Document:

EX-10.134

 

Exhibit 10.134

United States District Court

Middle District of Florida

Orlando Division

	 	 	 
	IN RE
	 	 
	CNL HOTELS & RESORTS, INC.

	 	Case No. 6:04-cv-1231-Orl-31KRS
	SECURITIES LITIGATION

	 	(Consolidated with 6:04-cv-1341-Orl-19JGG)
	 
	 	 
	 

	 	CLASS ACTION
	 
	 	 
	 

	 	STIPULATION OF SETTLEMENT

STIPULATION OF SETTLEMENT

     This Stipulation of Settlement is entered into by, between, and among the Parties (defined
below), by and through undersigned Co-Lead Counsel and counsel for the Settling Defendants.

     WHEREAS: A putative class action captioned Campbell v. CNL Hotels & Resorts, Inc., et al.,
Case No. 6:04-cv-1231-Orl-31KRS, was commenced in the United States District Court for the Middle
District of Florida on or about August 16, 2004 (the “Campbell Action”);

     WHEREAS: A putative class action captioned Wong v. CNL Hotels & Resorts, Inc., et. al., Case
No. 6:04-cv-01341-PCF-JGG, was commenced in the United States District Court for the Middle
District of Florida on or about September 8, 2004 (the “Wong Action”);

     WHEREAS: By Order of the Court, dated November 10, 2004, the Campbell Action and the Wong
Action were consolidated for all purposes under the caption In re CNL Hotels & Resorts, Inc.
Securities Litigation, Case No. 6:04-cv-1231-Orl-31KRS (the “Action”);

     WHEREAS: On December 21, 2004, pursuant to 15 U.S.C. §§ 77z-1(a)(3)(B) and 78u-4(a)(3)(B),
Plaintiff Macomb County ERS was appointed as Lead Plaintiff for the Proxy Class, the Barack Trust
was appointed as Lead Plaintiff for the Purchaser Class, Chimicles & Tikellis LLP was appointed as
Lead Litigation Counsel and Co-Lead Counsel, Labaton Sucharow & Rudoff LLP was appointed as Co-Lead
Counsel for Macomb County ERS, and Wolf Haldenstein Adler Freeman & Herz LLP as Co-Lead Counsel for
the Barack Trust. For purposes of this

 

 

Settlement, Chimicles & Tikellis LLP is designated as Lead Litigation Counsel, and Chimicles &
Tikellis LLP, together with Labaton Sucharow & Rudoff LLP and Wolf Haldenstein Adler Freeman &
Herz LLP, are designated as Co-Lead Counsel;

     WHEREAS: Plaintiffs filed the Consolidated Amended Class Action Complaint and the Corrected
Consolidated Amended Class Action Complaint (“Amended Complaint”), seeking damages for alleged
violations of the federal securities laws and state common law, on or about December 13, 2004 and
December 23, 2004, respectively;

     WHEREAS: Settling Defendants moved to dismiss the Amended Complaint and the Action in its
entirety on February 11, 2005. The Court issued rulings on May 9, 2005, denying in part and
granting in part Settling Defendants’ motions and the Court held in abeyance its ruling on Count
III of the Amended Complaint;

     WHEREAS: Following the Court’s May 9, 2005 rulings on Settling Defendants’ motions to
dismiss, on May 31, 2005, plaintiffs filed and served the Consolidated First Amended Class Action
Complaint for Violation of Federal Securities Laws and Derivative Action for Breaches of Fiduciary
Duties (“First Amended Complaint”);

     WHEREAS: Settling Defendants moved to dismiss the First Amended Complaint and the Action in
its entirety on July 22, 2005. Following oral argument, the Court issued rulings on September 9,
13, 20, and 21, 2005, denying in part and granting in part Settling Defendants’ motions;

     WHEREAS: On October 10, 2005, plaintiffs filed the Consolidated Second Amended Complaint
which seeks damages for alleged violations of the federal securities laws and state common law
(“Operative Complaint”);

     WHEREAS: Settling Defendants moved to dismiss, in part, and strike, in part, the Operative
Complaint on November 9, 2005. This set of motions was fully briefed and was scheduled for oral
argument before the Court on December 20, 2005; and

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     WHEREAS: On December 16, 2005, the Court postponed resolution of the motions to dismiss and
to strike portions of the Operative Complaint, pending settlement discussions among the Parties.

     NOW, THEREFORE, in consideration of the mutual undertakings and consideration provided for
herein, the Lead Plaintiffs, on behalf of themselves and the Class, on the one hand, and the
Settling Defendants, on the other hand, subject to approval by the Court pursuant to Fed. R. Civ.
P. 23(e), hereby stipulate and agree that the Action is hereby settled and compromised upon the
following terms and conditions:

I. DEFINITIONS

     For purposes of this Stipulation of Settlement (“Stipulation of Settlement” or “Stipulation”)
and the attached exhibits (which are an integral part of this Stipulation and are incorporated
herein in their entirety by this reference), the following terms have the indicated meanings,
unless a part or subpart of this Stipulation of Settlement or its exhibits otherwise provides. All
other capitalized terms used in this Stipulation and all ancillary documents relating to the
proposed Stipulation of Settlement shall have the meaning ascribed to them herein.

	 	a.	 	“Advisor” means CNL Hospitality Corp., on its behalf and on behalf
of its parents, subsidiaries (whether corporations, limited liability companies,
or partnerships), affiliates, successors, and assigns.
	 
	 	b.	 	“Advisor Fee Reduction Agreements” means the Amended and Restated
Renewal Agreement, dated as of December 30, 2005, between CHR and the Advisor,
and the Payment Agreement, dated as of December 30, 2005, between CHR and the
Advisor, and the terms therein that were set forth in the Preliminary Term Sheet
for the Payment of Certain Advisory Fees, dated December 8, 2005.
	 
	 	c.	 	“Amended Merger Agreement” means the Amended and Restated Merger
Agreement, dated April 3, 2006, the principal terms of which are set forth in the
Summary of Principal Terms of Proposed Amended and Restated

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	 	 	 	Merger Agreement, dated December 5, 2005. As provided herein, CHR intends to
promptly seek stockholder approval of the Amended Merger Agreement pursuant to
the New Proxy.
	 
	 	d.	 	“Attorneys’ Fees and Expenses” means the attorneys’ fees and
expenses that are awarded to Plaintiffs’ Counsel in connection with the
prosecution and settlement of the Action, including, without limitation, expert
fees, and costs and expenses incurred by or in connection with, experts,
consultants, claims administration and notice.
	 
	 	e.	 	“Cash Settlement Fund” means cash, Notes, and interest on the
Notes, if any, to be paid by or on behalf of Settling Defendants, as set forth in
Section II.C., below, including any interest or investment earnings thereon.
	 
	 	f.	 	“Charter” means the Articles of Amendment and Restatement of CHR,
filed with, and accepted for record by, the State Department of Assessments of
Maryland on July 21, 2003, as amended and supplemented from time to time.
	 
	 	g.	 	“Charter Amendments” means amendments to the Charter for which CHR
will seek approval by its shareholders pursuant to the New Proxy.
	 
	 	h.	 	“CHR” means CNL Hotels & Resorts, Inc., formerly known as CNL
Hospitality Properties, Inc., its parents, subsidiaries (whether corporations,
limited liability companies, or partnerships), operating partnerships,
affiliates, successors, and assigns.
	 
	 	i.	 	“Claims Administrator” means Complete Claim Solutions, Inc.,
retained by Co-Lead Counsel to distribute to the Class the Notice of Pendency and
Proposed Settlement, and, which shall be responsible (under Co-Lead Counsel’s
supervision) for administering and distributing the Net Settlement Consideration.
	 
	 	j.	 	“Class” means collectively the Purchaser Class and the Proxy Class.

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	 	k.	 	“Class Notice” means the Notice of Pendency and Proposed Settlement
of Class Action, substantially in the form annexed hereto as Exhibit C, that is
to be mailed to the Class.
	 
	 	l.	 	“Co-Lead Counsel” means: The law firms of Chimicles & Tikellis
LLP; Labaton Sucharow & Rudoff LLP; and Wolf Haldenstein Adler Freeman and Herz
LLP.
	 
	 	m.	 	“Confirmatory Discovery” means the discovery conducted by Co-Lead
Counsel relating to the allegations in the Action that was necessary for Co-Lead
Counsel to confirm the reasonableness of the Settlement.
	 
	 	n.	 	“Costs of Notice and Administration” means: All costs and expenses
incurred in connection with: (i) providing the Class Notice to Class members;
(ii) the administration of the claims of Class members; (iii) making the
distributions, from time to time, of the Net Settlement Consideration to Class
members; (iv) taxes on the Cash Settlement Fund, including the costs and expenses
incurred in connection with filing tax returns and related documents; and (v) any
costs associated with any escrow accounts or the retention of the Class’s agent.
	 
	 	o.	 	 “Court” means the United States District Court for the Middle
District of Florida, Orlando Division, and the Honorable Gregory A. Presnell, to
whom this Action has been assigned.
	 
	 	p.	 	“CSC” means CNL Securities Corp., its parents, subsidiaries
(whether corporations, limited liability companies, or partnerships), affiliates,
successors, and assigns.
	 
	 	q.	 	“Effective Date” means: The date by which all of the following
have occurred: (1) the Stipulation of Settlement has been finally approved by
the Court; (2) the Judgment has been entered by the Court and not vacated or
materially modified upon appeal or otherwise, unless such material

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	 	 	 	modifications are agreed to in writing by the Settling Defendants and Co-Lead
Counsel; (3) the dismissal with prejudice of the Action as against each and
all of the Settling Defendants; and (4) either (i) the time to appeal, or
otherwise seek review of the Judgment, has expired without any appeal having
been taken or review sought; or (ii) if an appeal is taken or review sought,
the expiration of five (5) days after the final decision on any such appeal or
review shall have been rendered by the highest court before which appeal or
review is sought and such decision is not subject to further judicial review,
or such appeal has been dismissed.
	 
	 	r.	 	“Escrow Agency Agreement” means: The Agreement entered into among
Chimicles & Tikellis LLP and the Investment Agent selected by Co-Lead Counsel to
govern the creation and operation of the Settlement Fund Account, an
interest-bearing escrow account to be held by the Investment Agent. A copy of
the Escrow Agency Agreement is attached as Exhibit B.
	 
	 	s.	 	“Investment Agent” means Wachovia Bank.
	 
	 	t.	 	“Investment Data” means the information that will be provided to
each Purchaser Class member concerning the Class member’s investment(s) in CHR.
	 
	 	u.	 	“Judgment” means the Order approving the Settlement and this
Stipulation of Settlement, and the Final Judgment entered pursuant to that Order,
in the form attached as Exhibit A.
	 
	 	v.	 	“Lead Litigation Counsel” means the law firm of Chimicles &
Tikellis LLP.
	 
	 	w.	 	“Listing” means the listing of the shares of CHR on a national
securities exchange or over-the-counter market.
	 
	 	x.	 	“Named Plaintiffs” means Mary M. Campbell, Macomb County Employees’
Retirement System, Elizabeth Hawkins Barack Revocable Living Trust, Raymond
Roberts, Victor Libov, and Edwin Wong.

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	 	y.	 	“Net Settlement Consideration” means the Cash Settlement Fund less
any Costs of Notice and Administration, Attorneys’ Fees and Expenses, and Costs,
taxes, and any other costs or expenses allowed by the Court from time to time.
	 
	 	z.	 	“New Proxy” means the proxy statement generated pursuant to Section
14(a) of the Securities Exchange Act of 1934 that will be filed with the United
States Securities and Exchange Commission (“SEC”), seeking CHR stockholder
approval of the Amended Merger Agreement.
	 
	 	aa.	 	“Notes” are the three (3) unsecured promissory notes referred to
and described in Section II.C.2. hereof.
	 
	 	bb.	 	“Parties” means any party in this Action, including: (i) the Named
Plaintiffs; (ii) the Class; and (iii) the Settling Defendants. All Parties are
represented by counsel who are signatories to this Stipulation.
	 
	 	cc.	 	“Plaintiffs’ Counsel” means the law firms of Chimicles & Tikellis
LLP; Labaton Sucharow & Rudoff LLP; Wolf Haldenstein Adler Freeman and Herz LLP;
Glancy Binkow & Goldberg LLP; Miller Shea P.C.; Lasky & Rifkind; VanOverbeke,
Michaud & Timmony, P.C.; and Cooper, Ridge & Lantinberg, P.A.
	 
	 	dd.	 	“Plan of Allocation” means the terms and procedures that will be
used by the Claims Administrator in calculating, allocating, and distributing the
Net Settlement Consideration to Class members. The Plan of Allocation shall be
submitted for approval to the Court separately by Co-Lead Counsel. Settling
Defendants take no position with respect to the Plan of Allocation, but Settling
Defendants have the right to review the Plan of Allocation before its submission
to the Court. Any Court proceedings with respect to the Plan of Allocation shall
not delay the Court’s consideration and approval of the Stipulation of
Settlement.

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	 	ee.	 	“Preliminary Approval Order” means the Order substantially in the
form annexed hereto as Exhibit D, granting preliminary approval of the Settlement
and the Plan of Allocation.
	 
	 	ff.	 	“Purchaser Class” means, pursuant to Fed. R. Civ. P. 23(a) and
(b)(3), a class of all persons who purchased or otherwise acquired CHR securities
issued or offered pursuant to or by means of CHR’s registration statements and/or
prospectuses between August 16, 2001 and August 16, 2004, inclusive. For
purposes of this definition, the date on which the member of the Purchaser Class
“purchased” or “otherwise acquired” the CHR securities shall be the date
reflected on CHR’s share data as the “Admission Date.”
	 
	 	gg.	 	“Proxy Class” means, pursuant to Fed. R. Civ. P. 23(a) and (b)(2),
a class of all persons who were entitled to vote on the proposals presented in
the proxy statement filed with the SEC by CHR, dated June 21, 2004, as amended or
supplemented by the additional proxy solicitation materials filed on July 7, July
8, and July 20, 2004 (“Proxy”).
	 
	 	hh.	 	“Released Persons” shall include the Settling Defendants, any
previously named defendants, any of their affiliates, including without
limitation, limited liability companies, partnerships and corporations (including
those that are minority-owned ) (collectively, “Affiliates”), their predecessors
and successors, and any person or entity that could have been named by the
plaintiffs as defendants in the Action as participants in the allegedly
actionable or wrongful conduct described therein, and their respective past and
present officers, directors, managers, partners, employees, agents, consultants,
advisors, attorneys, accountants, experts, or representatives.
	 
	 	ii.	 	“Sale” or “Sales” (i) means any transaction or series of
transactions whereby: (A) CHR sells, grants, transfers, conveys or relinquishes
its

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	 	 	 	ownership of any property or portion thereof, including the lease of any
property consisting of the building only, and including any event with respect
to any property which gives rise to a significant amount of insurance proceeds
or condemnation awards; (B) CHR sells, grants, transfers, conveys or
relinquishes its ownership of all or substantially all of the interest of CHR
in any joint venture in which it is a co-venturer or partner; (C) any joint
venture in which CHR as a co-venturer or partner sells, grants, transfers,
conveys or relinquishes its ownership of any property or portion thereof,
including any event with respect to any property which gives rise to insurance
claims or condemnation awards; or (D) CHR sells, grants, conveys, or
relinquishes its interest in any mortgage loan, secured equipment lease, or
other asset, or portion thereof, including any event with respect to any
mortgage loan, secured equipment lease or other asset which gives rise to a
significant amount of insurance proceeds or similar awards, but (ii) shall not
include any transaction or series of transactions specified in clause (i)(A),
(i)(B), or (i)(C) above in which the proceeds of such transaction or series of
transactions are reinvested in one or more properties within one hundred
eighty (180) days thereafter.
	 
	 	jj.	 	“Settled Claims” shall include any statutory, regulatory,
equitable, legal, common-law or other claims, causes of action, suits,
liabilities, obligations, expenses, costs, penalties, damages, demands, and/or
any other remedies of any nature whatsoever, under federal, state, local or any
other law (including Unknown Claims and including, without limitation, claims
within the exclusive jurisdiction of the federal courts), whether legal or
equitable, known or unknown, whether or not matured, accrued, or ripe, that are
based upon or related to, or arise out of, in whole or in part, (a) the facts,
transactions, events, occurrences, acts, disclosures, statements, omissions or

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	 	 	 	failures to act that were alleged or could have been alleged in the Action, or
(b) any count or allegation contained in any complaint in the Action by any
Named Plaintiff or the Class against each and all of the Released Persons,
through the date when Judgment is entered dismissing the Action with
prejudice.
	 
	 	kk.	 	“Settlement Consideration” means the consideration and benefits set
forth in Section II, below.
	 
	 	ll.	 	“Settlement Fund Account” means the interest-bearing account at
Investment Agent in which the Cash Settlement Fund will be deposited (or cause to
be deposited) by Settling Defendants.
	 
	 	mm.	 	“Settlement Hearing” or “Final Settlement Hearing” mean the hearing
to be scheduled by the Court to determine whether the proposed Settlement and the
Plan of Allocation are fair, reasonable and adequate and should be approved
pursuant to Fed. R. Civ. P. 23(e).
	 
	 	nn.	 	“Settling Defendants” means any or all of: CHR; Advisor; CSC
(former party dismissed by Court Order, dated September 20, 2005); James M.
Seneff, Jr.; Robert A. Bourne; Thomas J. Hutchison III; John A. Griswold; Charles
E. Adams; Lawrence A. Dustin; Craig M. McAllaster; and Robert E. Parsons, Jr.
Because former directors Adams and Dustin did not participate in matters
discussed in Sections II. A. and II. B., they are by necessity not joining in the
acknowledgements therein.
	 
	 	oo.	 	 “Summary Notice” means the form of Summary Notice of Pendency and
Proposed Settlement of Class Action that is to be published in accordance with
paragraph 12 of the proposed Preliminary Approval Order, substantially in the
form annexed hereto as Exhibit F.
	 
	 	pp.	 	“Unknown Claims” means any Settled Claim that any Named Plaintiff
or the Class does not know or suspect to exist in his, her, or its favor at the

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	 	 	 	time of the release of the Released Persons which, if known by him, her, or
it, might have affected his, her, or its settlement with and release of the
Released Persons, or might have affected his, her, or its decision not to
object to this settlement.

II. SETTLEMENT CONSIDERATION

     In consideration of the covenants and mutual promises provided for herein and in full,
complete and irrevocable satisfaction and settlement of the Action and of all Settled Claims, the
Settlement Consideration shall consist of the following:

     A. Amended Merger Agreement:

     CHR and the Advisor have executed the Amended Merger Agreement. Settling Defendants
acknowledge that the Action was a material factor that was taken into account in connection with
the terms of the Amended Merger Agreement.

     B. Advisor Fee Reduction Agreements:

     CHR and the Advisor have executed the Advisor Fee Reduction Agreements. Settling Defendants
acknowledge that the Action was a material factor that was taken into account in connection with
the terms of the Advisor Fee Reduction Agreements. CHR and the Advisor represent that the Advisor
Fee Reduction Agreements: (i) have received approval by all necessary persons; (ii) do not require
CHR stockholder approval; and (iii) are effective without further review or approval by any person.

     C. Cash Settlement Fund:

     1. In connection with the Purchaser Class claims asserted pursuant to Sections 11 and 15 of
the 1933 Securities Act, CHR will pay, or cause to be paid, in settlement of the Settled Claims,
the following amounts to be deposited into the Settlement Fund Account:

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	 	a.	 	“2006 Cash Consideration:” At a date of CHR’s
choosing, which shall be no later than January 15, 2007, or the Effective Date,
whichever is later, the sum of $3,700,000;
	 
	 	b.	 	“2007 Cash Consideration:” At a date of CHR’s
choosing, which shall be no later than January 15, 2008, the sum of
$15,650,000; and
	 
	 	c	 	“2008 Cash Consideration:” At a date of CHR’s
choosing, which shall be no later than January 15, 2009, the sum of
$15,650,000.

     2. The 2006 Cash Consideration, the 2007 Cash Consideration, and the 2008 Cash Consideration
shall be evidenced by non-interest bearing, unsecured Notes from CHR. Not later than three (3)
business days following the Effective Date, CHR shall deliver to Lead Litigation Counsel the three
(3), fully executed, promissory notes substantially in the form of Exhibit E hereto (collectively,
the “Notes,” individually, the “Note”):

     a. The 2006 Cash Consideration Note shall be in the principal amount of three million
seven hundred thousand dollars ($3,700,000), made payable to the order of “Chimicles &
Tikellis LLP as attorneys for the benefit of the Purchaser Class.” The maturity date of the
2006 Cash Consideration Note shall be January 15, 2007.

     b. The 2007 Cash Consideration Note shall be in the principal amount of fifteen million
six hundred fifty thousand dollars ($15,650,000), made payable to the order of “Chimicles &
Tikellis LLP as attorneys for the benefit of the Purchaser Class.” The maturity date of the
2007 Cash Consideration Note shall be January 15, 2008.

     c. The 2008 Cash Consideration Note shall be in the principal amount of fifteen million
six hundred fifty thousand dollars ($15,650,000), made payable to the

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order of “Chimicles & Tikellis LLP as attorneys for the benefit of the Purchaser
Class.”   The maturity date of the 2008 Cash Consideration Note shall be January 15,
2009.

     d. If any amount due to be paid by CHR on any Note is not timely received by Lead
Litigation Counsel, payment and maturity on that Note and any remaining Notes shall be
immediately accelerated, with all amounts due under the unpaid Notes immediately due and
payable, and interest, at the rate of ten (10) percent per annum, compounded annually, shall
immediately begin accruing on the total amount due on the remaining Notes, commencing on a
date ninety (90) days prior to an Event of Default (as defined in the Notes).

     e. If CHR fails to make any payment provided for under the preceding paragraph, Co-Lead
Counsel may exercise any and all rights they may have under law, and/or this Stipulation of
Settlement, to secure payment of the defaulted Note(s) including the acceleration of payment
and maturity of the remaining Notes, and the accrual of interest thereon.

     f. In the event that CHR is acquired or enters into any combination, merger, or other
business transaction whereby CHR’s obligation under the Notes is conveyed, transferred, or
assigned to another entity, other than any combination, merger, or other business
transaction with an affiliate of CHR, CHR shall:

	 	(i)	 	Immediately notify Lead Litigation Counsel of
such event;
	 
	 	(ii)	 	Make certain that the underlying transaction
documents specifically state that CHR’s successor or assign, or other
entity to which the Note obligation is being conveyed, shall fulfill
the obligations under the

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	 	 	 	Notes to the extent not already done so by the date of such conveyance,
transfer, or assignment.

     g. In the event that CHR engages in a business transaction that results in a Sale of
more than 50% of its assets and the net proceeds of such transaction are not reinvested in
one or more properties within one hundred eighty (180) days thereafter, the Notes shall
become immediately due and payable, unless CHR receives Lead Litigation Counsel’s prior
written consent (not to be unreasonably withheld, delayed, or conditioned) or makes adequate
provision to assure timely payment of the amounts due (and not then paid) under the Notes.
For purposes of this section, 50% of assets shall be calculated as the gross sale price of
the assets to be sold divided by the gross value of all assets owned by CHR as of the end of
the fiscal quarter immediately preceding the proposed sale.

     h. In the event of an orderly liquidation following December 31, 2007 pursuant to
Section 11.1 of the Charter (or corresponding provision following the approval of the
Charter Amendments), the following provisions will apply:

	 	(i)	 	If an orderly liquidation occurs pursuant to
which CHR’s assets are sold over a period of time, CHR shall establish
an interest bearing escrow account for the benefit of the Purchaser
Class. Liquidation proceeds in an amount equal to the then current
outstanding principal due on the Notes will be deposited in the escrow
account before any liquidating distribution is made to CHR
shareholders. Interest accruing and paid with respect to funds in such
account shall inure to the benefit of CHR’s shareholders generally.

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	 	(ii)	 	If the liquidation event involves a
transaction in which the CHR shareholders are to receive securities
of a successor entity as consideration for their stock, and if there is
a dispute among the Parties as to whether the transaction adversely
affects the ability of the surviving company to timely satisfy its
obligations under the Notes, the Court will retain jurisdiction to
determine whether the then outstanding principal due on the Notes will
become due and payable no later than the effective date of such
transaction, unless CHR obtains Lead Litigation Counsel’s written
consent (not to be unreasonably withheld, delayed, or conditioned) to
the assignment of the Notes to the successor entity.
	 
	 	(iii)	 	If the liquidation event involves a merger,
consolidation, acquisition or other business combination where the CHR
shareholders receive cash as consideration for their stock, CHR shall
cause to be established an interest bearing escrow account for the
benefit of the Purchaser Class. Merger, consolidation, acquisition, or
other business combination proceeds in an amount equal to the then
current outstanding principal due on the Notes is to be deposited in
the escrow account before any payment is made to CHR shareholders.
Interest accruing and paid with respect to funds in such account shall
inure to the benefit of CHR’s shareholders generally.

     D. Consideration of Liquidation:

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     1. CHR’s Board of Directors, or a committee thereof, shall pass a resolution(s), no later than
the date on which the Parties apply to the Court for Preliminary Approval of the Settlement,
adopting the corporate governance policy described below, to become effective and implemented upon
the Effective Date:

Any proposal by CHR to its shareholders to approve an amendment to extend the
December 31, 2007 date specified in the Charter by which CHR must commence an
orderly Liquidation shall first be reviewed and approved by a committee
consisting solely of at least three (3) of CHR’s independent directors (as
defined by applicable SEC Rule), which committee shall retain an advisor of
its choosing to assist such committee in the evaluation of such a proposal. A
copy of any final evaluation by the advisor presented to the committee shall
be made available to Co-Lead Counsel for inspection on a confidential basis.
Co-Lead Counsel shall not retain any copy of such evaluation. Co-Lead
Counsel’s reasonable comments to such evaluation will be taken into
consideration by such committee in its sole discretion.

     2. This “Consideration of Liquidation” mechanism shall remain in place only until June 1,
2008, unless CHR is in violation of its Charter relating to commencement of an orderly Liquidation,
in which event, it shall remain in place until the earlier of Listing or the commencement of the
orderly Liquidation.

     E. Related-Party Transaction Committee:

     1. CHR’s Board of Directors, or a committee thereof, shall pass a resolution(s), no later than
the date on which the Parties apply to the Court for Preliminary Approval of the

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Settlement, adopting the following corporate governance policy, to become effective and
implemented upon the Effective Date:

All transactions with management and others that are reportable under Item 404 of
Regulation S-K by CHR shall be considered by a committee of CHR’s Board of Directors
consisting solely of directors who do not have a financial interest in the
transaction being considered. The committee shall be authorized to retain an
advisor(s) and counsel of its choice as it deems appropriate, at CHR’s expense.
Such committee and its advisors/counsel shall review and, in its discretion, provide
comments on the contents and wording of any disclosure to shareholders and in any
SEC filing with respect to any Related-Party Transaction.

     2. The “Related Party Transaction Committee” mechanism shall remain in place only until the
earlier of June 1, 2008 or Listing.

     F. New Proxy:

     1. Upon execution of the Amended Merger Agreement, CHR will seek with a New Proxy the approval
by CHR’s shareholders of the Amended Merger Agreement and the Charter Amendments.

     2. Co-Lead Counsel will be given a reasonable opportunity to review and comment on the New
Proxy and all related materials for the purposes of compliance with all applicable securities and
corporate fiduciary laws, rules, and regulations.

     3. Any reasonable comments by Co-Lead Counsel on the New Proxy will be taken under
consideration by CHR in its sole discretion. Subject to being given reasonable opportunity (for
the avoidance of doubt, five (5) business days shall be considered a reasonable opportunity) for
conducting such review and providing such input, Co-Lead Counsel and Named Plaintiffs

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agree that they will fully support shareholder approval of the merger of the Advisor into CHR
and the Charter Amendments as being fair and reasonable, and in the best interests of CHR and its
shareholders.

III. SETTLEMENT FUND ACCOUNT

     1. Lead Litigation Counsel shall administer the Settlement Fund Account.

     2. All releases or withdrawals of funds from the Settlement Fund Account shall be in
accordance with a Court order.

     3. The Settlement Fund Account shall be invested in accordance with the Escrow Agency
Agreement; however, a reasonable amount of the Cash Settlement Fund may be held in cash for
purposes of paying taxes and the costs associated with Costs of Notice and Administration.

     4. Any interest or income shall accrue to the benefit of the Settlement and the Cash
Settlement Fund, and all principal and interest will be subject to allocation among the Purchaser
Class members and Plaintiffs’ Counsel entitled to participate in the Settlement upon the Effective
Date.

     5. The Parties agree that the Settlement Fund is intended to be a “Qualified Settlement Fund”
within the meaning of Treasury Regulation § 1.468B-1, and thus any tax liability on interest
accruing on the Settlement Fund Amount shall be the sole and exclusive responsibility of the
Settlement Fund. Any tax liability on payments made from the Settlement Fund, including, but not
limited to, payments to any Named Plaintiff, member of the Class, Claims Administrator, or
Plaintiffs’ Counsel, shall be the sole and exclusive responsibility of the recipient of such
payment. Under no circumstances shall Settling Defendants be responsible for any income, transfer,
intangible or other tax, levy, governmental charge or fee incurred, payable

18

 

or accrued in connection with the payment of monies into or from the Settlement Fund Account
or the payment of fees to Plaintiffs’ Counsel.

     6. All costs and expenses relating to Class Notice and the Summary Notice, administration of
the Settlement and the Settlement Fund Account shall be paid exclusively from, and shall be the
sole responsibility of, the Settlement Fund Account when incurred. Within (five) 5 business days
of entry of the Preliminary Approval Order by the Court, CHR shall cause to be paid an amount not
to exceed $250,000 into the Settlement Fund Account, as an advance on the amount payable under
Section V.1. herein, to be used solely to cover costs and expenses relating to the printing and
mailing of the Class Notice, mailing the Investment Data form, and the publication of the Summary
Notice. Such payment shall be on a non-recourse basis as to amounts actually expended or incurred
so that Plaintiffs’ Counsel, Named Plaintiffs, and the Class shall have no responsibility or
obligation to reimburse such expended amounts in the event the Effective Date does not occur.

     7. The Settling Defendants shall have no responsibility or liability for (a) the
administration of the Cash Settlement Fund or the Settlement Fund Account, (b) any dispute relating
to any allocation or disbursement of the Cash Settlement Fund or Settlement Fund Account, or (c)
any costs, expenses, or obligations associated with the Settlement Fund or Settlement Fund Account.

     8. Until the Effective Date, Co-Lead Counsel shall not disburse any portion of the Settlement
Consideration except to pay for reasonable notice costs or as otherwise provided for in this
Stipulation of Settlement, or with the written agreement of counsel for the Settling Defendants, or
by orders of the Court. All funds held in escrow shall be deemed and considered to be in the
custody of the Court, and shall remain subject to the jurisdiction of the Court until

19

 

such time as such funds shall be distributed pursuant to the Stipulation of Settlement, the
Plan of Allocation, and/or further orders of the Court.

     9. As of the Effective Date, the Settling Defendants and their agents, shall cease to have any
interest in or control over the Cash Settlement Fund. On and after the Effective Date, Co-Lead
Counsel, subject to the supervision of the Court, shall have sole responsibility and authority for
the investment of the Cash Settlement Fund and shall collect, liquidate, and distribute the Cash
Settlement Fund.

IV. DEFENDANTS’ DENIAL OF LIABILITY

     The Settling Defendants have denied and continue to deny that they have committed any act or
omission giving rise to any liability and/or violation of law or any act of negligence or
misconduct, and state that they are entering into the Settlement to eliminate the burden and
expense of further litigation. The Operative Complaint does not assert claims of fraud, deliberate
dishonesty, or malicious or willful act, or omission, or violation of law against the Settling
Defendants. No part of the Cash Settlement Fund shall constitute, be deemed or construed to
represent, restitution or disgorgement, including, without limitation, of any remuneration or any
ill-gotten gains allegedly received by Settling Defendants.

V. ATTORNEYS’ FEES AND EXPENSES

     1. Plaintiffs’ Counsel will seek Court approval of the payment from CHR of a fee and a portion
of reasonable reimbursable expenses with respect to the Proxy Class and derivative claims in the
aggregate total amount of $5.5 million (and no more), inclusive of the amount advanced by CHR
pursuant to Section III.6, on account of the benefits conferred by virtue of the Settlement, in
particular the benefits resulting from, without limitation, the modifications to the advisor fees,
the revised merger terms, and the provisions herein relating to corporate governance. Settling
Defendants agree not to oppose such fee application in an amount not to

20

 

exceed $5.5 million. Such fee shall be conditioned upon the entry of an order approving such
fee application, and shall be paid by CHR to Lead Litigation Counsel (on behalf of all Plaintiffs’
Counsel) within ten (10) days after the Effective Date.

     2. Plaintiffs’ Counsel will seek Court approval of the payment of a fee with respect to
obtaining for the benefit of the Purchaser Class Settlement Consideration described in Section
II.C. hereof, such attorneys’ fees equal to 25% of all amounts paid into and earned by the
Settlement Fund Account, plus reasonable expenses, including, but not limited to, expert fees, and
costs and expenses incurred by or in connection with, experts, consultants, claims administration,
and notice. Fees and expenses sought by Plaintiffs’ Counsel in accordance with this subparagraph
shall not be opposed by Settling Defendants. Such fees and expenses as are awarded by the Court
pursuant to this paragraph shall be deemed paid by CHR and funded solely out of the Cash Settlement
Fund in accordance with the Court’s order(s).

     3. The failure of the Court to approve the fee applications set forth in Section V, Paragraphs
1 and 2, above, in whole or in part, shall not relieve the Parties of their respective obligations
as set forth in this Stipulation.

     4. Except as otherwise provided in this Section, as between the Parties, the Named Plaintiffs
and Settling Defendants shall bear all of their own costs, fees, and expenses associated with the
prosecution and settlement of the Action.

VI. PLAN OF ALLOCATION AND INVESTMENT DATA

     1. The allocation of the Net Settlement Consideration among the members of the Class shall be
subject to a Plan of Allocation to be proposed by Co-Lead Counsel subject to approval of the Court.
The Settling Defendants shall have no role in or responsibility for review or evaluation of the
Plan of Allocation, but will be permitted to review the Plan of Allocation.

21

 

The Settling Defendants will take no position with respect to such proposed Plan of
Allocation, the Plan of Allocation being a matter separate and apart from the Settlement between
the Parties, and, accordingly, any decision by the Court concerning the Plan of Allocation shall
not affect the validity or finality of the Settlement, and the Released Persons shall have no
liability with respect to any claim arising out of the Plan of Allocation.

     2. CHR shall cooperate with Co-Lead Counsel and the Claims Administrator in responding to all
reasonable requests for information in the possession, custody, or control of CHR, and needed to
disseminate the Class Notice and Investment Data, or to prepare the Plan of Allocation. Plaintiffs
have retained a Claims Administrator to disseminate the Class Notice and prepare, review, assess,
disseminate, and process the Investment Data and claims of Purchaser Class members. In addition,
within ninety (90) days before any distribution of the Net Settlement Consideration, if requested
in writing by Co-Lead Counsel, CHR shall provide updated information in its possession, custody, or
control relating to any address changes for members of the Purchaser Class, or any redemptions of
shares, transfers of shares, or sales or purchases in the secondary market by members of the
Purchaser Class.

     3. CHR represents that all shareholders who purchased through CHR (including through CHR’s DRP
program) paid a net purchase price no less than $18.80 per share (split adjusted). 

     4. CHR represents that all redemptions made by CHR provided net proceeds to the shareholder of
no less than $19 per share (split adjusted).

     5. CHR agrees to make available to Co-Lead Counsel and the Claims Administrator engaged by
Co-Lead Counsel the person(s) most knowledgeable from CHR or CHR’s counsel with respect to the
shareholder data specified in Paragraph 2 above. Such person(s) shall have

22

 

authority to assemble and transmit data to the Claims Administrator. CHR agrees that such
person(s) will timely respond to requests for information and will work cooperatively with Co-Lead
Counsel and the Claims Administrator from time to time as requested through final distribution of
all settlement funds to Class members. CHR agrees that in the event that an original designee
leaves CHR, has a change in responsibilities, or is no longer CHR’s counsel that a new designee
shall be appointed promptly.

     6. In accordance with the Plan of Allocation, a member of the Purchaser Class will receive
his/her/its distribution from the Net Settlement Consideration based on the information provided in
the Investment Data that will be provided to each member of the Purchaser Class, unless such
member of the Purchaser Class provides corrected information in the manner and by the deadlines set
forth in the Investment Data form.

     7. CHR has or will provide a list (including the names and current addresses) of all CHR
shareholders who were entitled to vote on the Proxy.

VII. JUDGMENT

     1. If the terms of this Stipulation of Settlement are finally approved by the Court, the
Parties shall jointly request that the Court enter the Judgment, substantially in the form of
Exhibit A, as well as such other orders, if any, as may be necessary to:

	 	a.	 	Direct the Parties to implement the terms of
the Stipulation of Settlement; and
	 
	 	b.	 	Provide for the Court’s continuing jurisdiction
over the Parties to effectuate the terms of the Stipulation of
Settlement.

VIII. RELEASES AND SETTLEMENT HEARING

23

 

     1. Upon the Effective Date, Named Plaintiffs and each Class member shall, by Court approval of
this Stipulation and by operation of the Judgment (and any other necessary orders), fully, finally,
irrevocably, and forever release, relinquish, and discharge all Settled Claims against each of the
Released Persons.

     2. Upon the Effective Date, each of the Released Persons shall, by Court approval of this
Stipulation and by operation of the Judgment (and any other necessary orders), fully, finally,
irrevocably, and forever release, relinquish, and discharge the Named Plaintiffs and Plaintiffs’
Counsel, and the agents, experts, accountants, and consultants retained by Plaintiffs’ Counsel in
the course of this Action, from all claims including Unknown Claims arising out of, relating to, or
in connection with the prosecution of the Action or Settled Claims.

     3. As soon as practicable after execution of this Stipulation of Settlement, Named Plaintiffs
and the Settling Defendants shall:

	 	a.	 	Jointly move the Court for entry of the Preliminary Approval
Order. Among other things, the Preliminary Approval Order shall:

	 	(i)	 	preliminarily approve the terms and
conditions of the Stipulation of Settlement;
	 
	 	(ii)	 	preliminarily certify the Purchaser Class and
the Proxy Class;
	 
	 	(iii)	 	approve the form and content of the Class
Notice and direct the manner and timing of its dissemination to Class
members; and
	 
	 	(iv)	 	establish the date, time, and place for
conducting the Settlement Hearing.

	 	b.	 	At the Settlement Hearing, Named Plaintiffs will seek:

24

 

	 	(i)	 	approval of the Court of the terms and
conditions of the Stipulation of Settlement as being fair, reasonable,
and adequate and warranting approval pursuant to Fed. R. Civ. P. 23(e);
	 
	 	(ii)	 	approval of the Plan of Allocation;
	 
	 	(iii)	 	entry of the Judgment; and,
	 
	 	(iv)	 	approval of the payment of requested
Plaintiffs’ Attorneys’ Fees and Expenses, in accordance with the
Stipulation.

IX. GENERAL MATTERS AND RESERVATIONS

     1. Solely for purposes of this Settlement, the Parties to this Action stipulate to the
certification of the Class, comprising both the Proxy Class and Purchaser Class. The class
representatives of the Proxy Class are Macomb County Employees’ Retirement System (Lead Plaintiff)
and Mary Campbell. The class representatives of the Purchaser Class are Elizabeth Hawkins Barack
Revocable Living Trust (Lead Plaintiff), Raymond Roberts, Victor Libov, and Edwin Wong.
Certification of these Named Plaintiffs as class representatives by virtue of this Stipulation
shall be solely for purposes of this Settlement. Excluded from the Class are Settling Defendants,
the officers and directors of Settling Defendants, at all relevant times, members of each
Individual Settling Defendant’s immediate family, any entity in which any Settling Defendant has a
controlling interest, and the legal affiliates, representatives, heirs, controlling persons,
successors and predecessors in interest or assigns of any such excluded person.

     2. If this Stipulation is voided or terminated as set forth in subsections (a) and (b) of this
paragraph, then this paragraph will remain enforceable, and this Stipulation may be admissible
solely to enforce this paragraph. In addition, in respect to the application of the Non-Disclosure
Agreement executed by Co-Lead Counsel, dated December 7, 2005 (“NDA”), and in

25

 

particular Paragraph 3 thereof, Settling Defendants and their counsel agree that to the extent
Named Plaintiffs and Plaintiffs’ Counsel received any material in Confirmatory Discovery that would
not or could not have been made available to them through normal discovery practice, Settling
Defendants and their counsel shall only seek to have those materials returned and not used in the
litigation of the Action, and will not seek to disqualify or interfere with the Named Plaintiffs’
or Plaintiffs’ Counsel’s role in the Action.

	 	a.	 	If the Settlement is not approved by the Court (other than with respect to any
decision by the Court concerning the Attorneys’ Fees and Expenses applications as set
forth in Section V herein, and with respect to any decision by the Court concerning the
Plan of Allocation), this Stipulation shall be a nullity, and none of its terms shall
be effective or enforceable, and the Parties shall revert to their litigation positions
immediately prior to the execution of this Stipulation and the Memorandum Of
Understanding, dated February 6, 2006 (“MOU”), and the fact and terms of the Settlement
shall not be admissible in any trial against the Settling Defendants or otherwise used
against the Released Persons in any action, and this Stipulation, the material produced
in Confirmatory Discovery, and the Settlement shall be subject to the NDA.
	 
	 	b.	 	If the Court approves the Settlement with any material changes or modifications
(other than with respect to any decision by the Court concerning Attorneys’ Fees and
Expenses applications as set forth in Section V herein, and with respect to any
decision by the Court concerning the Plan of Allocation), this Stipulation shall be
voidable at the option of the adversely affected Party(ies) within five (5) business
days of the Court’s ruling or statement containing such material change or

26

 

	 	 	 	modification. If the adversely affected Party(ies) elect to void this Stipulation,
then this Stipulation shall be a nullity, and none of its terms shall be effective
or enforceable, and the Parties shall revert to their litigation positions
immediately prior to the execution of this Stipulation and the MOU, and the fact and
terms of the Settlement shall not be admissible in any trial against the Settling
Defendants or otherwise used against the Released Persons in any action, and this
Stipulation, the material produced in Confirmatory Discovery, and the Settlement
shall be subject to the NDA.

     4. If the Stipulation of Settlement is terminated, canceled, or rejected prior to the
Effective Date: (a) the balance remaining in Settlement Fund Account and all other Settlement
Consideration (less the actual costs expended or incurred for the mailing and publication of Class
Notice and Summary Notice, as provided in Section III.6 herein, and in accordance with any
applicable Court Order), shall be returned to CHR pursuant to Section II.j of the Escrow Agency
Agreement; and (b) Named Plaintiffs and the Settling Defendants shall be deemed to have reverted to
the respective status as of the date and time immediately prior to the execution of the Stipulation
of Settlement and the MOU, the fact and terms of the Settlement shall not be admissible in any
trial against the Settling Defendants or otherwise used against the Released Persons in any action,
and this Stipulation, the material produced in Confirmatory Discovery, and the Settlement shall be
subject to the NDA, and they shall proceed in all respects as if the Stipulation of Settlement and
MOU had not been executed and any related orders had not been entered. In such event, any Orders
that may have been vacated or expunged shall be reinstated nunc pro tunc.

27

 

     5. If CHR shareholders representing more than 5% of the shares otherwise includable in the
Purchaser Class timely and properly exclude themselves and opt out of the conditionally certified
Purchaser Class (“Opt-Outs”), CHR shall have the option to terminate the Settlement, and, if such
option is timely exercised, the Stipulation shall be a nullity, and none of its terms shall be
effective or enforceable, and the Parties shall revert to their litigation positions immediately
prior to the execution of the Stipulation and the MOU, and the fact and terms of the Settlement
shall not be admissible in any trial against the Settling Defendants or otherwise used against the
Released Persons in any action, and the Stipulation, the materials produced in Confirmatory
Discovery, and the Settlement shall be subject to the NDA; provided however, if the 5% opt out
threshold is exceeded, Co-Lead Counsel shall be afforded ten (10) days to solicit and receive
irrevocable withdrawals or retractions of opt-outs so as to bring the number of opt-outs below 5%,
in which event CHR’s option to terminate the Settlement and the Stipulation of Settlement under
this paragraph shall not be exercisable.

     6. All time periods set forth herein shall be computed in calendar days unless otherwise
expressly provided. In computing any period of time prescribed or allowed by this Stipulation or
by order of court, the day of the act, event, or default from which the designated period of time
begins to run shall not be included. The last day of the period so computed shall be included,
unless it is a Saturday, a Sunday, or a legal holiday. As used in this subsection, “legal holiday”
includes New Year’s Day, the celebration of the birthday of Martin Luther King, Jr., Presidents’
Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Thanksgiving Day, Christmas Day, and
any other day appointed as a holiday by the President or the Congress of the United States. If the
last day of the period falls on one of the dates described

28

 

above, the date for performance shall move forward to the next day that is not a Saturday,
Sunday or legal holiday.

     7. Neither this Stipulation of Settlement, whether or not executed or consummated, nor any of
its terms, provisions, or Exhibits, including the Plan of Allocation, nor any of the negotiations
or proceedings connected with it, nor any other document created in connection with the
implementation of the Settlement of this Action shall be:

	 	a.	 	Construed as an admission of any sort whatsoever, or a
finding of negligence or wrongful conduct, act, or omission, or useable for
any purpose other than the enforcement of this Settlement, by any Party to
this Stipulation of Settlement relating to any issue in the Action or Appeal
or to any Settled Claim;
	 
	 	b.	 	Offered or received in evidence in the Action, or in any other
action or proceeding between the Named Plaintiffs and any signatory to this
Stipulation of Settlement, other than to effectuate or enforce the provisions
of this Stipulation;
	 
	 	c.	 	Referred to by Plaintiffs’ Counsel or Named Plaintiffs in a
press release or other written publication primarily for the purpose of
publicizing or promoting this Settlement, unless Plaintiffs’ Counsel make a
good faith effort to provide a copy of such writing to CHR forty-eight (48)
hours in advance of publication. The obligation with regard to publicizing or
promoting this Settlement shall become null and void two (2) years from the
Effective Date of this Stipulation. All communications by the Parties or
their representatives, whether written or otherwise, concerning this

29

 

	 	 	 	Settlement shall be consistent with the terms and provisions of this
Stipulation.

     8. The Parties hereto and their attorneys agree to cooperate fully with one another in seeking
preliminary and final Court approval of this Stipulation of Settlement and to use their best
efforts to consummate its terms. Neither the Named Plaintiffs nor the Settling Defendants shall
seek to evade their good faith obligations to seek approval and implementation of this Stipulation
of Settlement by virtue of any rulings, orders, governmental report, the results of the claim
process or other development, whether in the Action, or in any other proceeding, or otherwise that
might hereafter occur and might be deemed to alter the relative strength of the Parties with
respect to any claim or defense or their relative bargaining power with respect to negotiating a
Stipulation of Settlement.

     9. This Stipulation of Settlement shall not be construed to create rights in, or grant
remedies to, or delegate any duty, obligation, or undertaking established herein to any person
other than the Parties or Plaintiffs’ Counsel.

     10. The Parties have arrived at this Stipulation of Settlement in arm’s-length negotiations
taking into account all relevant factors, present and potential.

     11. This Stipulation of Settlement shall be binding upon and inure to the benefit of the
Parties hereto and their respective heirs, executors, administrators, assigns, predecessors, and
successors, and upon any corporation or other entity into or with which any Party hereto may merge
or consolidate.

     12. Counsel for Defendants represent that they are authorized to enter into this Stipulation
on behalf of any Settling Defendants whom they represent in the Action.

30

 

     13. Whenever this Stipulation requires or contemplates that one Party shall or may give notice
to the other, notice shall be provided by facsimile and next-business day express delivery service
as follows:

          If to Plaintiffs, then to Lead Litigation Counsel:

Nicholas E. Chimicles

Chimicles & Tikellis LLP

361 West Lancaster Avenue

Haverford, PA 19041

Phone: (610) 642-8500

Fax: (610) 649-3633

Email: nick@chimicles.com

          If to Defendants, then to:

Kenneth A. Lapatine

Toby S. Soli

GREENBERG TRAURIG, LLP

200 Park Avenue

New York, NY 10166

Phone: (212) 801-9200

Fax: (212) 801-6400

lapatinek@gtlaw.com

solit@gtlaw.com

and

Scott B. Schreiber

John C. Massaro

ARNOLD & PORTER, LLP

555 Twelfth Street, NW

Washington, DC 20004

Phone: (202) 942-5000

Fax: (202) 942-5999

scott_schreiber@aporter.com

john_massaro@aporter.com

     13. This Stipulation of Settlement shall be construed under the laws of the State of Florida,
without giving effect to that State’s choice of law principles. The Court shall retain
jurisdiction with respect to implementation and enforcement of the terms of this Stipulation of

31

 

Settlement, and all Parties hereto submit to the jurisdiction of the Court for purposes of
implementing and enforcing the terms hereof.

     14. Any Settling Defendant having an obligation pursuant to this Stipulation of Settlement and
the Notes consents to the Court’s exercise of personal jurisdiction over said Released Person.

     15. The foregoing, including the documents referred to herein and exhibits hereto, constitutes
the entire agreement among the Parties with respect to the settlement of the Action, and may not be
modified or amended, except in writing, signed by all Parties hereto, or their successors in
interest.

     16. This Stipulation of Settlement may be executed by counsel in one or more counterparts,
including by signature transmitted by facsimile. Each counterpart when so executed shall be deemed
to be an original, and all such counterparts together constitute the same instrument.

[signatures appear on following page]

32

 

APPROVED AND AGREED TO BY AND ON BEHALF OF THE NAMED PLAINTIFFS AND THE CLASS

DATED: April 3, 2006

	 	 	 	 	 
	 	 	 
	 	By:  	
/s/ Nicholas E. Chimicles 	 
	 	 	Nicholas E. Chimicles 	 
	 	 	Kimberly M. Donaldson

CHIMICLES & TIKELLIS LLP

One Haverford Centre

361 W. Lancaster Avenue

Haverford, PA 19041

Telephone: (610) 642-8500

Facsimile: (610) 649-3633

Lead Litigation Counsel, Co-Lead Counsel for Lead
Plaintiffs, Counsel for Named Plaintiffs 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	
/s/ Lawrence A. Sucharow	 
	 	 	Lawrence A. Sucharow 	 
	 	 	LABATON SUCHAROW & RUDOFF LLP

100 Park Avenue

New York, NY 10017

Telephone: (212) 907-0700

Facsimile: (212) 818-0477

Co-Lead Counsel for Macomb County Employees
Retirement System 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	
/s/ Lawrence P. Kolker	 
	 	 	Lawrence P. Kolker 	 
	 	 	WOLF HALDENSTEIN ADLER FREEMAN AND HERZ LLP

270 Madison Avenue

New York, NY 10016

Telephone: (212) 545-4600

Facsimile: (212) 545-4653

Co-Lead Counsel for Elizabeth Hawkins Barack
Revocable Living Trust 	 

33

 

	 	 	 	 	 

APPROVED AND AGREED TO BY AND ON BEHALF OF SETTLING DEFENDANTS AS FOLLOWS:

DATED: April 3, 2006

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ David B. King	 
	 	 	David B. King 	 
	 	 	Thomas A. Zehnder

King, Blackwell, Downs

& Zehnder, P.A.

25 East Pine Street

Orlando, FL 32801

Telephone: (407) 422-2472

Facsimile: (407) 648-0161

Counsel for CNL Hotels & Resorts, Inc. – f/k/a CNL Hospitality Properties,
Inc., Thomas J. Hutchison, John A. Griswold 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Kenneth A. Lapatine	 
	 	 	Kenneth A. Lapatine 	 
	 	 	Mark H. Budoff

Toby S. Soli

Greenberg Traurig, LLP

200 Park Avenue

New York, NY 10166

Telephone: (212) 801-9200

Facsimile: (212) 801-6400

Counsel for CNL Hotels & Resorts, Inc. – f/k/a CNL Hospitality Properties,
Inc., Thomas J. Hutchison, John A. Griswold 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ T. Todd Pittenger	 
	 	 	T. Todd Pittenger 	 
	 	 	Terry C. Young

Lowndes Drosdick Doster Kantor

&  Reed, P.A.

215 North Eola Drive

Orlando, FL 32801

Telephone: (407) 843-4600

Facsimile: (407) 843-4444

Counsel for James M. Seneff, Robert A. Bourne, 	 

34

 

	 	 	 	 	 

  CNL Hospitality Corp., CNL Securities Corp.

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Scott B. Schreiber	 
	 	 	Scott B. Schreiber 	 
	 	 	John C. Massaro

Justin S. Antonipillai

Arnold & Porter, LLP

555 Twelfth Street, NW

Washington, DC 2004-1206

Telephone: (202) 942-5000

Facsimile: (202)942-999 Fax

Counsel for James M. Seneff, Robert A. Bourne,
CNL Hospitality Corp., CNL Securities Corp. 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Darryl M. Bloodworth	 
	 	 	Darryl M. Bloodworth 	 
	 	 	Nichole M. Mooney

Dean Mead, Egerton, Bloodworth, Capouano & Bozarth, P.A.

800 N. Magnolia Avenue, Suite 1500

Orlando, FL 32801

Telephone: (407) 841-1200

Facsimile: (407) 423-1831

Counsel for Charles E. Adams, Lawrence A. Dustin, Craig M. McAllaster, Robert
E. Parsons, Jr. 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Joseph M. Hassett	 
	 	 	Joseph M. Hassett 	 
	 	 	George H. Mernick III

Hogan & Hartson, LLP

555 Thirteenth Street, NW

Washington, DC 2004

Telephone: (202) 637-5600

Facsimile: (202) 637-5910

Counsel for Charles E. Adams, Lawrence
A. Dustin, Craig M. McAllaster, Robert E. Parsons, Jr. 	 
	 

35

 

EXHIBIT A

36

 

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

ORLANDO DIVISION

	 	 	 
	IN RE
	 	 
	CNL HOTELS & RESORTS, INC.

	 	Case No. 6:04-cv-1231-OrlKRS
	SECURITIES LITIGATION

	 	(Consolidated with 6:04-cv-1341-Orl-19JGG)
	 
	 	 
	 

	 	CLASS ACTION
	 
	 	 
	 

	 	[Proposed] ORDER GRANTING FINAL APPROVAL OF THE SETTLEMENT, THE PLAN OF ALLOCATION AND AWARD OF ATTORNEYS’ FEES AND REIMBURSEMENT OF LITIGATION EXPENSES

[Proposed] ORDER GRANTING FINAL APPROVAL OF THE SETTLEMENT, THE

PLAN OF ALLOCATION AND AWARD OF ATTORNEYS’ FEES AND

REIMBURSEMENT OF LITIGATION EXPENSES

     The Stipulation of Settlement, dated April 3, 2006 (the “Stipulation of Settlement”)
(capitalized terms herein shall have the same meaning as used in the Stipulation of Settlement
unless otherwise indicated), the Plan of Allocation, Plaintiffs’ Counsel’s Petition for Award of
Attorneys’ Fees and Reimbursement of Litigation Expenses, and related items, having been presented
at the Final Settlement Hearing on                     , 2006 pursuant to the Preliminary

37

 

Approval Order entered on                     , 2006; and, the Court having determined that the Class
Notice and Summary Notice were provided to the Class in accordance with the Preliminary Approval
Order, and that said Class Notice meets the requirements of Federal Rule of Civil Procedure 23(e)
and due process; and, the Parties having appeared by their attorneys of record and having been
heard in support of the Stipulation of Settlement; and, an opportunity to be heard having been
given to all other persons desiring to be heard as provided in and as scheduled by the Class
Notice; and, the entire matter of the Settlement having been considered by the Court:

     IT IS HEREBY ORDERED, ADJUDGED AND DECREED, this                      day of                                          2006 as follows:

APPROVAL OF THE SETTLEMENT

     1. Class Notice and Summary Notice, substantially in the form attached as Exhibit C and
Exhibit F, respectively, to the Stipulation of Settlement, have been mailed and/or published to the
Class pursuant to and in the manner directed by the Preliminary Approval Order, proof of the
mailing of the Class Notice has been filed with the Court by Complete Claim Solutions, Inc., proof
of the publication of the Summary Notice has been filed with the Court by Co-Lead Counsel and a
full opportunity to be heard has been afforded to all Parties, the Class, and persons in interest.
The form and manner of the Class Notice and Summary Notice are hereby determined to have been the
best notice practicable under the circumstances and to have been given in full compliance with the
requirements of due process and the notice requirements of the Federal Rules of Civil Procedure and
any other applicable law.

     2. In the Preliminary Approval Order, the Court granted conditional certification of the
Class. The Court now certifies the Class (“Class”) as follows:

38

 

(a) Pursuant to Fed. R. Civ. P. 23(a) and (b)(2), a class of all persons who were
entitled to vote on the proposals presented in the proxy statement filed with the
SEC by CHR, dated June 21, 2004, as amended or supplemented by the additional proxy
solicitation materials filed on July 7, July 8, and July 20, 2004 (“Proxy Class”).

(b) Pursuant to Fed. R. Civ. P. 23(a) and (b)(3), a class of all persons who
purchased or otherwise acquired CHR securities issued or offered pursuant to or by
means of CHR’s registration statements and/or prospectuses between August 16, 2001
and August 16, 2004, inclusive (“Purchaser Class”).

The Purchaser Class and the Proxy Class are collectively referred to as the Class. Each of the
Purchaser Class and the Proxy Class shall exclude the Settling Defendants, the officers and
directors of Settling Defendants, at all relevant times, members of each Individual Settling
Defendants’ immediate family, any entity in which any Settling Defendant has a controlling
interest, and the legal affiliates, representatives, heirs, controlling persons, successors and
predecessors in interest or assigns of any such excluded person.

     3. For purposes of the Settlement, the Court certifies the following as Class Representatives:
the class representatives of the Proxy Class are Macomb County Employees’ Retirement System
(“Macomb County ERS”) and Mary Campbell; and the class representatives of the Purchaser Class are
Elizabeth Hawkins Barack Revocable Living Trust (“Barack Trust”), Raymond Roberts, Victor Libov,
and Edwin Wong.

     4. Lead Litigation Counsel has filed with the Court a list of persons who timely requested
exclusion from the Purchaser Class (“Purchaser Class Opt-Outs”) and that list is attached hereto as
Exhibit A. Requests for exclusion were not permitted with respect to the Proxy Class, which is
certified as a non-opt out class under Fed. R. Civ. P. 23(b)(2).

     5. The Settlement as embodied in the Stipulation of Settlement is found to be fair, reasonable
and adequate and in the best interests of the Class, and it is hereby approved. The signatories to
the Stipulation of Settlement and their counsel are hereby authorized and directed

39

 

to comply with and to consummate the Settlement in accordance with its terms and provisions,
and the Clerk of the Court is directed to enter and docket this Order and Judgment dismissing this
Action with prejudice (“Final Judgment”).

     6. If the Settlement does not become effective in accordance with the terms of the Stipulation
of Settlement, then this Final Judgment shall be rendered null and void to the extent provided by
and in accordance with the Stipulation of Settlement and it shall be vacated and, in such event,
all orders entered and releases delivered in connection herewith shall be null and void, and the
Judgments and Orders that have been vacated or expunged shall be reinstated nunc pro tunc.

     7. Except as to any claims of the Purchaser Class Opt-Outs, the Action and the Class’ claims
contained therein, as well as all of the Settled Claims, are dismissed with prejudice. The persons
listed on Exhibit A have timely excluded themselves from the Purchaser Class. These persons are
not bound by this Final Judgment and Releases and shall not share in the benefits of the Settlement
of the Action, All further references in this Final Judgment to “Class Members” exclude the persons
listed on Exhibit A.

     8. All Class Members will be subject to and bound by the provisions of the Stipulation of
Settlement and this Final Judgment.

     9. This Final Judgment enjoins and prohibits any Class Member from seeking to recover,
directly or indirectly, against any Released Person based on the Settled Claims, and directs and
orders that the Class may only seek execution on the Final Judgment to exercise the rights of
recovery in accordance with the Stipulation of Settlement.

40

 

     10. Upon the Effective Date, the Named Plaintiffs and each Class Member hereby fully, finally,
irrevocably, and forever release, relinquish, and discharge all Settled Claims against each of the
Released Persons.

     11. The foregoing Release shall not relieve any Released Person from fulfilling and fully and
timely complying with all obligations that any Released Person has pursuant to the Stipulation of
Settlement or the Notes. If any Released Person does not fully and timely comply with and fulfill
its respective obligations as set forth in the Stipulation of Settlement or the Notes, the
foregoing Release in no manner will insulate, estop, or impede the Class’ claims for, and the
enforcement of, all of the Class’ rights against such a Released Person to compel compliance with
all terms of the Settlement.

     12. Upon the Effective Date, each of the Released Persons hereby fully, finally, irrevocably,
and forever releases, relinquishes, and discharges the Named Plaintiffs and Plaintiffs’ Counsel,
and the agents, experts, accountants, and consultants retained by Plaintiffs’ Counsel in the course
of this Action, from all claims including Unknown Claims arising out of, relating to, or in
connection with the prosecution of the Action or Settled Claims.

     13. Neither the Stipulation of Settlement, whether or not executed or consummated, nor any of
its terms, provisions, or Exhibits, including the Plan of Allocation, nor any of the negotiations
or proceedings connected with it, nor any other document created in connection with the
implementation of the Settlement of this Action shall be:

	 	a	 	Construed as an admission of any sort whatsoever, or a finding
of negligence or wrongful conduct, act, or omission, or useable for any purpose
other than the enforcement of this Settlement, by any Party to this

41

 

	 	 	 	Stipulation of Settlement relating to any issue in the Action or Appeal or
to any Settled Claim;
	 
	 	b	 	Offered or received in evidence in the Action, or in any other
action or proceeding between the Named Plaintiffs and any signatory to this
Stipulation of Settlement, other than to effectuate or enforce the provisions
of this Stipulation;
	 
	 	c	 	Referred to by Plaintiffs’ Counsel or Named Plaintiffs in a
press release or other written publication primarily for the purpose of
publicizing or promoting this Settlement, unless Plaintiffs’ Counsel make a
good faith effort to provide a copy of such writing to CHR forty-eight (48)
hours in advance of publication. The obligation with regard to publicizing or
promoting this Settlement shall become null and void two (2) years from the
Effective Date of this Stipulation. All communications by the Parties or their
representatives, whether written or otherwise, concerning this Settlement shall
be consistent with the terms and provisions of this Stipulation.

     14. CHR shall timely deliver the Notes to Lead Litigation Counsel and fulfill its obligations
thereunder.

     15. The Court hereby finds that CHR’s Board of Directors, or committee thereof, has duly
adopted the board resolutions provided for in Paragraphs II.D. and E. of the Stipulation, to become
effective and implemented upon the Effective Date.

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PLAN OF ALLOCATION IS APPROVED

     16. The Plan of Allocation, submitted concurrently with the Stipulation of Settlement, is
found to be fair, reasonable and adequate and in the best interests of the Purchaser Class, and it
is hereby approved.

     17. Each Member of the Purchaser Class will receive his, her or its distribution from the Net
Settlement Fund in accordance with the Plan of Allocation based on the Investment Data to be mailed
to the Purchaser Class member by the Claims Administrator no later than fourteen (14) days
following the date of entry of Judgment, unless the Purchaser Class member provides a Proof of
Claim or corrected information no later than                                          2006, in the manner provided for in the
Investment Data form.

     18. Funds remaining in the Settlement Fund Account from uncashed checks or bad addresses which
are, in the aggregate, not economical to redistribute to the Class shall be given to one or more
501(c) corporations selected by Co-Lead Counsel and approved by the Court.

     19. CHR shall cooperate with Co-Lead Counsel and the Claims Administrator in responding to all
reasonable requests for information in the possession, custody, or control of CHR, and needed to
disseminate the Investment Data or to prepare the Plan of Allocation. Named Plaintiffs have
retained a Claims Administrator to prepare, review, assess, disseminate, and process the Investment
Data and claims of Purchaser Class members. In addition, within ninety (90) days before any
distribution of the Net Settlement Consideration, if requested in writing by Co-Lead Counsel, CHR
shall provide updated information in their possession, custody, or control relating to any address
changes for the members of the Purchaser Class, or any redemptions of shares, transfers of shares,
or sales or purchases in the secondary market by members of the Purchaser Class.

43

 

     20. CHR agrees to make available to Co-Lead Counsel and the Claims Administrator engaged by
Co-Lead Counsel the person(s) most knowledgeable from CHR or CHR’s counsel with respect to the
shareholder data specified in paragraph 2. Such person(s) shall have authority to assemble and
transmit data to the Claims Administrator. CHR agrees that such person(s) will timely respond to
requests for information and will work cooperatively with Co-Lead Counsel and the Claims
Administrator from time to time as requested through final distribution of all settlement funds to
Class members. CHR agrees that in the event that an original designee leaves CHR, has a change in
responsibilities, or is no longer CHR’s counsel that a new designee shall be appointed promptly.

     21. Named Plaintiffs, the Class, Plaintiffs’ Counsel, the Cash Settlement Fund, and the Claims
Administrator’s reliance on such Investment Data is reasonable.

     22. Named Plaintiffs, the Class, Plaintiffs’ Counsel, the Cash Settlement Fund, and the Claims
Administrator shall be held harmless from any liability resulting from errors or inaccuracies in
the Investment Data.

     23. Settling Defendants and all Released Persons shall have no liability with respect to any
claim arising out of the Plan of Allocation.

APPROVAL OF ATTORNEYS’ FEES AND EXPENSE PETITION

     24. On account of the benefits conferred by virtue of the Settlement with respect to the Proxy
Class and derivative claims, and in particular the benefits resulting from, without limitation, the
modifications to the advisor fees, the revised merger terms, and the provisions relating to
corporate governance as set forth in the Stipulation, Plaintiffs’ Counsel are hereby awarded fees
and reimbursable expenses in the aggregate total amount of $                     to be paid by CHR to Lead
Litigation Counsel (on behalf of all Plaintiffs’ Counsel) within ten (10)

44

 

days after the Effective Date. Such awarded amount shall be inclusive of the amount advanced
by CHR pursuant to section III.6 of the Stipulation.

     25. With respect to obtaining, for the benefit of the Purchaser Class, the Settlement
Consideration described in Section II.C. of the Stipulation of Settlement, Plaintiffs’ Counsel are
hereby awarded fees in the amount of $                                         [or                     % of all amounts paid into and
earned by the Settlement Fund Account] which shall be paid from the Settlement Fund Account, as
each installment of the Cash Settlement Fund Account is received and deposited in the Settlement
Fund Account, and which Attorneys’ Fees the Court finds to be fair and reasonable.

     26. Co-Lead Counsel have reasonably allocated reimbursable litigation expenses in the amount
of $                                         to the Proxy Class and the amount of $                                         to the Purchaser Class, which
aggregate amount and allocation the Court finds to be fair and reasonable. The expenses in the
amount of                      with respect to the prosecution of the Purchaser Class claims shall be
reimbursed to Plaintiffs’ Counsel from the 2006 Cash Consideration, to be paid by CHR in January
2007 or after the Effective Date of this Settlement, whichever is later.

     27. The Stipulation of Settlement contemplates that the Cash Settlement Fund shall be funded
by CHR in three annual installments beginning January 2007 or the Effective Date, whichever is
later. The Court hereby authorizes Co-Lead Counsel to pay from the Settlement Fund Account from
time-to-time the reasonable costs of the administration and distribution of the Cash Settlement
Fund, as well as pay taxes (including the cost associated with paying the taxes) due and payable on
the Cash Settlement Fund and the interest that accrues thereon. Co-Lead Counsel are given the
discretion by this Court to distribute the Net Settlement Fund to

45

 

the eligible members of the Purchaser Class in either one or more installments, based on
Co-Lead Counsel’s determination of the costs associated with one or more distributions. Co-Lead
Counsel shall file a Distribution Report with the Court, reflecting the identities of the Purchaser
Class Members who receive distributions and the amount of such distributions.

     28. The Court will retain jurisdiction with respect to implementation and enforcement of the
terms of the Stipulation of Settlement, including but not limited to the resolution of any dispute
or issue that may arise with respect to the payment and terms of the Notes, the implementation of
the Plan of Allocation and distribution of the Net Settlement Consideration to the Purchaser Class
Members. All signatories to the Stipulation of Settlement hereby submit to the continuing
jurisdiction of the Court for purposes of implementing and enforcing this Final Judgment and the
Settlement embodied in the Stipulation of Settlement.

ENTERED this                      day of , 2006.

	 	 	 	 	 
	 

	 	BY THE COURT:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

Hon. Gregory A. Presnell
	 	 

46

 

EXHIBIT B

47

 

ESCROW AGENCY AGREEMENT

     WHEREAS, this Escrow Agency Agreement (“Settlement Fund Escrow Agreement” or “Agreement”) is
being entered into in connection with the Stipulation of Settlement (“Stipulation”) dated April 3,
2006 and filed with the United States District Court for the Middle District of Florida, in the
action In re CNL Hotels & Resorts, Inc. Securities Litigation, Case No. 6:04-cv-1231-Orl-31KRS (the
“Action”) (capitalized terms herein shall have the same meaning as used in the Stipulation unless
otherwise indicated).

     WHEREAS, this Agreement is made this ___ day of April, 2006, between the following Escrow
Parties: CHIMICLES & TIKELLIS LLP, Lead Litigation Counsel for Named Plaintiffs and the
Class,1 as “Escrow Agent”, and Wachovia Bank, the “Investment Agent.”

     WHEREAS, the Named Plaintiffs on behalf of the Class, by and through their Counsel, and the
Settling Defendants, by and through their Counsel have executed the Stipulation providing for the
release and dismissal with prejudice of the Settled Claims, in favor of the Released Persons,
subject to the terms, conditions, and other provisions set forth in the Stipulation, in
consideration of, among other things, the payments set forth in the Stipulation.

     WHEREAS, the Escrow Parties have entered into this Agreement in order to carry out and
effectuate the Settlement set forth in the Stipulation.

     WHEREAS, Escrow Agent intends to deliver property (the “Property”) to Investment Agent from
time to time and desires to enter into this Agreement with Investment Agent setting forth
Investment Agent’s duties with respect to the Property.

     NOW, THEREFORE, in consideration of these premises, and in further consideration of the
covenants set forth hereafter, it is hereby agreed mutually as follows:

48

 

I. INCORPORATION OF SETTLEMENT AGREEMENT

     The provisions of the Stipulation are hereby incorporated by reference as though fully set
forth in this Agreement. The provisions of this Agreement are to be construed to be consistent with
and in accordance with the provisions of the Stipulation. All terms defined in the Settlement
Agreement shall have the same meaning when used in this Agreement except as otherwise specified.

II. AGREEMENTS AND COVENANTS OF INVESTMENT AGENT

     Investment Agent hereby agrees and covenants to:

          a. Submit to the jurisdiction of the Court in the Action (the “Court”) for the purpose of
carrying out this Agreement;

          b. Hold such Property as may be delivered hereafter to it hereunder in safekeeping until the
same shall be disposed of in accordance with the provisions of the Stipulation and the orders(s) of
the Court;

          c. Register any Property held hereunder from time to time in the name of its nominee, unless
instructed to the contrary;

          d. Collect and receive, when due and if made payable to it or its nominee, all principal and
income of every nature arising from any of the Property held by it hereunder from time to time;

          e. Notify the Escrow Agent of all communications received by it with respect to any Property
requiring action by the owner thereof, unless instructed to the contrary or provided otherwise
herein;

 

			
	1	 	Labaton, Sucharow & Rudoff LLP, Co-Lead
Counsel, shall serve as Alternate Escrow Agent for Chimicles & Tikellis LLP in
the event Chimicles & Tikellis LLP is unable to fulfill its obligations
hereunder.

49

 

          f. Take no action with regard to the Property, unless instructed by the Escrow Agent;

          g. Unless otherwise directed by the Escrow Agent, invest the Property held by it hereunder in
securities issued or guaranteed by the United States or an agency thereof including but not limited
to AAA rated Repurchase Obligations secured by the United States or an agency thereof;

          h. Execute such securities transactions as directed by the Escrow Agent, so long as the
investment directed by the Escrow Agent is in securities issued or guaranteed by the United States
or an agency thereof including but not limited to AAA rated Repurchase Obligations secured by the
United States or an agency thereof;

          i. Create and/or terminate such separate accounts and allocate the Property held by it
hereunder among such accounts, if, as, and when instructed to do so by the Escrow Agent.

          j. Deliver any Property held by it hereunder from time to time, if as, and when instructed to
do so by the Escrow Agent as provided herein, upon obtaining an appropriate receipt;

          k. In accordance with the Stipulation, disburse the Property pursuant to the order(s) of the
Court: (i) in payment of costs for Notice of Settlement and administrative costs (including taxes),
Plaintiffs’ Counsel’s Attorneys’ Fees and Expenses; and (ii) to the Class Members at such time and
manner as ordered by the Court; and

          l. Render to the Escrow Agent, and to such other person as the Escrow Agent may instruct,
within thirty (30) days of the execution of the Stipulation and quarterly

50

 

thereafter, or at any time upon written request by the Escrow Agent, a statement of all
Property held by the Investment Agent hereunder, including receipts and disbursements.

III. AGREEMENTS AND COVENANTS OF THE ESCROW AGENT

     The Escrow Agent agrees and covenants:

          a. To give all instructions to Investment Agent hereunder in writing, signed on behalf of the
Escrow Agent by Nicholas E. Chimicles, Esquire, of Chimicles & Tikellis LLP;

          b. To indemnify and hold, and do hereby indemnify and hold, Investment Agent harmless for any
loss, cost, or other damage, including but not limited to attorneys’ fees and costs, arising Out of
Investment Agent’s complying with the terms hereof and/or with instructions given as provided
herein;

          c. To pay to Investment Agent from the Property upon appropriate order from the Court
compensation for Investment Agent’s services hereunder to be determined from time to time by the
application of the current rates then charged by Investment Agent for accounts of similar size and
character, provided that any change in fees or charges will be applicable only after reasonable
notice to the Escrow Agent. In the event that Investment Agent shall be called upon to render any
extraordinary services, it shall provide advance notice of its intent to assess additional charges,
and thereafter shall be entitled to reasonable additional compensation;

          d. That this Agreement shall be binding upon the Escrow Agent and Escrow Agent’s successors;

          e. That, for purposes of regulations promulgated by the Federal Deposit Insurance Corporation
(“FDIC”), Investment Agent’s statements rendered pursuant to Paragraph II. 1. hereof shall be
sufficient information concerning securities transactions effected for Escrow Agent’s account(s);

51

 

          f. That Investment Agent may, to the extent possible, deposit or arrange for the deposit of
securities held hereunder at Depository Trust Company or any other securities depository or
clearing corporation, and may hold securities on behalf of the Escrow Agent at any correspondent
bank of Investment Agent, with such securities registered in the depository’s or the
correspondent’s nominee name;

          g. That Investment Agent shall invest the Property in securities issued or guaranteed by the
United States or an agency thereof, including but not limited to AAA rated Repurchase Obligations
secured by the United States or an agency thereof, pursuant to written instructions from the Escrow
Agent. In the absence of such instructions, the Investment Agent shall invest the Property in
securities issued or guaranteed by the United States or an agency thereof.

IV. LIMITATION OF LIABILITY

     Investment Agent shall have no responsibility or liability to take any action with respect to
the Property, other than as undertaken in Paragraph II hereof, unless and until it shall have
actually received instructions given as provided herein.

V. TERMINATION

          a. This Agreement shall be terminated in the following manner:

               i. By the Escrow Agent giving written notice of such termination to Investment Agent at any
time; or

               ii. By Investment Agent giving written notice of such termination to the Escrow Agent at any
time; or

               iii. By the withdrawal, in accordance with the provisions of Paragraphs II. j. and k. hereof,
of all of the Property held hereunder.

52

 

          b. Upon such termination, Investment Agent shall deliver to the Escrow Agent, in accordance
with the Escrow Agent’s instructions and Orders of the Court, all of the Property held by it
hereunder, if any, upon obtaining an appropriate receipt. The provisions of Paragraphs III.c hereof
shall survive termination of this Agreement.

VI. NOTICES

     All notice or information to be provided to the Escrow Agent pursuant to this Agreement shall
be sent to the Escrow Agent at the address appearing on the signature page.

VII. GOVERNING LAW, VENUE AND JURISDICTION

     This Escrow Agency Agreement shall be construed under the laws of the State of Florida,
without giving effect to that State’s Choice of Law Principles. All parties hereto submit to the
exclusive jurisdiction, personal or otherwise, of the Court for purposes of implementing and
enforcing the terms hereof.

VIII. MISCELLANEOUS

          a. This Agreement may not be assigned by the Investment Agent without prior written approval
of the Escrow Agent;

          b. All funds held by the Investment Agent by virtue of this Agreement shall be deemed and
considered to be held in custodia legis until such time as such funds shall be disposed of
consistent with the terms of the Stipulation and this Agreement;

          c. The Escrow Parties agree to treat the Property as being at all times one or more “qualified
settlement funds” within the meaning of Treas. Reg. Section l.468B-l. In addition, the Parties
shall jointly and timely make (or cause to be jointly and timely made) any elections as are
necessary or advisable to carry out the provisions of this Paragraph VIII.c. Any such elections
shall be made in compliance with the procedures and requirements contained in such Treasury
Regulations. It shall be the responsibility of the Claims Administrator to timely

53

 

and properly prepare and deliver the necessary documentation for all necessary signatures, and
thereafter to cause the appropriate filing to occur;

               i. For the purpose of Treas. Reg. Section 1.468B, the “administrator” shall be Complete Claim
Solutions, Inc. (the “Claims Administrator”). The Claims Administrator shall timely and properly
file all informational and other tax returns necessary or advisable with respect to the Property
(including, without limitation, the returns described in Treas. Reg. Section 1.468B-2(k)). Such
returns (as well as the elections described in this Paragraph VIII.c. shall be consistent with this
Paragraph VIII. c. and, in all events, shall reflect that all taxes (including any interest or
penalties) on the income earned by the Property shall be paid out of the Property as provided in
this Paragraph VIII.c.;

               ii. All taxes (including any interest and penalties) arising with respect to the income earned
by the Property (“Taxes”), and expenses and costs incurred in connection with the operation and
implementation of this Paragraph VIII.c. (including, without limitation, expenses of tax attorneys
and accountants, and mailing and distribution costs and expenses relating to filing (or failing to
file) the returns described in this Paragraph VIII.c (“Tax Expenses”) shall be paid out of the
Property. The Escrow Agent shall have no liability or responsibility for the Taxes or the Tax
Expenses. Further, Taxes and the Tax Expenses shall be treated as, and considered to be, a cost of
administration of the Settlement and shall be timely paid by the Investment Agent out of the
Property pursuant to court order(s) or when instructed to do so in accordance with this Agreement.
The Investment Agent shall, under the direction of the Escrow Agent, be obligated (notwithstanding
anything herein to the contrary) to withhold from distribution to Class Members any funds necessary
to pay such amounts (as well as any amounts that may be required to be withheld under Treas. Reg.
Section 1.468B-2(1)(2)); the Escrow

54

 

Agent is not responsible and shall have no liability. The Escrow Agent hereto agrees to
cooperate with the Investment Agent, each other, and their tax attorneys and accountants to the
extent reasonably necessary to carry out the provisions of this Paragraph VIII.d;

          d. The Investment Agent has been appointed in compliance with the Stipulation and is subject
to the orders of the Court; and

          e. The Escrow Agent shall, simultaneous with the deposits into escrow, provide the Investment
Agent with the tax identification number for the Property.

     IN WITNESS WHEREOF, the Escrow Agent has hereunto set its hand, and Investment Agent has
caused this Agreement to be signed in its name by one of its Vice Presidents and its corporate seal
to be hereto affixed by one of its Assistant Secretaries, all done in duplicate as of the day and
year first above written.

55

 

	 	 	 	 	 	 	 
	 	 	 	 	ATTORNEY FOR PLAINTIFFS

AND THE CLASS

FOR CHIMICLES & TIKELLIS LLP

	 
	Witness:  	 	 	 	By:  	 	 
	 	 	 	 	Nicholas E. Chimicles, Esq.	 
	 	 	 	 	One Haverford Centre	 
	 	 	 	 	361 West Lancaster Avenue	 
	 	 	 	 	Haverford, PA 19041	 
	 	 	 	 	(610) 642-8500	 
	 
	 
	[Corporate Seal]	 	 	WACHOVIA BANK

	 	 
	Attest:  	 	 	 	By:  	 	 

56

 

EXHIBIT C

57

 

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

ORLANDO DIVISION

	 	 	 
	IN RE

	 	Case No. 6:04-cv-1231-Orl-31KRS
	CNL HOTELS & RESORTS, INC.

	 	(Consolidated with 6:04-cv- 1341 -On- I
	SECURITIES LITIGATION

	 	9JGG)

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION

	 	 	 
	TO:

	 	ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIRED ANY SECURITIES OF CNL HOTELS & RESORTS, INC.
(F/K/A CNL HOSPITALITY PROPERTIES, INC.) (“CHR”) PURSUANT TO OR BY MEANS OF CHR’S OFFERINGS,
REGISTRATION STATEMENTS, AND/OR PROSPECTUSES BETWEEN AUGUST 16, 2001 AND AUGUST 16, 2004,
INCLUSIVE (“CLASS PERIOD”) (“PURCHASER CLASS”);

AND/OR

	 	 	ALL PERSONS WHO WERE CHR STOCKHOLDERS ENTITLED TO VOTE ON THE PROPOSALS PRESENTED IN CHR’S
PROXY STATEMENT DATED JUNE 21, 2004 (“PROXY CLASS”).

IMPORTANT

     A Federal Court authorized this Notice. This is not a solicitation from a lawyer.

     PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. ACCORDING TO CHR’S RECORDS, YOU
MAY BE A MEMBER OF THE PURCHASER CLASS AND/OR PROXY CLASS, AND, IF ELIGIBLE, MAY BE ENTITLED TO
BENEFITS UNDER THE PROPOSED SETTLEMENT. YOUR RIGHTS MAY BE AFFECTED BY PROCEEDINGS IN THIS ACTION.
IT IS POSSIBLE TO BE A MEMBER OF BOTH THE PURCHASER CLASS AND PROXY CLASS.

SUMMARY OF NOTICE AND RELATED MATTERS

     The case is titled In re CNL Hotels & Resorts, Inc. Securities Litigation, Case No.
6:04-cv-1231-Orl-31KRS. The Judge presiding over this case is the Honorable Gregory A. Presnell,
United States District Judge (the “Judge”) of the United States District Court for the Middle
District of Florida (the “Court”), in Orlando, Florida. The case is referred to in this document as
the Action. The people who brought the lawsuit are called Plaintiffs, and the companies and the
persons they sued are called Settling Defendants.

58

 

A. Notice of Settlement Hearing

     This Notice has been sent to you pursuant to Rule 23 of the Federal Rules of Civil Procedure
and an Order of the Court. The purpose of this Notice is to inform you: (i) that there is a
proposed settlement of the Action, as provided for in the Stipulation of Settlement dated April 3,
2006 (the “Stipulation” or the
“Settlement”)1; and (ii) to give you notice of your
rights, among other things, to comment on the Settlement or to attend and participate in the
hearing to be held on                     , 2006, at                     a.m./p.m., before the Judge in Courtroom
No. 3, George C. Young U.S. Courthouse and Federal Bldg., 80 N. Hughey Avenue, Orlando, FL 32801
(“Final Settlement Hearing”).

     The purpose of the Final Settlement Hearing is for the Court to: (i) consider and rule upon
the fairness, reasonableness, and adequacy of the Settlement; (ii) finally certify the Proxy Class
and the Purchaser Class (collectively, the “Class”) for purposes of the Settlement; (iii) consider
and rule upon the Plan of Allocation; (iv) consider whether and in what amounts Plaintiffs’
Counsel’s application for an award of attorneys’ fees, costs and expenses should be approved; and
(v) determine whether to enter a judgment dismissing the Action with prejudice.

     This Notice describes the rights you may have under the proposed Settlement and what steps you
may take in relation to this Action.

THIS NOTICE IS NOT AN EXPRESSION OF ANY OPINION BY THE COURT AS TO THE MERITS OF ANY OF THE CLAIMS
OR DEFENSES ASSERTED BY ANY PARTY IN THIS ACTION, OR THE FAIRNESS, REASONABLENESS, OR ADEQUACY OF
THE PROPOSED SETTLEMENT,

B. Statement of Class’ Recovery

     Purchaser Class: Pursuant to the Settlement, a Cash Settlement Fund of $35,000,000, plus
interest, minus applicable attorneys’ fees and expenses, will be established for the benefit of the
Purchaser Class. Plaintiffs estimate that there were approximately 100 million shares of CHR common
stock that were purchased during the Class Period, for which members of the Purchaser Class may
have been damaged and may be entitled to a recovery. Plaintiffs estimate that the average recovery
per potentially damaged share of CHR common stock under the settlement is $.35 per share, before
deduction of Court-awarded attorneys’ fees and expenses. An individual Purchaser Class Member may
receive more or less than this average per share amount. A detailed explanation of how each
Purchaser Class Member’s claim will be calculated is governed by and set forth in the Plan of
Allocation described below.

     Proxy
Class: The Settling
Defendants2 who were directors of CHR during the negotiations and
execution of the Amended Merger Agreement and the Advisor Fee Reduction Agreements (“New
Agreements”) have acknowledged that this Action was among the material

 

			
	1	 	All capitalized terms herein shall have the
same meaning as used in the Stipulation of Settlement, unless otherwise
indicated.
	 
	2	 	Settling Defendants Adams and Dustin, who are
former directors, were not directors during the negotiations and execution of
the New Agreements.

59

 

factors taken into account in connection with the terms of the New Agreements. The price to be
paid by CHR for the Advisor and the amount of advisory fees being paid by CHR to the Advisor were
among the claims asserted by the Proxy Class and in the Action generally. Under the New Agreements:
CHR will pay substantially less for the Advisor than under the Original Merger Agreement, which had
been approved pursuant to the June 2004 Proxy; CHR will pay substantially reduced amounts for fees
that were allegedly due and owing to the Advisor under the challenged fee schedule; and, the
Advisor has agreed to substantially reduce its acquisition fees on a going forward basis. It is
Plaintiffs’ position that the net amount that CHR will pay in merger consideration and for advisory
fees as a result of the New Agreements will be approximately $200,000,000 less than CHR would have
paid under the terms of the Original Merger Agreement and the prior advisory fee structure had the
Original Merger Agreement become effective on a timely basis. Based on the number of shares
outstanding (approximately 152.8 million), it is Plaintiffs’ position that this price differential
and advisory fee differential equates to an equity enhancement of approximately $1.31 per share.
Furthermore, the Settlement requires CHR to adopt substantive corporate governance provisions, as
described more fully herein.

C. Statement of Potential Outcome of the Case

     The parties disagree on both liability and damages, and do not agree on the average amount of
damages per share of CHR’s common stock that would be recoverable if Plaintiffs were to have
prevailed on each claim alleged. The issues on which the parties disagree include: (i) whether the
statements made, or facts allegedly omitted, were false or misleading; (ii) whether the statements
made, or facts allegedly omitted, were material or otherwise actionable under the federal
securities laws; (iii) whether certain of the parties are proper parties to this Action; (iv) the
application of various financial and accounting principles to real estate investment trusts; (v)
the appropriate assumptions and projections for determining the value of the Advisor; (vi) the
extent to which external factors (including industry conditions) influenced the per share price, or
value, of CHR’s common stock; (vii) whether the per share price, or value, of CHR’s common stock
was allegedly artificially inflated; (viii) the appropriate economic model for determining the
amount by which the per share price of CHR’s common stock was allegedly artificially inflated (if
at all); and (ix) the appropriate economic model for determining the per share value of CHR’s
common stock. Co-Lead Counsel considered that there was a substantial risk that Plaintiffs and the
Class might not have prevailed on all their claims. Therefore, Plaintiffs and the Purchaser Class
could have recovered nothing or substantially less than the amount of the Cash Settlement Fund and
the value of the other benefits achieved for the Class as a result of the Settlement.

     The Settling Defendants have denied and continue to deny that (i) they are liable to the
Plaintiffs or the Class and (ii) Plaintiffs or the Class have suffered any damages.

D. Statement of Attorneys’ Fees and Costs Sought

     In connection with the settlement of the Purchaser Class claims and the benefits conferred on
the Purchaser Class in connection with the creation of the Cash Settlement Fund, Plaintiffs’
Counsel will ask the Court to award attorneys’ fees equal to 25% of the Cash Settlement Fund, and
for reimbursement of expenses incurred by them in connection with the

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prosecution and settlement of the Action. See Paragraph No. 35 below for a more detailed
description. Plaintiffs’ Counsel have expended considerable time and effort in the prosecution and
settlement of this Action on a contingent fee basis, and have advanced the expenses of the Action,
in the expectation that if they were successful in obtaining a recovery for the Purchaser Class
they would be paid solely from such recovery. In this type of action it is customary for
plaintiffs’ counsel to be awarded a percentage of the recovery as their attorneys’ fees.

     In connection with the prosecution and settlement of the Proxy Class and Fiduciary Duty Claims
(as described below), including the benefits conferred by the Amended Merger Agreement, the Advisor
Fee Reduction Agreements, and the corporate governance provisions, Plaintiffs’ Counsel will ask the
Court to award attorneys’ fees and reimbursable expenses in the total amount of $5.5 million. Such
amount, as is awarded and not to exceed $5.5 million, will be paid directly by CHR.

E. Further Information

     Further information regarding the Action and this Notice may be obtained by contacting any of
the Co-Lead Counsel: Nicholas E. Chimicles, Esq., CHIMICLES & TIKELLIS LLP, 361 West Lancaster
Avenue, Haverford, PA 19041, Phone: (610) 642-8500, Email: CNLHotelsSettlement@Chimicles.com,
www.chimicles.com; Lawrence A. Sucharow, Esq., LABATON SUCHAROW & RUDOFF LLP, 100 Park Avenue, New
York, NY 10017, Telephone: (212) 907-0700, www.labaton.com; or Lawrence P. Kolker, Esq., WOLF
HALDENSTEIN ADLER FREEMAN & HERZ LLP, 270 Madison Avenue, New York, New York 10016, Telephone:
(212) 545-4600, www.whath.com.

F. Reasons for the Settlement

     Co-Lead Counsel have concluded that it is in the best interests of the Plaintiffs and the
Class that the Action be settled on the terms and conditions set forth in the Stipulation. Co-Lead
Counsel have reached this conclusion after making a thorough investigation of the facts and
research of the law, and considering the risks and uncertainties of prevailing on the claims at the
pleading, summary judgment or trial stage in light of the defenses that have been or could be
asserted by Settling Defendants. The legal risks and uncertainties include, among other things,
whether Plaintiffs have met the requirements for pleading proper securities law claims on behalf of
certain purchasers; whether the statements made in the registration statements and the Proxy were
false or misleading; whether any statements, if false or misleading, were material; whether certain
parties are proper parties to this Action; and whether the Plaintiffs or any Class Member suffered
any loss as a result of any alleged misstatement or omission by any of the Settling Defendants.
Among the practical considerations which Co-Lead Counsel considered in deciding to settle is CHR’s
Listing or liquidation requirement, its dispute with its insurance carriers, the importance of
positioning CHR to continue operations with the prospect of Listing, and the fact that an
overwhelming percentage of the members of the Class remain stockholders of CHR. Additional
considerations included the expense and length of continued proceedings necessary to prosecute the
Action against Settling Defendants through trial and through appeals, as well as the substantial
benefits the Settlement confers upon the Class and CHR. Co-Lead Counsel believe that the proposed
Settlement is fair, reasonable, and adequate and in the best interests of the members of the Class.

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WHAT THIS NOTICE CONTAINS:

	 	 	 	 	 	 	 	 	 
	BACKGROUND OF THE ACTION AND SUMMARY OF THE CLAIMS	 	Page
	 
	 	 	 	 	 	 	 	 
	DETAILED INFORMATION	 	Page
	 
	 	 	 	 	 	 	 	 
	 

	 	 	22.	 	 	Why did I receive this Notice package?	 	 
	 

	 	 	23.	 	 	Why is the Action called a class action?	 	 
	 

	 	 	24.	 	 	Who is included in the classes?	 	 
	 

	 	 	25.	 	 	Who is not included in the Proxy Class and Purchaser Class?	 	 
	 

	 	 	26.	 	 	I’m still not sure if I am included.	 	 
	 

	 	 	27.	 	 	Why is there a Settlement?	 	 
	 

	 	 	28.	 	 	What are the Settlement’s benefits?	 	 
	 

	 	 	29.	 	 	How much will my payment be?	 	 
	 

	 	 	30.	 	 	How can I receive a payment?	 	 
	 

	 	 	31.	 	 	When will I receive my payment as a member of the Purchaser Class?	 	 
	 

	 	 	32.	 	 	What am I giving up to receive a payment?	 	 
	 

	 	 	33.	 	 	Can I remove myself from the Action and exclude myself from the Class?	 	 
	 

	 	 	34.	 	 	Do I have a lawyer in this case?	 	 
	 

	 	 	35.	 	 	How and in what amount will Co-Lead Counsel and Plaintiffs’ Counsel be
paid?	 	 
	 
	 	 	 	 	 	 	 	 
	OBJECTING TO THE SETTLEMENT	 	Page
	 
	 	 	 	 	 	 	 	 
	 

	 	 	36.	 	 	How do I notify the Court that I object to the Settlement, the Request
for Attorneys’ Fees and Expenses, and/or the Plan of Allocation?	 	 
	 

	 	 	37.	 	 	What is the difference between objecting and requesting exclusion?	 	 
	 
	 	 	 	 	 	 	 	 
	THE FINAL SETTLEMENT HEARING	 	Page
	 
	 	 	 	 	 	 	 	 
	 

	 	 	38.	 	 	When and where will the Court consider whether to approve the
Settlement, the Plan of Allocation, and the Request for Attorneys’ Fees and
Expenses?	 	 
	 

	 	 	39.	 	 	Do I have to come to the hearing?	 	 
	 

	 	 	40.	 	 	May I speak at the hearing?	 	 
	 
	 	 	 	 	 	 	 	 
	GETTING MORE INFORMATION	 	Page
	 
	 	 	 	 	 	 	 	 
	 

	 	 	41.	 	 	Are there more details about the Settlement?	 	 
	 
	 	 	 	 	 	 	 	 
	PLAN OF ALLOCATION OF THE NET SETTLEMENT FUND TO THE PURCHASER CLASS	 	Page
	 
	 	 	 	 	 	 	 	 
	SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES	 	Page

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BACKGROUND OF THE ACTION AND SUMMARY OF THE CLAIMS

     1. On August 16, 2004, certain investors in CNL Hotels & Resorts, Inc. (f/k/a CNL Hospitality
Properties, Inc.) (“CHR” or “Company”) filed a class action complaint against CHR, its affiliates
and certain of its present and former officers and directors captioned Campbell v. CNL Hotels &
Resorts, Inc., et a!., Case No. 6:04-cv- 1231 -Orl-3 I KRS (the “Campbell Action”). The Campbell
Action alleged violations of the federal securities laws, including violations of Sections 11,
12(2) and 15 of the Securities Act of 1933 (“Securities Act”), Sections 14 and 20(a) of the
Securities Exchange Act of 1934 (“Exchange Act”) and breaches of fiduciary duty under state law.
Subsequently, on or about September 8, 2004, a class action complaint captioned Wong v. CNL Hotels
& Resorts, Inc., et. al., Case No. 6:04-cv-01 341-PCF-JGG (the “Wong Action”) was filed with the
Court alleging substantially similar facts and claims. By Order of the Court dated November 10,
2004, the Campbell Action and the Wong Action were consolidated for all purposes under the caption
In re CNL Hotels & Resorts, Inc. Securities Litigation, Case No. 6:04-cv-1231-Orl-3IKRS (the
“Action”).

     2. On December 21, 2004, pursuant to the Private Securities Litigation Reform Act, Plaintiff
Macomb County Employees’ Retirement System (“Macomb”) was appointed Lead Plaintiff for the Proxy
Class; Plaintiff Elizabeth Hawkins Barack Revocable Living Trust (“Barack Trust”) was appointed as
Lead Plaintiff for the Purchaser Class; Chimicles & Tikellis LLP was appointed as Lead Litigation
Counsel and Co-Lead Counsel; Labaton Sucharow & Rudoff LLP was appointed as Co-Lead Counsel for
Macomb; and Wolf Haldenstein Adler Freeman & Herz LLP was appointed as Co-Lead Counsel for the
Barack Trust.

     3. CHR, a real estate investment trust (“REIT”), was formed in 1996. CHR has sold
approximately 308 million shares of its common stock through five best efforts public stock
offerings. CHR common stock is not listed on a national securities exchange or on an
over-the-counter market. CHR’s management, advisory and administrative services are provided by CNL
Hospitality Corp. (the “Advisor”), which is an entity that is separate from, but affiliated with,
CHR. Under the terms of the agreement between CHR and the Advisor (“Advisory Agreement”), the
Advisor was entitled to receive fees from CHR for the services it performed (“Advisory Fees”). One
of these Advisory Fees, the acquisition fee, was calculated at a rate of 4.5% of total proceeds
(“Acquisition Fee”).

     4. Pursuant to CHR’s Charter, CHR must list its stock on a national securities exchange or
over-the-counter market by December 31, 2007 (“Listing”), or, if there is no Listing, commence an
orderly liquidation of its assets as permitted by Maryland law (absent CHR stockholder approval to
extend the Listing deadline). The objective of such provisions is to provide CHR stockholders with
liquidity for their CHR investments. In papers first filed with the SEC on April 30, 2004, CHR
announced that it was going to proceed with a Listing, and in connection with the possible Listing,
become a self-advised REIT through the acquisition of its affiliate, the Advisor (“Merger”). In
connection with the possible Listing, CHR sought and obtained CHR stockholder approval of the
Merger via a proxy statement, dated June 21, 2004, as amended or supplemented by the additional
proxy solicitation materials filed on July 7, July 8, and July 20, 2004 (“Proxy”). The Merger
called for CHR to pay at a maximum approximately $307,000,000 in total consideration (in cash, CHR
stock, and CHR’s assumption of debt) to the Advisor’s owners (comprising, in large part, the
founders of CHR) (“Original Merger

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Agreement”). In addition, the Original Merger Agreement provided that under certain
circumstances CHR would not be required to pay to the Advisor certain fees that would otherwise
have been payable to the Advisor pursuant to the applicable Advisory Agreement prior to the
anticipated closing of the Merger (other than asset management fees, development fees, or
reimbursable expenses) (the “Deferred Fees”).

     5. On December 23, 2004, Plaintiffs filed a Consolidated Amended Class Action Complaint
(“Amended Complaint”), which named CHR, CNL Hospitality Partners, L.P. (“CNL LP”), RFS Partnership,
L.P. (“RFS”), the Advisor, CNL Financial Group, Inc. (“CFG”), CNL Real Estate Group, Inc. (“CREG”),
Five Arrows Realty Securities II, LLC (“Five Arrows”), James M. Seneff, Jr. (“Seneff’), Robert A.
Bourne (“Bourne”), Thomas J. Hutchison III (“Hutchison”), John A. Griswold (“Griswold”), Charles E.
Adams (“Adams”), Lawrence A. Dustin (“Dustin”), Craig M. McAllaster (“McAllaster”), and Robert E.
Parsons, Jr. (“Parsons”), as defendants.

     6. The Amended Complaint alleged on behalf of the Purchaser Class that the registration
statements and prospectuses issued by CHR in connection with its 2000, 2002, and 2003 stock
offerings contained materially false and misleading statements in violation of Sections 11, 12(2),
and 15 of the Securities Act (“Purchaser Claims”). The affected stock offerings are: (a) the 2000
Offering, for purchases or acquisitions of CHR stock made between August 16, 2001 and April 22,
2002; (b) the 2002 Offering, for purchases or acquisitions of CHR stock made between April 23. 2002
and February 4, 2003; and, (c) the 2003 Offering, for purchases or acquisitions of CI-IR stock made
between February 5, 2003 and March 12, 2004 (the “Offerings”).

     7. The allegedly materially false and misleading statements concerned, among other things:

CHR’s operations and financial condition;

     the use of an Acquisition Fee that was substantially higher than
the market rate;

certain of defendants’ investments and financial interests in joint ventures with
CHR (“Joint Ventures”); and

the use of improper accounting practices that, among other things,
were alleged to have materially inflated Cl-JR’s reported income, and thereby
created and maintained the appearance that CHR had generated sufficient cash
flow from operations to pay distributions to CHR stockholders at the stated
historic levels.

     8. The Purchaser Claims are asserted on behalf of all persons who purchased or otherwise
acquired Cl-JR securities pursuant to or by means of the Offering documents, including the purchase
of CHR stock through CHR’s Dividend Reinvestment Program (“Purchaser Class”). The Purchaser Class
also includes persons who had their CI-IR stock redeemed pursuant to CHR’s stock redemption plan.

     9. The Amended Complaint also alleged that the Proxy used to solicit shareholder approval of
the Merger and other matters contained materially false and misleading statements in

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violation of Sections 14(a) and 20(a) of the Exchange Act. It is alleged that material
misstatements and omissions concerned the valuation of the Advisor, and that the amount to be paid
by CHR for the Advisor was inflated and based on speculative, faulty and unreasonable projections
and valuations (“Proxy Claims”). The Proxy Claims were alleged on behalf of all persons who were
entitled to vote on the Proxy (“Proxy Class”).

     10. The Amended Complaint also asserted breach of fiduciary duty claims under state law,
alleging that certain relationships and transactions between CHR and the Advisor were not
arms-length or in conformity with CHR’s charter (“Fiduciary Duty Claims”).

     11. Settling Defendants moved to dismiss the Amended Complaint on February 11, 2005.

     12. On April 6, 2005, CHR announced that in connection with the renewal of the Advisory
Agreement, independent members of CHR’s board of directors were in discussions with the Advisor to
determine the comparable current market percentage rate for calculating the Acquisition Fee.

     13. On April 8, 2005, CHR announced that a special committee of CHR’s board of directors was
in discussions with the Advisor regarding the possible amendment of the Merger Agreement. Although
CHR and its shareholders had previously approved the terms of the Merger pursuant to the Proxy, CHR
announced that the terms of the Merger were the subject of new discussions between a committee of
Independent Directors and the Advisor’s owners.

     14. The Court issued rulings on May 9, 2005 denying in part and granting in part Settling
Defendants’ motions. As part of these rulings, the Court dismissed the breach of Fiduciary Duty
Claims in their entirety, holding that such claims could be not brought directly by the Plaintiffs.
The Court dismissed all causes of action against CHR’s operating partnerships, CNL LP and RFS, and
against the Advisor, CFG, CREG, and Five Arrows. The Court held in abeyance its ruling on the Proxy
Claims.

     15. On or about May 31, 2005, Plaintiffs filed the Consolidated First Amended Class Action
Complaint for Violation of Federal Securities Laws and Derivative Action for Breaches of Fiduciary
Duties (“First Amended Complaint”) naming CHR, CNL Securities Corp. (“CSC”), the Advisor, Seneff,
Bourne, Hutchison, Griswold, Adams, Dustin, McAllaster, and Parsons, as defendants and asserting
claims under Sections 11, 12, and 15 of the Securities Act, Sections 14 and 20(a) of the Exchange
Act, as described in Paragraph Nos. 6-9, above. The Fiduciary Duty Claims were reasserted by
Plaintiffs on behalf and for the benefit of CHR, and thus are termed derivative, not direct,
claims.

     16. The Settling Defendants moved to dismiss the First Amended Complaint on July 22, 2005. The
Court issued rulings on September 9, 13, 20, and 21, 2005 denying in part and granting in part
Settling Defendants’ motions, including dismissing all claims against CSC, and dismissing the Proxy
Claim as moot. In addition, the Court again dismissed the breach of Fiduciary Duty Claims, this
time with prejudice, based on its view that Plaintiffs had failed to satisfy a prerequisite to a
shareholder’s right to assert a derivative claim, that is, to demonstrate that a demand on the
board of directors to act would have been futile.

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     17. On or about October 10, 2005, Plaintiffs filed the Consolidated Second Amended Complaint
which seeks damages for alleged violations of’ the federal securities laws and state common law
(“Operative Complaint”). The Settling Defendants moved to dismiss the Operative Complaint, in part,
on November 9, 2005. These motions were fully briefed.

     18. On December 16, 2005, at the request of the parties, the Court adjourned any hearings on
the Motions to Dismiss because the parties to the Action had entered into serious settlement
discussions. On December 30, 2005, CHR and the Advisor entered into the Advisor Fee Reduction
Agreements, the effectiveness of which are not contingent upon the Settlement or Merger. On April
3, 2006, CHR and the Advisor entered into the Amended Merger Agreement, which is subject to
shareholder approval.

     19. In connection with the settlement discussions, Co-Lead Counsel requested, and Defendants
have furnished, more than 250,000 pages of documents with respect to the claims in the Action and
the Settlement. The discovery was conducted by Plaintiffs’ Counsel in order to verify information
that Co-Lead Counsel and their experts and consultants had researched, gathered or inferred from
other sources during the course of the investigation and prosecution of this Action.

     20. Co-Lead Counsel have extensively investigated the claims and underlying events and
transactions alleged in the Operative Complaint. Co-Lead Counsel have: reviewed thousands of pages
of public documents, including SEC filings; analyzed the documents produced by the Settling
Defendants; engaged and consulted with experts on the claims and allegations related to CHR’s
accounting practices and damages issues; and, researched the applicable law with respect to the
claims asserted in the Operative Complaint and the potential defenses thereto.

     21. The Settling Defendants have denied and continue to deny that they have committed any act
or omission giving rise to any liability and/or violation of law or any act of negligence or
misconduct. The Stipulation is not evidence or an admission or a concession on the part of any of
the Settling Defendants of any fault or liability or damages whatsoever.

DETAILED INFORMATION

     22. Why did I receive this Notice package?

     The Court authorized this Notice to be sent to you because you may be a member of the
Purchaser Class, Proxy Class, or both. (See Paragraph No. 24 for definitions).

     If you are a member of either of the classes you have a right to know about the proposed
Settlement of the Action, and about your rights, obligations, and options, before the Court decides
whether to approve the Settlement. This Notice package explains the Action, the Settlement, your
legal rights, what benefits are available, who is eligible for them, and how to get them.

     23. Why is the Action called a class action?

     In a class action, one or more people or entities, called plaintiffs, sue on behalf of all the
other people and entities that have similar claims. All of them are referred to as the class or,

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individually, as class members. In a class action like this case, one court resolves in a
single action the issues common to all class members.

     24. Who is included in the classes?

     The Court has preliminarily certified this action to proceed as a class action on behalf of
the following two classes:

The Proxy Class consisting of all stockholders of CHR who were
entitled to vote on the proposals presented in CHR’s proxy statement, dated
June 21, 2004, as amended or supplemented by the additional proxy solicitation
materials filed on July 7, July 8, and July 20, 2004. The class representatives
of the Proxy Class are Macomb and Mary Campbell;

The Purchaser Class consisting of all persons who purchased or
otherwise acquired CHR securities issued or offered pursuant to or by means of
CHR’s registration statements and/or prospectuses effective between August 16,
2001 and August 16, 2004, inclusive. The class representatives of the Purchaser
Class are the Barack Trust, Raymond Roberts, Victor Libov, and Edwin Wong.

The Purchaser Class and the Proxy Class are collectively referred to as the Class. Excluded from
the Class are the persons and entities set out in Paragraph No. 25, below.

     25. Who is not included in the Proxy Class and Purchaser Class?

     The Settling Defendants, any officer or director of a Settling Defendant, at all relevant
times, a member of any Individual Settling Defendant’s immediate family, any entity in which any
Settling Defendant has a controlling interest, or the legal affiliate, representative, heir,
controlling person, successor or predecessor in interest or assign of any such person is not
included in either Class.

     In addition, any otherwise eligible Purchaser Class member may elect not to participate in the
Action or Settlement by submitting a valid and timely written Exclusion Request in accordance with
the procedures set forth in Paragraph No. 33, below, and thereby remove themselves from these
proceedings.

     The members of the Proxy Class do not have the option or legal right to exclude themselves
from the Proxy Class because the benefits will automatically be conferred on all Proxy Class
members by virtue of the terms of the settlement of’ the Proxy Class Claims.

     26. I’m still not sure if I am included.

     If you are still not sure whether you are included in the Purchaser Class and/or the Proxy
Class, you can ask for help free of charge. You can call
(___) ______ toll-free or
contact Lead Litigation Counsel at the addresses listed in Section E of Summary of Notice and
Related Matters, above, or visit www.CompleteClaimSolutions.com for more information.

     27. Why is there a Settlement?

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     THE COURT HAS NOT FINALLY DETERMINED THE MERITS OF NAMED PLAINTIFFS’ CLAIMS OR THE DEFENSES
THERETO. THIS NOTICE DOES NOT IMPLY THAT THERE HAS BEEN OR WOULD BE A FINDING OF VIOLATION OF THE
LAW OR THAT RECOVERY COULD BE HAD IN ANY AMOUNT IF THE ACTION WERE NOT SETTLED.

     Both sides have agreed to a settlement. In determining to enter into settlement discussions,
Co-Lead Counsel took into consideration the substantial expense and length of time necessary to
prosecute the Action through trial, post-trial motions and likely appeals, and the significant
risks and uncertainties in a complex Action such as this. In addition, Co-Lead Counsel took into
account the substantial benefits achieved by the Settlement and the other items noted in Sections C
and F, above.

     Among other things, to succeed at trial on their claims, Plaintiffs and the Class would have
to prove that the Proxy and CHR’s registration statements and/or prospectuses contained false and
misleading statements, and that such statements were material. Settling Defendants have denied all
such allegations and have pointed to several pages of warnings and disclosures set forth in the
challenged Proxy and in CHR’s registration statements and prospectuses. Plaintiffs would also have
to prove that they suffered damages, and defendants would have the opportunity to prove that any
such damages were not caused by the allegedly false and misleading statements. Settling Defendants
have denied that plaintiffs suffered any damages and have asserted that the per share price, or
value, of CHR’s common stock was not artificially inflated.

     At the same time that settlement negotiations were being conducted, CHR and its Advisor
entered into agreements-in-principle relating to the New Agreements. Those Settling Defendants who
were directors of CHR during the negotiations and execution of the agreements-in-principle relating
to the New Agreements have acknowledged that the Action was among the material factors taken into
account by the parties in connection with the terms of those agreements-in-principle, which terms,
as described in Paragraph Nos. 28.b. & 28.c. below, conferred significant benefits on the Class,
CHR, and its stockholders.

     The Parties engaged in extensive arms-length settlement negotiations before agreeing to the
proposed Settlement. Based upon their consideration of all of these factors and after several
weeks of intense negotiations, counsel for the Parties reached a settlement-in-principle on
February 6, 2006 to resolve all of the Settled Claims. Thereafter, Plaintiffs Counsel conducted six
weeks of intensive due diligence discovery to confirm certain representations made by the Settling
Defendants and the fairness of the proposed Settlement. That discovery further confirmed
Plaintiffs’ and Co-Lead Counsel’s conclusion that the Settlement is fair, reasonable, adequate, and
in the best interests of the members of the Class. On April 3, 2006 the Parties executed the
Stipulation of Settlement setting forth the terms and conditions of the Settlement.

     28. What are the Settlement’s benefits?

     The Settlement’s benefits consist of the following:

     (a)
Purchaser Class Cash Settlement Fund.

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     CHR will pay, or cause to be paid, a total of $35,000,000 for the benefit of the Purchaser
Class according to the following timetable: (i) $3,700,000 no later than January 15, 2007 (“2006
Cash Consideration”); (ii) $15,650,000 no later than January 15, 2008 (“2007 Cash Consideration”);
and (iii) $15,650,000 no later than January 15, 2009 (“2008 Cash Consideration”). The 2006 Cash
Consideration, the 2007 Cash Consideration, and the 2008 Cash Consideration will be evidenced by
non-interest bearing, unsecured Notes from CHR as Maker, and payable to the order of Chimicles &
Tikellis LLP, as Lead Litigation Counsel, for the benefit of the Purchaser Class, as Payee.

(b)   New Agreements.

     CHR and the Advisor have executed the New Agreements (defined above to include the Amended
Merger Agreement and Advisor Fee Reduction Agreements), which agreements contain terms more
favorable to CHR and its shareholders than the Original Merger Agreement (discussed in Paragraph
No. 4, above) and the prior advisory fee structure. Those Settling Defendants who were directors of
CHR during the negotiations and execution of the New Agreements have acknowledged that this Action
was among the material factors taken into account in connection with the terms of the New
Agreements.

     The Original Merger Agreement contemplated, among other things, the acquisition of the Advisor
for total merger consideration of approximately $297 million, comprised of approximately $29.7
million in cash and approximately $267.3 million of CHR’s common shares (or approximately 26.73
million common shares based on a deemed per share price of $10.00 prior to giving effect to the
one-for-two reverse stock split that became effective on August 2, 2004), and the assumption of a
certain promissory note with a then-outstanding principal balance of approximately $10.98 million.
In addition, the Original Merger Agreement provided that under certain circumstances CHR would not
be required to pay to the Advisor certain fees that would otherwise have been payable to the
Advisor pursuant to the then-applicable Advisory Agreement prior to the anticipated closing of the
Merger (other than asset management fees, development fees or reimbursable expenses) (the “Deferred
Fees”).

     The Amended Merger Agreement contemplates, among other things, the acquisition of the Advisor
for total merger consideration of approximately $72 million of CHR’s common shares (or
approximately 3.6 million common shares based on a deemed per share price of $20 after giving
effect to the one-for-two reverse stock split that became effective on August 2, 2004), and the
assumption of a certain promissory note with an outstanding principal balance of approximately
$7.875 million. The Advisor Fee Reduction Agreements provide, among other things, that: (I) CHR
will pay $37 million to the Advisor in full satisfaction of the Deferred Fees, which the Advisor
had claimed, prior to the effectiveness of the Advisor Fee Reduction Agreements, to be
approximately $82.7 million; (2) the Advisor waived the right to payment of certain fees from
January 1, 2006 through June 30, 2006 (which plaintiffs’ estimate will save CHR approximately $36.6
million); and (3) the Advisor agreed to a reduction in the rate of Acquisition Fees from 4.5% to
3.0%, retroactive to April 1,2005, saving CHR additional millions of dollars.

     It is Plaintiffs’ position that the net amount that CHR will pay in merger consideration and
certain advisory fees as a result of the New Agreements will be approximately $200,000,000

69

 

less than CHR would have paid under the terms of the Original Merger Agreement and the prior
advisory fee structure had the Original Merger Agreement become effective on a timely basis.

          c. Implementation of Corporate Governance Policies. CHR’s Board of Directors, or a committee
thereof, have adopted and will implement the following corporate governance policies if the
Settlement is approved:

             (i)  Consideration of Liquidation: Any proposal submitted by CHR to its shareholders to
approve an amendment to extend the December 31, 2007 date specified in the Charter by which
CHR must commence an orderly Liquidation shall first be reviewed and approved by a committee
consisting solely of at least three (3) of CHR’s independent directors, which committee
shall retain an advisor of its choosing to assist it in the evaluation of such a proposal.
Co-Lead Counsel will inspect on a confidential basis a copy of any final evaluation by the
advisor and Co-Lead Counsel’s reasonable comments to such evaluation will be taken into
consideration by such committee in its sole discretion. Co-Lead counsel shall not retain any
copy of such evaluation. This mechanism shall remain in place until June 1, 2008, unless CHR
is in violation of its Charter relating to commencement of an orderly liquidation in which
event, it shall remain in place until the earlier of Listing or the commencement of the
orderly Liquidation.

             (ii)  Related-Party Transaction Committee. All transactions with management and others that
are reportable by CHR under Item 404 of Regulation S-K (“Related Party Transaction”) shall
be considered by a committee of CHR’s Board of Directors consisting solely of directors who
do not have a financial interest in the transaction being considered. The committee shall be
authorized to retain such advisor and counsel of its choice as it deems appropriate. Such
committee and its advisors/counsel shall review and, in its discretion, provide comments on
the contents and wording of any disclosure to shareholders and in any SEC filing with
respect to any Related-Party Transaction. This mechanism shall remain in place until the
earlier of June 1, 2008 or Listing.

          d. New Proxy. In connection with CHR’s seeking shareholder approval of the Amended Merger
Agreement and related Charter Amendments, Co-Lead Counsel will be given a reasonable opportunity to
review and comment on the New Proxy and all related materials to be issued by CHR for the purposes
of compliance with all applicable securities and corporate fiduciary laws, rules, and regulations.
Any reasonable comments by Co-Lead Counsel on the New Proxy will be taken under consideration by
CHR in its sole discretion. Subject to being given reasonable opportunity for conducting such
review and providing such input, Co-Lead Counsel and Plaintiffs agree that they will fully support
shareholder approval of the merger of the Advisor into CHR and the related Charter Amendments as
being fair and reasonable, and in the best interests of CHR and its shareholders.

     29. How much will my payment be?

     If you are a member only of the Proxy Class, you are not entitled to a payment from the Cash
Settlement Fund, which has been established solely for the benefit of the Purchaser Class.

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     If you are a member of the Purchaser Class your share of the Net Settlement Fund will be
determined in accordance with the Plan of Allocation that is included at the end of this Notice.

     30. How can I receive a payment?

     If you are a member only of the Proxy Class, you are not entitled to a payment from the Cash
Settlement Fund.

     If you are a member of the Purchaser Class, you will be sent a personalized Investment Data
Form no later than fourteen (14) days following the date of entry of the Judgment, which will
reflect your purchases, sales, and transactions in the common stock of CHR during the Purchaser
Class Period. The information on the Investment Data Form was prepared from data provided by CHR.
Review the form and read the instructions carefully.

     If
you have any questions, or need assistance, call (___)
______ toll-free or send
an e-mail to CNLHotelsSettlement@Chimicles.com, and someone will assist you.

     31. When will I receive my payment as a member of the Purchaser Class?

     If you are a member only of the Proxy Class, you are not entitled to a payment from the Cash
Settlement Fund.

     Assuming the Court approves the Settlement at a hearing to be held on ___, 2006, the
Settlement provides that the Cash Settlement Fund shall be funded by CHR in three annual
installments beginning January 2007 (or the Effective Date of this Settlement, whichever is later)
and ending in January 2009. Due to the costs associated with making multiple distributions to the
Purchaser Class, Co-Lead Counsel may determine to make either one or more distributions of the Net
Settlement Fund. Therefore, if Co-Lead Counsel determines that it is appropriate to make multiple
payments to the Purchaser Class you should not expect to receive a payment before February 2008. If
Co-Lead Counsel determines that it is more cost effective and appropriate to make a single payment
to members of the Purchaser Class, you should not expect a payment before February 2009.

     32. What am I giving up to receive a payment?

     As a Class member, in consideration of the benefits of the settlement, you will be releasing
all of your claims against the Settling Defendants and other Released Persons, and the Action will
be dismissed in its entirety.

     If the Settlement is approved, you, on behalf of yourself, your heirs, executors,
administrators, successors, assigns, and any persons you represent, will release all “Settled
Claims,” including all “Unknown Claims,” against all “Released Persons” (as defined below). If the
Settlement is approved by the Court, all claims which have or could have been asserted in the
Action will be dismissed on the merits and with prejudice as to all Plaintiffs, Class
Representatives and members of the Class, who shall be forever barred from prosecuting an
action raising the Settled Claims against the Released Persons.

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\

     “Settled Claims” shall include any statutory, regulatory, equitable, legal, common-law or
other claims, causes of action, suits, liabilities, obligations, expenses, costs, penalties,
damages, demands, and/or any other remedies of any nature whatsoever, under federal, state, local
or any other law (including Unknown Claims and including, without limitation, claims within the
exclusive jurisdiction of the federal courts), whether legal or equitable, known or unknown,
whether or not matured, accrued, or ripe, that are based upon or related to, or arise out of, in
whole or in part, (a) the facts, transactions, events, occurrences, acts, disclosures, statements,
omissions or failures to act that were alleged or could have been alleged in the Action, or (b) any
count or allegation contained in any complaint in the Action by any Named Plaintiff or the Class
against each and all of the Released Persons, through the date when Judgment is entered dismissing
the action with prejudice.

     “Unknown Claims” means any Settled Claim that any Named Plaintiff or the Class does not know
or suspect to exist in his, her, or its favor at the time of the release of the Released Persons
which, if known by him, her, or it, might have affected his, her, or its settlement with and
release of the Released Persons, or might have affected his, her, or its decision not to object to
this settlement.

     “Released Persons” shall include the Settling Defendants, any previously named defendants, any
of their affiliates, including without limitation, limited liability companies, partnerships and
corporations (including those that are minority-owned ) (collectively, “Affiliates”), their
predecessors and successors, and any person or entity that could have been named by the Plaintiffs
as defendants in the Action as participants in the allegedly actionable or wrongful conduct
described therein, and their respective past and present officers, directors, managers, partners,
employees, agents, consultants, advisors, attorneys, accountants, experts, or representatives.

     33. Can I remove myself from the Action and exclude myself from the Class?

     If you are a member of the Proxy Class, which is certified as a Rule 23(b)(2) Class, you do
NOT have the right to exclude yourself from or opt-out of the Proxy Class.

     If you are a member of the Purchaser Class, you have the right to exclude yourself or opt-out
of the Purchaser Class. If you do not want a payment from this Settlement, but you do want to keep
the right to sue or continue to sue any of the Settling Defendants or to assert any Settled Claims
against any of the Released Persons on your own, then you must take steps to get out of the
Purchaser Class. Each member of the Purchaser Class shall be bound by all determinations and
judgments in this Action, whether favorable or unfavorable, unless he files a written request for
exclusion from the Purchaser Class (“Opt-Outs”). This is called excluding yourself or “opting out”
of the Purchaser Class. Defendants may withdraw from and terminate the settlement if more then a
certain amount of Opt-Outs are made.

     If you are a member of the Purchaser Class and wish to be excluded from the Purchaser Class
and the Action, you must mail, by first class mail, postmarked no later than
___, 2006, a written request for exclusion from the Purchaser Class,
(“Exclusion Request”) that includes the following information:

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a. a statement that you “request exclusion from the Purchaser Class
in In re CNL Hotels & Resorts, Inc. Securities Litigation, Case No. 6:04-cv-l
231 -Orl-31KRS”;

b. your signature and those of any joint purchasers;

c. the date(s), price(s), and number(s) of shares of all your
purchases and sales of CUR common stock made between August 16, 2001 and August
16, 2004, inclusive; and

d. the name, address and telephone number of the person seeking
exclusion from the Purchaser Class.

If your Exclusion Request does not include that information, you will not be excluded and you will
be deemed to continue to be a member of the Purchaser Class.

Your Exclusion Request must be postmarked no later than ___, 2006 and mailed to:

In re CNL Hotels & Resorts, Inc. Securities Litigation

do Complete Claim Solutions, Inc., Claims Administrator

EXCLUSIONS

319 Clematis St., Suite 300 [P.O. Box_____]

West Palm Beach, FL 33401

(800) 930-0057

     34. Do I have a lawyer in this case?

     Yes. Chimicles & Tikellis LLP was appointed as Lead Litigation Counsel and together with
Labaton Sucharow & Rudoff LLP and Wolf Haldenstein Adler Freeman & Herz LLP are Co-Lead Counsel for
the Plaintiffs and the Class:

Nicholas E. Chimicles, Esq.

CHIMICLES & TIKELLIS LLP

361 West Lancaster Avenue

Haverford, PA 19041

Phone: (610) 642-8500

Fax: (610) 649-3633

Email: CNLHotelsSettlement@Chimicles.com

www.chimicles.com

Lead Litigation Counsel

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	Lawrence A. Sucharow, Esq.

	 	Lawrence P. Kolker, Esq.
	 
	 	 
	LABATON SUCHAROW & RUDOFF LLP

	 	WOLF HALDENSTEIN ADLER FREEMAN
	 
	 	 
	100 Park Avenue

	 	& HERZ LLP
	 
	 	 
	New York, NY 10017

	 	270 Madison Avenue
	 
	 	 
	 

	 	New York, New York 10016
	 
	 	 
	Telephone: (212) 907-0700

	 	Telephone: (212) 545-4600
	 
	 	 
	www.labaton.com

	 	www.whafli.com
	 
	 	 
	 

	 	Co-Lead Counsel

     You will not be charged directly by these lawyers for such representation. They will ask the
Court to award them reasonable attorneys’ fees and expenses, as described in Paragraph No. 35 to be
paid by CHR either directly or through the Purchaser Class Cash Settlement Fund.

     If you want to be represented by your own lawyer, you may hire one at your own expense. You
are not required to retain your own lawyer, but if you choose to do so, your lawyer must file with
the Court an appearance on your behalf on or before ___. 2006, and must serve copies of such
appearance on the attorneys listed in this Paragraph No. 34.

     35. How and in what amount will Co-Lead Counsel and Plaintiffs’ Counsel be paid?

     Plaintiffs’ Counsel will seek the payment of fees and the reimbursement of expenses from the
Cash Settlement Fund. Plaintiffs’ Counsel shall file a Fee Petition with the Court (and will post a
copy at www.ohimicles.com) fourteen (14) days prior to the Final Approval Hearing. The Settlement
contemplates that Plaintiffs’ Counsel shall be paid separately fees and expenses for their
prosecution of the Proxy Class claims and Fiduciary Duty Claims and the Purchaser Class claims.

     Litigation Expenses:

     Plaintiffs’ Counsel have incurred a total of approximately $1,250,000 in expenses in
connection with the prosecution and settlement of this Action. Those expenses were incurred by
Plaintiffs’ Counsel on a totally contingent basis. In the Fee Petition, Plaintiffs’ Counsel will
reasonably allocate the litigation expenses between the Proxy Class and Fiduciary Duty Claims,

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and the Purchaser Class claims based upon whether the expenses were incurred principally in prosecuting
one or both sets of claims. This allocation is necessary because there will be different fee
expense awards for the settlements achieved with respect to the Proxy Class and Fiduciary Duty
Claims, and the Purchaser Class claims.

     Fee Applications:

     With respect to prosecuting the Proxy Class and Fiduciary Duty Claims and obtaining for the
Class the Settlement benefits described in Paragraph Nos. 28 b., c., d., e., and f., above,
Plaintiffs’ Counsel will seek from the Court an award of attorneys’ fees and expenses allocable to
the Proxy Class and Fiduciary Duty Claims in an amount not to exceed $5,500,000, to be paid by CHR
after the Effective Date of the Settlement.

     With respect to prosecuting the Purchaser Class Claims and obtaining for the benefit of the
Purchaser Class the Cash Settlement Fund described in Paragraph No. 28a. above, Plaintiffs’ Counsel
will seek from the Court an award of reasonable attorneys’ fees equal to 25% of the Cash Settlement
Fund ($8,750,000 of the Cash Settlement Fund), plus an award of expenses allocable to the Purchaser
Class claims. The awarded fees shall be paid from the Settlement Fund Account, as each installment
of the Cash Settlement Fund is received and deposited in the Settlement Fund Account. The expenses
awarded by the Court with respect to the Purchaser Class claims shall be reimbursed to Plaintiffs’
Counsel from the 2006 Cash Consideration, to be paid by CHR in January 2007 or after the Effective
Date of this Settlement, whichever is later.

OBJECTING TO THE SETTLEMENT

     At the Final Settlement Hearing, the Court will determine whether to finally approve the
Settlement and dismiss with prejudice the Action and the claims of the Class. The Court will also
determine whether the Plan of Allocation for the distribution of the Net Settlement Fund is fair,
reasonable, adequate and is in the best interests of the Purchaser Class. The Court may also
consider Plaintiffs’ Counsel’s application for an award of attorneys’ fees and reimbursement of
expenses. The Final Settlement Hearing may be adjourned from time to time by the Court without
further written notice to the Class.

     As a member of the Purchaser Class or Proxy Class, you can formally object to the Settlement,
some part of it, the Plan of Allocation, or Plaintiffs’ Counsel’s request for attorneys’ fees and
reimbursement of expenses.

     36. How do I notify the Court that I object to the Settlement, the Request for Attorneys’ Fees
and Expenses, and/or the Plan of Allocation?

     If you are a Proxy Class Member or a Purchaser Class Member (and have not sought to exclude
yourself) and you wish to object to any part of the Settlement, the Request for Attorneys’ Fees and
Expenses and/or the Plan of Allocation, you can object. If you decide to object to the Settlement,
the Request for Attorneys’ Fees and Expenses and/or the Plan of Allocation, you can present the reasons
why you believe the Court should not approve any of
them. But in order for your objection to be considered, you must comply with the following
procedures.

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     To
object, you must, on or before ___, 2006 file with the Clerk of the Court a
notice of intention to appear, a statement or letter saying what you are objecting to and the
reasons for your objection, and any supporting documentation. Be sure to include:

(i) the case name and number: “In re CNL Hotels &
Resorts, Inc. Securities Litigation, Case No. 6:04-cv-123 I -Orl-31KRS
(M.D. Fla.)”;

(ii) your name, address, telephone number, and signature;

(iii) information concerning your purchase(s), sale(s) and transactions in CHR
stock from August 16, 2001 through August 16, 2004,

inclusive
(to
evidence proof of membership in the Class);

(iv) the reason(s) you object to the Settlement, the
Request for Attorneys’ Fees and Expenses and/or the Plan of Allocation;
and

(v) all legal support you wish to bring to the Court’s
attention or evidence you have to support your objection.

     You must also, on or before ___, 2006 serve, either in person or by mail, copies
of such notice, statement, and documentation, together with copies of any other papers or briefs
you filed with the Court, upon the Court and counsel for the Parties as follows:

To the Court:

Honorable Hon. Gregory A. Presnell

United States District Court, Middle District of Florida

George C. Young U.S. Courthouse and Federal Bldg.

80 N. Hughey Avenue, Courtroom No. 3

Orlando, FL 32801

	 	 	 
	To Lead Litigation Counsel:

	 	To Defendants’ Counsel:
	 
	 	 
	Nicholas E. Chimicles, Esquire

	 	Kenneth A. Lapatine, Esq.
	CHIMICLES & TIKELLIS LLP

	 	GREENBERG TRAURIG, LLP
	One Haverford Centre

	 	The MetLife Building
	361 West Lancaster Avenue

	 	200 Park Avenue
	Haverford, PA 19041

	 	New York, NY 10166
	Phone: (610) 642-8500

	 	Phone: (212) 801-9200
	www.chimicles.com
	 	www.gtlaw.com
	 
	 	 
	 

	 	Scott B. Schreiber, Esq.
	 

	 	ARNOLD & PORTER, LLP
	 

	 	555 Twelfth Street, NW
	 

	 	Washington, DC 20004
	 

	 	Phone: (202) 942-5000
	 

	 	www.aporter.com

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     Waiver of Objections. Any person who fails to comply with the requirements for
objecting to the Settlement shall be deemed to have waived all such objections and shall be
foreclosed from raising any objection to the proposed Settlement. Any Class member may attend the
Final Settlement Hearing, but only those Class members who comply with the provisions hereof will
be permitted to raise any objections to the proposed Settlement.

     37. What is the difference between objecting and requesting exclusion?

     Objecting is telling the Court that you don’t like something about the Settlement, Plan of
Allocation, or Request for Attorneys’ Fees and Expenses. You can object only if you are a Class
Member. If you took steps to exclude yourself from the Purchaser Class, that tells the Court that
you don’t want to be a member of the Purchaser Class, and therefore you cannot object because the
Action and the Settlement no longer affect you.

THE FINAL SETTLEMENT HEARING

     The Court will hold a hearing, called a Final Settlement Hearing, to consider whether to
approve the Settlement. At or after the Final Settlement Hearing, the Court will also consider
whether to approve the Plan of Allocation and Plaintiffs’ Counsel’s Request for Attorneys’ Fees and
Expenses. You may attend the Final Settlement Hearing and you may ask to speak by notifying the
Court of your intention to appear as described below in Paragraph No. 40.

     38. When and where will the Court consider whether to approve the Settlement, the Plan of
Allocation, and the Request for Attorneys’ Fees and Expenses?

     The
Court will hold a Fairness Hearing on ___, 2006, at
___ a.m./p.m., before
the Honorable Hon. Gregory A. Presnell at the United States District Court for the Middle District
of Florida, Courtroom No. 3, George C. Young U.S. Courthouse and Federal Bldg., 80

77

 

N. Hughey Avenue, Orlando, FL 32801. At the hearing, the Court will consider whether the
Settlement is fair, reasonable, and adequate. At or after the Final Settlement Hearing, the Court
will also consider whether to approve the Plan of Allocation and the Request for Attorneys’ Fees
and Expenses.

     If there are objections, the Court will also consider them. The Court has discretion to listen
to people who have asked to speak at the hearing. We do not know how long the Final Settlement
Hearing will last or how long it will take for the Court to decide whether to approve the
Settlement, the Request for Attorneys’ Fees and Expenses or the Plan of Allocation.

	 	39.	 	Do I have to come to the hearing?

     No. Co-Lead Counsel will answer the questions the Court may have on behalf of Plaintiffs and
the Class. However, you are welcome to attend the hearing at your own expense. If you send in a
written objection, you do not have to come to Court to have the Court consider it. As long as you
serve and mail your written objection on time and in accordance with the procedures described in
Paragraph No. 36 above, the Court will consider it. You may also pay your own lawyer to attend the
Final Settlement Hearing, but you don’t need to hire your own lawyer.

     If you do hire your own lawyer, he or she should file a Notice of Appearance in the manner
described in Paragraph No. 40, below.

     The Court may choose to reschedule the hearing without sending a further notice to Class
Members. If you plan to come to the hearing, you should contact one of the Counsel listed above to
make sure the hearing has not been rescheduled.

	 	40.	 	May I speak at the hearing?

     At the Final Settlement Hearing, any member of the Class (who has not made a timely Exclusion
Request) may appear in person or by counsel and be heard, to the extent allowed by the Court, in
support of or in opposition to the fairness, reasonableness and adequacy of the Settlement, the Plan of Allocation, and/or
Plaintiffs’ Counsel’s request for an award of Attorneys’ Fees and Expenses.

     You may speak at the Final Settlement Hearing if you are a Class Member and you filed a timely
objection in the manner described in the answer to Paragraph No. 36 above.

     If you intend to have an attorney speak on your behalf at the Final Settlement Hearing, your
attorney must file a “Notice of Appearance” with the Clerk of the Court at the address noted in
Paragraph No. 36, and serve a copy of that notice on Lead Litigation Counsel and Defendants’
Counsel at the addresses set forth in Paragraph No. 36, Your attorney’s Notice of Appearance must
be filed with the Court and postmarked or delivered by other means to Lead Litigation Counsel and
Defendants’ Counsel no later than ___, 2006. If you or your attorney intend to present
evidence at the Final Settlement Hearing, your written objections (prepared and submitted in
accordance with Paragraph No. 36) must identify any witness you or your attorney

78

 

may seek to call to testify and any exhibits you or your attorney may seek to introduce into
evidence at the hearing.

	 	41.	 	Are there more details about the Settlement?

     Yes. This Notice summarizes the proposed Settlement. More details (including the definitions
of various terms used in this Notice) are contained in the pleadings and other papers in this
Action, including the formal Stipulation of Settlement, which has been filed with the Court. In
addition, Plaintiffs’ submissions in support of the Settlement, the Plan of Allocation, and
Plaintiffs’ Counsel’s Fee and Expense Application will be filed with the Court on                     
2006. If you want a copy of the Stipulation of Settlement, Plaintiffs’ submissions in support of
the Settlement, Plan of Allocation, or Plaintiffs’ Counsel’s Fee and Expense Application, or if you
have any questions about the Settlement, Plan of Allocation, or Plaintiffs’ Counsel’s Fee and
Expense Application, you may:

	 	•	 	Call (866) 404-0132, toll-free;
	 
	 	•	 	Write to one of Co-Lead Counsel at one of the addresses in the answer
to Section E above;
	 
	 	•	 	Write to: In re CNL Hotels & Resorts, Inc. Securities Litigation, do
Complete Claim Solutions, Inc., P.O Box ___, West Palm Beach, Florida
33416; or
	 
	 	•	 	Send an e-mail to CNLHotelsSettlement@Chimcles.com.

PLEASE DO NOT CALL THE COURT OR CLERK OF COURT.

PLAN OF ALLOCATION OF THE NET

SETTLEMENT FUND TO THE PURCHASER CLASS

     The $35,000,000 Purchaser Class Cash Settlement Fund and the interest earned thereon is the
Cash Settlement Fund. The Cash Settlement Fund less the fees and expenses awarded by the Court with
respect to the prosecution and settlement of the Purchaser Class claims (see Paragraph No. 35
above) and less all costs of claims administration, taxes, and other approved expenses (the “Net
Settlement Consideration”) shall be distributed to member of the Purchaser Class in accordance with
the Plan of Allocation.

     The summary below is intended to provide a general overview of the terms of the Plan of
Allocation. Each itemized section describes a particular method by which shares of CNL Hotels and
Resorts, Inc. (“CHR”) could have been acquired or disposed. Please refer to each section that
applies to your investment history.

     The summary is not intended to replace the Plan of Allocation. All shareholders and Purchaser
Class members are encouraged to read the Plan of Allocation in its entirety.

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	1.	 	Purchased in one or more Subscription Offerings and/or through the CHR Reinvestment Plan and
still hold some or all the shares purchased.

	 	-	 	All shares purchased where the admission date on the CHR records is
between August 16, 2001 and August 16, 2004 (which have not been redeemed,
transferred or sold) are Eligible Purchaser Class Shares and will be allocated
a portion of the Net Settlement Consideration.
	 
	 	-	 	Shareholder will receive an Investment Data Form (following the end of
the calendar quarter during which Judgment is entered by the Court related to
this action). No Proof of Claim is required. If the Investment Data Form is
accurate, do nothing. If any of the information on the Investment Data Form is
incorrect submit corrected information and documentation to the Claims
Administrator.
	 
	 	-	 	If you sold or sell any shares through the CHR Redemption Plan after
August 16, 2004 but prior to the end of the calendar quarter during which
Judgment is entered by the Court related to this action the shares sold through
the CHR Redemption Plan will be treated as described in Paragraph No. 2 below.
	 
	 	-	 	If you sold or sell any shares to a person or entity other than CHR
after August 16, 2004 but prior to the end of the calendar quarter during which
Judgment is entered by the Court related to this action the shares sold through
such a transaction(s) will be treated as described in Paragraph No. 7 below.
	 
	 	-	 	Plan of Allocation paragraph references: I through 8a, 11, and 12.

	2.	 	Purchased in one or more Subscription Offerings and/or through the CHR Reinvestment Plan,
sold some or all shares through the CHR Redemption Plan and still hold all the shares not
redeemed.

	 	-	 	All shares purchased, which have not been redeemed, where the admission
date on the CHR records is between August 16,2001 and August 16, 2004 are
Eligible Purchaser Class Shares and will be allocated a portion of the Net
Settlement Consideration.
	 
	 	-	 	All shares sold through the CHR Redemption Plan prior to the end of the
calendar quarter during which Judgment is entered by the Court related to this
action are not Eligible Purchaser Class Shares and will not be allocated a
portion of the Net Settlement Consideration.
	 
	 	-	 	Shareholder will receive an Investment Data Form (following the end of
the calendar quarter during which Judgment is entered by the Court related to
this action). No Proof of Claim is required. If the Investment Data Form is
accurate, do nothing. If any of the information on the Investment Data

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	 	 	 	Form is incorrect submit corrected information and documentation to the
Claims Administrator.
	 
	 	-	 	Plan of Allocation paragraph references: 1 through 8b, II, and 12.

	3.	 	Purchased in one or more Subscription Offerings and/or through the CHR Reinvestment Plan
(“transferor”) transferred some or all shares by gift, bequest, account change, marriage or
divorce to a person or entity (“transferee”) for zero consideration and still hold all the
shares not transferred.

	 	-	 	All shares purchased, which have not been transferred, where the
admission date on the CHR records is between August 16, 2001 and August 16,
2004 are Eligible Purchaser Class Shares and will be allocated a portion of the
Net Settlement Consideration.
	 
	 	-	 	Shares transferred where your original admission date on the CHR
records is between August 16, 2001 and August 16, 2004 are Eligible Purchaser
Class Shares and will be allocated a portion of the Net Settlement
Consideration. However, you as the transferor are not eligible to receive the
Net Settlement Consideration allocated to the shares transferred. Rather, your
transferee, the person or entity to whom the shares were transferred, will
receive the Net Settlement Consideration.
	 
	 	-	 	Shareholder and transferee will receive an Investment Data Form
(following the end of the calendar quarter during which Judgment is entered by
the Court related to this action). No Proof of Claim is required. If the
Investment Data Form is accurate, do nothing. if any of the information on the
Investment Data Form is incorrect submit corrected information and
documentation to the Claims Administrator.
	 
	 	-	 	Plan of Allocation paragraph references: I through 8a, 8e, II, and 12.

	4.	 	Purchased CHR shares from a person or entity other than CHR between August 16, 2001 and
August 16, 2004.

	 	-	 	All shares purchased where the admission date on the CHR records is
between August 16, 2001 and August 16, 2004 are Eligible Purchaser Class Shares
and will be allocated a portion of the Net Settlement Consideration.
	 
	 	-	 	The amount of the Net Settlement Consideration will be determined
according to a weighting formula based on the gross purchase price you paid per
share.
	 
	 	-	 	You must file a Proof of Claim and include written evidence to
demonstrate the purchase of CHR shares with the Claims Administrator. If you do
not timely submit the Proof of Claim and the required evidence,

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	 	 	 	you will not be eligible to receive a distribution of the Net Settlement
Consideration.
	 
	 	-	 	Plan of Allocation paragraph references: I through 8, 8c, 9, 10, 13,
and 14.

	5.	 	Sold shares to a person or entity other than CHR between August 16, 2001 and August 16, 2004.

	 	-	 	If the shares you sold were purchased between August 16, 2001 and
August 16, 2004 (as evidenced by the admission date on the CHR records) then
you may be eligible to receive an allocation from the Net Settlement
Consideration with respect to the shares sold.
	 
	 	-	 	The amount of the Net Settlement Consideration will be determined
according to a weighting formula based on the gross purchase price per share
you received from the sale.
	 
	 	-	 	You must file a Proof of Claim and include written evidence to
demonstrate the sale of CHR shares with the Claims Administrator. If you do not
timely submit the Proof of Claim and the required evidence and documentation,
you will not be eligible to receive a distribution of the Net Settlement
Consideration with respect to the shares sold.
	 
	 	-	 	Plan of Allocation paragraph references: 1 through 8, 8d, 9, 10, 13,
and 14.

	6.	 	Weighting Formula for shares sold to or purchased from a person or entity other than CHR
(“Third Party Transaction”).

	 	-	 	The midpoint for the weighting will be established at the weighted
average price per Eligible Purchaser Class Shares where the gross transaction
price is less than $19 per Eligible Purchaser Class Share. Only Third Party
Transactions for which properly executed and documented Proof of Claims have
been timely submitted will be included in this calculation.
	 
	 	-	 	The Claims Administrator will calculate a sliding scale for the range
of actual gross transaction prices where: (a) the weighted average price is
assigned a 50% weight to both seller and buyer; (b) the highest gross
transaction price that is less than $19 per share will have a weighting of 95%
to the buyer and 5% to the seller and (c) the lowest actual gross transaction
price will have a weighting of 5% to the buyer and 95% to the seller.
	 
	 	 	 	For Example: assuming the highest gross transaction price per share
less than $19 is $18.50, the weighted average price is $17.00 per share and
the lowest gross transaction price per share is $15.50, the resulting
sliding scale would be as follows:

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	Gross Transaction	 	Assigned Weighting to
	Price Per Share	 	Per Share Allocation
	$19.00
	 	 	100	%	 	 	0	%
	$18.50
	 	 	95	%	 	 	5	%
	$17.75
	 	 	72.5	%	 	 	27.5	%
	$17.00
	 	 	50	%	 	 	50	%
	$16.75
	 	 	27.5	%	 	 	72.5	%
	$15.50
	 	 	5	%	 	 	95	%

	 	-	 	The Per Share Allocation will be allocated among parties based on the
assigned weighting.
	 
	 	-	 	Plan of Allocation paragraph references: I through 8, 10.

	7.	 	Sold shares to a person or entity other than CHR after August 16, 2004 but prior to the end
of the calendar quarter during which Judgment is entered by the Court related to this action.

	 	-	 	Eligible Purchaser Class Shares sold after August 16, 2004 but prior to
the end of the calendar quarter during which Judgment is entered by the Court
related to this action may be allocated a portion of the Net Settlement
Consideration with respect to the shares sold.
	 
	 	-	 	The amount of the Net Settlement Consideration will be determined
according to a weighting formula based on the gross proceeds you received per
share from the sale.
	 
	 	-	 	You must file a Proof of Claim and include written evidence to
demonstrate the sale of CHR shares with the Claims Administrator. If you do not
timely submit the Proof of Claim and the required evidence, you will not be
eligible to receive a distribution of the Net Settlement Consideration with
respect to the shares sold.
	 
	 	-	 	Plan of Allocation paragraph references: I through 8,9, 10, 13, and 14.

	8.	 	Purchased shares after August 16, 2004.

	 	-	 	You are not a Purchaser Class member and the shares purchased are not
Eligible Purchaser Class Shares regardless of any contractual arrangements
between the seller and yourself.

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	 	-	 	You will not receive an Investment Data Form and may not file a Proof
of Claim.
	 
	 	-	 	Neither the Claims Administrator nor Plaintiffs’ Counsel will review
any contractual arrangements, mediate any dispute, or withhold distribution of
the Net Settlement Consideration.
	 
	 	-	 	Plan of Allocation paragraph references: I through 3 and 1 5.

SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES

          If you hold shares of CHR stock that were purchased during the Class Period as nominee for a
beneficial owner, then within ten (10) days after you receive this Notice, you must either: (1)
mail copies of this Notice and the accompanying Investment Data Form by first-class mail to each
such beneficial owner; or (2) send a list of the names and addresses of such beneficial owners to
the Claims Administrator at the following address:

In re CNL Hotels & Resorts, Inc. Securities Litigation Nominees

c/o Complete Claim Solutions, Inc.

P.O. Box ______

West Palm Beach, Florida 33416

( ) ______________

PLEASE DIRECT YOUR QUESTIONS TO THE CLAIMS ADMINISTRATOR OR TO CO-LEAD COUNSEL DO NOT CONTACT THE
COURT OR DEFENDANTS’ COUNSEL WITH QUESTIONS.

	 	 	 
	DATED: ___, 2006

	 	BY ORDER OF THE UNITED STATES DISTRICT COURT FOR THE

MIDDLE DISTRICT OF FLORIDA

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EXHIBIT D

85

 

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

ORLANDO DIVISION

	 	 	 
	IN RE
	 	 
	CNL HOTELS & RESORTS, INC.

	 	Case No. 6:04-cv-1231-Orl-3IKRS
	SECURITIES LITIGATION

	 	(Consolidated with 6:04-cv-1341-On

19JGG)
	 
	 	 
	 

	 	CLASS ACTION
	 
	 	 
	 

	 	[Proposed] ORDER GRANTING
	 

	 	PRELIMINARY APPROVAL OF THE
	 

	 	STIPULATION OF SETTLEMENT
	 

	 	AND THE PLAN OF ALLOCATION
	 

	 	AND SCHEDULING SETTLEMENT
	 

	 	HEARING

[Proposed] ORDER GRANTING PRELIMINARY APPROVAL OF THE

STIPULATION OF SETTLEMENT AND THE PLAN OF ALLOCATION AND

SCHEDULING SETTLEMENT HEARING

     Subject to Court Approval, the Named Plaintiffs and Settling Defendants in this Action entered
into a Stipulation of Settlement dated April 3, 2006 in proposed Settlement of the Action
(“Stipulation of Settlement”) (capitalized terms herein shall have the same meaning as used in the
Stipulation of Settlement unless indicated otherwise).

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     Application has been made for preliminary approval of the Settlement, upon the terms and
conditions in the Stipulation of Settlement. The Court has received and reviewed the Stipulation
of Settlement and its attached exhibits.

     AND NOW, upon consideration of the Stipulation of Settlement and all that has occurred in this
Action to date, it is hereby ORDERED as follows:

     1. The terms of the Stipulation of Settlement are preliminarily approved solely for the
purpose of sending and publishing the Class Notice and the Summary Notice to the Class, subject to
further consideration at the final hearing on the Settlement (“Final Settlement Hearing”) described
in Paragraph 20 of this Order.

     2. The terms of the Plan of Allocation are preliminarily approved solely for the purpose of
sending and publishing the Class Notice and Summary Notice to the Class, subject to further
consideration at the Final Settlement Hearing.

     3. The Court conditionally certifies for purposes of this Settlement only the following
Classes in this Action, subject to further consideration at the Final Settlement Hearing:

	 	a.	 	Pursuant to Fed. R. Civ. P. 23(a) and (b)(2), a class of all
persons who were entitled to vote on the proposals presented in the proxy
statement filed with the SEC by CHR, dated June 21, 2004, as amended or
supplemented by the additional proxy solicitation materials filed on July 7,
July 8, and July 20, 2004 (“Proxy Class”). Solely for purposes of this
Settlement, the class representatives of the Proxy Class are Macomb County
Employees’ Retirement System (“Macomb County ERS”) and Mary Campbell. Members
of the Proxy Class shall not have the right to opt out of the Proxy Class, but
may file objections to the proposed

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	 	 	 	Settlement of the claims brought on behalf of the Proxy Class in accordance
with Paragraph 15, herein.

	 	b.	 	Pursuant to Fed. R. Civ. P. 23(a) and (b)(3), a class of all
persons who purchased or otherwise acquired CHR securities issued or offered
pursuant to or by means of CHR’s registration statements and/or prospectuses
between August 16, 2001 and August 16, 2004, inclusive (“Purchaser Class”).
Solely for purposes of this Settlement, the class representatives of the
Purchaser Class are Elizabeth Hawkins Barack Revocable Living Trust (“Barack
Trust”), Raymond Roberts, Victor Libov, and Edwin Wong. Members of the
Purchaser Class shall be afforded an opportunity to object to the proposed
Settlement of the claims brought on behalf of the Purchaser Class or opt-out of
the Purchaser Class, in accordance with Paragraphs 14 and 15, herein.

The Purchaser Class and the Proxy Class are collectively referred to as the Class, which shall
exclude Settling Defendants, the officers and directors of Settling Defendants, at all relevant
times, members of each Individual Settling Defendant’s immediate family, any entity in which any
Settling Defendant has a controlling interest, and the legal affiliates, representatives, heirs,
controlling persons, successors and predecessors in interest or assigns of any such excluded
person.

     4. Pursuant to 15 U.S.C §§ 77z-l(a)(3)(B) and 78u-4(a)(3)(B), Plaintiff Macomb County ERS was
appointed as Lead Plaintiff for the Proxy Class, the Barack Trust was appointed as Lead Plaintiff
for the Purchaser Class, Chimicles & Tikellis LLP was appointed as Lead Litigation Counsel and
Co-Lead Counsel, Labaton Sucharow & Rudoff LLP was appointed as

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Co-Lead Counsel for Macomb County ERS, and Wolf Haldenstein Adler Freeman & Herz LLP as
Co-Lead Counsel for the Barack Trust. Such appointments are hereby confirmed.

     5. Co-Lead Counsel are authorized to act on behalf of the Class with respect to all acts
required by the Stipulation of Settlement or such other acts which are reasonably necessary to
consummate the proposed Settlement set forth in the Stipulation of Settlement.

     6. Co-Lead Counsel are hereby authorized to retain the firm of Complete Claim Solutions, Inc.
as Claims Administrator (“Claims Administrator”) to supervise and administer the Class Notice and,
if the Settlement is finally approved, to implement the Plan of Allocation.

     7. CHR shall cooperate with Co-Lead Counsel and the Claims Administrator in responding to all
reasonable requests for information in the possession, custody, or control of CHR, and needed to
disseminate the Class Notice and Investment Data, or to prepare the Plan of Allocation.

     8. CHR agrees to make available to Co-Lead Counsel and the Claims Administrator engaged by
Co-Lead Counsel the person(s) most knowledgeable from CHR or CHR’s counsel, with respect to the
shareholder data specified in Section VI.2 of the Stipulation of Settlement.

     9. Named Plaintiffs, the Class, Plaintiffs’ Counsel, the Cash Settlement Fund, and the Claims
Administrator’s reliance on such Investment Data is reasonable.

     10. Named Plaintiffs, the Class, Plaintiffs’ Counsel, the Cash Settlement Fund, and the Claims
Administrator shall be held harmless from any liability resulting from errors or inaccuracies in
the Investment Data.

     11. Within Fourteen (14) days from the date of entry of this Order (the “Notice Mailing
Date”), Co-Lead Counsel shall cause to be mailed to all Class Members at their last known
addresses, via first-class mail, the Class Notice, substantially in the form attached hereto

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as Exhibit 1. Class Notice will also be sent via electronic mail (“email”) to members of the
Class for which e-mail addresses are available. The Investment Data forms shall mailed no later
than fourteen (14) days following the date of entry of Judgment.

     12. Within Fourteen (14) days from the date of entry of this Order (the “Summary Notice
Publication Date”), Co-Lead Counsel shall cause the Summary Notice to be published once in The New
York Times, substantially in the form attached hereto as Exhibit 2.

     13. Seven (7) days before the date fixed by this Court for the Final Settlement Hearing,
Co-Lead Counsel shall cause to be filed with the Clerk of this Court affidavits or declarations of
the person or persons under whose general direction the mailing of the Class Notice and publication
of the Summary Notice were accomplished which affidavits shall verify that such mailing and
publication were made in accordance with this Order.

     14. The Court finds that dissemination of the Class Notice and Summary Notice pursuant to
Paragraphs 11 and 12 above, (a) constitutes the best notice practicable under the circumstances,
(b) constitutes due and sufficient notice of the Settlement and the Final Settlement Hearing to all
persons entitled to receive such notice as Class Members, and (c) complies with due process and the
notice requirements of the Federal Rules and any other applicable law.

     15. For purposes of mailing the Class Notice, publishing the Summary Notice and processing and
mailing the Investment Data, as provided in Paragraphs 11 and 12 above, the Claims Administrator or
its designee shall lease and maintain one or more Post Office Boxes of adequate size for the
receipt of all communications necessary for the administration of the Settlement. The Class Notice
and Summary Notice shall designate the appropriate Post Office

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Box as the return address for the designated purposes. In addition, the Claims Administrator
shall provide members of the Class with access to pertinent information via the internet.

     16. For purposes of mailing the Class Notice, publishing the Summary Notice and processing and
mailing the Investment Data, as provided in Paragraphs 11 and 12, within five (5) business days
from the date of entry of this Order, CHR shall cause to be paid an amount not to exceed $250,000
into the Settlement Fund Account, in accordance with Section III.6 of the Stipulation, to be used
solely to cover costs and expenses relating to the printing and mailing of the Class Notice,
mailing the Investment Data form, and the publication of the Summary Notice. Such payments as are
made which are consistent with this Order shall be on a non-recourse basis as to amounts actually
expended or incurred so that Plaintiffs’ Counsel, Named Plaintiffs and the Class shall have no
responsibility or obligation to reimburse such expended amounts in the event the Effective Date
does not occur.

     17. The Class Notice will inform members of the Purchaser Class of their right to submit a
request for exclusion from the conditionally certified Purchaser Class (“Opt-Outs”). The Class
Notice will set forth that in order for a member of the Purchaser Class to be excluded from the
Purchaser Class, he/she/it must send a letter by mail that: (a) includes a statement that the
member of the Purchaser Class “requests exclusion from the Purchaser Class in In re CNL Hotels &
Resorts, Inc. Securities Litigation, Case No. 6:04-cv-1231-Orl-31KRS”; (b) is signed by the CHR
stockholder, and any joint purchasers; (c) includes the date(s), price(s), and number(s) of shares
of all purchases and sales of CHR common stock made during the Purchaser Class Period; and (d)
includes the name, address, and telephone number of the person seeking exclusion from the Purchaser
Class. (“Exclusion Requests”). Exclusion Requests will not be

91

 

accepted by phone or e-mail. Exclusion Requests must be postmarked on or before fourteen (14)
days prior to the date fixed by this Court for the Final Settlement Hearing to:

In re CNL Hotels & Resorts, Inc. Securities Litigation

c/o Complete Claim Solutions, Inc.

EXCLUSIONS

Claims Administrator

319 Clematis St., Suite 300

West Palm Beach, FL 33401

(800) 930-0057

     18. Any Class Member may appear at the Final Settlement Hearing in person or by counsel (if an
appearance is filed and served as hereinafter provided) and may be heard to the extent allowed by
the Court in support of, or in opposition to, the fairness, reasonableness and adequacy of the
Settlement, the Plan of Allocation, the request for an award of Attorneys’ Fees and Expenses of
Plaintiffs’ Counsel; provided, however, no person shall be heard in opposition to the Settlement
and, if the Settlement is approved, the judgment entered thereon, and no papers or briefs submitted
by any such person shall be accepted or considered by the Court unless, on or before fourteen (14)
days prior to the date fixed by this Court for the Final Settlement Hearing, such Class Member: (a)
has filed with the Clerk of’ the Court a notice of intention to appear together with a statement
that indicates the basis for such opposition along with any supporting documentation, including
proof of membership in the Class; and (b) has served copies of such notice, statement, and
documentation together with copies of any other papers or briefs filed with the Court, either in
person or by mail, upon the following counsel:

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	Lead Litigation Counsel:

	 	Defendants’ Counsel:
	 	 	 
	CHIMICLES & TIKELLIS LLP

	 	GREENBERG TRAURIG, LLP
	Nicholas E. Chimicles, Esquire

	 	Kenneth A. Lapatine, Esquire
	One Haverford Centre

	 	The MetLife Building
	361 West Lancaster Avenue

	 	200 Park Avenue
	Haverford, PA 19041

	 	New York, NY 10166
	 
	 	 
	 

	 	ARNOLD & PORTER, LLP
	 

	 	Scott B. Schrieber, Esquire
	 

	 	555 Twelfth Street, NW
	 

	 	Washington, DC 20004

     19. Three (3) business days before the date fixed by this Court for the Final Settlement
Hearing, Co-Lead Counsel shall cause to be filed with the Clerk of this Court: (a) a list of
Opt-Outs who made timely and proper Exclusion Requests; and (b) a response to any timely filed
objections to the Settlement, Plan of Allocation, or request for an award of Attorneys’ Fees and
Expenses of Plaintiffs’ Counsel.

     20. The Final Settlement Hearing shall be held before the undersigned at                     a.m. on
                    , 2006, United States District Court for the Middle District of Florida, Courtroom
No. 3, George C. Young U.S. Courthouse and Federal Bldg., 80 N. Hughey Avenue, Orlando, FL 32801,
to consider: the fairness, reasonableness, and adequacy of the Stipulation of Settlement; the
fairness, reasonableness, and adequacy of the Plan of Allocation; whether the Proxy Class and the
Purchaser Class should be finally certified for purposes of Settlement; whether the Settlement
should be finally approved; the entry of a

93

 

Judgment dismissing the Action with prejudice; the request of Plaintiffs’ Counsel for
Attorneys’ Fees and Expenses; and other related matters.

     21. The Settling Defendants shall have no role in or responsibility for review or evaluation
of the Plan of Allocation, but will be permitted to review the Plan of Allocation. The Settling
Defendants will take no position with respect to such proposed Plan of Allocation, the Plan of
Allocation being a matter separate and apart from the Settlement between the Parties, and
accordingly, any decision by the Court concerning the Plan of Allocation shall not affect the
validity or finality of the Settlement, and the Released Persons shall have no liability with
respect to any claim arising out of the Plan of Allocation.

     22. Briefs in support of the Settlement and the Plan of Allocation and in support of the
request for payment of Attorneys’ Fees and Expenses of Plaintiffs’ Counsel, claims administration
costs, and all other matters (other than responses to timely filed objections) shall be filed with
the Clerk of the Court on or before fourteen (14) days prior to the Final Settlement Hearing.

     23. All members of the Class, except those members of the Purchaser Class who validly Opt-Out
and submit timely Exclusion Requests, shall be bound by all determinations and judgments in the
Action concerning the Settlement, whether favorable or unfavorable to the Class.

     24. Lead Litigation Counsel is hereby authorized to enter into the Escrow Agency Agreement
(Exhibit B to the Stipulation of Settlement) with the Investment Agent to establish and operate the
Settlement Fund, as described in the Stipulation of Settlement, in anticipation of the Final
Settlement Hearing.

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     25. The Court reserves the right to adjourn the Final Settlement Hearing from time to time
without further notice by adjournment announced in open court and to rule upon the Settlement, the
Plan of Allocation or the award of Attorneys’ Fees and Expenses to Plaintiffs’ Counsel at any time
after the Final Settlement Hearing.

     26. All proceedings in the Action, other than such as may be necessary to carry out the terms
and conditions of the Stipulation of Settlement or the responsibilities related or incidental
thereto, are stayed and suspended until further Order of this Court.

     27. Pending resolution of these settlement proceedings, no other action now pending or
hereafter filed arising out of all or any part of the subject matter of the Action shall be
maintained as a class action, and, except as provided by this or further order of this Court, for
good cause shown, all putative Class Members are hereby enjoined during the pendency of these
settlement proceedings from filing or prosecuting purported class actions against any Released
Person with respect to any of the Settled Claims.

     28. If the Settlement is not approved or consummated for any reason whatsoever, the Settlement
and all proceedings in connection with the Settlement shall be without prejudice to the status quo
ante rights of the Parties to the Action, except insofar as the Stipulation of Settlement expressly
provides to the contrary.

     29. Neither the Stipulation of Settlement nor the Settlement contained therein, nor any of the
negotiations or proceedings connected with it, nor any act performed or document executed pursuant
to or in furtherance of the Stipulation of Settlement or the Settlement: (a) is or may be deemed to
be, or may be used as, an admission of, or evidence of, the validity of any Settled Claim, or of
any wrongdoing or liability of the Released Persons; or (b) is or may be deemed to be, or may be
used as, an admission of, or evidence of, any fault or omission of any of

95

 

the Released Persons in any civil, criminal or administrative proceeding in any court,
administrative agency or other tribunal.

ENTERED this                      day of                     , 2006.

	 	 	 	 	 
	 

	 	 	 	 
	 

	 	BY THE COURT:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Hon. Gregory A. Presnell	 	 

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EXHIBIT E

 

PROMISSORY NOTE NO. 1

	 	 	 
	Maker:
	 	CNL Hotels & Resorts
Inc.1 (“CHR” or the “REIT”)
	 
	 	 
	Payee:
	 	Chimicles & Tikellis LLP, as Lead Litigation Counsel for the benefit of the Court-certified Purchaser Class, One Haverford Centre, 361 West Lancaster Ave., Haverford, PA 19041
	 
	 	 
	Principal Amount:
	 	$3,700,000
	 
	 	 
	Maturity Date:
	 	January 15, 2007
	 
	 	 
	Issuance Date of Note:
	 	                    , 2006

PROMISE TO PAY. For value received, the undersigned CHR (“Maker”) promises to pay to Chimicles &
Tikellis LLP as attorneys for the benefit of the Purchaser Class (“Payee”) in lawful money of the
United States of America, the principal amount of three million seven hundred thousand dollars
($3,700,000) to be paid in full by January 15, 2007 (“Maturity”).

This Note is one of 3 promissory notes (each substantially in the form of this Note) of even date
made by the Maker to the Payee (collectively, the “Notes”).

1. PAYMENT. Maker will pay to Payee at Maturity all principal, subject to the provisions as to
acceleration and prepayment below. Payment shall be made in lawful tender of the United States.
Maker will pay Payee at Payee’s address shown above or at such other place Payee may from time to
time designate in writing. Unless Maker has obtained Payee’s written consent to another form of
payment, such payment shall be made by wire transfer of immediately available funds no later than
2:00 p.m. eastern standard time on the due date of the payment, in accordance with Payee’s payment
instructions.

This Note may be prepaid, in whole or in part, at any time without premium or penalty. Any partial
prepayment of this Note shall be in an amount of at least $500,000. Payee shall note each
prepayment or repayment of this Promissory Note on the grid attached as Schedule A to this Note.

If the date of Maturity is a day other than a Business Day, then the payment of all amounts due and
owing under this Note shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in any computation of payment of interest hereunder. As used
herein, “Business Day” means a day (i) other than Saturday or Sunday, and (ii) on which commercial
banks are open for business in Florida.

 

			
	1	 	Unless otherwise indicated, capitalized terms
used herein shall have the same meaning used in the Stipulation of Settlement
dated April 3, 2006.

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2. INTEREST AFTER DEFAULT. Upon and during the continuation of an Event of Default, the interest
rate shall be ten percent (10.000%) per annum, compounded annually, which shall immediately begin
accruing on the total amount due on the remaining Notes, commencing on a date ninety (90) days
prior to an Event of Default (as defined below).

3. DEFAULT. Each of the following events listed in clauses (a) through (e) below shall constitute
an event of default (an “Event of Default”) under this Note:

     a. Payment. Any failure by Maker to make any payment when due under this Note or any
of the other Notes, if Maker, after receiving written notice from Payee demanding such payment,
fails to make such payment within five (5) Business Days of receipt of such notice.

     b. Debtor Relief Laws. CHR institutes or consents to the institution of any
proceeding under Debtor Relief Laws with respect to itself or its assets, or makes an assignment
for the benefit of creditors; or applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or
any substantial part of its property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed for CHR or any substantial part of its property
without the application or consent of CHR, and the appointment continues undischarged or unstayed
for 90 calendar days; or any proceeding under Debtor Relief Laws relating to CHR, or to all or any
substantial part of its property, is instituted without the consent of CHR and continues
undismissed or unstayed for 90 calendar days, or an order for relief is entered in any such
proceeding. As used in this Note, “Debtor Relief Laws” means the Bankruptcy Code of the United
States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the
benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or
similar debtor relief laws of the United States of America or other applicable jurisdictions from
time to time in effect affecting the rights of creditors generally.

     c. Dissolution; Liquidation. The liquidation of CHR’s assets in accordance with its
Charter and Maryland law or if any order, judgment or decree shall be entered against CHR decreeing
the dissolution, liquidation or split up of CHR and such order shall remain undischarged,
undismissed or unstayed for a period in excess of ninety (90) calendar days.

     d. Sale of Assets. Any transaction or series of transactions whereby CHR sells,
grants, transfers, conveys or relinquishes its ownership of more than 50% of its assets (including
any event with respect to any property which gives rise to a significant amount of insurance
proceeds or condemnation awards), and the net proceeds of such transaction(s) are not reinvested in
one or more properties within one hundred eighty (180) days thereafter, unless Maker obtains the
prior written consent of the Payee. For purposes of this Note, 50% of assets shall be calculated
as the gross sale price of the assets to be sold divided by the gross value of all assets owned by
CHR as of the end of the fiscal quarter immediately preceding the proposed sale.

     e. Default in Favor of Third Parties. If an acceleration occurs with respect to (i)
the $1.525 billion loan agreement that was entered into on January 9, 2006 by CHR and German
American Capital Corporation (“GACC”), an affiliate of Deutsche Bank Securities Inc., with a

98

 

maturity date of February 1, 2011 (the “New CMBS Loan) or (ii) indebtedness entered into by
CHR to replace the New CMBS Loan.

     If an Event of Default shall occur and be continuing, the entire unpaid principal amount of
this Note, and all other Notes, and all other sums due and payable hereunder, and on all other
Notes, shall accelerate and become immediately due and payable hereunder.

4. ORDERLY LIQUIDATION. Section 3(c) herein shall not apply to an orderly liquidation of Maker
commenced prior to December 31, 2007 in accordance with its Charter. If a liquidation event
occurs, pursuant to the Articles of Incorporation, this provision will apply. As used in this
Note, a liquidation event will include a sale of assets, merger, consolidation, acquisition or
other business combination.

     a. If an orderly liquidation occurs pursuant to which the Maker’s assets are sold over a
period of time, then Maker shall establish an interest bearing escrow account for the benefit of
Purchaser Class. Liquidation proceeds in an amount equal to the then current outstanding principal
due on the Notes will be deposited in the escrow account before any liquidating distribution is
made to shareholders. Interest accruing and paid with respect to funds in such account shall inure
to the benefit of Maker’s shareholders generally.

     b. If the liquidation event involves a transaction in which CHR’s shareholders are to receive
securities of a successor entity as consideration for their stock, and if there is a dispute among
the Parties as to whether the transaction adversely effects the ability of the surviving company to
timely satisfy its obligations under the Notes, the Court will retain jurisdiction to determine
whether the then outstanding principal due on the Notes will become due and payable to Payee no
later than the effective date of such transaction, unless Maker obtains Payee’s written consent
(not to be unreasonably withheld, delayed or conditioned) to the assignment of the Notes to the
successor entity.

     c. If the liquidation event involves a merger, consolidation, acquisition or other business
combination where CHR’s shareholders receive cash as consideration for their stock, Maker shall
cause to be established an interest bearing escrow account for the benefit of the Purchaser Class.
Merger, consolidation, acquisition or other business combination proceeds in an amount equal to the
then current outstanding principal due on the Notes is to be deposited in the escrow account before
any payment is made to CHR’s shareholders. Interest accruing and paid with respect to funds in
such account shall inure to the benefit of CHR’s shareholders generally.

5. PAYEE’S RIGHTS. Upon the occurrence and during the continuation of an Event of Default, Payee
may, after giving such notices as required by applicable law, after giving effect to the waivers
contained herein, declare the entire unpaid principal balance on this Note, and all Notes, and all
accrued unpaid interest, immediately due, and then Maker will pay that amount.

6. COVENANTS OF MAKER. So long as any principal or interest due hereunder shall remain unpaid,
Maker agrees that Maker shall execute, acknowledge, deliver, file, notarize and register at its own
expense all such further agreements, instruments, certificates, documents, and assurances and
perform such acts as Maker shall deem necessary or appropriate to effectuate the

99

 

purpose of this Note, and promptly provide Payee with evidence of the foregoing reasonably
satisfactory in form and substance to Payee.

7. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Maker, its legal
representatives (including trustees in bankruptcy), successors, and permitted assigns, and shall
inure to the benefit of Payee. The Maker may assign its obligations under this Note, pursuant to a
combination, merger, or any other business transaction whereby Maker’s obligations under the Notes
is conveyed, transferred, or assigned to another entity, with the prior written consent of the
Payee (not to be unreasonably withheld, delayed or conditioned).

8. NOTICES. All notices and other communications hereunder shall be in writing and shall be
deemed given (a) when delivered personally, (b) when sent by reputable overnight courier service,
or (c) when telecopied (which is confirmed by copy sent within one business day by a reputable
overnight courier service) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):

For Payee:

Nicholas E. Chimicles, Esquire

Chimicles & Tikellis LLP

One Haverford Centre

361 W. Lancaster Ave.

Haverford, PA 19041

Telephone: (610) 642-8500

Facsimile: (610) 649-3633

For Maker:

Greerson G. McMullen, Esquire

CNL Hotels & Resorts, Inc.

420 South Orange Avenue

Orlando, Florida 32801-3313

Telephone: (407) 650-1151

          -and-

Kenneth A. Lapatine, Esquire

Greenberg Traurig LLP

100

 

200 Park Avenue

New York, New York 10166

Telephone: (212) 801-9200

Facsimile: (212) 801-6400

9. GENERAL PROVISIONS.

     a. Waiver. Maker and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest, notice of dishonor and
any other notice of any kind whatsoever. Upon any change in the terms of this Note, no parry who
signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released
from liability. Neither the failure nor any delay by any party in exercising any right, power, or
privilege under this Note will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of
this Note can be discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that may be given by a
party will be applicable except in the specific instance for which it is given; and (c) no notice
to or demand on one party will be deemed to be a waiver of any obligation of such party or of the
tight of the party giving such notice or demand to take further action without notice or demand as
provided in this Note.

     b. Severability. The provisions of this Note shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof. Any provision or part of this Note which is invalid or unenforceable
in any situation in any jurisdiction shall, as to such situation and such jurisdiction, be
ineffective only to the extent of such invalidity and shall not affect the enforceability of the
remaining provisions hereof or the validity or enforceability of any such provision in any other
situation or in any other jurisdiction.

10. ATTORNEYS’ FEES; EXPENSES. Payee may hire or pay someone else to help collect this Note if
Maker does not pay. Maker will pay Payee the reasonable expenses Payee incurs to collect during
the continuance of an Event of Default. This includes, subject to any limits under applicable law,
Payee’s reasonable attorneys’ fees and Payee’s reasonable legal expenses, whether or not there is a
lawsuit, including reasonable attorneys’ fees, expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by
applicable law, Maker also will pay any court costs, in addition to all other sums provided by law.

11. JURY WAIVER. Maker and Payee hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Maker or Payee against the other in connection with
this Note.

101

 

12. GOVERNING LAW. This Note will be governed by, construed or enforced in accordance with the
laws of the State of Florida without giving effect to that state’s choice of law principles.

13. JURISDICTION AND VENUE. Maker hereby (i) submits to the exclusive jurisdiction of the courts
of the State of Florida and the Federal courts of the United States sitting in the State of Florida
for the purpose of any action or proceeding arising out of or relating to this Note, (ii) agrees
that all claims in respect of any such action or proceeding may be heard and determined in such
courts, (iii) irrevocably waives (to the extent permitted by applicable law) any objection which it
now or hereafter may have to the laying of venue of any such action or proceeding brought in any of
the foregoing courts in and of the State of Florida, and any objection on the ground that any such
action or proceeding in any such court has been brought in an inconvenient forum, and (iv) agrees
that a final judgment in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner permitted by law.

     IN WITNESS WHEREOF, the Maker has caused this instrument to be duly executed as of the date
first set forth above.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	CNL HOTELS & RESORTS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 

102

 

Schedule A

PAYMENTS

	 	 	 	 	 	 	 
	 	 	Principal Amount of	 	Unpaid Principal	 	Notation Made
	Date	 	Loan Repaid	 	Balance	 	By
	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    
	 
	 	 	 	 	 	 
	                    

	 	                    
	 	                    
	 	                    

 

 

EXHIBIT F

United States District Court

Middle District Of Florida

Orlando Division

	 	 	 
	IN RE CNL HOTELS & RESORTS, INC.
	 	Case No. 6:04-cv-1231-Orl-31KRS
	SECURITIES LITIGATION

	 	 

SUMMARY NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION

	 	 	 
	TO:

	 	ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIRED ANY SECURITIES OF CNL HOTELS & RESORTS, INC.
(F/K/A CNL HOSPITALITY PROPERTIES, INC.) (“CHR”) PURSUANT TO OR BY MEANS OF CHR’S OFFERINGS,
REGISTRATION STATEMENTS, AND/OR PROSPECTUSES BETWEEN AUGUST 16, 2001 AND AUGUST 16, 2004,
INCLUSIVE (“CLASS PERIOD”) (“PURCHASER CLASS”);

AND / OR

	 	 	 
	

	 	ALL PERSONS WHO WERE CHR STOCKHOLDERS ENTITLED TO VOTE ON THE PROPOSALS PRESENTED IN
CHR’S PROXY STATEMENT DATED JUNE 21,2004 (“PROXY CLASS”).

YOU ARE HEREBY NOTIFIED that the above-captioned Action has been certified as a class action for
the purpose of the proposed Settlement. The Settlement has two principal components:

     1. The Proxy Class claims are proposed to be settled by (a) CHR’s entering into an Amended
Merger Agreement, subject to shareholder approval, which significantly reduces the amount that CHR
will pay to acquire its Advisor, CNL Hospitality Corp., compared to the Original Merger Agreement
approved by CHR stockholders pursuant to the June 2004 Proxy; (b) CHR’s entering into certain
Advisor Fee Reduction Agreements, which significantly reduces certain historic, current, and future
advisory fees that CHR pays its Advisor before the Merger; and (C) the adoption of certain
corporate governance provisions by the CHR Board of Directors. Those Settling Defendants who were
directors of CHR during the negotiation and execution of the Amended Merger Agreement and the
Advisor Fee Reduction Agreements (the “New Agreements”) have acknowledged that this Action was
among the material factors taken into account in connection with the terms of the New Agreements.
It is Plaintiffs’ position that the net amount that CHR will pay in merger consideration and for
advisory fees as a result of the New Agreements will be approximately $200,000,000 less than CHR
would have paid under the terms of the Original Merger Agreement and the prior advisory fee
structure had the Original Merger Agreement become effective on a timely basis.

 

 

     2. The Purchaser Class claims are proposed to be settled by Settling Defendants’ payment of
$35,000,000, payable in three annual installments (January 2007 to January 2009). These monies,
after payment of fees and expenses, will be distributed pursuant to a Plan of Allocation to all
eligible members of the Purchaser Class.

The Settlement will resolve all claims, including known and unknown claims that could have been
alleged in the Action through the date when Judgment is entered dismissing the Action with
prejudice, of Named Plaintiffs and the Proxy Class and the Purchaser Class against all present and
former Defendants and their affiliates, including CNL Hotels & Resorts, Inc. (f/k/a CNL Hospitality
Properties, Inc.)(“CHR”), CNL Securities Corp. (“CSC”), CNL Hospitality Corp. (the “Advisor”),
James M. Seneff, Jr., Robert A. Bourne, Thomas J. Hutchison Ill, John A. Griswold, Charles E.
Adams, Lawrence A. Dustin, Craig M. McAllaster, and Robert E. Parsons, Jr. (“Settling Defendants”).
A hearing will be held on ______ 2006, at ______a.m./p.m., before the Honorable Hon.
Gregory A. Presnell at the United States District Court for the Middle District of Florida
(“Court”), Courtroom No. 3, George C. Young U.S. Courthouse and Federal Bldg., 80 N. Hughey Avenue,
Orlando, FL 32801 (“Final Settlement Hearing”) to determine whether the proposed Settlement and
Plan of Allocation should be approved by the Court as fair, reasonable, and adequate, and to
consider the application of Plaintiffs’ Counsel for attorneys’ fees and reimbursement of litigation
expenses.

IF YOU ARE A MEMBER OF THE CLASSES DESCRIBED ABOVE AND MORE FULLY IN THE CLASS NOTICE, YOUR RIGHTS
WILL BE AFFECTED BY THE SETTLEMENT. IF YOU ARE A MEMBER OF THE PURCHASER CLASS YOU MAY BE ENTITLED
TO SHARE IN THE NET SETTLEMENT CONSIDERATION. If you have not yet received the Notice of Pendency
and Proposed Settlement of Class Action (the “Class Notice”), you may obtain copies of this and
related documents by contacting: In re CNL Hotels & Resorts, Inc. Securities Litigation, c/o
Complete Claim Solutions, Inc., Claims Administrator, 319 Clematis St., Suite 300 [P.O. Box ___],
West Palm Beach, FL 33401, (800) 930-0057. Copies of the Class Notice and related documents also
may be downloaded from: www.chimicles.com or www.completeclaimsolutions.com. If you are a member
of the Purchaser Class, and you purchased your shares from the Company, you will be receiving an
Investment Data Form and you will be asked to verify its accuracy and communicate corrections to
the claims administrator. If you bought or sold CNL stock other than through the Company, you will
be asked to file a Proof of Claim by ______in order to participate in the Net
Settlement Consideration you may be entitled to share in the distribution of the Net Settlement
Consideration. You will be bound by any judgment entered in the Action whether or not you make a
claim.

IF YOU DESIRE TO BE EXCLUDED FROM THE PURCHASER CLASS, you must file a request for exclusion by
______ 2006, in the manner and form explained in the Class Notice. All Purchaser Class
Members who do not request exclusion from the Purchaser Class will be bound by any judgment entered
in the Action. Members of the Proxy Class, which is certified pursuant to Federal Rule of Civil
Procedure 23(b)(2), shall not have the right to opt out or request exclusion from the Proxy Class.

ANY OBJECTION TO THE PROPOSED SETTLEMENT, Plan of Allocation or application for attorneys’ fees and
reimbursement of litigation expenses must be filed with the Court and

 

 

delivered to counsel for the Parties, in the manner and form explained in the Class Notice, no
later than ______, 2006.

PLEASE DO NOT CONTACT THE COURT OR THE CLERK’S OFFICE REGARDING THIS NOTICE.

INQUIRIES MAY BE MADE TO:

Nicholas E. Chimicles, Esq.

Kimberly M. Donaldson, Esq.

CHIMICLES & TIKELLIS LLP

361 West Lancaster Avenue

Haverford, PA 19041

Phone: (610) 642-8500

Fax: (610) 649-3633

Email: CNLHoteIsSettlement@Chimicles.com
www.chimicles.com

Lead Litigation Counsel

	 	 	 
	Lawrence A. Sucharow, Esq.

	 	Lawrence P. Kolker, Esq.
	LABATON SUCHAROW & RUDOFF LLP

	 	WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP
	100 Park Avenue

	 	270 Madison Avenue
	New York, NY 10017

	 	New York, New York 10016
	Telephone: (212) 907-0700

	 	Telephone: (212) 545-4600
	www.labaton.com

	 	www.whafh.com
	Co-Lead Counsel

	 	Co-Lead Counsel

	 	 	 
	DATED:                     ,2006

	 	BY ORDER OF THE UNITED STATES DISTRICT COURT
	 
	 	 
	 

	 	FOR THE MIDDLE DISTRICT OF FLORIDAEX-10.135

 

Exhibit 10.135

CNL HOTELS & RESORTS, INC.

May 19, 2006

Greerson McMullen

Senior Vice President & Chief General Counsel

CNL Hotels & Resorts, Inc.

420 South Orange Avenue

Orlando, FL 32801-3336

Dear Greerson:

We are pleased that you have recently been elected as the Senior Vice President, Chief General
Counsel and Secretary of CNL Hotels & Resorts, Inc. (the “Company” or the “REIT”).

In those positions you will be reporting directly to Thomas Hutchison, Chief Executive Officer of
the Company, except in situations which arise in which you believe in good faith that the Company
has a potential conflict with CNL Hospitality Corp. (the “Advisor”), in which instances you will
report directly to a representative of the independent directors who, until further notice, shall
be Robert Parsons.

COMPENSATION

Your annual base salary will be $275,000 ($10,576.92 per bi-weekly pay period). In addition to
base salary compensation, you will be eligible to receive additional cash bonus compensation of up
to 100% of base salary, based upon performance. This bonus opportunity will be pro-rated for the
performance year 2006, earned based upon performance, and paid by the Company in proportion to the
number of days you are employed in 2006 by the Company, as compared to the total number of days
during 2006 you have been employed by (i) the Company; and/or (ii) the Advisor. In the event the
REIT grants equity or equivalent rights (Equity) pursuant to a long-term incentive compensation
program including any grant of Equity to Senior Vice Presidents upon completion of the merger
(“Merger”) of the Advisor into the REIT), you will be included in the program and granted Equity on
an equivalent basis as other Senior Vice Presidents; provided that you otherwise meet the
qualifications and requirements of the plan documents (not contingent on years of service), if and
when such a plan is implemented (Similar Treatment). Notwithstanding the foregoing, if you execute
an employment agreement with the Company and such agreement takes effect, such agreement will
control the terms of any grant of Equity to you.

BENEFITS

As a regular, full-time associate, you will also be eligible for coverage under the provisions
of our benefits program. A benefits summary describing your coverage is attached hereto as Exhibit
A. To the extent that the benefits you and your family receive as an employee (or officer) of the
Company (whether during the term of your employment or thereafter) are less

 

than you would have received as an employee (or officer) of the Advisor or you otherwise suffer any
adverse economic consequences from being an employee (or officer) of the Company based on any
differences in the benefits program provided by the Company as compared to that provided by the
Advisor, the Company hereby agrees to make you whole on a current basis.

SEVERANCE

As an at-will employee, either you or the employer (Company) may terminate the employment
relationship at any time for any reason or for no reason. If your employment is terminated by the
Company for cause (defined below) or by you without good reason (defined below), you will only have
the right to receive salary and benefits accrued prior to the date of termination. If, however,
your employment is terminated by the Company for any reason other than for cause (defined below) or
by you for good reason (defined below), you will receive severance pay equal to 6 months salary
plus 50% of your maximum bonus opportunity. If, however, such an event occurs prior to the
completion of the Merger and the above referenced equity grant (if any) or within 16 months of the
date hereof, you will receive severance pay equal to 12 months salary plus 100% of your maximum
bonus opportunity. Notwithstanding the foregoing, if your employment is terminated by
the Company for cause or by you without good reason during this period, or at any time, you will
receive only the salary and benefits you accrued prior to the date of termination and you will not
be eligible to receive any severance. If you terminate your employment based on the failure of the
Company to provide you with the benefits to which you are entitled under “Benefits” above, then the
severance to which you would be entitled under this “Severance” provision shall be equal to 12
months salary plus 100% of your maximum bonus opportunity; provided, however, that if you are
thereafter employed by the Advisor or any of its affiliates within one year after ceasing to be
employed by the Company and you receive from your new employer benefits substantially equivalent to
those described under “Benefits” above, you shall repay to the Company a pro rata a portion of all
severance payments you previously received from the Company based upon a fraction equal to the
number of days during the 12 months following your termination that you were employed by the
Advisor or any of its affiliates, divided by 365.

Cause is defined as your commission of an act of fraud, theft or dishonesty related to his duties;
willful and continuing failure or habitual neglect to perform his duties after notice and an
opportunity to cure; or conviction or indictment of a crime involving moral turpitude.

Good Reason is defined as a material reduction in your authority, duties or responsibilities; a
reduction in your annual salary that is not in connection with the reduction of compensation
generally applicable to senior management (including at least one other Senior Vice President who
is an employee of the Company), when there are at least two other senior managers employed by the
Company; failure to comply with this letter agreement (including, without limitation, the
provisions set forth under “Benefits” above); the Company’s requirement that the work location be
moved more than 50 miles from the principal place of business; or the failure to receive Similar
Treatment.

The severance payment described above shall be in lieu of any amount of severance to which you
would be entitled under the Company’s severance policy, if any, in effect at the time of
termination.

 

Payment of any severance is conditioned upon your signing a customary agreement prepared by the
Company which includes a general release of claims.

CONDITIONS

This offer is not an employment contract, and, except as described above, any compensation
including salary and bonuses is based upon your continued employment with the Company.

This letter shall not be effective until (i) you have resigned from your positions with and
employment by the Advisor and such resignation has been accepted by the Advisor and has become
effective; and (ii) the Advisor has executed an acknowledgement and waiver substantially in the
form attached hereto as Exhibit B, which shall have become effective.

Notwithstanding anything to the contrary contained herein, if at any time you enter into an
employment agreement with the Company and such agreement becomes effective, such agreement (i)
shall not be deemed a termination of this agreement so as to entitle you to severance; and (ii)
shall supersede the terms of this agreement; and this agreement shall have no further force and
effect, except for any monies owed with respect to the period prior to the termination of this
agreement.

If all of the above meets with your understanding, please indicate your acceptance by signing the
signature line on the following page. Please return the signed original to me in the enclosed
envelope. The enclosed copy is for your records.

 

If you have any questions, please do not hesitate to contact me.

Sincerely,

	 	 	 	 	 
	 	 	 
	/s/ Dianna F. Morgan, Chair Compensation Committee
 	 
	Dianna F. Morgan, Chair Compensation Committee 	 
	 	 
	 

/enclosures

cc: Thomas Hutchison

I have read, understand and agree with the terms of the employment offer as outlined in this
letter.

	 	 	 	 	 
	 	 	 
	/s/ Greerson G. McMullen
 	 
	Signature/Date 	 
	 	 

 

Exhibit A

	 	 	 	 	 

REIT Benefits Coverage

GREERSON MCMULLEN

GOAL

Employ Greerson McMullen, Chief General Counsel, by the REIT while maintaining a comparable
level of coverage at equal cost and with similar tax consequences to the associate.

ASSUMPTIONS

1. Current employer is CNL Financial Group; REIT employer is CNL Hotels & Resorts, Inc. Tax
EIN # 59-3396369

2. Merger will take effect within 18 months or there will be an agreement made to re-employ
Greerson McMullen by the advisor to eliminate risk of lapse of coverage due to COBRA maximum time
limits.

3. REIT as employer would adopt practices and policies as they relate to Human Resources currently
in place at the Advisor.

4. Offer letter outlining terms of employment, reporting structure, and severance guidelines would
be provided by REIT.

	 	 	 	 	 
	BENEFIT/PLAN	 	2006 MONTHLY COST	 	COVERAGE OPTION
	Medical – United Health Care
90/70 EE + Family; $250/$500
annual deductible; $15 copays;
out of pocket max $2000 indiv
($4000 family)

	 	CNL 70% = $738.23
EE 30% = $308.67
pre-tax
plus copays and
deductible
	 	Same medical
coverage provided
through COBRA.
REIT pays the
difference between
COBRA rates and
current associate
costs (approx.
$759.17 per month).
	 
	 	 	 	 
	Dental (MetLife)
100% preventative care; $50
indiv/ $150 family deductible;
$1,500 annual max

	 	CNL 60% = $52.68
EE 40% = $35.12
pre-tax
plus $150 deductible
	 	Same dental
coverage provided
through COBRA.
REIT pays the
difference between
COBRA rates and
current associate
costs (approx.
$54.45 per month)
	 
	 	 	 	 
	Vision Insurance (VSP)

	 	100% associate paid
	 	Same vision
coverage provided
through COBRA.
REIT pays 2%
	 
	 	 	 	 
	$20 office visit; $20 materials
copay; lenses covered; $120
toward frames

	 	$19.76 pre-tax
	 	COBRA administration cost
(approx. $0.39 per
month).

 

	 	 	 	 	 
	BENEFIT/PLAN	 	2006 MONTHLY COST	 	COVERAGE OPTION
	Section 125 Plan Allows for medical, dental, and
vision premiums to be payroll
deducted pre-tax

	 	N/A	 	REIT to pay lump
sum of approx. $675
per month to offset
the loss of the
tax benefit
provided by the
Section 125 Plan
not available at
REIT. Calculation:
	 

	 	 
	 	$premium/(1- tax
rate)=
$436.83/(.65)
	 
	 	 	 	 
	Short Term Disability (STD) -
Reliance
60% of covered earnings up to
$1,500 per week for up to 12
weeks; 7 day elimination period.

	 	100% paid by CNL at
$37.50 per month
	 	REIT can provide
same coverage for a
maximum of 12
months at the same
cost. Individual
policy to be
provided by
Reliance.
	 
	 	 	 	 
	Long Term Disability (LTD) -
Reliance
60% of covered earnings up to
$15K per month until SSNRA; 90
day elimination period covered
by STD

	 	100% paid by CNL at
$0.37 per $1,000
monthly salary
	 	REIT can provide
same coverage for a
maximum of 12
months at the same
cost. Individual
policy to be
provided by
Reliance.
	 
	 	 	 	 
	Life / AD&D Insurance — Reliance
1 x annual base salary up to
$250K

	 	100% paid by CNL at
$0.11 per $1,000
salary to max of
$250K
	 	REIT can provide
same coverage for a
maximum of 12
months at the same
cost. Individual
policy to be
provided by
Reliance.
	 
	 	 	 	 
	Supplemental Life Insurance —
Reliance

	 	100% paid by
associate at
	 	REIT can provide
same coverage for a
maximum of 12
	 
	Purchased add’l $250K Life & ADD

	 	$18.58 per month
	 	months at the
same cost. Individual
policy to be
provided by Reliance.

 

	 	 	 	 	 
	BENEFIT/PLAN	 	2006 MONTHLY COST	 	COVERAGE OPTION
	Flexible Spending Accounts -
Pre tax deductions to fund
medical expenses up to $3,500

	 	N/A
	 	FSA to be provided
through COBRA –
post tax. REIT to
pay associate lump
sum of approx. $150
per month to make
up for the loss of
the tax benefit
provided by a
pre-tax FSA.
Subject to final
determination based
on expenses
submitted YTD.
	 
	 	 	 	 
	Parking

	 	100% paid by
associate
$60 per month pre tax
	 	REIT will pay the
parking expense
(non-reserved spot)
until merger.
	 
	 	 	 	 
	Employee Assistance Program (EAP)

	 	100% paid by CNL
	 	Associate may
utilize CARE 24
through United
Health Care
	 
	 	 	 	 
	401 (K) Fidelity Investments
Eligible Jan 1 2006; 4 year
vesting schedule; match to 50%
of 1st 7%, starting 6 months
after employment

	 	N/A
	 	A one time lump sum
in the amount of
$4,500 will be paid
to the associate in
lieu of providing
401K plan.
Associate will be
eligible to join
plan post merger.

 

OTHER COMPANY INSURANCE POLICIES

While not required due to the number of employees, Worker’s Comp coverage will be instituted
for the REIT.

Employment Practices Liability Insurance will not be obtained.

Fidelity bond will not be obtained.

 

Exhibit B

CONSENT AND WAIVER AGREEMENT

     THIS CONSENT AND WAIVER AGREEMENT, which shall become effective as of the commencement of
business on May 22, 2006, is entered into as of this 19th day of May, 2006, among CNL
Hotels & Resorts, Inc., a company formed under the laws of Maryland (“Company”), CNL Hospitality
Corp., a company formed under the laws of Florida (“CHC”) and Greerson G. McMullen residing at 673
Granville Drive, Winter Park, Florida 32789 (“McMullen”).

W I T N E S S E T H:

     WHEREAS, CHC entered into employment arrangements with McMullen subject to an employment
letter, dated August 23, 2005 (“Original Employment Letter”), pursuant to which CHC retained
McMullen as its Senior Vice President and Chief General Counsel for the purpose of having McMullen
provide services to CHC in connection with CHC’s role as the advisor to the Company; and

     WHEREAS, the Original Employment Letter contemplated that McMullen would also serve as the
Senior Vice President, Chief General Counsel and Secretary of the Company and McMullen was
appointed to those positions by the Board of Directors of the Company on November 30, 2005;

     WHEREAS, situations have arisen and may continue to arise which present potential or real
conflicts between the Company and CHC (“Conflict Situations”), the Company wants to be able to
fully utilize the services of McMullen in such Conflict Situations and his continued employment by
CHC would limit his ability to advise the Company in Conflict Situations because of duties he would
owe to CHC; and

     WHEREAS, it is possible that as a result of his employment by CHC (including serving as
CHC’s Senior Vice President and General Counsel), McMullen has learned confidential, non-public,
information about CHC, which is not otherwise known by the Company or its other officers or
representatives (the Company and its officers and representatives, collectively, “Representatives”
and individually, a Representative) (such information, until the earlier of (i) the consummation of
any merger of CHC with or into the Company or a subsidiary of the Company; or (ii) the time such
information becomes publicly known or is otherwise learned by a Representative, otherwise than
first through its disclosure by McMullen, is hereinafter referred to as “Confidential
Information”); and

     WHEREAS, the Company wishes to employ McMullen on an exclusive basis, McMullen wishes to be
employed by the Company on an exclusive basis and CHC is willing to accept McMullen’s resignation
and permit him to be employed by the Company on an exclusive basis;

     NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
contained herein and of other good and valuable consideration, the receipt and sufficiency of
which is hereby irrevocably acknowledged, the parties hereto agree as follows:

     1. Recitals. The Recitals hereto are herby incorporated herein by reference.

 

     2. Acceptance By CHC. CHC agrees to accept any resignation by McMullen effective at
the effective time of such resignation and to continue to honor those portions of the Original
Employment Letter as set forth in a side letter from CHC to Mr. McMullen to be executed
simultaneously herewith.

     3. Waiver. CHC, having been represented by its own counsel, waives any conflicts
necessary to permit McMullen to be employed by the Company and to counsel the Company in Conflict
Situations whether such Conflict Situations arose during McMullen’s exclusive employment by CHC,
his simultaneous employment as an officer of each of CHC and of the Company, or his exclusive
employment by the Company.

     4. Confidential Information. CHC has not and does not authorize McMullen to
communicate any Confidential Information to the Representatives with respect to Conflict
Situations. Any such authorization given in the future shall be void unless expressly given in
writing, duly approved and executed by CHC. McMullen agrees to use his good faith efforts not to
communicate Confidential Information to a Representative.

     5. Company Limitations. The Company agrees not to pursue claims against CHC based on
Confidential Information which McMullen discloses to a Representative. The Company further agrees
not to provide Confidential Information obtained from McMullen in any proceedings against CHC,
unless compelled to do so by subpoena or other court or regulatory order.

     6. No Liability. With respect to Conflict Situations and notwithstanding paragraph 4,
each of the Company and CHC agrees not to hold McMullen liable or bring any suit, claim or action
(collectively, “Action”) (or threaten such) or otherwise take any adverse action against McMullen
for any claims, damages, expenses, losses or other liabilities which arise from his counseling of
CHC or the Company during his employment by CHC or his counseling of the Company during his
employment by the Company. With respect to any disclosure of Confidential Information, CHC’s sole
and exclusive remedies against any party hereto shall be to enjoin the Company from utilizing such
Confidential Information and/or to bring an Action for money damages against the Company for the
use of the Confidential Information.

     7. Modification or Waiver. This Consent and Waiver Agreement shall not be changed,
modified or terminated except by an instrument in writing signed by all parties hereto, or their
respective successors or permitted assignees. No waiver shall be effective unless it is in writing
and is signed by the party asserted to have granted such waiver.

     8. Severability. The provisions of this Consent and Waiver Agreement are independent
of and severable from each other, and no provisions shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other or others of them may be invalid
or unenforceable in whole or in part.

     9. Construction. The provisions of this Consent and Waiver Agreement shall be
interpreted, construed and enforced in all respects in accordance with the laws of the State of
Florida applicable to contracts to be made and performed entirely in said state.

 

     10. Entire Agreement. This Agreement, together with a letter from CHC to McMullen,
dated the date hereof, acknowledging certain ongoing obligations of CHC to McMullen, a letter from
the Company to McMullen, dated the date hereof, setting forth certain employment arrangements, and
an indemnification agreement provided by the Company to McMullen contain the entire agreement and
understanding among the parties hereto with respect to the subject matter hereto, and supersedes
all prior and contemporaneous agreements, understandings, inducements and conditions express or
implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The
express terms hereof control and supersede any course of performance inconsistent with any of the
terms hereof.

     11. Gender. Words used herein regardless of the number and gender specifically used,
shall be deemed and construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context requires.

     12. Headings. The headings contained in this Consent and Waiver Agreement are for
convenience only, and they neither form a part of this Consent and Waiver Agreement nor are they to
be used in construction or interpretation hereof.

     13. Execution in Counterparts. This Consent and Waiver Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original as against any party
whose signature appears thereon, and all of which shall together constitute one and the same
instrument. This Consent and Waiver Agreement shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures of all of the parties reflected
hereon as the signatories.

 

     IN WITNESS WHEREOF, the parties hereto have executed this Consent and Waiver Agreement as of
the date and year above written.

CNL HOTELS & RESORTS, INC.

	 	 	 	 	 
	By:

	 	/s/ Thomas J. Hutchison III	 	 
	 

	 	 	 	 
	Printed:

	 	Thomas J. Hutchison III	 	 
	Title:

	 	CEO
	 	 
	 
	 	 	 	 
	CNL HOSPITALITY CORP.	 	 
	 
	 	 	 	 
	By:

	 	/s/ James M. Seneff, Jr.	 	 
	 

	 	 	 	 
	Printed:

	 	James M. Seneff, Jr.	 	 
	Title:

	 	Chairman	 	 
	 
	 	 	 	 
	/s/ Greerson G. McMullen	 	 
	 	 	 
	Greerson G. McMullen

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