such item shall be
finally resolved on the Final Statement (defined below) pursuant to Section 4.4.14 below.



     4.4.1 Proration of Taxes.



          (a) All real estate ad valorem taxes, general assessments and special assessments and all
personal property ad valorem taxes assessed against the Hotel (collectively, “Taxes”) with
respect to the tax year in which Closing occurs shall be prorated between Purchaser and Seller as
of the Closing Date. If the amount of any such Taxes is not ascertainable on the Closing Date, the
proration for such Taxes shall be based on the tax rates set forth in the most recent available
bill and the latest assessed valuation of the Property; provided, however, that after the Closing,
Seller and Purchaser shall re-prorate the Taxes in accordance with Section 4.4.14 below and
pay any deficiency in the original proration to the other party promptly upon receipt of the actual
bill for the relevant taxable period. Purchaser shall give Seller written notice of the actual
amounts of any such bills within three (3) days after receipt thereof. If, at the time of the
Closing, the Hotel is subject to a special assessment or assessments which are payable by Seller
and which are or may become payable in installments, then, for the purposes of this Agreement, all
of the installments of any such special assessment or assessments which are not delinquent on the
Closing Date and which may be paid thereafter shall be equitably apportioned between Seller and
Purchaser based upon their respective periods of ownership in relation to the benefits for which
such assessments were levied.




          (b) Seller retains the right to commence, continue and settle any proceeding to contest any
Taxes for any taxable period which terminates prior to the date of the Closing, and shall be
entitled to any refunds or abatements of Taxes awarded in such proceedings.




          (c) Seller shall have the right to commence, continue and settle any proceeding to contest any
Taxes for any taxable period which includes the Closing Date. Notwithstanding the foregoing, if
Purchaser desires to contest any Taxes for such taxable period and Seller has not commenced any
proceeding to contest any such Taxes for such taxable period, Purchaser shall provide written
notice requesting that Seller contest such Taxes. If Seller desires to contest such Taxes, Seller
shall provide written notice to Purchaser within fifteen (15) days after receipt of Purchaser’s
request confirming that Seller will contest such Taxes, in which case Seller shall proceed to
contest such Taxes, and Purchaser shall not have the right to contest such Taxes. If Seller fails
to provide such written notice confirming that Seller will contest such Taxes within such fifteen
(15) day period, Purchaser shall have the right to contest such Taxes. Any refunds or abatements
awarded in such proceedings shall be used first to reimburse the party contesting such Taxes for
the reasonable costs and expenses incurred by such party in contesting such Taxes, and the
remainder of such refunds or abatements shall be prorated between Seller and Purchaser as of the
Cut-Off Time, and the party receiving such refunds or abatements promptly shall pay such prorated
amount due to the other party.




15









 








          (d) Purchaser shall have the right to commence, continue and settle any proceedings to contest
Taxes for any taxable period which commences after the Closing Date, and shall be entitled to any
refunds or abatements of Taxes awarded in such proceedings.




          (e) Seller and Purchaser shall use commercially reasonable efforts to cooperate with the party
contesting the Taxes (at no cost or expense to the party not contesting the Taxes other than any de
minimis cost or expense or any cost or expense which the requesting party agrees in writing to
reimburse) and to execute and deliver any documents and instruments reasonably requested by the
party contesting the Taxes in furtherance of the contest of such Taxes.




     4.4.2 General Proration of Expenses.



          (a) The following items of expense with respect to any portion or aspect of the Hotel shall be
prorated between Seller and Purchaser as of the Closing Date:




          (i) All charges and expenses under any Service Contracts.




          (ii) All utility charges (but excluding any utility deposits). To the extent reasonably
practicable, though, in lieu of prorating the charges for any metered utility service, Purchaser
and Seller shall endeavor to have the utility read the meter as close as practicable to the Closing
Date, render a final bill to Seller based on such reading and Purchaser shall thereafter be
responsible for all subsequent bills relating to such service.




          (iii) Prepaid expenses of the Hotel, excluding insurance but including without limitation, (A)
amounts incurred to pay for natural gas (if any) held in storage pending use at the Hotel and (B)
the expense of all transferable licenses and permits obtained in connection with the operation of
the Hotel.




          (iv) All other Hotel operating expenses, other than employment expenses (which are covered by
Section 4.4.3 below).




     4.4.3 Employment Expenses. All salaries, bonuses, other compensation and employment benefits
for unused vacation, holiday, sick leave and personal days if, and to the extent, that amounts are
accrued and vested and unused prior to the Closing Date, and contributions for retirement and
welfare benefits, together with F.I.C.A., unemployment and other payroll taxes and benefits due
with respect to the employment of the Employees shall be prorated between Seller and Purchaser as
of the Closing Date, with accrued vacation and other benefits due to Employees in accordance with
past practices. Purchaser shall pay the salaries and related benefits that are payable to any
Employees for work performed at the Hotel on the Closing Date, whether prior to or following the
time of Closing, regardless of whether such persons are employees of Seller, Manager or Purchaser.



     4.4.4 Hotel Revenues.



          (a) At Closing, Seller shall receive one-half (1/2) of all revenues from the Hotel guest rooms
and facilities occupied on the evening immediately preceding the Closing Date, including without
limitation any sales taxes, room taxes, occupancy taxes and other taxes charged






16









 







to guests in such
rooms, all parking charges, sales from mini-bars, in-room food and beverage, telephone, facsimile
and data communications, in-room movie, laundry, and other service charges allocable to such rooms
with respect to the evening immediately preceding the Closing Date. All revenues from restaurants,
bars, lounges, vending machines and other service operations conducted at the Property shall be
allocated based on whether the same accrued before or after the Cut-Off Time, and Seller shall
cause the Manager to separately record sales occurring before and after the Cut-Off Time at the
Property. Notwithstanding the foregoing, all revenues from any bars and lounges at the Property
shall be prorated based on the actual closing time for such bar or lounge. For example, if such
bar or lounge closes at 2 a.m. on the Closing Date, Seller shall retain the revenues from such
services and operations even though such revenues were generated two (2) hours after the Cut-Off
Time.




          (b) Revenues from conferences, receptions, meetings, and other functions occurring in any
conference, banquet or meeting rooms in the Hotel, or in any adjacent facilities owned or operated
by Seller, including usage charges and related taxes, food and beverage sales, valet parking
charges, equipment rentals, and telecommunications charges, shall be allocated between Seller and
Purchaser, based on when the function therein commenced, with: (i) one-day functions commencing
prior to the Cut-Off Time being allocable to Seller; (ii) functions commencing after the Cut-Off
Time being allocable to Purchaser; and (iii) multi-day functions being allocated on a pro rata
basis between Seller and Purchaser according to when the event commences and is scheduled to end in
relation to the Cut-Off Time.




          (c) Any operating revenues not otherwise provided for in this Section 4.4, shall be
prorated between Purchaser and Seller as of Closing.




     4.4.5 Rent.



          (a) Rent and other payments payable by tenants, licensees, concessionaires, and other persons
using or occupying the Real Property or any part thereof under a Space Lease or otherwise, if any,
for or in connection with such use or occupancy, including, without limitation, fixed monthly
rentals, additional rentals, percentage rentals, escalation rentals, retroactive rentals, operating
cost pass-throughs, common area maintenance charges, HVAC charges, payments of taxes and insurance
expenses, promotional/marketing charges, construction receivables and other sums and charges
payable by the tenants under the Space Leases (collectively, “Rent”) shall be prorated as
of the Closing Date such that Seller will be entitled to Rent attributable to periods prior to the
Closing Date and Purchaser will be entitled to Rent attributable to periods from and after the
Closing Date, all as more particularly set forth below:




          (b) All Rent, other than Percentage Rent, owed under any Space Lease collected during the
calendar month for the month in which the Closing occurs, but prior to the Closing Date, shall be
applied in the following order of priority (after deduction of actual out-of-pocket costs of
collection paid by Seller to third parties): (i) first, to Rent due from such tenant for the month
in which the Closing occurs prorated between Seller and Purchaser as of the Closing Date, and (ii)
second, to the extent the applicable tenant shall be in arrears for any Rent due for periods of
time prior to the calendar month during which the Closing occurs (“Rent Arrears”), then
Rent collected from such tenant during the calendar month in which the Closing





17











 




occurs shall be applied to Rent Arrears due from such tenant for the months preceding the
month during which the Closing occurs.




          (c) All Rent, other than Percentage Rent, owed under any Space Lease collected after the
Closing Date shall be applied in the following order of priority (after deduction of actual
out-of-pocket costs of collection paid by Purchaser to third parties): (i) first, to Rent then due
from the applicable tenant to Purchaser; (ii) second, to Rent due from the applicable tenant for
the calendar month in which the Closing occurs, prorated between Seller and Purchaser as of the
Closing Date; and (iii) third, thereafter to the balance of Rent Arrears due then to Seller from
such tenant. Any sums owed to Seller or Purchaser, as the case may be, pursuant to the foregoing
shall be paid to the party entitled hereunder to receive such sum within fifteen (15) days
following receipt thereof by the other party. Purchaser shall deliver to Seller by the twentieth
(20th) day of the first full calendar month after the Closing and every month thereafter through
the twelfth (12th) month following the Closing, a statement of the collection status of each Rent
Arrear until the collection of all Rent Arrears. For one (1) year following the Closing, Seller
shall have the right, upon reasonable notice, but no more often than once in such twelve (12) month
period, to audit Purchaser’s books and records to verify the amount of Rent Arrears which has
actually been collected by Purchaser. Purchaser shall pursue all Rent Arrears in the ordinary
course of business and shall have the right to negotiate settlements with tenants who have Rent
Arrears as it may determine in good faith; provided that, at its sole cost and expense (A) Seller
shall have the unrestricted right to pursue collection from any tenant not in possession of its
space as of the Closing Date in Seller’s sole discretion including, without limitation, initiating
and prosecuting a lawsuit against the applicable tenant and (B) in the event that after Closing
Purchaser evicts or otherwise terminates the possession of any tenant with Rent Arrears, Seller
shall have the unrestricted right to pursue collection from such tenant in Seller’s sole discretion
including, without limitation, initiating and prosecuting a lawsuit against the applicable tenant.




          (d) Percentage rent or overage rent (referred to herein as “Percentage Rent”) under
each Lease shall be prorated between Purchaser and Seller for the Lease Year (as defined below) in
which the Closing occurs in proportion to the relative periods of ownership of Seller and Purchaser
during such Lease Year, with an adjustment to be made post-Closing upon completion of each
applicable Lease Year to account for any Percentage Rent paid after 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 to which
annual Percentage Rent is owed under each Lease.




     4.4.6 Hotel Payables. At Closing, Purchaser shall receive a proration credit equal to
the aggregate amount of all outstanding accounts payable for the Hotel with respect to purchases of
goods and services delivered prior to the Closing Date (“Hotel Payables”) as set forth in a
schedule attached to the Preliminary Statement. Purchaser shall: (a) assume the obligation to
satisfy all Hotel Payables for which Purchaser received such credit at Closing; (b) indemnify,
defend and hold Seller harmless against any claim for such Hotel Payables; and (c) assume all
obligations of Seller to pay for any (i) consumables or other items ordered by or for the benefit
of Seller in the ordinary 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 are not yet
received as of the Closing Date, which list shall be
updated by Manager immediately prior to



18









 







Closing. There shall not be any adjustment to the
Purchase Price in connection with Purchaser’s assumption of the liabilities described in clauses
(i) and (ii) above.



     4.4.7 Credit for Certain Inventories. At Closing, Seller shall receive a credit (based
upon the original net invoice price paid) for (x) all unopened Liquor Inventory owned by 8440 LLC
as of the Closing (which Liquor Inventory is not being purchased by Purchaser hereunder but shall
be transferred in accordance with the Liquor Assets Escrow Agreement, subject to the post-Closing
food and beverage operations agreement referred to in Section 4.2(p)) and (y) all unopened
Retail Inventories at the Hotel as of the Closing Date, and Purchaser shall purchase all such
unopened Retail Inventories. The amount of such credit shall be based on the actual costs
(including without limitation sales tax) paid by Seller (or 8440, as applicable) for the actual
inventory of such unopened Liquor Inventory and Retail Inventories by Seller’s and Purchaser’s
representatives.



     4.4.8 Credit for Reservation Deposits. Purchaser shall receive a proration credit
equal to the aggregate amount of advance deposits that shall have been received by Seller prior to
the Cut-Off Time on account of reservations for use or occupancy of the Property after the Cut-Off
Time.



     4.4.9 Credit for Cash Banks. Seller shall receive a credit at Closing in an amount
equal to all House Bank Funds.



     4.4.10 Space Lease Deposits. Purchaser shall receive a credit at Closing in an amount
equal to the aggregate amount of security and other deposits of tenants under the Space Leases
which have not been applied to the tenants’ obligations in accordance with the terms of such Space
Leases as of the Closing Date. All obligations with respect to such security deposits shall be
assumed by Purchaser and Purchaser shall indemnify, defend and hold Seller harmless with respect
thereto.



     4.4.11 Regarding Hotel Prorations Generally. Unless this Section 4.4 expressly
provides otherwise: (a) all prorations hereunder with respect to the Hotel shall be made as of
12:00:01 a.m., local time at the Hotel (“Cut-Off Time”) on the Closing Date; (b) all
prorations shall be made on an actual daily basis; and (c) for purposes of such prorations, all
items of revenue and expense with respect to the Hotel’s operations shall be classified and
determined in accordance with the Uniform System of Accounts for the Lodging Industry, as
reasonably modified by Manager for use at the Hotel consistent with past practices within the
twelve (12) months preceding the Closing, and otherwise in accordance with generally accepted
accounting principles. Except as otherwise expressly provided herein, in any case in which
Purchaser receives a credit at Closing on account of any obligation of Seller hereunder, Seller
shall have no further liability for such obligation to the extent of the credit so given, Purchaser
shall pay and discharge the same, and Purchaser shall indemnify, defend and hold Seller harmless
Seller with respect thereto.



     4.4.12 Vouchers. Purchaser shall: (a) honor all outstanding unexpired gift
certificates, coupons or other writings issued by Seller or its affiliates prior to the Closing
Date that entitles the holder or bearer thereof to a credit (whether in a specified dollar amount
or for a
specified item, such as room night or meals) to be applied against the usual charge for rooms,
meals, or goods



19









 







and services at the Hotel (collectively, “Vouchers”) and shall assume all
liability, if any, for all outstanding Vouchers as of the Closing Date; (b) receive a credit
against the Purchase Price payable at Closing in the amount set forth on the schedule entitled
“Vouchers and Barter” Agreements annexed to the Property Information Letter, with respect to the
Vouchers listed thereon, as updated as of the Closing Date; (c) be reimbursed by Manager for any
other Vouchers presented by holders thereof in accordance with the New Management Agreement; and
(d) indemnify, defend and hold Seller harmless from and against all claims, liabilities, costs and
expenses arising out of a violation of this Section 4.4.12 with respect to the Vouchers
from and after the Closing Date.



     4.4.13 Utility and Other Deposits. At Closing, Seller shall receive a credit for all
refundable cash or other deposits posted with utility companies serving the Property or any
governmental agencies or authorities or posted pursuant to any Service Contract, or, at Seller’s
option, Seller shall be entitled to receive and retain such refundable cash and deposits.



     4.4.14 Final Statement; Post-Closing Adjustments. Except for prorations for real
estate taxes and other assessments, which shall be adjusted within fifteen (15) business days of
receipt of the tax bill for the tax year in which the Closing occurs, and prorations of Percentage
Rent in accordance with Section 4.4.5 hereof, Purchaser and Seller shall make a one-time
post-Closing adjustment of any item of income and expense subject to adjustment as provided above
which was either incomplete or incorrect (whether as a result of an error in calculation or a lack
of complete and accurate information) as of the Closing. Purchaser will prepare and deliver to
Seller for its review and approval a statement of prorations (the “Final Statement”) within
ninety (90) days following the Closing Date, and the party in whose favor the original incorrect
adjustment or error was made (“Adjusting Party”) shall pay to the other party
(“Requesting Party”) the sum necessary to correct such prior incorrect adjustment or error
within ten (10) days after completion of the Final Statement. Notwithstanding any provision of
this Agreement to the contrary, all items required to be adjusted pursuant to this Section
4.4.14 shall be adjusted within one hundred twenty (120) days of Closing (except real estate
taxes, which shall be re-adjusted within the period set forth above), and such adjustment shall be
final and no further adjustment to the prorations or the Purchase Price shall be made.



     4.4.15 Resolution of Disputes. In the case of a dispute with respect to any
post-closing adjustment, the parties shall attempt to resolve such dispute, but if for any reason
such dispute is not resolved by the date that is thirty (30) days after the delivery of the
original notice of the claimed adjustment by Purchaser or Seller, but not to exceed one hundred
fifty (150) days after Closing, then the parties shall, upon the written request of either party to
the other, submit such dispute to Ernst & Young (“Outside Accountants”), and the
determination of the Outside Accountants, which shall be made within a period of fifteen (15) days
after such submittal by the parties, shall be conclusive. The fees and expenses of the Outside
Accountants shall be paid equally by Purchaser and Seller. At such time as the amount of any
adjustment or dispute shall be determined (either by agreement or by determination of the Outside
Accountants), any amount that shall be payable by the Requesting
Party to the Adjusting Party as a result of such adjustment or determination shall be paid
within ten (10) business days after the date on which such agreement or determination shall have
been made.



20









 





     4.4.16 Survival. The provisions of this Section 4.4 shall survive Closing.



     4.5 Closing Costs.



          (a) Seller Closing Costs. At Closing, Seller shall pay: (a) the fees of any counsel representing it in connection
with this transaction; (b) 100% of the premium for the Title Policy; (c) one-half of the escrow
fees charged by Escrow Agent; (d) all recording and filing fees; and (e) 100% of the city, county,
and state documentary transfer tax imposed in connection with the consummation of the transactions
contemplated by this Agreement. The parties acknowledge and agree that Seller may use the Purchase
Price to pay Seller’s closing costs.




          (c) Purchaser Closing Costs. At Closing, Purchaser shall pay: (a) the fees of any counsel representing Purchaser in
connection with this transaction; (b) 100% of the (i) cost of any endorsements or extended
coverages to the Title Policy, and (ii) cost of any title insurance provided to Purchaser’s lender;
(c) the cost of any modifications or updates to the Survey, including the update referred to in
Section 2.2; (d) one-half of the escrow fees charged by Escrow Agent; (e) the cost of any
third party engineering and environmental reports and any updates obtained by Purchaser to the
property condition report and the Phase I environmental report; and (f) all bulk sales taxes, sales
tax on the sale of the Personal Property (or any part thereof) and any other sales or use taxes.




          (e) Other Costs. All other costs and expenses incident to this transaction and the closing thereof shall
be paid in a manner consistent with custom for similar transactions in the city where the Hotel is
located. Notwithstanding the foregoing, in the event that this Agreement is terminated as a result
of a party’s default, such defaulting party shall pay all escrow and title cancellation fees
charged in connection with such cancellation.




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



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




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




          (c) Seller shall have delivered to Purchaser or deposited with Escrow Agent all of the items
required to be delivered to Purchaser or deposited with Escrow Agent pursuant to the terms of
Section 4.2.




          (d) Title Company shall have issued, or be irrevocably committed to issue subject to payment
of title premiums, the Title Policy.




21









 








          (e) Seller shall deliver an executed Tenant Estoppel for the Space Lease for Liquor Seller.




          (f) The existing alcoholic beverage license for the Hotel (License No. 326147), which is owned
by 8440 LLC (the “Existing Liquor License”) shall be in full force and effect.




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



          (a) Purchaser shall have deposited with Escrow Agent the Purchase Price as adjusted pursuant
to and payable in the manner provided for in this Agreement and Seller shall have received such
Purchase Price from Escrow Agent.




          (b) All of the representations and warranties of Purchaser contained in this Agreement shall
be true and correct in all material respects as of the Closing Date (with modifications which are
not materially adverse to Seller).




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




          (d) Purchaser shall have deposited with Escrow Agent all of the items required to be delivered
to Seller or deposited with Escrow Agent pursuant to the terms of Section 4.3.




     4.8 Failure or Waiver of Conditions Precedent. If other than as a result of a default
by either party (in which case Article VI shall apply), any of the conditions set forth in Sections
4.6 or 4.7 are not fulfilled or waived on or before the Outside Closing Date, the sole and
exclusive remedy available to the party benefited by such conditions shall be to terminate this
Agreement by written notice to the other party, whereupon the Earnest Money shall be refunded to
Purchaser (less Purchaser’s share of any escrow charges) and all rights and obligations hereunder
of each party shall be at an end except those that expressly survive any termination of this
Agreement. Either party benefited by a condition set forth in Sections 4.6 and 4.7 above may, at
its election, at any time or times on or before the date specified for the satisfaction of the
condition, waive in writing the benefit of such condition. The parties’ consummation of the Closing
pursuant to this
Agreement shall waive any remaining unfulfilled conditions and any liability on the part of
the other party for breaches of representations and warranties of which such party had actual
knowledge as of the Closing.



     4.9 Alcoholic Beverage License.



          (a) Purchaser and Seller recognize that the Existing Liquor License and all alcoholic
beverages on hand at the Hotel or the Property as of the Effective Date, whether issued to the food
and beverage department or held in reserve storage (the “Liquor Inventory” and, together
with the Existing Liquor License, the “Liquor Assets”) are currently owned by 8440 LLC, a
California limited liability company (the “Liquor Seller”). On or prior to Closing,
Wolverines




22









 







Lessee LLC, a Delaware limited liability company (“Wolverines LLC”), and Liquor
Seller (collectively, the “Liquor Designee”) shall execute a separate escrow agreement
relating to the transfer of the Liquor Assets to Liquor Designee, as co-licensees, (the “Liquor
Assets Escrow Agreement”), in the form of Exhibit I attached hereto, and any other
documents required by the California Department of Alcoholic Beverage Control (the “ABC”)
and reasonably required by the Liquor Assets Escrow Agent (as defined below) to effectuate such
transfer, and the parties shall, at or prior to Closing, deliver a fully executed Liquor Assets
Escrow Agreement to Bay Commercial Bank, 3895 East Castro Valley Boulevard—Suite A, Castro Valley,
CA 94552, Attention Chloe Flowers (the “Liquor Assets Escrow Agent”) along with the Liquor
Assets Purchase Price.




          (b) Simultaneously with the Closing, Purchaser shall deposit into the Liquor Assets Escrow, in
cash or other immediately available funds, an amount equal to Seventy-Five Thousand and 00/100
Dollars ($75,000.00) (the “Liquor Assets Purchase Price”), which amount shall be allocated
as set forth in the Liquor Assets Escrow Agreement. The amount deposited as the Liquor Assets
Purchase Price shall be a credit to Purchaser against the Purchase Price at Closing.




          (c) The Liquor Assets Escrow Agreement shall close as promptly as possible after the Closing,
subject to Applicable Law. Upon the closing of the Liquor Assets Escrow Agreement, the Liquor
Assets Escrow Agent shall deliver to Liquor Seller the Liquor Assets Purchase Price (less any
amounts disbursed to third parties by the Liquor Assets Escrow Agent from the Liquor Assets Escrow
pursuant to the terms of the Liquor Assets Escrow Agreement).




          (d) Promptly after the Liquor Assets Escrow Agreement and Liquor Assets Purchase Price has
been deposited with the Liquor Assets Escrow Agent, Purchaser shall, at its cost and expense,
submit an application to the ABC to transfer of the Existing Liquor License to the Liquor Designee,
as co-licensees. Liquor Seller shall use commercially reasonable efforts to cooperate with
Purchaser and Liquor Designee to cause the Existing Liquor License to be transferred or issued as
provided herein, which such cooperation shall include, without limitation, maintaining and renewing
the Existing Liquor License until such time as the Liquor Designee
secures approval from the ABC for the transfer of the Existing Liquor License (or receives an
unappealable order denying the transfer.








23









 








ARTICLE V

REPRESENTATIONS, WARRANTIES AND COVENANTS




     5.1 Representations and Warranties of Seller. Seller hereby makes the following representations and
warranties to Purchaser as of the Effective Date, subject to the qualifications and exceptions set
forth below:



          (a) Organization and Authority. Seller has been duly organized and is validly existing
and in good standing under the laws of Delaware and is qualified to do business in the State of
California. Seller has the full right and authority to enter into this Agreement and to transfer
all of the Property to be conveyed by Seller pursuant hereto and to consummate or cause to be
consummated the transactions contemplated herein to be made by Seller. The person signing this
Agreement on behalf of Seller is authorized to do so.




          (b) No Breach. The execution, delivery and performance of this Agreement by Seller and
the consummation of the transactions contemplated herein will not: (i) result in a breach or
acceleration of or constitute a default or event of termination under the provisions of any
agreement or instrument by which the Property is bound which would have a material adverse impact
on the ownership and operation of the Property by Purchaser; or (ii) constitute or result in the
violation or breach by Seller of any judgment, order, writ, injunction or decree issued against or
imposed upon Seller or result in the violation of any Applicable Law, rule or regulation of any
governmental authority which, with respect to any of the foregoing, would have a material adverse
impact on the ownership or operation of the Property by Purchaser.




          (c) Litigation/Condemnation. Except as set forth on the schedule entitled “Litigation”
annexed to the Property Information Letter, neither Seller nor Manager has received written notice
and, to Seller’s knowledge, there has been no written threat, of any litigation which has been
filed against Seller that arises out of the ownership of the Property, or affecting the Property,
an adverse determination of which would reasonably be expected to materially and adversely affect
the Property or use thereof, or Seller’s ability to perform its obligations hereunder, nor has
Seller received written notice of any condemnation proceedings.




          (d) Space Leases. The list of Space Leases attached hereto as Schedule 1.1(j)
lists all leases or licenses for the lease and occupancy of space at the Hotel, and Seller has made
available to Purchaser a true and correct copy of each such Space Lease. No written notice of
default has been delivered by Seller or Manager or received by Seller or Manager with respect to
any Space Leases that, to Seller’s knowledge, remains uncured, other than as set forth in
Schedule 5.1(d). Any and all brokerage, leasing and other commissions and tenant
improvement credits or contributions due under any such Space Leases have been performed in all
material respects and all amounts due from Seller under the Space Leases as of the Closing Date
have been (or will be) paid by the Closing Date.




          (e) Service Contracts and Equipment Leases. There are no Service Contracts, including
without limitation Equipment Leases, which will affect the Property in any material respect after
the Closing Date except as set forth on Schedule 1.1(e)-1(a), Schedule 1.1(e)-1(b),
Schedule 1.1(e)-2(a), Schedule 1.1(e)-2(b), or Service Contracts entered into
after the Effective Date which Seller is permitted to enter into under the terms of this Agreement.
No Service






24









 







Contracts, including without limitation Equipment Leases, have been amended except as set
forth in said Schedules or as otherwise permitted pursuant to this Agreement. As of the Effective
Date and the Closing Date, no written notice of material default has been delivered by Seller or
Manager or, to Seller’s knowledge, received by Seller or Manager with respect to any Service
Contracts or Equipment Leases that, to Seller’s knowledge, remain uncured. The copies of Service
Contracts and Equipment Leases made available to Purchaser by Seller are true and complete in all
material respects.




          (f) Personal Property. Seller owns the Personal Property, other than any leased
Personal Property under the Equipment Leases, free of all liens and encumbrances.




          (g) No Consents. No consent, approval or action of, filing with or notice to any
governmental or regulatory authority or any other person or entity on the part of Seller is
required in connection with the execution, delivery and performance of Agreement or the
consummation of the transactions contemplated.




          (h) No Violations. Except for violations shown in or disclosed by the Title Report or
any Title Update and any violations disclosed on the schedule entitled “Violations of Law” annexed
to the Property Information Letter, Seller has not received any written notice of, nor does Seller
have any knowledge of, any violation in any material respect of Applicable Law that remains
uncured.




          (i) Liquor Licenses. Neither Seller nor Manager has received any written notice from
any Governmental Authority or other Person of any violation, suspension, revocation or non renewal
of the liquor licenses held by Seller or any of its affiliates in effect with respect to the Hotel
that has not been cured or dismissed.




          (j) Hotel Operating Statements. To Seller’s knowledge, the operating statements of
the Hotel provided to Purchaser: fairly present in all material respects the financial condition of
the Hotel as of the date thereof and the results of operations for the period covered thereby in
accordance with GAAP consistently applied throughout the periods covered thereby.




          (k) Patriot Act Compliance. Neither Seller nor any individual or entity having an
interest in Seller or controlled by Seller: (i) is a person or entity listed on the Specially
Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control,
Department of the Treasury (“OFAC”) pursuant to Executive Order No. 13224, 66 Fed. Reg.
49079 (September 25, 2001) (the “Order”) and/or on any other list of terrorists or
terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or 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 authority to be subject to the
prohibitions contained in the Order; or (iii) is owned or controlled by, or acts for or on behalf
of, any person or entity on the Lists or any other person or entity who has been determined by
competent authority to be subject to the prohibitions contained in the Order.







25









 








          (l) Employees.




          (i) There are no employees of the Hotel other than those employees who are employed by Manager
with respect to the Hotel.




          (ii) Neither the Seller nor the Manager is a party to any collective bargaining agreement or
other agreement with any labor union with respect to the Property or the Hotel or any employees at
the Hotel.




          (iii) Neither the Seller nor the Manager is a party to any written employment agreement with
any employee at the Hotel that contains a fixed term or provides for severance other than in
accordance with the generally applicable severance policy of Manager or Seller.




* * *




     Notwithstanding the foregoing, if Purchaser has actual knowledge of a breach of any
representation or warranty made by Seller in this Agreement prior to Closing and Purchaser
nevertheless proceeds to close the purchase of the Property, such representation or warranty by
Seller shall be deemed to be qualified or modified to reflect Purchaser’s knowledge of such breach
and Seller shall have no liability whatsoever respecting the same.



     5.2 Knowledge Defined. For purposes of this Agreement, “knowledge” means (a) with respect
to Seller, the actual knowledge of Richard Szymanski or Richard Russo (provided that, in no event
shall such person have any personal liability arising under this Agreement), without any duty of
inquiry or investigation (other than to make reasonable inquiries of the general manager of the
Hotel), and expressly excluding the knowledge of any other shareholder, partner, member, trustee,
beneficiary, director, officer, employee, agent or representative of Seller or any of its
affiliates, and (b) with respect to Purchaser: (i) the actual knowledge of Thomas Fisher and Jon
Bortz (provided that, in no event shall such person(s) have any personal liability arising under
this Agreement); (ii) any matter disclosed in this Agreement or in any exhibits or schedules to
this Agreement; (iii) any matter disclosed in any of the Seller Due Diligence Materials or any
other documents or other written materials delivered by Seller or its agents to Purchaser prior to
Closing; (iv) any matter disclosed by Purchaser’s inspections or investigations of the Property;
and (v) any matter disclosed by a Tenant Estoppel (defined below).


     5.3 Covenants of Seller.




          (a) Seller hereby covenants as follows:




          (i) From the Effective Date hereof until the Closing or earlier termination of this Agreement,
Seller shall cause Manager to operate and maintain the Hotel in the ordinary course and in a manner
generally consistent with the manner in which Manager has operated and maintained the Hotel during
the twenty-four (24) month period prior to the date hereof, in good condition consistent with past
practice, reasonable wear and tear excepted and so as (i) to maintain levels of Retail Inventory
and Consumable Inventory consistent with past practice (ii) maintain all existing insurance
coverages for the Hotel, (iii) perform maintenance and repairs for the Property and Hotel in the
ordinary course of business and consistent with past practices,






26









 







and (iv) maintain all Permits and the Existing Liquor License in full force and effect, subject in
all events to force majeure and other circumstances or events outside of control of Seller.




          (ii) From and after the Effective Date until the Closing, Seller shall not sell, assign or
enter into any agreement to sell or transfer the Hotel or any portion thereof, except for the
provision of hotel rooms and facilities in the ordinary course.




          (iii) From and after the Effective Date until the Closing, Seller shall not (i) enter into any
new, written management agreement or Service Contracts, Space Lease or other agreement or
encumbrance with respect to the Property (other than agreements with potential guests or groups
entered into in the ordinary course of business consistent with past practice), nor shall Seller
enter into any written agreements modifying the Service Contracts, Permitted Exceptions or Space
Leases unless: (A) any such agreement or modification will not bind Purchaser or the Property after
the Closing Date; (B) any such agreement or modification is subject to termination on not more than
thirty (30) days’ notice without penalty; or (C) Seller has obtained Purchaser’s prior written
consent to such agreement or modification which consent shall not unreasonably be withheld or
delayed or (ii) grant its consent to any action described in clause (i) above by Manager;
provided that Seller shall be permitted to enter into a new lease with Liquor Seller on the
same terms as the existing Space Lease with Liquor Seller except for the term thereof which shall
extend to February 28, 2019. Contracts and agreements entered into after the Effective Date in
accordance with this Section 5.3(a)(iii) shall constitute, as applicable, “Service
Contracts” or “Space Leases” and be scheduled on, and assigned pursuant to, the Assignment of
Contracts or the Assignment of Space Leases.




          (b) Following the Effective Date and prior to Closing, Seller shall obtain from 8440 LLC, in
its capacity as tenant under the Space Lease for certain restaurant, bar, and similar areas in the
Hotel, an estoppel in the form required under the applicable Lease (or, if neither a form nor the
contents of any estoppel is specified, in substantially the form of Exhibit H attached
hereto) (such estoppel being referred to herein as a “Tenant Estoppel”), which Tenant
Estoppel shall be delivered to Purchaser at the Closing pursuant to Section 4.6(e).




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



          (a) ERISA. Purchaser is not acquiring the Property with the assets of an employee
benefit plan as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (as
amended, “ERISA”).




          (b) Organization and Authority. Purchaser has been duly organized and is validly
existing and in good standing under the laws of the State of Delaware. Purchaser has the full
right, power and authority to purchase the Property as provided in this Agreement and to carry out
Purchaser’s obligations hereunder, and all requisite action necessary to authorize Purchaser to
enter into this Agreement and to carry out its obligations hereunder have been, or by the Closing
will have been, taken. The person signing this Agreement on behalf of Purchaser is authorized to
do so, and this Agreement is enforceable against Purchaser in accordance with its terms, subject to
bankruptcy, insolvency and similar laws.







27









 








          (c) No Breach. The execution, delivery and performance of this Agreement by Purchaser
and the consummation of the transaction contemplated herein will not: (i) result in a breach or
acceleration of or constitute a default under any agreement or instrument by which Purchaser is
bound or affected which would have a material adverse impact on the ability of Purchaser to timely
close the acquisition of the Property pursuant to the terms of this Agreement; or (ii) constitute
or result in the violation or breach by Purchaser of any judgment, order, writ, injunction or
decree issued against or imposed upon Purchaser or result in the violation of any Applicable Law,
rule or regulation of any governmental authority which, with respect to any of the foregoing, would
have a material adverse impact on the ability of Purchaser to timely complete the acquisition of
the Property pursuant to this Agreement.




          (d) No Consents. No consent, approval or action of, filing with or notice to any
governmental or regulatory authority or any other person or entity on the part of Purchaser is
required in connection with the execution, delivery and performance of Agreement or the
consummation of the transactions contemplated.




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




          (f) Patriot Act Compliance. Neither Purchaser nor any individual or entity having an
interest in Purchaser or controlled by Purchaser (i) is in violation of any applicable anti-money
laundering or anti-bribery laws and regulations, (ii) is a person or entity listed on the Lists;
(iii) is a person or entity who has been determined by competent authority to be subject to the
prohibitions contained in the Order; or (iv) is owned or controlled by, or acts for or on behalf
of, any person or entity on the Lists or any other person or entity who has been determined by
competent authority to be subject to the prohibitions contained in the Order.




          (g) Tax Identification Number. Purchaser’s valid tax identification number is
45-1822358.




          (h) Bankruptcy. No petition in bankruptcy (voluntary or otherwise), assignment for the
benefit of creditors, or petition seeking reorganization or arrangement or other action under
federal or state bankruptcy laws is pending against or contemplated by Purchaser or its general
partner(s) or controlling shareholders or members.







28









 








     5.5 Covenants of Purchaser and/or of Seller.



          (a) Purchaser may at its election (but subject to the limitations of Section 3.1
above), inspect the Property for the presence of Hazardous Substances, and, at Seller’s request,
shall furnish to Seller without representation or warranty copies of any reports received by
Purchaser in connection with any such inspection. Purchaser shall also furnish to Seller without
representation or warranty copies of any other reports received by Purchaser relating to any other
physical inspections of the Property conducted on Purchaser’s behalf, if any (including,
specifically, without limitation, any reports analyzing compliance of the Property with the
provisions of the Americans with Disabilities Act, 42 U.S.C. §12101, et seq., if
applicable).




          (b) Purchaser hereby assumes full responsibility for its inspections of the Property regarding
Hazardous Substances and irrevocably waives any claim against Seller and releases Seller from all
liability arising from the presence of Hazardous Substances on the Property.




          (c) Not later than three (3) days prior to the Closing, Seller shall send, or cause the
Manager to send, written notice to guests or other persons who have safe deposit boxes at the Hotel
advising of the sale of the Hotel and requesting verification or removal of the contents within two
(2) days. The safe deposit boxes of guests or other persons not responding to said written notice
shall be opened only in the presence of the Manager or representatives of both Seller and
Purchaser. The contents of all boxes opened as aforesaid shall be listed at the time such boxes
are opened and each such list shall be signed by or on behalf of the Manager or by or on behalf of
Seller and Purchaser, and Purchaser shall not be liable or responsible for any items claimed to
have been in said boxes unless such items are included in such list. Seller agrees to indemnify,
defend and hold Purchaser harmless from and against any liability or responsibility for any items
claimed to have been in said boxes but not included on such list and Purchaser agrees to indemnify,
defend and hold Seller harmless from and against any liability or responsibility for items claimed
to have been in said boxes and included in such list and all claims, losses and liabilities with
respect thereto arising out of the acts or omissions of Purchaser after the Closing Date.




          (d) All baggage or other property of guests of the Hotel which has been checked with or left
in the care of Seller and remains in Seller’s care as of the Cut-Off Time shall be inventoried and
tagged jointly by Seller and Purchaser. Purchaser hereby agrees to defend, indemnify and hold
harmless Seller against any claims, losses or liabilities in connection with such tagged baggage
and property arising out of the acts or omissions of Purchaser from and after the Closing Date.
Seller hereby agrees to defend, indemnify and hold harmless Purchaser against all claims, losses
and liabilities with respect to such tagged baggage and property arising out of the acts or
omissions of Seller prior to the Closing Date.




          (e) Purchaser shall honor (and shall cause its manager to honor) all reservations made in the
ordinary course of business at the Hotel (including honoring the rates at which such reservations
were made, including reservations made on a wholesale, reward points redemption, or other basis),
or for any related conference, banquet, or meeting space or any other facilities in connection with
the Hotel made by Seller on or prior to the Cut-Off Time for periods on or after the Closing Date.







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     The provisions of this Section 5.5 shall survive Closing or any earlier termination of
this Agreement.



     5.6 Employees.



          (a) For purposes of this Agreement, “Employees” means, collectively, all individuals
employed at the Hotel by Manager as of the Closing Date, irrespective of whether such individuals
are active or on leaves of absence or otherwise inactive but still employed at the Hotel.




          (b) Purchaser agrees that it will cause the Manager to continue to employ, following the
Closing, the Employees so that Seller shall not be required to give any layoff, closing or other
termination notices or otherwise incur any liability pursuant to the provisions of the Federal
Worker Adjustment and Retraining Notification Act. 29 U.S.C. 2101-2109 (the “Federal WARN
Act”) and the California Worker Adjustment and Retraining Notification Act (the “California
WARN Act”). Purchaser shall be required to assume and discharge all obligations and
liabilities of Seller or Manager with respect to costs of termination of any Employee incurred
after the Closing including, without limitation, any severance claim made after the Closing or
arising from the transactions contemplated by this Agreement.




          (c) From and after the Closing, Purchaser (i) shall be solely responsible for complying or
causing compliance with all applicable provisions of federal, state and municipal laws and
regulations relating to Employees, including Purchaser’s covenants set forth in this Section
5.6, including without limitation compliance with any applicable provisions of the Federal WARN
Act or the California WARN Act, and (ii) hereby agrees to indemnify, defend, protect and hold
Seller, Manager, and their respective affiliates harmless from and against any and all claims,
liabilities, debts, costs, expenses, damages, attorneys’ fees and disbursements arising out of any
violation of the Federal WARN Act or the California WARN Act in connection with the transaction
contemplated by this Agreement. Seller agrees to indemnify, defend, protect and hold Purchaser and
its affiliates harmless from and against any and all claims, liabilities, debts, costs, expenses,
damages, attorneys’ fees and disbursements arising out of any violation of the Federal WARN Act or
the California WARN Act for any period prior to the Closing (excluding any matters arising from the
transaction contemplated by this Agreement).




          (d) During the period prior to Closing, the parties agree to reasonably cooperate and also to
consult on a regular basis and coordinate their activities relating to employee matters so as to
facilitate a smooth transition of Hotel operations and the continued proper performance by the
Employees of their respective duties up to Closing.




          (e) Purchaser agrees to indemnify, defend and hold harmless Seller, Manager and their
respective officers, directors, members, owners and affiliates (together with Seller and Manager,
the “Seller-Related Parties”) from and against any claim, liability, or judgment asserted
against any of the Seller-Related Parties on account of or with respect to any of the following:
(i) any causes of action, damages, complaints, judgments, orders and/or claims, whatsoever, and all
costs and expenses (including, without limitation, reasonable attorneys’ fees and costs) incurred
in connection therewith, which may be
asserted against any of the Seller-Related Parties on account of any violation of the National
Labor Relations Act, Title VII of the Civil Rights Act, the Fair






30









 







Labor Standards Act, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave
Act, the Vocational Rehabilitation Act of 1973, the Federal WARN Act and/or the California WARN
Act, California Labor Law, California and City of West Hollywood Human Rights Law, and/or any other
applicable federal, state or city employment statutes, laws, rules and regulations (collectively,
“Employment Laws”) by Purchaser, or any designee or management company engaged by Purchaser
to employ Hotel personnel (other than Manager), except to the extent such are based on the acts of
any Seller Related Parties (other than those arising from the transactions contemplated by this
Agreement), and (ii) any claims or liabilities arising (A) under ERISA and/or any other applicable
federal or state law or regulation concerning employee benefit plans with respect to the employment
of employees by Purchaser or such designee or management company from and after the Closing or from
the transactions contemplated by the Agreement, to the extent that any such claim or liability
relates to any period of employment from and after the Closing or arise from the transactions
contemplated by this Agreement or (B) from or under any employee benefit plan applicable to any
Employee or any other employee hired by Purchaser or such designee or management company to perform
services at or for the Hotel, to the extent that any such claim or liability relates to any period
of employment from and after the Closing or arise from the transactions contemplated by this
Agreement. For the avoidance of doubt, nothing in this Section 5.6(e) shall be deemed to
require Purchaser to indemnify any Seller-Related Party with respect to any claim, liability or
judgment of the type described in clause (i) or (ii) of Section 5.6(f).




          (f) Seller agrees to indemnify, defend and hold harmless Purchaser, or any designee or
management company engaged by Purchaser to employ Hotel personnel and their respective officers,
directors, members, owners and affiliates (together with Purchaser, the “Purchaser-Related
Parties”) from and against any claim, liability, or judgment asserted against any of the
Purchaser-Related Parties other than those arising from the transactions contemplated by this
Agreement on account of or with respect to any of the following: (i) any causes of action, damages,
complaints, judgments, orders and/or claims, whatsoever, and all costs and expenses (including,
without limitation, reasonable attorneys’ fees and costs) incurred in connection therewith, which
may be asserted against any of the Purchaser-Related Parties on account of any violation of the
Employment Laws occurring up to and including the Closing by Seller-Related Parties, except to the
extent such are based on the acts of any Purchaser-Related Parties and (ii) any claims or
liabilities arising (A) under ERISA and/or any other applicable federal or state law or regulation
concerning employee benefit plans with respect to the employment of employees by Seller-Related
Parties up to and including the Closing, or (B) from or under any employee benefit plan applicable
to any Employee or any other employee hired by Purchaser or such designee or management company to
perform services at or for the Hotel, to the extent that any such claim or liability relates to any
period of employment up to and including the Closing. For the avoidance of doubt, nothing in this
Section 5.6(f) shall be deemed to require Seller to indemnify any Purchaser-Related Party
with respect to any claim, liability or judgment of the type described in clause (i) or (ii) of
Section 5.6(e).




          (g) Purchaser’s and Seller’s obligations under this Section 5.6 shall survive Closing
without limitation.




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     5.7 Independent Audit. From the Effective Date until two (2) years after the Closing or
earlier termination of this Agreement, Seller shall make the books and records for the years ending
December 31, 2010, 2009, and 2008 and interim periods as required by the rules and regulations of
the Securities and Exchange Commission (“SEC”) of the Property/Seller available to Purchaser and
Purchaser’s independent accountants for inspection, copying and audit by Purchaser’s designated
accountants at the expense of Purchaser. Seller and the Manager of the Property will provide the
Purchaser’s independent accountants with a management representation letter with respect to the
audited historical financial statements of the Property/Seller for the years ending December 31,
2010, 2009, and 2008 and any unaudited interim period required by the rules and regulations of the
SEC. Seller shall provide Purchaser with copies of, or access to, such factual information,
accounting records and financial information as may be reasonably requested by Purchaser or its
auditors, and in the possession or control of Seller, to enable Purchaser or its affiliates to file
reports or registration statements in compliance with the rules and regulations of the SEC. This
Section 5.7 shall survive the Closing for two (2) years.



ARTICLE VI

DEFAULT




     6.1 Default by Purchaser. If prior to Closing, Purchaser defaults under this Agreement, Seller
shall be entitled, as its sole and exclusive remedy (without limiting Seller’s rights with respect
to any indemnification obligations of Purchaser under Section 11.1, ARTICLE III
and/or Section 11.18) to terminate this Agreement and receive the Earnest Money as
liquidated damages for the breach of this Agreement, it being agreed between the parties hereto
that the actual damages to Seller in the event of such breach are impractical to ascertain and the
amount of the Earnest Money is a reasonable estimate thereof. THEREFORE, SUBJECT TO THE PRECEDING
SENTENCE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN
AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES’ REASONABLE ESTIMATE OF SELLER’S DAMAGES AND AS
SELLER’S EXCLUSIVE REMEDY AGAINST PURCHASER, AT LAW OR IN EQUITY, IN THE EVENT OF A DEFAULT UNDER
THIS AGREEMENT ON THE PART OF PURCHASER. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH
LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE
LIQUIDATED DAMAGES TO SELLER.



INITIALS: Seller                              Purchaser


Nothing contained in this Section 6.1 shall limit or prevent Seller, after Closing has
occurred, from: (a) asserting any legal or equitable claims against Purchaser for Purchaser’s
obligation to pay attorneys’ fees and other amounts under Section 11.18; (b) enforcing any
indemnity obligation of Purchaser under this Agreement or preclude Seller from obtaining a damage
award in connection therewith; or (c) enforcing Purchaser’s other obligations and liabilities which
survive Closing.




     6.2 Default by Seller. In the event that Seller fails to consummate this Agreement for any reason
other than Purchaser’s default (in which event Section 6.1 applies), then Purchaser shall
be entitled, as its sole and exclusive remedy, to terminate this Agreement and receive the return
of the Earnest Money, in which event Seller shall be released from any and all liability



32









 







hereunder
; provided that if the termination resulted from an intentional or willful act of Seller, then
Seller shall pay Purchaser its Termination Costs (as hereinafter defined) upon Purchaser’s written
notice to Seller that the same have become due Purchaser expressly waives its rights to seek
monetary or other damages in the event of Seller’s default hereunder other than as expressly
provided in the preceding sentence. Notwithstanding the foregoing, if Purchaser is ready, willing
and able to close and Seller is obligated to close pursuant to the terms of this Agreement, then
Purchaser shall have the right for file suit for specific performance against Seller in a court
having jurisdiction in the county and state in which the Property is located, on or before sixty
(60) days following the date upon which Closing was to have occurred. Purchaser shall be deemed to
have elected to waive such right to seek specific performance if it fails to file suit within such
period. As material consideration to Seller’s entering into this Agreement with Purchaser,
Purchaser expressly waives any right under statutory or common law or otherwise to record or file a
lis pendens or a notice of pendency of action or similar notice against all of any portion of the
Property unless all conditions precedent to Seller’s obligation to proceed to Closing have been
satisfied and Seller defaults in its obligation to proceed to Closing. “Termination Costs”
shall mean those reasonable costs actually incurred by Purchaser in connection with its
investigation and efforts to purchase the Property, including, without limitation, actual
reasonable fees and costs of counsel and consultants, all of which Termination Costs shall be
evidenced by written documentation reasonably acceptable to Seller, but in no event shall the
Termination Costs payable by Seller to Purchaser in connection with this Section 6.2 exceed
$500,000.



     6.3 Seller’s Right to Cure Defaults. Notwithstanding anything to the contrary in this Agreement,
Purchaser shall not have the right to exercise its remedies under Section 6.2 for a Seller
default unless Purchaser has provided written notice to Seller specifying in reasonable detail the
nature of the Seller default, and Seller has not cured the same within ten (10) business days after
Seller’s receipt of such notice (the “Seller Cure Period”), in which case the Outside
Closing Date shall be extended until the date which is five (5) business days after the expiration
of the Seller Cure Period.



     6.4 Purchaser’s Right to Cure Defaults. Notwithstanding anything to the contrary contained in
this Agreement, with respect to any default under this Agreement by Purchaser other than a default
in Purchaser’s obligation to close the transaction contemplated hereunder on the Closing Date,
Seller shall not have the right to exercise its remedies under Section 6.1 for any such Purchaser
default unless Seller has provided written notice to Purchaser specifying in reasonable detail the
nature of the Purchaser default, and Purchaser has not cured the same within 10 days after
Purchaser’s receipt of such notice. It is expressly understood and agreed that there shall be no
cure period afforded Purchaser and no need for Seller to provide any notice, written or otherwise,
with respect to a default by Purchaser in its obligation to close the transaction on the Closing
Date, and in the event of such a default, Seller shall have the immediate right to exercise its
remedies on account thereof provided in Section 6.1 above.



ARTICLE VII

SURVIVAL, INDEMNIFICATION, AND LIMITATIONS ON LIABILITY 




     7.1 Survival. The representations and warranties of Seller set forth in Section 5.1 of this
Agreement, as updated by the certificate of Seller to be delivered to Purchaser at Closing in
accordance with Section 4.2(e) hereof, and any other representations and warranties of
Seller



33









 







contained herein or in any other instrument delivered to Purchaser in connection herewith
shall survive Closing for a period of six (6) months. The representations and warranties of
Purchaser set forth in Section 5.4, as updated by the certificate of Purchaser to be
delivered to Seller at Closing in accordance with Section 4.3(d) hereof, and any other
representations and warranties of Purchaser contained herein or in any other instrument delivered
to Seller in connection herewith shall survive the Closing for a period of nine (9) months from the
Closing Date.



     7.2 Seller’s Indemnification. From and after the Closing, Seller shall, subject to the provisions
of this Section 7.2, defend, indemnify and save harmless Purchaser and its Affiliates, and
their respective employees, contractors, officers, directors, and agents (collectively,
“Purchaser Indemnitees”) from and against any and all losses, injuries, claims, penalties,
liabilities, fines, damages, costs or expenses (including, without limitation, reasonable
attorneys’ fee and costs) (collectively, “Losses”) arising out of, resulting from or
relating to:




     (a) the inaccuracy of any representation or warranty of Seller;




     (b) the failure by Seller to perform or fulfill any covenant or agreement of Seller
contained in this Agreement; or




     (c) any injury to or death of any person or persons or damage to or destruction of any
property owned by a third-party, arising out of or in any manner directly or indirectly
connected with the Hotel and having accrued prior to the Closing Date (unless caused by a
Purchaser Indemnitee).


The provisions of this Section 7.2 shall survive the Closing without limitation.




     7.3 Purchaser’s Indemnification. From and after the Closing, Purchaser shall, subject to the
provisions of this Section 7.3, defend, indemnify and save harmless Seller and its
Affiliates, and their respective employees, contractors, officers, directors, and agents
(collectively, “Seller Indemnitees”) from and against any and all Losses arising out of,
resulting from or relating to:




     (a) the inaccuracy of any representation or warranty of Purchaser;




     (b) the failure by Purchaser to perform or fulfill any covenant or agreement of
Purchaser contained in this Agreement; or




     (c) any injury to or death of any person or persons or damage to or destruction of any
property owned by a third-party, arising out of or in any manner directly or indirectly
connected with the Hotel and having accrued after the Closing Date (unless caused by a
Seller Indemnitee).


The provisions of this Section 7.3 shall survive the Closing without limitation.




     7.4 Notice and Resolution of Claims.



          (a) Notice. Each Person entitled to indemnification pursuant to Section 7.2
or 7.3 (an “Indemnitee”) shall give written notice to the indemnifying party or
parties from whom indemnity is sought (the “Indemnifying Party”) promptly after obtaining
knowledge of any claim





34









 







that it may have under Section 7.2 or 7.3, as applicable.
The notice shall set forth in reasonable detail the claim and the basis for indemnification.
Failure to give the notice in a timely manner shall not release the Indemnifying Party from its
obligations under Section 7.2 or 7.3, as applicable, except to the extent that the
failure materially prejudices the ability of the Indemnifying Party to contest that claim.




          (b) Defense of Third Party Claims. If a claim for indemnification pursuant to
Section 7.2 or 7.3 shall arise from any action made or brought by a third party
that would reasonably be expected to result in indemnifiable Losses (a “Third Party
Claim”), the Indemnifying Party may assume the defense of the Third Party Claim. If the
Indemnifying Party assumes the defense of the Third Party Claim, the defense shall be conducted by
counsel chosen by the Indemnifying Party, who shall be reasonably acceptable to Indemnitee,
provided that the Indemnitee shall retain the right to employ its own counsel and participate in
the defense of the Third Party Claim at its own expense (which shall not be recoverable from the
Indemnifying Party under this ARTICLE VII unless (i) the Indemnitee is advised by counsel
reasonably satisfactory to the Indemnifying Party that use of counsel of the Indemnifying Party’s
choice would be expected to give rise to a conflict of interest, (ii) the Indemnifying Party shall
not have employed counsel to represent the Indemnitee within a reasonable time after notice of the
assertion of any such claim or institution of any such action or proceeding, or (iii) the
Indemnifying Party shall authorize the Indemnitee in writing to employ separate counsel at the
expense of the Indemnifying Party, in each of which cases the reasonable expenses of counsel to the
Indemnitee shall be reimbursed by the Indemnifying Party). In no event shall the Indemnifying
Party be obligated to pay the fees and expenses of more than one counsel (other than local counsel)
for all Indemnitees with respect to any claim indemnified under this ARTICLE VII; provided
that an Indemnitee shall be entitled to employ separate counsel at the expense of the Indemnifying
Party if the Indemnitee is advised by counsel reasonably satisfactory to the Indemnifying Party
that use of such other counsel would give rise to a conflict of interest, in which case the
reasonable expenses of counsel to such Indemnitee shall be reimbursed by the Indemnifying Party.
Notwithstanding the foregoing provisions of this Section 7.4(b), (i) no Indemnifying Party
shall be entitled to settle any Third Party Claim for which indemnification is sought under
Section 7.2 or 7.3 without the Indemnitee’s prior written consent, which shall not
be unreasonably withheld, conditioned or delayed, unless it has assumed the defense of such Third
Party Claim and as part of the settlement the Indemnitee is released from all liability with
respect to the Third Party Claim and the settlement does not impose any equitable remedy on the
Indemnitee or require the Indemnitee to admit any fault, culpability or failure to act by or on
behalf of the Indemnitee, and (ii) no Indemnitee shall be entitled to settle any Third Party Claim
for which indemnification is sought under Section 7.2 or 7.3 without the
Indemnifying Party’s prior written consent, which shall not be unreasonably withheld, conditioned
or delayed, unless the Third Party claim is for money damages only and such settlement does not
include a statement as to, or an admission of fault, culpability or a failure to act by or on
behalf of the Indemnifying Party and as part of such settlement the Indemnifying Party is released
from all liability (for indemnification pursuant to
this ARTICLE VII and otherwise) with respect to such Third Party Claim. If the
Indemnifying Party does not notify the Indemnitee within twenty (20) Business Days after receipt of
the Indemnitee’s notice of a Third Party Claim of indemnity hereunder that it elects to assume the
control of the defense of any Third Party Claim, the Indemnitee shall have the right to contest the
Third Party Claim but shall not thereby waive any right to indemnity therefor pursuant to this


35









 







Agreement and the costs of such actions by the Indemnitee shall be paid by the Indemnifying Party.




     7.5 Limitations on Liability.




     (a) Deductible.




     (i) Seller shall not have any obligation or liability to any Purchaser Indemnitee under
Section 7.2(a) unless and until the aggregate amount of Losses incurred or suffered
by the Purchaser Indemnitees arising out of the matters referred to in Section
7.2(a) shall have exceeded $75,000, in which case Seller shall be obligated and liable
under Section 7.2(a) only with respect to such excess.




     (ii) Purchaser shall not have any obligation or liability to any Seller Indemnitee
under Section 7.3(a) unless and until the aggregate amount of Losses suffered by the
Seller Indemnitees arising out of the matters referred to in Section 7.3(a) shall
have exceeded $75,000, in which case Purchaser shall be obligated and liable under
Section 7.3(a) only with respect to such excess.



          (b) Limit of Liability. The aggregate liability of Seller or Purchaser, as
applicable—





     (i) under Section 7.2(a) shall not exceed $3,000,000;




     (ii) under Section 7.3(a) shall not exceed $3,000,000; and




     (iii) under Section 7.2(b), 7.2(c), 7.3(b), or 7.3(c)
shall not be subject to any limits.



          (c) Limit on Time for Assertion of Claims. Neither Seller nor Purchaser shall have
any obligation or liability pursuant to Section 7.2 or 7.3, respectively, for any
breach of any representation or warranty unless notice of a claim asserting such breach shall have
been given in accordance with Section 7.4 prior to the termination of the survival period
applicable to such representation or warranty as set forth in Section ARTICLE VII. Neither
Seller nor Purchaser shall have any obligation or liability pursuant to Section 7.2 or
7.3, respectively, for any breach of any covenant contained in this Agreement that occurred
prior to the Closing unless notice of a claim asserting such breach shall have been given in
accordance with Section 7.4 on or before the date six (6) months following the Closing
Date.




     7.6 Other Matters Regarding Indemnification.



          (a) In the event either Seller or Purchaser (the “Claiming Party”) has actual
knowledge on or before the Closing that any
representation or warranty of the other is incorrect (either through independent investigation
or through information and materials provided to the Claiming Party) or that a covenant of the
other has been breached and the Claiming Party proceeds to Closing, then the Claiming Party shall
not be permitted to assert a claim for such matters following the Closing Date.





36









 








          (b) The right to be indemnified for Losses, on the terms and subject to the limitations set
forth in this ARTICLE VII, shall be the exclusive remedy available to the Parties and the
Indemnitees for the matters set forth in Sections 7.2 and 7.3.




ARTICLE VIII

RISK OF LOSS




     8.1 Minor Damage. In the event of loss or damage to the Real Property or any portion thereof which
is not “major” (as hereinafter defined), this Agreement shall remain in full force and effect
provided Seller shall, at Seller’s option, either (a) perform any necessary repairs (to return the
Real Property to substantially the condition in which it existed immediately prior to such loss or
damage), or (b) assign to Purchaser all of Seller’s right, title and interest to any claims and
proceeds Seller may have with respect to any casualty insurance policies or condemnation awards
relating to the premises in question (other than business interruption proceeds attributable to the
period prior to Closing and proceeds in respect of amounts expended by or on behalf of Seller prior
to Closing to restore the Property). In the event that Seller elects to perform repairs upon the
Real Property, Seller shall use commercially reasonable efforts to complete such repairs promptly
and the Outside Closing Date shall be extended a reasonable time, not to exceed thirty (30) days,
in order to allow for the completion of such repairs. If Seller elects to assign a casualty claim
to Purchaser, the Purchase Price shall be reduced by an amount equal to the deductible amount under
Seller’s insurance policy with respect to such loss or damage and not paid by Seller prior to
Closing and Seller shall assign all of its rights to proceeds under the applicable policy with
respect to any claim for the applicable loss (other than business interruption proceeds
attributable to the period prior to Closing and proceeds in respect of amounts expended by or on
behalf of Seller prior to Closing to restore the Property). Upon Closing, full risk of loss with
respect to the Property shall pass to Purchaser.



     8.2 Major Damage. In the event of a “major” loss or damage to the Real Property, Purchaser may,
upon notice in writing to Seller delivered within ten (10) days after Seller sends Purchaser
written notice of the occurrence of such major loss or damage, terminate this Agreement by written
notice to Seller, in which event the Earnest Money shall be returned to Purchaser and neither
Seller nor Purchaser shall have any further rights or obligations under this Agreement except any
obligations that expressly survive the termination of this Agreement. If Purchaser fails for any
reason to deliver written notice of termination to Seller within ten (10) days after Seller sends
Purchaser written notice of the occurrence of major loss or damage, then Purchaser shall be deemed
to have elected to proceed with Closing, in which event Seller shall, at Seller’s option, either
(a) perform any necessary repairs (to return the Real Property to substantially the condition in
which it existed immediately prior to such loss or damage), or (b) assign to Purchaser all of
Seller’s right, title and interest to any claims and proceeds Seller may have with respect to any
casualty insurance policies or condemnation awards relating to the premises in question (other than
business interruption proceeds attributable to the period prior to Closing and proceeds in
respect of amounts expended by or on behalf of Seller prior to Closing to restore the Property).
In the event that Seller elects to perform repairs upon the Real Property, Seller shall use
commercially reasonable efforts to complete such repairs promptly and the Outside Closing Date
shall be extended a reasonable time in order to allow for the completion of such repairs. If
Seller elects to assign a casualty claim to Purchaser, the Purchase Price shall be



37









 







reduced by an
amount equal to the deductible amount under Seller’s insurance policy with respect to such loss or
damage and not paid by Seller prior to Closing and Seller shall assign all of its rights to
proceeds under the applicable policy with respect to any claim for the applicable loss (other than
business interruption proceeds attributable to the period prior to Closing and proceeds in respect
of amounts expended by or on behalf of Seller prior to Closing to restore the Property). Upon
Closing, full risk of loss with respect to the Property shall pass to Purchaser.



     8.3 Definition of “Major” Loss or Damage. For purposes of Sections 8.1 and 8.2,
“major” loss or damage refers to the following (a) loss or damage to the Real Property or any
portion thereof such that the cost of repairing or restoring the premises in question to a
condition substantially identical to that of the premises in question prior to the event of damage
would be, in the opinion of a licensed independent architect or registered professional engineer
with a minimum of ten (10) years experience related to commercial real estate construction selected
by Seller, equal to or greater than five percent (5%) of the Purchase Price or (b) any loss due to
a condemnation which permanently and materially adversely modifies or impairs the continued
operation of the Hotel in substantially the same manner as the Hotel is operated on the Effective
Date.



ARTICLE IX

COMMISSIONS




     9.1 Brokerage Commissions. In the event the transaction contemplated by this Agreement is
consummated, but not otherwise, Seller agrees to pay to Goldman Sachs (“Broker”) at Closing
a brokerage commission pursuant to a separate written agreement between Seller and Broker and
Seller shall indemnify and hold Purchaser harmless with respect to any payments due and owing to
Broker in connection with this transaction under such agreement. Each party agrees that should
any claim be made for brokerage commissions or finder’s fees by any broker or finder other than the
Broker by, through or on account of any acts of said party or its representatives, said party will
indemnify, defend, protect and hold the other party free and harmless from and against any and all
loss, liability, cost, damage and expense in connection therewith. The provisions of this
Section 9.1 shall survive Closing or earlier termination of this Agreement.



ARTICLE X

DISCLAIMERS AND WAIVERS




     10.1 No Reliance on Documents. Except as expressly set forth in this Agreement, Seller makes no
representation or warranty as to the truth, accuracy or completeness of any materials, data or
information delivered by or on behalf of Seller or its brokers to Purchaser in connection with the
transaction contemplated hereby including, without limitation, the Reports, material available in
the E-Room, and other Seller Due Diligence Materials, provided, however, that Seller shall not
intentionally alter any material, data or information for the purpose of misleading Purchaser.
Purchaser acknowledges and agrees that all materials, data and information delivered by Seller to
Purchaser in connection with the transaction contemplated hereby are provided to Purchaser as a
convenience only and that any reliance on or use of such materials, data or information by
Purchaser shall be at the sole risk of Purchaser, except as otherwise expressly stated herein.
Without limiting the generality of the foregoing provisions, Purchaser



38









 







acknowledges and agrees that
(a) any environmental or other report with respect to the Property which is delivered by Seller to
Purchaser shall be for general informational purposes only, (b) Purchaser shall not have any right
to rely on any such report delivered by Seller to Purchaser, but rather will rely on its own
inspections and investigations of the Property and any reports commissioned by Purchaser with
respect thereto, and (c) except for matters expressly set forth in this Agreement, neither Seller
nor any affiliate of Seller nor the person or entity which prepared any such report delivered by
Seller to Purchaser shall have any liability to Purchaser for any inaccuracy in or omission from
any such report or other materials provided to Purchaser in connection with this Agreement.



     10.2 DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT: IT IS UNDERSTOOD AND AGREED THAT
SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR
CHARACTER, EXPRESSED OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, PROFITABILITY, FITNESS FOR A
PARTICULAR PURPOSE, TITLE, ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL OR ENVIRONMENTAL
CONDITION, UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE
COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE
PROPERTY DOCUMENTS OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER, OR ANY
OTHER MATTER OR THING REGARDING THE PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING
SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY “AS IS, WHERE IS,
WITH ALL FAULTS”, EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT. PURCHASER
HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESSED OR
IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE
PROPERTY OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, PROPERTY INFORMATION
PACKAGES DISTRIBUTED WITH RESPECT TO THE PROPERTY AND ANY ACTUAL OR PROPOSED BUDGETS FOR THE REAL
PROPERTY) MADE OR FURNISHED BY SELLER, THE MANAGER OF THE PROPERTY, OR ANY REAL ESTATE BROKER OR
AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR
INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN THIS AGREEMENT. PURCHASER
REPRESENTS TO SELLER THAT PURCHASER IS A SOPHISTICATED INSTITUTIONAL INVESTOR WITH SUBSTANTIAL
EXPERIENCE AND EXPERTISE WITH INVESTMENT PROPERTIES AND HAS CONDUCTED, OR WILL CONDUCT PRIOR TO
CLOSING, SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF AS TO THE
CONDITION OF THE PROPERTY AND THE EXISTENCE
OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON
OR DISCHARGED FROM THE PROPERTY, AND WILL RELY SOLELY UPON SAME AND



39









 







NOT UPON ANY INFORMATION
PROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN SUCH
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT
AND THE DOCUMENTS DELIVERED AT CLOSING. UPON CLOSING AND SUBJECT TO THE REPRESENTATIONS AND
WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE DOCUMENTS DELIVERED AT CLOSING,
PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION
DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY
PURCHASER’S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED,
RELINQUISHED AND RELEASED SELLER (AND SELLER’S OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND
AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION
IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES AND COURT
COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR
ALLEGED AGAINST SELLER (AND SELLER’S OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) AT
ANY TIME BY REASON OF OR ARISING OUT OF ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL
CONDITIONS, VIOLATIONS OF ANY APPLICABLE LAWS RELATING TO THE CONDITION OF THE PROPERTY (INCLUDING,
WITHOUT LIMITATION, ANY ENVIRONMENTAL LAWS) AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS,
CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY EXCEPT FOR FRAUD AND OBLIGATIONS OF SELLER UNDER
THIS AGREEMENT OR ANY AGREEMENTS EXECUTED AND DELIVERED BY SELLER AT CLOSING. PURCHASER AGREES THAT
SHOULD ANY CLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL
CONDITIONS ON THE PROPERTY BE REQUIRED AFTER THE CLOSING DATE, SUCH CLEAN-UP, REMOVAL OR
REMEDIATION SHALL BE THE RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF
PURCHASER.


The waivers and releases set forth in Sections 5.5(a) and 5.5(b) and in the
immediately preceding paragraph include claims of which Purchaser is presently unaware or which
Purchaser does not presently suspect to exist which, if known by Purchaser, would materially affect
Purchaser’s waiver or release of Seller and the other parties referenced in this Section.




     10.3 Repairs, Reserves, and Capital Expenditures. Purchaser acknowledges and agrees that except as
provided in Section 5.3 of this Agreement, (a) Seller shall have no obligation to make any
repairs, replacements, improvements or alterations to the Property or to expend any funds therefor,
including, without limitation, any reserves that may be held for such purpose, and (b) Purchaser
shall not be entitled to a credit to the Purchase Price at Closing in the event capital
expenditures actually made at the Hotel for any year are less than the budgeted amount as of the
date of the Closing.



40









 





     10.4 Effect and Survival of Disclaimers. Seller and Purchaser acknowledge that the compensation to
be paid to Seller for the Property has been decreased to take into account that the Property is
being sold subject to the provisions of this Article X. Seller and Purchaser agree that the
provisions of this Article X shall survive Closing.



ARTICLE XI

MISCELLANEOUS




     11.1 Confidentiality. Prior to the Closing, and subject to the provisions of Section 11.2,
this Agreement, the terms hereof and the Property Information shall be treated as “Evaluation
Material” in accordance with that certain Confidentiality Agreement executed by Purchaser in favor
of Seller (the “Confidentiality Agreement”). From and after the Closing, Seller and its
affiliates shall hold in confidence, and shall not disclose to third parties without the prior
written consent of Purchaser, any non-public proprietary information regarding the Hotel and the
Property. The foregoing shall not be deemed to restrict the ability of Seller and its affiliates
to comply with their disclosure and reporting obligations under applicable law.



     11.2 Public Disclosure. Prior to the Closing, neither Purchaser nor Seller, nor any of their
respective affiliates, shall make any press release or other public statement, or file any report
with the Securities and Exchange Commission containing information, regarding the terms of this
Agreement that are not generally known to the public (the “Confidential Information”)
without affording the other party a reasonable opportunity (not to exceed two business days) to
review and comment on the content of such release, report, or statement insofar as it applies to
this Agreement and the transaction contemplated hereby. For the avoidance of doubt, Purchaser or
Seller or their respective affiliates shall be permitted to make such disclosure and shall not be
required to obtain the consent of the other party prior to making such disclosure. Notwithstanding
the foregoing, Seller and Purchaser shall be permitted to (i) disclose any Confidential Information
to the extent required by court order or under Applicable Law (subject to providing the other party
the reasonably opportunity to review and comment on any such disclosure, as provided above, to the
extent consistent with Applicable Law) and (ii) disclose any Confidential Information to any Person
on a “need-to-know” basis, such as their respective members, trustees, directors, officers,
employees, attorneys, consultants, engineers, surveyors, lenders, investors, and such other Persons
whose assistance is required to consummate the transactions contemplated in this Agreement or to
whom notice of this transaction may be required pursuant to the Service Contracts or Applicable
Law, or with whom communication may be required to accomplish the assignment of the Permits, the
Service Contracts or the Space Leases; provided, however, that Purchaser or Seller (as applicable)
shall, to the extent consistent with Applicable Law, (a) advise such person of the confidential
nature of such Confidential Information, and (b) use commercially reasonable efforts to cause such
Person to maintain the confidentiality of such information. Purchaser and Seller shall mutually
agree on the content of the initial press release regarding the consummation of the transaction
contemplated by this Agreement following the Closing. Notwithstanding anything to the contrary
contained herein, the parties understand and agree that Pebblebrook Hotel Trust, Inc. and Morgans
Hotel Group Co. each will file a report on Form 8-K with the Securities and Exchange Commission in
connection
with the transaction contemplated by this agreement. The provisions of this Section 11.2
shall survive the Closing.



41









 





     11.3 Assignment. Purchaser may not assign or otherwise transfer this Agreement or any of its rights
or obligations under this Agreement without first obtaining Seller’s written approval which may be
given or withheld in Seller’s sole discretion; provided that Purchaser may assign all or any
portion of this Agreement to one or more entities that are wholly-owned, directly or indirectly, by
Pebblebrook Hotel, L.P. Any assignment by Purchaser of this Agreement shall not relieve Purchaser
of its obligations under this Agreement and any permitted assignee must expressly assume the
obligations of Purchaser in writing. Without limiting the foregoing, in no event shall Purchaser
assign this Agreement to any assignee which, in the reasonable judgment of Seller, will cause the
transaction contemplated hereby or any party thereto to violate the requirements of ERISA.



     11.4 Notices. Any notice pursuant to this Agreement shall be given in writing by (a) personal
delivery, or (b) reputable overnight delivery service with proof of delivery, or (c) United States
Mail, postage prepaid, registered or certified mail, return receipt requested, or (d) legible
facsimile transmission or PDF transmission completed before 5:00 p.m. (New York time) on a business
day sent to the intended addressee at the address set forth below, or to such other address or to
the attention of such other person as the addressee shall have designated by written notice sent in
accordance herewith, and shall be deemed to have been given either at the time of personal
delivery, or, in the case of expedited delivery service or mail, as of the date of first attempted
delivery at the address and in the manner provided herein, or, in the case of facsimile
transmission or PDF transmission, as of the date of the facsimile transmission or PDF transmission
provided that an original of such facsimile or PDF is also sent to the intended addressee by means
described in clauses (a), (b) or (c) above. Notices may be given by a party’s counsel on behalf of
such party as if such party had given such notice itself. Unless changed in accordance with the
preceding sentence, the addresses for notices given pursuant to this Agreement shall be as follows:



     If to Seller:


Mondrian Holdings LLC

c/o Morgans Group LLC

475 Tenth Avenue

New York, NY 10018

Attention: David Smail, Executive Vice President & General Counsel

Facsimile No.: (212) 277-4172

Email: david.smail@morganshotelgroup.com




     With a copy to:


Hogan Lovells US LLP

555 13th Street NW

Washington, DC 20004

Attention: Bruce W. Gilchrist

Facsimile No.: (202) 637-5600

Email: bruce.gilchrist@hoganlovells.com





42









 








     If to Purchaser:



     Wolverines Owner LLC


c/o Pebblebrook Hotel Trust

2 Bethesda Metro Center

Suite 1530

Bethesda, Maryland 20814

Attention: Thomas Fisher

Facsimile no. (240) 396-5763

Email: tfisher@pebblebrookhotels.com




     With a copy to:


Hunton & Williams LLP

1900 K Street, NW

Washington, DC 20006

Attention: John M. Ratino, Esquire

Facsimile No.: (202) 828-3779

Email: jratino@hunton.com




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



     11.6 Calculation of Time Periods; Time is of the Essence. Unless otherwise specified, in computing
any period of time described in this Agreement, the day of the act or event after which the
designated period of time begins to run is not to be included and the last day of the period so
computed is to be included, unless such last day is a Saturday, Sunday or legal holiday under the
laws of the State in which the Real Property is located, in which event the period shall run until
the end of the next day which is neither a Saturday, Sunday or legal holiday. The final day of any
such period shall be deemed to end at 5:00 p.m., New York time. Time is of the essence with
respect to each and every term and provision of this Agreement.



     11.7 Successors and Assigns. Subject to the limitations on assignment set forth in Section
11.3 above, the terms and provisions of this Agreement are to apply to and bind the permitted
successors and assigns of the parties hereto.



     11.8 Entire Agreement. This Agreement, including the Exhibits, the Schedules and the
Confidentiality Agreement contain the entire agreement between the parties pertaining to the
subject matter hereof and fully supersedes all prior written or oral agreements and understandings
between the parties pertaining to such subject matter.




43











 





     11.9 Further Assurances. Each party agrees that it will without further consideration execute and deliver such other
documents and take such other action, whether prior or subsequent to Closing, as may be reasonably
requested by the other party to consummate more effectively the purposes or subject matter of this
Agreement. Without limiting the generality of the foregoing, Purchaser shall, if requested by
Seller, (a) execute acknowledgments of receipt with respect to any materials delivered by Seller to
Purchaser with respect to the Property, and (b) obtain sellers’ permits for any sales activities
conducted at the Property prior to Closing and/or obtain “sale for resale certificates” for any
Personal Property that may be sold after the Closing. The provisions of this Section 11.9
shall survive Closing.



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



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



     11.12 Applicable Law. THIS AGREEMENT IS PERFORMABLE IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF
SUCH STATE. SELLER AND PURCHASER HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT SITTING IN THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING SHALL BE HEARD AND DETERMINED IN A STATE OR FEDERAL COURT SITTING IN THE STATE OF NEW
YORK. PURCHASER AND SELLER AGREE THAT THE PROVISIONS OF THIS SECTION 11.12 SHALL SURVIVE
THE CLOSING OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT.



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



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


Schedule 1.1(a) -Legal Description of Land

Schedule 1.1(c) -Excluded Personal Property




44









 







Schedule 1.1(e)-1(a) -Service Contracts (assignable without consent)

Schedule 1.1(e)-1(b) -Service Contracts (consent required for assignment)

Schedule 1.1(e)-2(a) -Equipment Leases (assignable without consent)

Schedule 1.1(e)-2(b) -Equipment Leases (consent required for assignment)

Schedule 1.1(f) -Intellectual Property

Schedule 1.1(g) — Transferable Permits

Schedule 1.1(j) -List of Space Leases

Schedule 1.5(c) -Allocations of Real and Personal Property

Schedule 2.4(a) -Permitted Exceptions

Schedule 3.2 -Reports

Schedule 5.1(d) -Space Leases



Exhibit A -Deed

Exhibit B -Bill of Sale

Exhibit C -Assignment of Contracts

Exhibit D -Assignment of Space Leases

Exhibit E -FIRPTA Certificate

Exhibit F -Title Affidavit

Exhibit G -Escrow Agreement

Exhibit H - Form of Tenant Estoppel

Exhibit I — Form of Liquor Assets Escrow Agreement




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



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



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



     11.18 Attorneys Fees. If any action or proceeding is commenced by either party to enforce their rights under this
Agreement or to collect damages as a result of the breach of any of the provisions of this
Agreement, the prevailing party in such action or proceeding, including any bankruptcy, insolvency
or appellate proceedings, shall be entitled to recover all reasonable costs and expenses,
including, without limitation, reasonable attorneys’ fees and court costs, in addition to any other
relief awarded by the court.



45









 





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



     11.20 No Reservation of Property. The preparation and/or delivery of unsigned drafts of this Agreement shall not create any legally
binding rights in the Property and/or obligations of the parties, and Purchaser and Seller
acknowledge that this Agreement shall be of no effect until it is duly executed by both Purchaser
and Seller.



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



[SIGNATURE PAGE FOLLOWS]







46









 








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



	 	 	 	 	 
	 	SELLER:



Mondrian Holdings LLC

 	 
	 	By:  	Mondrian Senior Mezz LLC,
 	 
	 	 	its Managing Member 	 
	 	 	 
	 	By:  	                                                                Morgans Group LLC,
 	 
	 	 	its Managing Member 	 
	 	 	 
	 	By:  	                                                                Morgans Hotel Group Co.,
 	 
	 	 	its Managing Member 	 
	 	 	 
	 	By:  	                                                            /s/ Yoav Gery
 	 
	 	 	Its: CDO and EVP 	 
	 	 	 	 
	 
	 	PURCHASER:



Wolverines Owner LLC, a Delaware

limited liability company

 	 
	 	By:  	Thomas C. Fisher
 	 
	 	 	Its: Vice President 	 
	 	 	 	 
	 








47









 








Annex I




Definitions




     (a) As used in this Agreement, the following terms have the meanings ascribed thereto below:


“Applicable Law” means all statutes, laws, common law, rules, regulations, ordinances,
codes or other legal requirements of any Governmental Authority, Board of Fire Underwriters and
similar quasi-governmental agencies or entities, and any judgment, injunction, order, directive,
decree or other judicial or regulatory requirement of any court or Governmental Authority of
competent jurisdiction affecting or relating to the Person or property in question.



“Consumable Supplies” shall mean office, cleaning, engineering, laundry and valet supplies,
food service supplies, decorations, menus, guest supplies (including stationery, soap, matches,
toilet and facial tissues) and such other supplies as are customarily consumed on a daily basis in
the operation of the Hotel.



“Environmental Laws” means Applicable Laws regulating or relating to any Hazardous
Substances including, without limitation, (i) the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”), (ii) the Resource Conservation
and Recovery Act, 42 U.S.C. § 6901 et seq. (“RCRA”), (iii) the Federal Water Pollution Control Act,
33 U.S.C. § 2601 et seq., (iv) the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., (v) the
Clean Water Act, 33 U.S.C. § 1251 et seq., (vi) the Clean Air Act, 42 U.S.C. § 7401 et seq., (vii)
the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., (viii) the Safe Drinking
Water Act, 42 U.S.C. § 803 et seq., (ix) the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.,
(x) the Emergency Planning and Community Right-To-Know Act of 1986, 42 U.S.C. § 11001 et seq., (xi)
the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (to the extent it regulates
exposure to Hazardous Substances), and similar state and local Applicable Law, as amended from time
to time, and all regulations, rules and guidance issued pursuant thereto.



“Governmental Authority” means any federal, state or local government or other political
subdivision thereof, including, without limitation, any agency or entity exercising executive,
legislative, judicial, regulatory or administrative governmental powers or functions, in each case
to the extent the same has jurisdiction over the person or property in question.



“Guest Records” shall mean guest records, profiles, histories, contact information and
preferences gathered by Manager based on the guest’s stay or information provided by the guest
during, prior to or after such stay at the Hotel.



“Hazardous Substances” means any hazardous or toxic substances, materials or waste, whether
solid, semisolid, liquid or gaseous, including, without limitation, asbestos, polychlorinated
biphenyls, petroleum or petroleum by-products (excluding any substances of kinds and amounts
ordinarily used or stored in similar properties for purposes of cleaning or other maintenance or
operations and otherwise in compliance with all Environmental Laws), and any other material or






 









 







substance which is defined as a “hazardous substance”, “hazardous waste”, “toxic waste” or “toxic
substance” under any Environmental Laws.



“Operating Equipment” shall mean chinaware, glassware, linens, silverware, and other items
of a comparable nature, and all replacements, additions and substitutions therefor.



“Manager’s Materials” shall mean materials, files, lists, records, compilations and methods
of operation which constitute valuable proprietary information, trade secrets and Manager’s work
product, including, by way of example and not of limitation, Guest Records, marketing techniques,
customer and mailing lists and reservation systems.



“Manager’s Tradenames” shall mean the Primary Name, the marks “Morgans”, “A Morgans Hotel”,
“Mondrian”, “SkyBar”, “Asia de Cuba” and “ADCB” or any other tradenames, trademarks, service marks,
symbols, logos or designs owned or licensed by Manager or any of its affiliates including, without
limitation, the name of any restaurant, bar and/or lounge at any Morgans Hotel, and any words or
designs, marketing materials, concepts and trade dress (such as the menu and the items thereon)
related thereto.



“Primary Name” shall mean Mondrian.



“Property Information Letter” shall mean that certain letter from Seller to Purchaser dated
as of the Effective Date.




     (b) The following terms are defined in the Section of this Agreement set forth after such term
below:



			
	 	 	 
	ABC
	 	Section 4.9(a)
	Adjusting Party
	 	Section 4.4.14
	Agreement
	 	Introduction
	Assignment of Contracts
	 	Section 4.2(c)
	Assignment of Space Leases
	 	Section 4.2(d)
	Bookings
	 	Section 1.1(d)
	Broker
	 	Section 9.1
	California WARN Act
	 	Section 5.6(b)
	Claiming Party
	 	Section 7.6(a)
	Closing
	 	Section 4.1(a)
	Closing Date
	 	Section 4.1(a)
	Confidentiality Agreement
	 	Section 11.1
	Consumable Inventory
	 	Section 1.1(i)
	Cut-Off Time
	 	Section 4.4.11
	Deed
	 	Section 4.2(a)
	Effective Date
	 	Introduction
	Employees
	 	Section 5.6(a)
	Employment Laws
	 	Section 5.6(e)
	Equipment Leases
	 	Section 1.1(e)
	ERISA
	 	Section 5.4(a)






 









 






			
	 	 	 
	Escrow Agreement
	 	Section 1.6(b)
	Excluded Permits
	 	Section 1.1(g)
	Excluded Personal Property
	 	Section 1.1(c)
	Existing Liquor License
	 	Section 4.6(f)
	Federal WARN Act
	 	Section 5.6(b)
	Final Statement
	 	Section 4.4.14
	Hotel
	 	Recitals
	Hotel Payables
	 	Section 4.4.6
	House Bank Funds
	 	Section 1.1(k)
	Improvements
	 	Recitals
	Initial Earnest Money
	 	Section 1.6(a)
	Intangibles
	 	Section 1.1(h)
	Land
	 	Recitals
	Lease Year
	 	Section 4.4.5(d)
	Legal Requirements
	 	Section 2.4(d)
	Liquor Assets
	 	Section 4.9(a)
	Liquor Assets Escrow Agent
	 	Section 4.9(a)
	Liquor Assets Escrow Agreement
	 	Section 4.9(a)
	Liquor Assets Purchase Price
	 	Section 4.9(b)
	Liquor Designee
	 	Section 4.9(a)
	Liquor Inventory
	 	Section 4.9(a)
	Liquor Seller
	 	Section 4.9(a)
	Lists
	 	Section 5.1(k)
	Losses
	 	Section 7.2
	Management Agreement
	 	Section 1.7
	Manager
	 	Section 1.7
	Monetary Encumbrances
	 	Section 2.3(c)
	OFAC
	 	Section 5.1(k)
	Order
	 	Section 5.1(k)
	Outside Accountants
	 	Section 4.4.15
	Outside Closing Date
	 	Section 4.1(a)
	Percentage Rent
	 	Section 4.4.5(d)
	Permits
	 	Section 1.1(g)
	Permitted Exceptions
	 	Section 2.4
	Personal Property
	 	Section 1.1(c)
	Pre-Closing Date
	 	Section 4.1(b)
	Preliminary Statement
	 	Section 4.4
	Property
	 	Section 1.2(a)
	Property Information
	 	Section 3.1(a)
	Purchase Price
	 	Section 1.4
	Purchaser
	 	Introduction
	Purchaser Indemnitees
	 	Section 7.2
	Purchaser-Related Parties
	 	Section 5.6(f)
	Real Property
	 	Recitals
	Receivables
	 	Section 1.2(b)(v)
	Rent
	 	Section 4.4.5






 









 






			
	 	 	 
	Rent Arrears
	 	Section 4.4.5(b)
	Requesting Party
	 	Section 4.4.14
	Retail Inventory
	 	Section 1.1(i)
	Retained IP
	 	Section 1.1(f)
	Seller
	 	Introduction
	Seller Cure Period
	 	Section 6.3
	Seller Indemnitees
	 	Section 7.3
	Seller-Related Parties
	 	Section 5.6(e)
	Service Contracts
	 	Section 1.1(e)
	Space Leases
	 	Section 1.1(j)
	Survey
	 	Section 2.2
	Taxes
	 	Section 4.4.1(a)
	Tenant Estoppel
	 	Section 5.3(b)
	Title Affidavit
	 	Section 4.2(k)
	Title Company
	 	Section 2.1
	Title Policy
	 	Section 2.5
	Title Report
	 	Section 2.1
	Title Update
	 	Section 2.1
	Unopened Inventory
	 	Section 1.1(i)
	Wolverines LLC
	 	Section 4.9(a)