Document:

Exhibit 10.1

PURCHASE AND SALE AGREEMENT

by and between

BOSTON CONVENTION CENTER HOTEL LLC,

BCCH RETAIL LLC

and

DIAMONDROCK HOSPITALITY LIMITED
PARTNERSHIP

 

FOR

WESTIN BOSTON WATERFRONT

 

 

DATED January 9, 2007

 

 

TABLE OF CONTENTS

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Certain Defined Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Purchase and Sale; Payment of Purchase Price

  	
  6

  
	
   

  	
  2.1

  	
  Purchase and Sale

  	
  6

  
	
   

  	
  2.2

  	
  Allocation of Purchase Price

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Conditions Precedent

  	
  7

  
	
   

  	
  3.1

  	
  Title Matters

  	
  7

  
	
   

  	
  3.2

  	
  Due Diligence Reviews

  	
  8

  
	
   

  	
  3.3

  	
  Performance by Seller

  	
  11

  
	
   

  	
  3.4

  	
  Performance by Buyer

  	
  11

  
	
   

  	
  3.5

  	
  Management Agreement

  	
  12

  
	
   

  	
  3.6

  	
  Liquor Licenses

  	
  12

  
	
   

  	
  3.7

  	
  Audit

  	
  12

  
	
   

  	
  3.8

  	
  Ground Lessor Estoppels

  	
  13

  
	
   

  	
  3.9

  	
  Management Agreement Estoppel

  	
  13

  
	
   

  	
  3.10

  	
  License Agreement Estoppel

  	
  13

  
	
   

  	
  3.11

  	
  Option Agreement Estoppel

  	
  14

  
	
   

  	
  3.12

  	
  PILOT Agreement

  	
  14

  
	
   

  	
  3.13

  	
  Retail Ground Lease

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Closing Procedure

  	
  16

  
	
   

  	
  4.1

  	
  Retail Closing

  	
  16

  
	
   

  	
  4.2

  	
  Closing Deliveries

  	
  16

  
	
   

  	
  4.3

  	
  Closing Costs

  	
  20

  
	
   

  	
  4.4

  	
  Prorations

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Condemnation or Destruction of Property

  	
  26

  
	
   

  	
  5.1

  	
  Condemnation

  	
  26

  
	
   

  	
  5.2

  	
  Fire or Other Casualty

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Representations, Warranties and Covenants

  	
  27

  
	
   

  	
  6.1

  	
  Representations, Warranties and Covenants of Seller

  	
  27

  
	
   

  	
  6.2

  	
  Representations and Warranties of Buyer

  	
  32

  
	
   

  	
  6.3

  	
  Survival

  	
  37

  
	
   

  	
  6.4

  	
  Interim Covenants of Seller

  	
  37

  
	
   

  	
  6.5

  	
  Additional Retail Ground Lease Covenants and
  Agreements

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  DISCLAIMER, RELEASE AND ASSUMPTION

  	
  44

  
	
   

  	
  7.1

  	
  DISCLAIMER

  	
  44

  
	
   

  	
  7.2

  	
  SURVIVAL

  	
  45

  

 

 i
 

 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Disposition Of Escrow Deposit

  	
  45

  
	
   

  	
  8.1

  	
  Default by Seller

  	
  45

  
	
   

  	
  8.2

  	
  Default By Buyer

  	
  46

  
	
   

  	
  8.3

  	
  Closing

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Miscellaneous

  	
  47

  
	
   

  	
  9.1

  	
  Brokers

  	
  47

  
	
   

  	
  9.2

  	
  Limitation of Liability

  	
  47

  
	
   

  	
  9.3

  	
  Exhibits; Entire Agreement; Modification

  	
  48

  
	
   

  	
  9.4

  	
  Time of the Essence

  	
  49

  
	
   

  	
  9.5

  	
  Interpretation

  	
  49

  
	
   

  	
  9.6

  	
  Governing Law

  	
  49

  
	
   

  	
  9.7

  	
  Successors and Assigns

  	
  49

  
	
   

  	
  9.8

  	
  Notice

  	
  50

  
	
   

  	
  9.9

  	
  Third Parties

  	
  51

  
	
   

  	
  9.10

  	
  Legal Costs

  	
  51

  
	
   

  	
  9.11

  	
  No Recordation

  	
  52

  
	
   

  	
  9.12

  	
  Counterparts

  	
  52

  
	
   

  	
  9.13

  	
  Effectiveness

  	
  52

  
	
   

  	
  9.14

  	
  Press Releases or other Disclosure

  	
  52

  
	
   

  	
  9.15

  	
  Indemnities

  	
  52

  

 

	
  Exhibit

  	
   

  	
  List of Exhibits and Schedules

  
	
  A.

  	
   

  	
  Hotel Land

  
	
  B.

  	
   

  	
  Retail Land

  
	
  C.

  	
   

  	
  Environmental Reports

  
	
  D.

  	
   

  	
  Financial Information

  
	
  E.

  	
   

  	
  Leases

  
	
  F.

  	
   

  	
  Escrow Deposit Agreement

  
	
  G.

  	
   

  	
  Interim Beverage Services Agreement

  
	
  H.

  	
   

  	
  Hotel Ground Lease Assignment and Assumption

  
	
  I.

  	
   

  	
  Retail Ground Lease Assignment and Assumption

  
	
  J.

  	
   

  	
  Option Agreement Assignment and Assumption

  
	
  K.

  	
   

  	
  License Agreement Assignment and Assumption

  
	
  L.

  	
   

  	
  Management Agreement Assignment and Assumption

  
	
  M.

  	
   

  	
  Other Assignment and Assumption

  
	
  N.

  	
   

  	
  Bill of Sale

  
	
  O.

  	
   

  	
  Seller closing Certificate

  
	
  P.

  	
   

  	
  FIRPTA

  
	
  Q.

  	
   

  	
  Buyer Closing Certificate

  

 

 ii
 

 

 

	
  R.

  	
   

  	
  Retail Ground Lease Amendment

  
	
  S.

  	
   

  	
  Hotel Ground Lease Amendment

  
	
  T.

  	
   

  	
  Status Report Update

  
	
  U.

  	
   

  	
  PILOT Agreement

  
	
  V.

  	
   

  	
  Article 80 Agreements

  
	
   

  	
   

  	
   

  
	
  Schedule 2.2

  	
   

  	
  Purchase Price Allocation

  
	
  Schedule 3.2.1

  	
   

  	
  Materials to be Delivered

  

 

 iii

 

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND
SALE AGREEMENT (this “Agreement”) is made and entered into as of the 9th day of January, 2007, by and between BOSTON
CONVENTION CENTER HOTEL LLC, a Delaware limited liability company (“Hotel Seller”), BCCH RETAIL LLC, a Delaware
limited liability company (“Retail Seller”
and collectively with Hotel Seller, “Seller”),
and DIAMONDROCK HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited partnership
(“Buyer”).

R E C I T A L S

A.            Seller is the owner of
the Property; and

B.            Buyer desires to
purchase the Property from Seller and Seller is willing to sell the Property to
Buyer, subject to and upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in
consideration of the mutual undertakings of the parties hereto, it is hereby
agreed as follows:

Certain Defined Terms. As
used herein:

1.1           “Additional Rent” shall have the meaning set
forth in Section 4.4.1(b).

1.2           “Additional Use” shall have the meaning set
forth in Section 3.13.

1.3           “Amended PILOT Agreement” shall have the meaning set forth in
Section 3.12.

1.4           “Closing” shall have the meaning set forth
in Section 4.

1.5           “Closing Date” shall mean January 31, 2007.

1.6           “Due Diligence Period” shall have the
meaning set forth in Section 3.2.

1.7           “Environmental Reports” shall mean the
reports described in Exhibit C attached hereto.

1.8           “Equipment Leases” means, collectively, (a)
the equipment leases now in effect with respect to the Property and to be set
forth on an Exhibit hereto to be added by amendment to the Agreement not
later than January 10, 2007, and (b) those equipment leases hereafter
entered into in accordance with the terms hereof.

1.9           “Escrow Deposit” shall mean Fifteen Million
Dollars ($15,000,000.00) to be deposited as set forth in Section 2.1.1 (a),
together with all interest earned thereon, as such amount may be adjusted
pursuant to the terms hereof.

1.10         “Existing Indebtedness” shall mean (i) that
certain loan made by The Bank of Nova Scotia, as administrative agent for
itself and other lenders, to Seller on May 27, 2004 in the original principal
amount of $121,000,000.00 (ii) that certain loan made by the City

 1
 

 

 

of Boston, as
lender, to Seller, in the principal amount of $15,000,000, and (iii) those two
certain mezzanine loans, each made by Starwood Hotels & Resorts Worldwide,
Inc., in the original aggregate principal amount of $32,500,000.00.

1.11         “Existing Indebtedness Lenders” shall mean
the current noteholders or lenders of any of the Existing Indebtedness.

1.12         “Existing Policies” shall have the meaning
set forth in Section 3.1.1.

1.13         “Financial Information” means Seller’s
financial information provided to Buyer and set forth on Exhibit D
attached hereto.

1.14         “Ground Leases” means the Hotel Ground Lease
and the Retail Ground Lease, collectively.

1.15         “Ground Lessor” means Massachusetts
Convention Center Authority, a body politic and corporate.

1.16         “Hotel and Option Closing” shall have the
meaning set forth in Section 4.1.1.

1.17         “Hotel Ground Lease” means that certain
Hotel Ground Lease for Convention Center Hotel Parcel, dated as of May 27,
2004, between Ground Lessor and Seller, together with all amendments and
supplements thereto.

1.18         “Leases” means, collectively, (a) the
leases, licenses and concessions agreements listed on Exhibit E
attached hereto and (b) the leases, licenses and concessions agreements
entered into with respect to the Property in accordance with this Agreement.

1.19         “License Agreement” means that certain
License Agreement, dated as of May 27, 2004, between Ground Lessor, as
licensor, and Seller, as licensee.

1.20         “Management Agreement” shall mean that
certain Management Contract for the Westin Boston, Seaport, dated May 27, 2004,
between Manager and Hotel Seller, together with all amendments and supplements
thereto.

1.21         “Manager” shall mean Westin Management
Company East, the manager under the Management Agreement.

1.22         “Material Adverse Affect” means an event or
circumstance which may reasonably be expected to cause out-of-pocket loss, cost
or damage of $250,000.00 or more.

1.23         “Material Contracts” shall have the meaning
set forth in Section 6.1.2(viii).

1.24         “Operational Taxes” shall have the meaning
set forth in Section 4.4.1(a)(ii).

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1.25         “Option Agreement” means that certain Option
Agreement (The Westin Boston, Seaport – Phase II), dated as of May 27, 2004,
between Ground Lessor, as optionor, and Seller, as optionee.

1.26         “Permitted Exceptions” means, with respect
to the Property: (a) all matters referred to as exceptions in the Existing
Policies, shown on the Surveys, or which would be shown on the Commitment or
any updates to the Surveys, other than Additional Title Matters disapproved in
a Title Disapproval Notice, (b) liens for taxes, assessments and governmental
charges with respect to the Property not yet due and payable; and (c)
applicable zoning regulations and ordinances and other governmental laws,
ordinances and regulations (provided, however, that any violation of such laws,
regulations or ordinances first arising after the end of the Due Diligence
Period and which has a Material Adverse Affect shall not be a Permitted
Exception).

1.27         “Person” shall mean any individual,
corporation, partnership, association, trust, limited liability company or
other entity or organization.

1.28         “PILOT Agreement” means the Contract for
Payment in Lieu of Taxes, dated May 27, 2004, among the Hotel Seller, the
City of Boston and The Boston Redevelopment Authority, as the same may amended
and/or restated.

1.29         “Property” means:  Seller’s leasehold right, title and interest
in and to (a)  that certain land described in Exhibit A,
together with all easements, licenses, rights-of-way, and appurtenances
benefiting such land which Seller may own or lease or hereafter acquire an
interest with respect thereto (the “Hotel
Land”), (b) those certain air rights described in Exhibit B,
together with all easements, licenses, rights-of-way, and appurtenances
benefiting such land which Seller may own or lease or hereafter acquire an
interest with respect thereto (the “Retail
Land” and together with the Hotel Land, the “Land”) and (c) all improvements,
structures and facilities located upon the Land (the “Leasehold Improvements”);  all improvements, structures and facilities
owned by Seller and located upon the Land (the “Owned Improvements”, together with the Leasehold Improvements,
collectively, the “Improvements”);  Seller’s right, title and interest in and to
(a) all furniture, fixtures, and equipment and items of personal property
(other than cash) used in the operation of the Improvements on or attached or
appurtenant to the Improvements, including, without limitation, furnishings,
artwork, all fabric, textile and flexible plastic products which are used in
furnishing the hotel, including carpeting, drapes, bedspreads, wall and floor
coverings, mats, shower curtains and similar items, furniture and furnishings
used in the hotel, including, chairs, beds, chests, headboards, desks, lamps,
tables, television sets, mirrors, pictures, wall decorations and similar items,
signage, audio visual equipment, kitchen appliances, vehicles, carpeting and
equipment, including front desk and back of the house computer equipment,
manuals, all books and records relating to the Property, phone lists, guest
lists and off site and on-site signs (collectively, the “Personal Property”), (b) all food, liquor,
wine and other beverages, including such food, liquor and other beverages held
for sale in hotel rooms within the Improvements, and all consumable supplies
and inventories of every kind and nature including “Inventories of Merchandise”
and “Inventories of Supplies” as such terms are defined in the current Uniform
System of Accounts for Hotels published by the Hotel Association of New York
City, Inc. (the “Consumables”), in
each case owned by Seller as of the Closing Date (and not by tenants under

 3
 

 

 

Leases applicable
to the Property), and located at, and used in connection with the operation of,
the Improvements, including, without limitation, cleaning supplies, guest
supplies, paper supplies, stationary, bar supplies, robes, slippers, fuel,
laundry supplies, engineering supplies, sundry or gift shop inventory and room,
food and beverage linen, glassware and silverware, whether in use or held in
stock or storage for future use in connection with Seller’s ownership, operation
or maintenance of the Improvements provided that to the extent that any
applicable law prohibits the transfer of alcoholic beverages from Seller to
Buyer, such beverages shall not be considered a part of the Property until such
time as the same may lawfully be transferred after Closing, at which point the
same shall be transferred (and pending such post-Closing transfer, such
alcoholic beverages shall be subject to the terms of any post-Closing liquor
license operating agreement entered into pursuant to the terms of Section 3.6
hereof); the landlord’s interest in all Leases, the rights of Seller, to the
extent assignable, in and to all Service Agreements, the Article 80 Agreements listed
on Exhibit V attached hereto (the “Article 80 Agreements”), the Equipment
Leases, the Management Agreement, the License Agreement, and the Option
Agreement, goodwill, Seller’s rights, if any, in Manager’s workforce in place
at the Land and, to the extent assignable, all right, title and interest of
Seller in and to all copyrights, trademarks, trade names, and any licenses
related to the foregoing that relate to the business being conducted on the
Land (except for liquor licenses owned by Seller until transferred to Buyer in
accordance with Section 3.6), other than any software licenses used by
Seller in the corporate offices of Seller (the matters described in this clause
collectively called the “Intangible Property”);
provided, however, in no event shall the Intangible Property include Westin
brand concepts or the “Intellectual Property” as defined in the Management
Agreement;  to the extent assignable, the
corporate, airline, bus, tour operator, barter and similar agreements pursuant
to which third parties have been given certain rights to rooms or services at
the Hotel from and/or after the Closing Date, including, without limitation the
Westin Boston, Room Block Commitment Agreement (the “Room Block Agreement”) dated May 27, 2004 among Hotel
Seller, Manager and Ground Lessor, and such other rooms agreements as may
hereafter be entered into in compliance with the terms hereof (the “Rooms Agreements”), and all Bookings
(hereinafter defined). Notwithstanding anything to the contrary in this
Agreement, the Property shall not include any of the following:  (i) property of guests; (ii) items owned
by the Manager; (iii) tax deposits, utility deposits and other deposits held by
parties other than Seller or by third parties on Seller’s behalf (including
without limitation the Manager), except for any transferable deposits assigned
to Buyer, for which Seller is to be reimbursed as herein provided; (iv) any
tax, insurance, FF&E, capital improvement and/or other escrows, impounds or
reserves held by Existing Indebtedness Lenders, the Manager or any other party,
except to the extent such items are specifically assigned to Buyer and for
which Seller is reimbursed;  (v) all
checks, drafts, notes, and other evidence of indebtedness held at the Hotel on
the Closing Date, and any balances on deposit with banking institutions
relating to the Hotel, including amounts held in “house banks”; (vi) all
computer software and/or systems owned by Manager, including, without
limitation, the payroll software and/or system; and (vii) any and all personal
property owned by employees of the Hotel or by a vendor or any other third
party distinct from Seller (all of the foregoing, collectively, the “Excluded Property”).

1.30         “Purchase Price” shall mean Three Hundred
Thirty Million Three Hundred Thousand and No/100 Dollars ($330,300,000.00),
representing the total consideration to be paid to Seller by Buyer prior to
adjustments, prorations, credits, and allocations of income and expenses
provided for in this Agreement.

 4
 

 

 

1.31         “Required Liquor Licenses” shall have the
meaning set forth in Section 3.5.

1.32         “Retail Allocation” shall have the meaning
set forth in Section 4.1.1.

1.33         “Retail Closing” shall have the meaning set
forth in Section 4.1.2.

1.34         “Retail Closing Date” shall have the meaning
set forth in Section 4.1.2.

1.35         “Retail Conditions Failure” shall have the
meaning set forth in Section 4.1.1.

1.36         “Retail Escrow Deposit” shall have the
meaning set forth in Section 8.3.

1.37         “Retail Ground Lease” means that certain
Retail Ground lease for Convention Center Retail Parcel, dated as of May 27,
2004, between Ground Lessor, as lessor and BCCH Retail LLC, as lessee together
with all amendments and supplements thereto.

1.38         “Retail Land Build-Out” shall have the
meaning set forth in Section 6.5.2(b).

1.39         “Retail Land Lease-Up” shall have the
meaning set forth in Section 6.5.2(a).

1.40         “Retail Special Conditions Precedent” shall
have the meaning set forth in Section 3.13.

1.41         “Seller Mortgage Liens” means any mortgage
or deed of trust liens, construction or mechanics’ liens, tax liens (excluding
liens for taxes not yet due and payable) or other liens or charges in a fixed
sum created or arising by, through or under Seller or capable of computation as
a fixed sum that encumber the Property (excluding therefrom any mortgages or
deeds of trust and related encumbrances securing the Existing Indebtedness).

1.42         “Service Agreements” means, collectively,
(a) that certain Garage Management and Valet Services Agreement with Pilgrim
Parking dated June 21, 2006 and the service, maintenance and operation
contracts now in effect with respect to the Property and to be set forth on an Exhibit
hereto to be added by amendment to the Agreement not later than January 10,
2007, (b) such contracts which are cancelable on thirty (30) days’ or less
notice, without penalty, and (c) such contracts with respect to the Property
entered into in accordance with this Agreement.

1.43         “Surveys” shall have the meaning set forth
in Section 3.1.1.

1.44         “Tax Return” or “Tax Returns” includes all returns, reports, information
returns, forms, declarations, claims for refund, statements and other documents
(including any amendments thereto and including any schedule or attachment
thereto) in connection with income taxes that are required to be filed with a
governmental or other tax authority, or sent or

 5
 

 

 

provided to
another party under applicable law (including any schedule or attachment
thereto and including any amendment thereof).

1.45         “Tenants” shall mean the tenants under the
Leases.

1.46         “Transaction Rent” shall have the meaning
ascribed to it in the Hotel Ground Lease.

Purchase and Sale;
Payment of Purchase Price.

Purchase and Sale. Upon
the terms and conditions hereinafter set forth, Seller shall sell to Buyer, and
Buyer shall purchase from Seller, the Property.

1.1.1        Payment of Purchase
Price. The Purchase Price shall be paid to Seller by Buyer as
follows:

(a)           Escrow
Deposit. Within two (2) business days after the execution hereof, Buyer
shall deliver the sum of Fifteen Million Dollars ($15,000,000.00) as a deposit
to First American Title Insurance Company, at its offices at 1801 K Street, NW,
Suite 200K, Washington, D.C. 20006, Attention: Clare Ursano (which company, in
its capacity as escrow holder hereunder, is called “Escrow
Holder”). In the event that Buyer elects to make public disclosure
of the transaction in accordance with the penultimate sentence of Section 9.14
hereof, Three Million Dollars ($3,000,000.00) of the Escrow Deposit shall be
deemed earned by and payable to Seller upon termination of this Agreement by
Buyer in accordance with Section 3.2.2(a) or Section 3.2.2(b), or
(if not waived by Buyer on the Hotel and Option Closing Date), upon failure of
the conditions set forth in Section 3.13.6. The Escrow Deposit shall be
delivered to Escrow Holder by wire transfer of immediately available federal
funds or by bank or cashier’s check drawn on a national bank reasonably
satisfactory to Seller. The Escrow Deposit shall be held by Escrow Holder as a
deposit against the Purchase Price, and shall be invested by Escrow Holder, in
accordance with the terms and provisions of this Agreement, and a separate
escrow agreement in the form of Exhibit F attached hereto and dated
the date hereof by and among Buyer, Seller and Escrow Agent (the “Interim Deposit Agreement”). At all times that the Escrow
Deposit is being held by the Escrow Holder, the Escrow Deposit shall be
invested by Escrow Holder in the following investments (“Approved
Investments”):  (i) United
States Treasury obligations, (ii) United States Treasury backed repurchase
agreements issued by a major money center banking institution reasonably
acceptable to Seller and Buyer, (iii) the Bank of America money market fund
that invests in U.S. Treasury securities known as “Nations Treasury Reserves -
Daily Shares (symbol NTRDX)” or (iv) such other manner as may be reasonably
agreed to by Seller and Buyer. The Escrow Deposit shall be disposed of by
Escrow Holder only as provided in this Agreement. All accrued interest on the
Escrow Deposit shall become part of the Escrow Deposit.

(b)           Closing
Payment. The balance of the Purchase Price, as adjusted by the adjustments,
prorations, credits, and allocations of income and expenses provided for in
this Agreement (as so adjusted, the “Closing Payment”),
shall be paid by Buyer

 6
 

 

 

delivering the
Closing Payment to Escrow Agent by federal funds wire transfer of immediately
available funds on the applicable Closing Date.

Allocation of Purchase
Price. Seller and Buyer agree that the Purchase Price will be allocated to the
assets acquired by Purchaser for all purposes as set forth in Schedule 2.2
attached hereto. The Seller and Purchaser shall file all Tax Returns (including
amended returns and claims for refund) and information reports in a manner
consistent with such allocation. The provisions of this Section 2.2 shall
survive the Closing.

Conditions Precedent. The
obligation of Buyer to acquire the Property, the obligation of Seller to sell
the Property, as contemplated by this Agreement, is subject to satisfaction of
each of the following conditions precedent (any of which may be waived in
writing by the party in whose favor such condition exists) on or before the
applicable date specified for satisfaction of the applicable condition. Subject
to Section 4.1 below, if any of such conditions is not fulfilled (or waived)
pursuant to the terms of this Agreement, then this Agreement shall terminate
following the expiration of the applicable cure period under Section 8.1 or
8.2, and, in connection with any such termination made in accordance with this
Section 3, the Seller and Buyer shall be released from further obligation or
liability hereunder (except for those obligations and liabilities which,
pursuant to the terms of this Agreement, survive such termination), and the
Escrow Deposit shall be disposed of in accordance with Section 8. The “Closing”
(as hereinafter defined) shall constitute approval by each party of all matters
to which such party has a right of approval and a waiver of all conditions
precedent; and, in the case of Buyer, a waiver of any breaches of Seller’s
representations and warranties contained herein known to Buyer as set forth in
Section 9.2.3(b); except that there shall be no waiver for a breach of the
Seller’s representations and warranties contained herein not known to Buyer as
set forth in Section 9.2.3(b) or for any covenants expressly surviving
Closing as set forth herein.

Title Matters.

1.1.2        Title Report/Survey. Buyer has received Seller’s
existing title policies dated June 8, 2004 (the “Existing
Policies”) issued by Fidelity National Title Insurance Company as
Policy Nos. 5312-996058 and 5312-996059 and has ordered title insurance
commitments for the Land  dated on or
after the date hereof (the “Commitment”)
from First American Title Insurance Company or such other national title
insurance company as Buyer selects (which company, in its capacity as title
insurer hereunder, is herein called the “Title Company”).
In addition, Seller has delivered and Buyer has received the surveys of the
Land in Seller’s possession (the “Surveys”). Seller
shall cooperate reasonably with Buyer to facilitate Buyer’s obtaining the
Commitment and any updates to the Surveys or new surveys. If Buyer shall fail
to deliver the Termination Notice as hereinafter defined on or before the end
of the Due Diligence Period (as hereinafter defined), Buyer shall be deemed to
have approved the exceptions to title shown on the Commitments and the matters
disclosed on the Surveys (other than Existing Loan Documents or other Seller
Mortgage Liens) and such other title or survey matters as are disclosed to
Buyer during the Due Diligence Period.

1.1.3        Additional Post Due Diligence Title Matters.
Approval by Buyer of any, in Buyer’s reasonable opinion, material additional
exceptions to title or survey matters first arising after the end of the Due
Diligence Period (“Additional Title Matters”)
shall

 7
 

 

 

be a condition precedent to Buyer’s obligations to purchase the
Property (Buyer hereby agreeing that its approval of Additional Title Matters
shall not be unreasonably withheld). Unless Buyer gives written notice (“Title Disapproval Notice”) that it disapproves any
Additional Title Matters, stating the Additional Title Matters so disapproved,
before the sooner to occur of the Closing or ten (10) days after receipt of
written notice of such Additional Title Matters, Buyer shall be deemed to have
approved such Additional Title Matters. Seller shall have up to a thirty (30)
day period after its receipt of any Title Disapproval Notice within which to
remove the disapproved Additional Title Matters set forth therein from title or
obtain from Title Company a commitment to issue an endorsement affirmatively
insuring against such items in a form reasonably acceptable to Buyer at no cost
or expense to Buyer (Seller having the right but not the obligation to do so),
and the Closing Date shall be extended, at Seller’s option, to allow for such
thirty (30) day period. In the event Seller determines at any time that it is
unable or unwilling to remove any one or more of such disapproved Additional
Title Matters, Seller may give written notice to Buyer to such effect; in such
event, Buyer may, at its option, terminate this Agreement upon written notice
to Seller (whereupon the Escrow Deposit shall be returned to Buyer) but only if
given prior to the sooner to occur of the Closing or ten (10) days after Buyer
receives Seller’s notice. If Buyer fails to give such termination notice by
such date, Buyer shall be deemed to have waived its objection to, and approved,
the matters set forth in Seller’s notice.

1.1.4        Seller Mortgage Liens. Notwithstanding
the foregoing provisions of this Section 3.1.3, Seller shall be
obligated to take such actions as may be required by the Title Company so that
the Title Company is willing to issue title insurance to Buyer without
exception for any Existing Loan Documents or other Seller Mortgage Liens. Such
actions shall include obtaining a pay-off letter and leaving a portion of the
Purchase Price in escrow to satisfy the Seller Mortgage Liens; provided,
however, that Seller’s obligations under this Section 3.1.3 with respect
to mechanics liens, attachments, or the like, not voluntarily imposed by or
otherwise in the control of Seller shall be limited to the expenditure or
escrow of not more than $250,000.00 in the aggregate.

1.1.5        Exceptions to Title. Buyer shall be
obligated to accept title to the Property, subject to the Permitted Exceptions.
Conclusive evidence of the availability of such title shall be the willingness
of Title Company to issue to Buyer on the Closing Date an owner’s title
insurance policy in the standard form issued in the Commonwealth of
Massachusetts (the “Owner’s Policy”),
in the face amount of the Purchase Price, which policy shall show
(i) title to the Land vested of record in Buyer’s designee, and (ii) the
Permitted Exceptions to be the only exceptions to title.

1.1.6        Endorsements to Owner’s Policies. It is
understood that Buyer may request a number of endorsements to the Owner’s
Policies. Buyer shall satisfy itself during the Due Diligence Period that the
Title Company will issue such additional endorsements in connection with the
Owner’s Policies at Closing. However, the issuance of such endorsements shall
not be a condition to Closing and in no event shall Seller be obligated to
provide any indemnity or other document in order to issue such endorsements
except as otherwise provided in and subject to Section 4.2.1(y).

Due Diligence Reviews. Except
for title and survey matters (which shall be governed by the provisions of
Section 3.1 above), and subject to the provisions hereinafter set

 8
 

 

 

forth, Buyer shall
have until 5:00 p.m. (Eastern Standard Time) on January 18, 2007, (the period
beginning on the date hereof and ending on such date and time being herein
called the “Due Diligence Period”)
within which to perform and complete all of Buyer’s due diligence examinations,
reviews and inspections of all matters pertaining to the purchase of the
Property, including all permits, licenses, management agreements, leases,
service contracts, and all physical, environmental and compliance matters (including,
without limitation, compliance with any off-site mitigation requirements) and
conditions respecting the Property. Seller shall provide Buyer with reasonable
access to the Property (subject to this Section 3.2) upon reasonable advance
notice and shall also make available to Buyer (to the extent in Seller’s
possession or control) and shall instruct Manager to make available to Buyer
such leases, service contracts and other information relating to the operation
of the Property as Buyer shall reasonably request, all upon reasonable advance
notice. By not later than January 10, 2007, Seller shall prepare and submit to
Purchaser Exhibits setting forth a list of all Service Agreements and Equipment
Leases in effect as well as copies of all such listed Service Agreements and
Equipment Leases, whereupon the parties shall execute an amendment to the
Agreement providing for the attachment of such Exhibits as Exhibits hereto. In
no event, however, shall Seller be obligated to make available any
attorney-client work product or privileged documents or documents in breach of
confidentiality agreements or any internal memoranda, correspondence, analyses,
documents or reports prepared by or for Seller for its internal use in
connection with this Agreement, the transaction contemplated by this Agreement,
the acquisition of the Property by Seller (other than any property condition,
compliance, engineering, third party inspection or environmental reports
pertaining to the Property), and appraisals or other valuations of the Property
in the possession or control of Seller. Buyer shall promptly commence, and
shall diligently and in good faith pursue, its due diligence review hereunder. Seller
acknowledges and agrees that Buyer shall have the continued right to access the
Property in accordance with this Section 3.2 at all times prior to Closing, it
being understood that Buyer shall only have the right to terminate this
Agreement set forth in Section 3.2.2 below on or before the expiration of the
Due Diligence Period.

1.1.7        Review Standards. Buyer shall at all
times conduct its review, inspections and examinations in a manner so as to not
cause liability, damage, lien, loss, cost or expense to Seller or the Property
and so as to not unreasonably interfere with or disturb Manager, any guest or
any tenant at the Property, and Buyer will indemnify, defend, and hold Seller
and the Property harmless from and against any such liability, damage, lien,
loss, cost or expense (the foregoing obligation surviving any termination of
this Agreement). Prior to entry upon the Property, Buyer shall provide Seller
with copies of certificates of insurance evidencing comprehensive general
liability insurance policies (naming Seller as an additional insured) which
shall be maintained by Buyer in connection with its investigations upon the
Property prior to the date of entry upon the Property, with limits, coverages
and insurers under such policies reasonably satisfactory to Seller which
insurance policies must have limits for bodily injury and death of not less
than Five Million Dollars ($5,000,000) for any one occurrence and not less than
Five Million Dollars ($5,000,000) for property damage liability for any one
occurrence. Without limitation on the foregoing, in no event shall Buyer:  (a) make any intrusive physical testing
(environmental, structural or otherwise) at the Property (such as soil borings,
water samplings or the like) without Seller’s express written consent which may
be withheld in Seller’s sole and absolute discretion (and Buyer shall in all
events promptly return the Property to their prior condition and repair
thereafter) and which may be further conditioned upon, among other things,
Seller’s reasonable approval of the following: 
(i) the insurance coverage of the contractor who

 9
 

 

 

will be conducting such testing; and (ii) the scope and nature of
such testing to be performed by such contractor; (b) contact the Manager or any
of the Manager’s employees without Seller’s express written consent and
approval of the text, scope, context and/or agenda for any proposed
communication (which shall not be unreasonably withheld or delayed in the case
of any proposed contact with Manager’s senior executives); (c) contact any
governmental authority having jurisdiction over the Property or any tenant of
the Property without Seller’s express written consent and approval of the text,
scope, context and/or agenda for any proposed communication (which shall not be
unreasonably withheld or delayed in the case of any proposed contact with
senior officials in any particular authority); provided, that Buyer or Buyer’s
attorneys may with Seller’s prior consent and approval (not to be unreasonably
withheld) of the text, scope, context and/or agenda for any proposed
communication, perform a zoning and permit review or retain a third party firm
engaged in the business of zoning and permit reviews to perform such a review
with respect to determining Seller’s and the Property’s compliance with
applicable zoning and building code requirements, and may contact governmental
authorities to cause the transfer or issuance of all applicable licenses and
permits (including liquor licenses) necessary for the continued normal
operation of the Property following the Closing. Seller shall deliver to Buyer
promptly after the date hereof copies of any zoning or permitting opinions
which Seller has delivered to the Existing Indebtedness Lenders. Seller shall
have the right, at its option, to cause a representative of Seller to be
present at all inspections, interviews, reviews and examinations conducted
hereunder, including, without limitation, any communications with Manager, any
employees or any governmental authorities. Seller agrees that its
representative(s) shall be reasonably available to Buyer on reasonable advance
notice for purposes of the immediately preceding sentence (including, without
limitation, making its representatives reasonably available to discuss issues
raised by Buyer with respect to the entitlement of the Land). To the extent in
Seller’s possession (or in its attorneys’ possession), Seller shall cause the
materials listed on Schedule 3.2.1 attached hereto to be delivered to
Buyer on or before the date set forth therefor on Schedule 3.2.1. Seller
will cooperate with Buyer at Buyer’s request by using reasonable efforts to
arrange a meeting for Buyer during the Due Diligence Period with a senior
official having jurisdiction of the PILOT Agreement and real estate taxation
matters in order that Buyer may attempt to ascertain the effect consummation of
the transaction will have on the PILOT Agreement and on real estate taxes. At
Seller’s written request, at no expense to and without representation, warranty
by or liability to Buyer, and provided Buyer has the right to do so, Buyer
shall promptly deliver to Seller true and complete copies of any written
reports relating to the Property prepared for or on behalf of Buyer by any
third party. In the event of any termination of this Agreement, Buyer shall
return all documents and other materials furnished by Seller. Prior to Closing
and subject to Section 9.14 hereof, Buyer shall keep all non-public
information or data received or discovered in connection with any of Buyer’s
inspections, reviews or examinations strictly confidential, except for
disclosures required to comply with applicable law and disclosures to
representatives, investors, lenders, counsel and agents, provided such
disclosures are on an as needed basis for Buyer’s acquisition of the Property,
and such persons are instructed to keep the information strictly confidential. The
provisions of this Section 3.2.1 shall survive any termination of this
Agreement.

 10
 

 

 

1.1.8        Termination Rights.

(a)           If,
on or before the expiration of the Due Diligence Period, Buyer shall determine
in its sole discretion that it no longer intends to acquire the Property, then
Buyer shall promptly (but in all events prior to the expiration of the Due
Diligence Period) notify Seller of such determination in writing (such notice
being herein called the “Termination Notice”),
whereupon this Agreement, and the obligations of the parties hereunder, shall
terminate (and no party hereto shall have any further obligation in connection
herewith except under those provisions that expressly survive a termination of
this Agreement). In such event, subject to Section 2.1.1(a) above, the
Escrow Deposit shall be released to Buyer by Escrow Holder. In the event that
Buyer shall fail to have delivered the Termination Notice to Seller before the
expiration of the Due Diligence Period, Buyer shall have no further right to
terminate this Agreement pursuant to this Section 3.2.2(a), and the
Escrow Deposit shall not be refundable to Buyer for any reason whatsoever,
except as otherwise set forth in this Agreement. If Buyer obtains a written
recommendation from a licensed engineer that it conduct any invasive testing or
sampling, then so long as Buyer requests Seller’s consent to such testing by
written notice to Seller not later than January 10, 2007 (accompanied by a copy
of the engineer’s recommendation), Seller shall respond on or before January 12,
2007. If Seller fails to so respond, such failure shall be deemed a refusal of
Buyer’s request.

(b)           Buyer
may elect to terminate the Agreement by written notice (including, without
limitation, via email) to Seller on or before 12:00 pm (Eastern Standard Time)
on January 19, 2007 (the “Feasibility Date”) if Buyer has not obtained and
executed a firm commitment to underwrite a public offering of equity in an
amount not less than One Hundred Sixty Five Million Dollars ($165,000,000.00). If
Buyer terminates the Agreement in accordance with the immediately preceding
sentence, Three Million Dollars ($3,000,000.00) of the Escrow Deposit shall be
released and paid to Seller as Seller’s property and the remainder of the
Escrow Deposit shall be released and paid to Buyer and this Agreement shall be
void, excepting those provisions which expressly survive termination.

Performance by Seller. The
accuracy of Seller’s representations and warranties in all material respects
and the performance and observance, in all material respects, by Seller of all
covenants and agreements of this Agreement to be performed or observed by
Seller prior to or on the Closing Date shall be a condition precedent to Buyer’s
obligation to acquire the Property. Without limitation on the foregoing, in the
event that the Seller Closing Certificate shall disclose any material
inaccuracies or material adverse changes in the representations and warranties
of Seller which are not otherwise permitted or contemplated by the terms of
this Agreement or known to Buyer during the Due Diligence Period, then Buyer
shall have the right to terminate this Agreement. For purposes only of
determining whether or not a failure of condition has occurred under this Section
3.3, or whether a materiality threshold under Section 8.1 has been reached, a
breach, inaccuracy, or adverse change shall not be considered “material” unless
the loss, cost or damage arising on account thereof is reasonably expected to
be $250,000 or more.

Performance by Buyer. The
accuracy of Buyer’s representations and warranties in all material respects and
the performance and observance, in all material respects, by Buyer of all
covenants and agreements of this Agreement to be performed or observed by it
prior to or on the Closing Date shall be a condition precedent to Seller’s
obligation to sell the Property.

 11
 

 

 

Without limitation
on the foregoing, in the event that the Buyer Closing Certificate shall
disclose any material inaccuracies or material adverse changes in the
representations and warranties of Buyer contained in Section 6.2 which are not
permitted or contemplated by the terms of this Agreement, then Seller shall
have the right to terminate this Agreement.

Management Agreement. Seller
and Buyer acknowledge and agree that the Management Agreement will be assigned
by Seller to Buyer (or Buyer’s designee) and that Buyer (or Buyer’s designee)
will assume the obligations of Seller under the Management Agreement as of the
Closing Date pursuant to the Assignment and Assumption of Management Agreement.
Seller shall cause Manager to recognize that all amounts held by Manager in the
Fund (as defined in the Management Agreement) are held in accordance with the
terms of the Management Agreement for the benefit of Buyer from and after
Closing. Seller hereby represents and warrants to Buyer that, to its knowledge,
the Manager is not currently holding any amounts in the Fund, although the
Management Agreement may require the same to have been paid.

Liquor Licenses. Buyer
acknowledges that there may be various liquor licenses associated with the
operation of the Hotel. As soon as is reasonably practicable after the Feasibility
Date, Buyer shall file an application with the required state and local
agencies for the issuance of such licenses (the “Required Liquor Licenses”) as are necessary for the continued
service of alcoholic beverages at the Property. Buyer shall diligently pursue
the obtaining of the Required Liquor Licenses at Buyer’s sole cost and expense.
Seller shall cooperate and instruct Manager to cooperate reasonably with Buyer
in its efforts to obtain the Required Liquor Licenses. The issuance of the
Required Liquor Licenses shall not be a condition to Buyer’s obligations to
close the sale contemplated hereby; 
provided, however, that if such Required Liquor Licenses have not issued
by Closing, Seller and Buyer shall enter into an Interim Beverage Services
Agreement in the form of Exhibit G attached hereto for use of Seller’s
liquor licenses until the earlier of the 180th day after Closing or the date on which the
Required Liquor Licenses are issued. In such event, Buyer shall maintain liquor
liability insurance with coverage in the amount of at least Twenty-Five Million
and No/100 Dollars ($25,000,000.00) naming Seller as additional insured, and
further agrees to indemnify, defend and hold Seller harmless from and against
any liability, cost or expense arising out of Seller’s cooperation with Buyer
during such interim period. Seller shall provide Buyer with a list of and
copies of the Liquor Licenses and all other material permits and approvals
related to the Property by not later than January 10, 2007.

Audit. Buyer shall have
the right to obtain from a third-party certified public accountant (at Buyer’s
sole cost and expense) audits with respect to the Property providing all
disclosures required by generally accepted accounting principles and Securities
and Exchange Commission regulations, specifically in accordance with Section
3.05 of Regulation S-X and all related rules and regulations thereof. Seller,
at no cost or expense to Seller, shall, and shall use reasonable efforts to
cause Manager and the predecessor owner(s) and manager(s) of the Property to,
cooperate in a commercially reasonable manner in connection with the
performance of such audits and to provide information reasonably requested by
such accountants. In connection with such audits, Seller, at no cost or expense
to Seller, shall and shall use reasonable efforts to cause Manager and the predecessor
owner(s) and manager(s) to provide the accountants performing such audits with
representation letters conforming to American Institute

 12
 

 

 

of Certified
Public Accountants professional standards. Buyer completing the preparation of
any such audited financial statements shall not be a condition to Closing and
the failure to obtain same will not permit Buyer to terminate this Agreement.

Ground Lessor Estoppels. It
shall be condition to Buyers’ obligation to close that Seller shall have
obtained Ground Lessor’s consent to the transaction contemplated hereunder and
shall have obtained and delivered to Buyer (i) an estoppel letter (the “Hotel Ground Lease Estoppel and Consent”)
addressed to Buyer dated within thirty (30) days of the Closing with respect to
the Hotel Ground Lease, consenting to the transaction and otherwise
substantially in the form required under the Ground Lease, which estoppel
shall, among other things, certify that there are no material defaults under
the Hotel Ground Lease and (ii) an estoppel letter (the “Retail Ground Lease Estoppel and Consent”)
addressed to Buyer dated within thirty (30) days of the Closing with respect to
the Retail Hotel Ground Lease, consenting to the transaction and otherwise
substantially in the form required under the Retail Ground Lease, which
estoppel shall, among other things, certify that there are no material defaults
under the Retail Ground Lease. While obtaining the same shall not be a
condition of Buyer’s obligation to close, Seller shall request that the Ground
Lessor set forth the following in each of the documents under this Section 3.8:

(i)                                     that
the Ground Lessor has complied with all transportation mitigation required in
connection with the BCEC Project and/or that there are no outstanding
obligations for such mitigation which would be imposed upon the Hotel Ground
Lessee/Retail Ground Lessee/or Option Holder;

(ii)                                  that
the Tenant Improvements which are required to be completed as a condition of
Section 3.1 of each of the Hotel Ground Lease and the Retail Ground Lease have
been completed; and

(iii)                               that
the Tenant has obtained a copy of the South Boston Parking Freeze permit or
other authorization as required pursuant to Section 8.13 of the Hotel Ground
Lease.

Management Agreement
Estoppel. It shall be condition to Buyer’s obligation to close that Seller
shall have obtained and delivered to Buyer an estoppel letter (the “Management Agreement Estoppel”) addressed
to Buyer dated within thirty (30) days of the Closing with respect to the
Management Agreement, substantially in the form required under the Management
Agreement, which estoppel shall, among other things, certify that there are no
material defaults under the Management Agreement.

License Agreement
Estoppel. It shall be condition to Buyer’s obligation to close that Seller
shall have obtained and delivered to Buyer an estoppel letter (the “License Agreement Estoppel”) addressed to
Buyer dated within thirty (30) days of the Closing with respect to the License
Agreement, substantially in the form required under the License Agreement,
which estoppel shall, among other things, certify that there are no material
defaults under the License Agreement.

 13
 

 

 

Option Agreement Estoppel.
It shall be condition to Buyer’s obligation to close that Seller shall have obtained
and delivered to Buyer an estoppel letter (the “Option Agreement Estoppel”) addressed to Buyer dated within
thirty (30) days of the Closing with respect to the Option Agreement,
substantially in the form required under the Option Agreement, which estoppel
shall, among other things, certify that there are no material defaults under
the Option Agreement. At Seller’s option, the Estoppels referenced in Sections
3.8, 3.10 and 3.11 may appear in one document.

PILOT Agreement. It shall
be a condition of Buyer’s obligation to close that Seller shall have obtained
and delivered to Buyer an amendment and restatement of the PILOT Agreement (the
“Amended PILOT Agreement”) naming
an affiliate of Buyer as the tenant thereunder in all material respects in
substance as set forth on Exhibit U duly executed by the City of Boston
Assessing Department and the Boston Redevelopment Authority, and that the
Amended PILOT Agreement shall be in full force and effect as of the Closing
Date. Seller agrees to cooperate with Buyer by providing Buyer with drafts of
the Amended PILOT Agreement prior to submission to a governmental authority.

Retail Ground Lease. Seller
acknowledges that, in addition to its currently contemplated retail use, Buyer
intends to utilize the Retail Land for certain uses ancillary to the hotel
located on the Hotel Land, including, without limitation, conference room,
meeting space and/or exhibition space (the “Additional
Use”), and in furtherance thereof, it shall be a condition to Buyer’s
obligation to close on the assignment of the Retail Ground Lease that
(collectively the “Retail Special Conditions
Precedent”):

1.1.9        Seller shall have obtained and delivered to
Buyer an amendment (the “Retail Ground Lease
Amendment”) to the Retail Ground Lease in all material respects in
the substance of Exhibit R and duly executed by the parties thereto;

1.1.10      Seller shall have obtained and delivered to Buyer
an amendment (the “Hotel Ground Lease
Amendment”) to the Hotel Ground Lease in all material respects in
the substance of Exhibit S attached hereto and duly executed by the
parties thereto;

1.1.11      Seller shall have submitted to the Boston
Redevelopment Authority and the Massachusetts Environmental Policy Act Office of
the EOEA its Status Report Update in all material respects in the form and substance
attached as Exhibit T hereto (the “Status Report Update”).
With respect to notice to the EOEA, either (a) the Seller shall have obtained
the written confirmation of the EOEA that it has approved the Status Report
Update, or (b) twenty (20) days shall have elapsed from the date of submission
without request from the EOEA for further study. Seller hereby agrees to use
commercially reasonable efforts to cause the Ground Lessor to join in execution
of the Status Report Update;

1.1.12      Seller shall have obtained and delivered to Buyer
a vote of the Board of Directors of the Boston Redevelopment Authority (i)
approving the transactions described in the Status Report Update and expressly
providing that there are no requirements for staff review or other conditions
which would become applicable upon execution and delivery of either the Hotel
Ground Lease Amendment or the Retail Ground Lease Amendment and 

 14
 

 

 

(ii) authorizing expansion of the temporary taking to cover the third
floor space under the Retail Ground Lease at such time as the Retail Ground Lease
Amendment goes into effect;

1.1.13      Seller shall have obtained and delivered to Buyer
fully executed originals of such amendments to the Notices of Lease of record
with respect to the Retail Ground Lease and the Hotel Ground Lease and to the
May 27, 2004 Reciprocal Easement Agreement as are made necessary by virtue of
the Hotel Ground Lease Amendment and the Retail Ground Lease Amendment; and

1.1.14      Seller shall have obtained and delivered to Buyer
a form of financeable Hotel Sublease (as defined in the Retail Ground Lease
Amendment) to accommodate hotel uses on the ground floor of the Retail Parcel containing
the following terms:

(a)           Rent.
Notwithstanding the provisions of Section 4.1(g), Section 4.5 and Section
8.3(f) of the Retail Lease, the rent payable by Hotel Tenant to Retail Tenant
for all Hotel Sublease Areas (as defined in the Retail Ground Lease Amendment) shall
be a nominal rent, and all Hotel Subleased Areas shall be excluded from the
Leased Square Footage (as defined in the Retail Ground Lease) of the Premises
for the purpose of calculating Minimum Rent (as defined in the Retail Ground
Lease) pursuant to Section 4.2 of the Retail Lease;

(b)           Term.
The term of the Hotel Sublease shall expire on the date that is ten (10) years
from the effective date of Retail Ground Lease Amendment; provided, that,
the subtenant under the Hotel Sublease shall have the right to terminate the
Hotel Sublease at any time upon ninety (90) days prior written notice.

(c)           Use.
The use of the premises demised under the Hotel Sublease shall be limited to
meeting and conference room facilities, pre-function space, banquet preparation
and service, audio-visual display space (regardless of the technology used),
exhibition space, hallways, restrooms and any other activities related to the
foregoing or otherwise related to providing services to groups of individuals
staying at the Hotel or otherwise paying to use the Hotel’s facilities.

The form and
substance of the Hotel Sublease shall otherwise be reasonably acceptable to
Buyer (it being understood that Buyer requires a form of Hotel Sublease under
which the Hotel and the Hotel Sublease Areas may be financed and transferred as
a single integrated asset) and shall have been approved in writing by the
Ground Lessor in accordance with the terms of the Hotel Ground Lease and the
Retail Ground Lease. The parties shall use all commercially reasonable best
efforts (not including the payment of money for a favorable outcome or the
initiation of any legal proceeding) to agree on a form as soon as is reasonably
practicable.

Seller
agrees to cooperate with Buyer by providing Buyer with drafts of documents to
be produced by Seller under this Section 3.13 prior to submission to a
governmental authority and to allow Buyer and Buyer’s counsel a reasonable
period for review and comment and to consult with Buyer with regard to any
comments or questions that Buyer may have. No failure of condition under this
Section 3.13 shall arise, however, solely on account of Seller’s failure to
adopt any of Buyer’s suggestions.

 15
 

 

 

Closing Procedure. Subject
to Section 4.1, the closing (the “Closing”)
of the transaction contemplated herein shall occur at 12:00 p.m. on the Closing
Date. The Closing shall be accomplished pursuant to customary escrow
instructions (the “Escrow Instructions”)
to be executed by and among Buyer, Seller and the Escrow Holder.

Retail Closing.

1.1.15      Notwithstanding anything to the contrary
contained herein, in the event that the Retail Special Conditions Precedent are
not satisfied (or waived in writing by Buyer) on or before the Closing Date (a “Retail Conditions Failure”), at Buyer’s option, the
assignment of the Retail Ground Lease shall not occur at the scheduled closing
of the assignment of the Hotel Ground Lease and the Option Agreement (the “Hotel and Option Closing”), but shall instead occur at the
Retail Closing referred to in Section 4.1.2 below. If Buyer does not waive a
Retail Conditions Failure, the Hotel and Option Closing shall proceed as
scheduled and the Purchase Price shall be reduced by the amount allocated to
the Retail Ground Lease on Schedule 2.2 attached hereto (the “Retail Allocation,” i.e. $20,000,000.00) and Seller’s obligation
to sell, and Buyer’s obligation to buy, the Retail Ground Lease as contemplated
by this Agreement shall be deferred in accordance with and subject to the
provisions of Section 4.1.2 below. For purposes of clarification, in the
event of a Retail Conditions Failure not waived by Buyer, Seller shall remain
obligated to sell, and Buyer shall remain obligated to buy, the balance of the
Property (excluding the Retail Ground Lease) on the Hotel and Option Closing
Date in accordance with the terms of this Agreement.

1.1.16      At 12:00 p.m. on the date (the “Retail Closing Date”) that is ten (10) days after the date
that the Retail Special Conditions Precedent are satisfied (or waived in
writing by Buyer), Buyer shall be obligated to buy, and Seller shall be
obligated to sell, the Retail Ground Lease (the “Retail Closing”) pursuant to the terms of this Agreement as
though the Retail Ground Lease had not been excluded from the transaction
contemplated by this Agreement under Section 4.1.1. The purchase price for the
Retail Ground Lease (the “Retail Purchase Price”)
shall be an amount equal to the Retail Allocation. In the event that the Retail
Special Conditions Precedent have not been satisfied or waived on or before
December 31, 2007, Seller shall have the right to terminate this Agreement, whereupon
the Retail Escrow Deposit shall be returned to Buyer and neither party shall
have any further obligation hereunder except for those obligations which
expressly survive a termination of this Agreement.

1.1.17      The terms “Closing” and “Closing Date” as used in
this Agreement shall refer to the Hotel and Option Closing and/or the Retail
Closing and the Retail Closing Date, respectively, as the case may be. The
parties agree that they shall respectively cause all relevant deliverables set
forth in Section 4.2 below with respect to either Closing to be delivered to
the Escrow Holder prior to the Hotel and Option Closing Date and the Retail
Closing Date, respectively, to the full extent such deliverables are applicable
to the relevant Closing.

Closing Deliveries. Prior
to the Closing Date, the parties shall deliver to the Escrow Holder the
following:

 16
 

 

 

1.1.18      Seller Deliveries. Seller shall deliver to
Escrow Holder the following:

(a)           Duly
executed and acknowledged original assignment and assumption of the Hotel
Ground Lease (the “Hotel Ground Lease
Assignment and Assumption”) in the form of Exhibit H
attached hereto, and (to the extent in Seller’s possession) a duly executed and
acknowledged original Hotel Ground Lease Amendment;

(b)           Duly
executed and acknowledged original assignment and assumption of the Retail
Ground Lease (the “Retail Ground Lease
Assignment and Assumption” and collectively with the Hotel Ground
Lease Assignment and Assumption, the “Ground Lease Assignments”)
in the form of Exhibit I attached hereto, and a duly executed and
acknowledged original Retail Ground Lease Amendment;

(c)           Duly
executed and acknowledged original assignment and assumption of Option
Agreement (the “Option Agreement Assignment and Assumption”)
in the form of Exhibit J attached hereto;

(d)           Duly
executed original assignment and assumption of the License Agreement (the “License Agreement Assignment and Assumption”) in the form of
Exhibit K attached hereto;

(e)           A
duly executed and acknowledged original assignment and assumption of Management
Agreement (the “Management Agreement Assignment and
Assumption”) in the form of Exhibit L attached hereto;

(f)            A
duly executed assignment and assumption document, (the “Other
Assignment and Assumption Agreement”) attached hereto as Exhibit M,
with respect to all of Seller’s right, title and interest to the Service
Agreements, the Article 80 Agreements, the Room Agreements, the Equipment
Leases and the Leases;

(g)           A
duly executed Bill of Sale (“Bill of Sale”)
in the form of Exhibit N with respect to all of Seller’s right,
title and interest to the Property;

(h)           A
duly executed original certificate of Seller (the “Seller
Closing Certificate”) in the form of Exhibit O updating
the representations and warranties contained in Section 6.1 to the Closing
Date and noting any changes thereto;

(i)            A
duly executed and acknowledged memorandum of the Hotel Ground Lease Assignment
and Assumption (or an assignment of the existing memorandum of Hotel Ground
Lease), in the proper form for recording in the appropriate jurisdiction;

(j)            A
duly executed and acknowledged memorandum of the Retail Ground Lease Assignment
and Assumption (or an assignment of the existing memorandum of Retail Ground
Lease), in the proper form for recording in the appropriate jurisdiction;

 17
 

 

 

(k)           A duly executed and acknowledged memorandum
of the Option Agreement Assignment and Assumption (or an assignment of the
existing memorandum of Option Agreement), in the proper form for recording in
the appropriate jurisdiction ;

(l)            A duly executed original certificate of “non-foreign”
status in the form of Exhibit P executed by Seller with respect to
transfer of the Property;

(m)          Evidence reasonably satisfactory to Buyer and
Title Company respecting the due organization, good standing and qualification
to do business of Seller and the due authorization and execution of this
Agreement and the documents required to be delivered hereunder;

(n)           To the extent they are then in Seller’s
possession, and have not theretofore been delivered to Buyer:  (i) any plans and specifications for the
Improvements; (ii) all unexpired warranties and guarantees which Seller has
received in connection with any work or services performed with respect to, or
equipment installed in, the Improvements; (iii) all keys for the Improvements;
(iv) originals of all Leases, all correspondence to or from any tenants,
relating to the Leases; (v) originals of all Service Agreements that will
remain in effect after the Closing; (vi) a set of guest registration cards;
(vii) a list of advance room reservations and functions; (viii) a list of
Seller’s outstanding accounts receivable as of midnight on the date prior to
the Closing; (ix) all permits and licenses for the Property; and (x) all books
and records relating solely to the operation of the Property (which materials
under this clause (h) may be either delivered at Closing or left at the
management office at the Property);

(o)           Tenant Notices to each of (i) the tenants
under the Leases, duly executed by the Seller, addressed to each of such
tenants;

(p)           Notices of the sale to Buyer to each of the
vendors under the Service Agreements duly executed by the Seller, addressed to
each of such vendors;

(q)           To the extent then in Seller’s possession,
the Hotel Ground Lease Estoppel and Consent duly executed by Ground Lessor;

(r)            To the extent then in Seller’s possession,
the Retail Ground Lease Estoppel and Consent duly executed by Ground Lessor;

(s)           To the extent then in Seller’s possession,
the Management Agreement Estoppel duly executed by Manager.

(t)            To the extent then in Seller’s possession,
the License Agreement Estoppel duly executed by Ground Lessor;

(u)           To the extent then in Seller’s possession,
the Option Agreement Estoppel duly executed by Ground Lessor;

(v)           Duly executed and acknowledged resale
certificates or other exemption certificates which are applicable to sales
taxes on the transfer of personal property;

 18
 

 

 

(w)          Payoff letters from the Existing Indebtedness
Lenders;

(x)            A duly executed and acknowledged Interim
Beverage Services Agreement;

(y)           Such additional documents as may be
customarily required by Title Company, including those needed in order for the
Title Company to issue its Title Policy to Buyer hereunder free of exceptions
for parties in possession (other than the Tenants under the Leases) or
mechanics liens and to insure over any “gap” between Closing and recording, so
long as the same do not enlarge Seller’s liability beyond that contemplated
hereunder;

(z)            To the extent then in Seller’s possession,
duly executed and acknowledged (where appropriate) originals of the documents
referenced in Section 3.13.5 and true and accurate copies of the
documents referenced in Section 3.13.3, Section 3.13.4 and Section
3.13.6;

(aa)         The Amended PILOT Agreement, duly executed and
acknowledged by the parties thereto; and

(bb)         Fully executed copies of the Leases referred
to on Exhibit E attached hereto in the same form as the draft versions
previously delivered to Buyer, or delivery of the premises described in such
drafts free and clear of any rights of tenants or possession.

For avoidance of doubt, Seller’s delivery of
items (q) through (u), inclusive, above in this Section 4.2.1 are a
condition of Buyer’s Obligation to Close, whether or not such items are in
Seller’s possession.

1.1.19      Buyer Deliveries. Buyer
shall deliver to the Escrow Holder the following:

(a)           The Closing Payment in immediately available
federal funds;

(b)           An original Hotel Ground Lease Assignment
and Assumption for the Property, duly executed by Buyer;

(c)           An original Retail Ground Lease Assignment
and Assumption for the Property, duly executed by Buyer;

(d)           An
original Management Agreement Assignment and Assumption for the Property, duly
executed by Buyer;

(e)           An
original Option Agreement Assignment and Assumption for the Property, duly
executed by Buyer;

(f)            An
original License Agreement Assignment and Assumption for the Property, duly
executed by Buyer;

 19
 

 

 

(g)           An
original of Other Assignment and Assumption Agreement, duly executed by Buyer;

(h)           An
original Bill of Sale, duly executed by Buyer;

(i)            A
duly executed original certificate of Buyer (“Buyer
Closing Certificate”) in the form of Exhibit R updating
the representations and warranties contained in Section 6.2 to the
Closing Date and noting any changes thereto;

(j)            A
duly executed and acknowledged Interim Beverage Services Agreement;

(k)           Evidence
reasonably satisfactory to Seller and Title Company respecting the due
organization of Buyer and the due authorization and execution of this Agreement
and the documents required to be delivered hereunder; and

(l)            Such
additional documents as may be reasonably required by Seller or Title Company
in or to consummate the transactions hereunder (provided the same do not
increase in any material respect the costs to, or liability or obligations of,
Buyer in a manner not otherwise provided for herein), the acceptability of
which documents and instruments are conditions Buyer’s obligation to close.

1.1.20      Mutual Deliveries. Buyer and Seller shall
mutually execute and deliver to the Escrow Holder, the following:

(a)           A
Closing Statement reflecting the Purchase Price, and the adjustments and
prorations required hereunder and the allocation of income and expenses
required hereby; and

(b)           Such
transfer tax forms as required by state and local authorities.

Closing Costs. With
reference to Closing, Seller shall pay (1) 50% of all escrow charges, (2) the
brokerage commission payable at Closing to Pinnacle Realty Investments, Inc.
(the “Broker”), under separate
agreement between Broker and Seller, (3) all state, county and city excise
taxes and transfer fees (including under G.L. c. 64D, Section 1) payable in
connection with the assignment of the Ground Leases, (4) all sales taxes, if
any, in connection with the transfer of the Personal Property, (5) any
Transaction Rent coming due under the Hotel Ground Lease on account of the
assignment of the Hotel Ground Lease, and (6) any costs or prepayment fees
relating to the payoff of the Existing Indebtedness. Buyer shall pay (1) all
recording charges, if any, in connection with the transfers contemplated
hereby, (2) the premiums and costs of obtaining the Owner’s Policy, (3) Buyer’s
due diligence costs and property inspection fees, including the cost of any
additional environmental, asbestos, structural and physical audits it deems
necessary, (4) the costs, if any, to update the Existing Surveys, (5) all fees,
costs or expenses in connection with any financing obtained by Buyer in
connection with the transaction contemplated hereby, and (7) 50% of all escrow
charges. Seller shall pay all costs associated with the payoff of the Existing
Indebtedness (including any exit or prepayment fees).

 20
 

 

 

Prorations. The following
provisions shall govern the adjustments and prorations that shall be made at
Closing and the allocation of income and expenses from the Property between
Seller and Buyer. Except as expressly provided in this Section 4.4, all items
of operating revenue and operating expense of the Property, with respect to the
period prior to 12:00:01 a.m. (the “Cut-Off
Time”) local time at the Hotel on the Closing Date, shall be for the
account of and paid by Seller and all items of operating revenue and operating
expense of the Property with respect to the period after the Cut-Off Time,
shall be for the account of and paid by Buyer.

(c)           Taxes.

(i)            All
real estate taxes or payments in lieu thereof, personal property taxes and
other assessments on the Property shall be prorated at Closing. Seller shall be
responsible for all real property taxes or payments in lieu thereof and
personal property taxes and other assessments for the tax periods prior to the
Closing Date, and Buyer shall be responsible for all real property taxes or
payments in lieu thereof and personal property taxes and other assessments for
the tax periods from and after the Closing Date; however if any special
improvement assessments on the Property are payable in installments, then the
installments (including the current installment) shall be prorated as of the
Cut-Off Time (with Buyer assuming the obligation to pay any installments
payable after the Closing). If the real property tax rate or payments in lieu
thereof, personal property tax rate or any assessment has not been set for the
tax year in which the Closing occurs, then the proration of such real property
tax or payments in lieu thereof, personal property tax or assessment shall be
based on the previous tax bill for the preceding tax year for such tax or
assessment which has not been set for the tax year in which the Closing occurs,
and such proration shall be adjusted between Seller and Buyer upon presentation
of written evidence that the actual taxes or payments in lieu thereof or
assessment paid (determined as of the date such taxes or payments in lieu
thereof or assessment are actually paid) for the tax year in which the Closing
occurs differ from the amounts used at Closing and in accordance with Section
4.4.2. Seller shall consult with Buyer regarding any assessment for real
property taxes for the 2007 tax year.

(ii)           The
parties acknowledge that certain taxes accrue and are payable to the various
local governments by any business entity operating a hotel and its related
facilities. Included in those taxes may be business and occupation taxes,
retail sales and use taxes, gross receipts taxes, and other special lodging or
hotel taxes. For purpose of this Agreement, all of such taxes (expressly
excluding taxes and assessments covered by Section 4.4.1(a)(i) above,
corporate franchise taxes, and federal, state, and local income taxes)
(hereinafter referred to as “Operational
Taxes”) shall be allocated between Seller and Buyer such that those
attributable to the period prior to the Cut-Off Time shall be allocable to
Seller and those attributable to the period from and after the Cut-Off Time
shall be to Buyer (with the attribution of such taxes hereunder to be done in a
manner consistent with the attribution under this Agreement of the applicable
revenues on which such taxes may be based). Buyer shall receive a credit for
any Operational Taxes attributable to the period prior to the Cut-Off Time
which Seller has not paid. Except for the Operational Taxes for which (and in
the amount for which) Buyer has received a credit under this Section 4.4(a)(ii),
Seller shall be solely responsible for payment of the Operational Taxes with
respect to the period prior to the Cut-Off Time, and Buyer shall be solely

 21

 

responsible for
payment of such Operational Taxes with respect to the period after the Cut-Off
Time (and those for which and in the amount for which it receives a credit).

(d)           Lease and Rental Expenses.  Collected rents and other charges from the
Tenants shall be prorated between Seller and Buyer as of 11:59 P.M. on the day
prior to the Closing Date.  If on the
Closing Date there are past due rents or charges owed by Tenants, collection of
such amounts shall be prorated when received. 
If any payments of rent or other fixed charges received by Seller or
Buyer on or after the Closing Date are payable to the other party by reason of
this allocation, the appropriate sum shall be promptly paid to the other
party.  Seller is responsible, at its
cost, to direct Manager to collect all past due amounts prior to Closing.  If any Lease contains obligations on the part
of the Tenant for tax, escalation, percentage, or overage payments (“Additional Rent”) and such Additional Rent is not yet
payable as of the Closing Date, then if Seller’s portion of such additional
rent is collected by Buyer from the Tenant, Buyer shall remit such amounts to
Seller.  Buyer will make reasonable
efforts to collect all past due rents, if any, for Seller’s account, but Buyer
shall not be obligated to commence dispossession or other legal proceedings.

(e)           Hotel Reservations and Revenues.

(i)            Reservations.  On the Closing Date, Seller shall request
that Manager provide Buyer with its schedule of confirmed reservations for
dates subsequent to the Closing Date (the “Bookings”), which schedule shall
list the party for whose benefit the reservation was made, the amount of
deposit thereunder, the amount of any room rental deposits, and the amount of
any other deposits made for advance reservations, banquets or future services
to be provided after the Closing Date. 
Buyer will honor (or cause its manager to honor), for its account, all
pre-Closing Date reservations as so confirmed by Seller for dates subsequent to
the Closing Date at the rate or price previously agreed to by Seller (so long
as such rates conform to customary rates charged by Seller).  Seller shall pay or credit to Buyer the
amount of all unforfeited prepayments or deposits disclosed in such schedule.

(ii)           Guest
Revenues.  Seller shall receive a
credit for, and Buyer shall purchase from Seller, the Guest Ledger.  Such credit shall equal the amount of the
accounts receivable (or 50% thereof in the case of the final night’s room
revenue, including any sales taxes, room taxes and other taxes charged to
guests in such rooms, all parking charges, sales from mini-bars, in-room food
and beverage, telephone, facsimile and data communications, in-room movie,
laundry, and other service charges allocated to such rooms with respect to the
night), less credit card charges, travel company charges and similar
commissions.  Revenues from guest rooms
in the Hotel occupied on the night containing the Cut-Off Time, including any
sales taxes, room taxes and other taxes charged to guests in such rooms, all
parking charges, sales from mini bars, in room food and beverage, telephone,
facsimile and data communications, in room movie, laundry, and other service
charges allocated to such rooms with respect to the night containing the
Cut-Off Time shall be divided equally between Seller and Buyer; provided,
however, that to the extent the times at which food and beverage sales,
telephone, facsimile or data communication, in room movie, laundry, and other
services are ordered by guests can be determined, the same shall be allocated
between Seller and Buyer based on when orders for the same were received, with
orders originating prior to Cut-Off Time being allocable to Seller, and orders
originating from

 22
 

 

and after the
Cut-Off Time being allocable to Buyer. 
All other revenues from restaurants, lounges, and other service
operations conducted at the Property shall be allocated based on whether the
same accrued before or from and after the Cut-Off Time as described in the
preceding sentence, and Seller shall instruct the Manager, and Buyer shall
instruct its manager, to separately record sales occurring before and from and
after the Cut-Off Time.  The foregoing
amounts are referred to collectively as “Guest Revenues”.

(iii)          Banquet and Meeting Room Revenues.  Revenues from conferences, receptions,
meetings, and other functions occurring in any conference, banquet or meeting
rooms in the Hotel, including usage charges and related taxes, food and
beverage sales, valet parking charges, equipment rentals, and
telecommunications charges, shall be allocated between Seller and Buyer, based
on when the function therein commenced, with (i) one-day functions commencing
prior to the Cut-Off Time being allocable to Seller; (ii) one day functions
commencing from and after the Cut-Off Time being allocable to Buyer; and (iii)
multi day functions that include periods both before and after the Cut-Off Time
being prorated between Seller and Buyer according to the period of time before
and from and after the Cut-Off Time.  The
foregoing amounts are referred to collectively as “Conference Revenues.”

(iv)          Unredeemed
Gift Certificates and Vouchers. 
Buyer shall receive a credit against the Purchase Price at Closing in
the amount actually received by Seller on account of all redeemable, but
unredeemed vouchers, gift certificates and other promotional materials
(together, the “Vouchers”) which
may be used as full or partial payment for any Hotel service including, room
rentals, food and beverage service, or any other item either borne directly by
the owner of the Hotel or which is reimbursable by the owner of the Hotel
(i.e., if a gift certificate can be used to pay for items in the Hotel gift
shop).  The parties also agree that no
credit shall be given for any complimentary Vouchers. Seller shall request that
Manager deliver to Buyer one (1) business day prior to the Closing Date a list
of all such Vouchers.

(f)            Utilities and Insurance.  Buyer shall be responsible for all dealings
with utility service providers with respect to any actions to change over accounts
to Buyer as of the Closing Date.  All
charges for utilities shall be prorated as of the Closing Date.  In the event the actual amounts for such
charges for utilities or telephone calls are not known as of the Closing Date
or cannot be billed separately to the responsible party, such charges shall be
prorated between the parties as of the Closing Date once the actual amounts
thereof become known.  If necessary, at
the request of Buyer, Seller shall complete the customary forms required by any
telephone company or telephone company service provider to assign the Property’s
existing telephone numbers to Buyer.  Any
fees payable by the owner of the Hotel in respect of the insurance policies
maintained by Manager for the Property shall be prorated as of the Closing
Date.  The parties shall request that
Manager add Buyer as an additional named insured on any such insurance policies
as of the Closing Date.

(g)           Permits.  Permit and license fees of assignable permits
and licenses, if any, shall be prorated as of the Closing Date.

(h)           Service Agreements.  Fees and other amounts, including accrued
employee expenses, payable and/or accrued under the Management Agreement and

 23
 

 

payments due under the other Service Agreements shall be prorated as of
the Closing Date.  Seller shall be
required to pay or cause to be paid (or reimbursed to Manager) or credit to
Buyer at the Closing any accrued or earned wages, vacation pay, sick pay,
bonuses, pension, profit-sharing and welfare benefits and other compensation
and fringe benefits of all persons employed at the Property on or before the
Closing Date, including any employment taxes or other fees or assessments
attributable thereto; it being understood, however, that Seller shall not be
required to pay any withdrawal liability with respect to any union
employees.  The parties further agree
that with respect to sick pay, at the end of the calendar year in which the
Closing occurs, Buyer shall reimburse Seller for all unused sick pay credited
to Buyer at Closing which did not carry over to the following calendar year.

1.1.21            Calculation.  The Seller shall prepare and deliver to Buyer
a preliminary closing statement (the “Preliminary Closing
Statement”) which shall show the net amount due either to Seller or
Buyer as a result thereof, and such net amount will be added to, or subtracted
from the payment of the Purchase Price to be paid to Seller pursuant to the
terms hereof.  If any of the prorations
or credits cannot be calculated based on actual figures, then they shall be
calculated based on Seller’s good faith estimates thereof.  Within one hundred and twenty (120) days
following the Closing Date, Buyer shall prepare and submit to Seller a
recalculation of the prorations and credits, reflecting actual figures and not
estimates.  Such recalculation shall be
binding on Buyer and Seller unless Seller delivers to Buyer, within thirty (30)
days after Seller has received such recalculation, a notice (“Audit Notice”) stating Seller does not agree with such
calculations, and, if such notice is given, a nationally recognized accounting
firm selected by Seller and reasonably approved by Buyer shall be engaged to
make the final determination of such prorations and credits (the accounting
firm engaged to make such determination herein called the “Accounting
Firm”).  If Buyer notifies
Seller after receipt of the Audit notice that it does not approve Walter &
Shuffain, P.C. as the Accounting Firm (which Audit Notice shall request such
approval or disapproval), then Buyer shall be deemed to approve either Price
Waterhouse Coopers or Ernst and Young as the Accounting Firm unless within
thirty (30) days after the delivery of an Audit Notice, Seller shall provide
notice to Buyer of another Big Four accounting firm selected by Seller; if
Buyer reasonably objects to the accounting firm so selected by Seller, Buyer
shall give notice of disapproval within fifteen (15) days after the delivery of
the notice from Seller of Seller’s selection (and if Buyer fails to give a
notice of such disapproval within such fifteen (15) day period, Buyer will be
deemed to have approved Seller’s selection). 
If Buyer reasonably objects to the firm so selected by Seller within
such fifteen (15) day period, Seller shall nominate another accounting firm,
which shall be subject to Buyer’s reasonable approval using the same procedure
as provided in the preceding sentence. 
The fees and costs of the Accounting Firm in making such determination
shall be borne as follows:  if the net
amount of the prorations and credits determined by the Accounting Firm is
within 2% of the net amount as determined by Buyer, Seller shall bear the
entire fees and costs of the Accounting Firm in making such determination; and
if the net amount of the prorations and credits determined by the Accounting
Firm is greater than 2% of the net amount as determined by Buyer, Buyer shall
bear the entire fees and costs of the Accounting Firm in making such
determination.  Each of Seller and Buyer
shall cooperate in good faith and act reasonably after Closing to assist Manager
and  Accounting Firm in their
determinations

 24
 

 

1.1.22            Accounts Receivable.  Accounts Receivable shall be identified as of
the Cut-Off Time.  Seller shall receive a
credit for, and Buyer shall purchase from Seller, all accounts receivable
(other than the Guest Ledger) that are less than ninety (90) days past
due.  Such credit shall equal the amount
of the accounts receivable, less (i) credit card charges, travel company
charges and similar commissions and (ii) on all accounts receivable other than
credit card receivables, a percentage discount for uncollectible amounts for
past due receivables as mutually agreed upon by the parties prior to Closing
not to exceed three percent (3%). 
Subject to the following sentence, all accounts receivable and credit card
claims for goods and services furnished prior to the Cut-Off Time that are not
so purchased by Buyer shall remain the property of Seller and, to the extent
Buyer receives any payments on account thereof after Closing (A) if the
applicable account debtor who makes such payment then owes payment on one of
Seller’s accounts receivable and no accounts receivable of Buyer, then Buyer
shall immediately remit such amount (net of travel agent commissions or credit
card company charges for payment of such claims) to Seller, and (B) if the
applicable account debtor who makes such payment then owes payment on accounts
receivable owing to Buyer and to Seller, such payments (net of travel agent
commissions or credit card company charges for payment of such claims) shall be
applied to pay accounts receivable in order of priority from the least-aged to
the most-aged.  The foregoing shall apply
to past due or accruing room rents and other customary Hotel charges including
the guest and city ledgers.

1.1.23            Bank Accounts,
Reserves, Inventory and Seller’s Deposits. 
Buyer and Seller shall mutually agree upon the aggregate amount of cash
in the house bank accounts, house banks and cash on hand as of the Closing Date
(the “Aggregate Cash Amount”).  At the Closing, Seller shall be credited with
the Aggregate Cash Amount, including without limitation any management account
(but excluding the Fund account which will be treated in accordance with the
provision of Section 3.5 hereof), to the Cut-Off Time.  For avoidance of doubt, Seller will receive a
credit for all transferred cash accounts other than the Fund account, including
the cash amount of working capital transferred at Closing and any amounts on
deposit in any accounts established pursuant to Section 3.5.1(a), (b) or (d)
of the Management Agreement.  All
transferable deposits of Seller made for utilities, maintenance or service
contracts, licenses, or otherwise, shall be transferred to Buyer and credited
to Seller at Closing.  Seller shall not receive
a credit at Closing for unopened Consumables, Inventory of Supplies and
Inventory of Merchandise.

1.1.24            Health Club and
Other Dues.  Prepaid health club and
other revenues shall be prorated between Buyer and Seller as of the Cut-Off
Time, with Buyer receiving a credit for the unearned health club and other
revenue as of the Cut-Off Time.

1.1.25            Prepaids.  Seller shall receive a credit for prepaid
expenses as of the Cut-Off Time, including prepaid expenses under contracts,
advertising expenses, trade association dues and trade subscriptions, and fees
for permits.  Prepaid advertising
expenses shall only include advertising which will be published, mailed or
aired after the Cut-Off Time.

1.1.26            Payables.  Seller shall use reasonable commercial
efforts to pay off all trade accounts payable as of the Cut-Off Time.  To the extent unpaid, Buyer shall receive a
credit for all accounts payable and accrued liabilities owing for goods and
services furnished prior to the Cut-Off Time. 
Buyer shall pay all accounts payable relating to goods and services

 25
 

 

for which orders have been
placed but, as of the Cut-off Time, such goods and services have not yet been
delivered or provided.  All fees,
reimbursements and other amounts payable to the Manager under the Management Agreement
shall be apportioned between Seller and Buyer as of the Cut-off Time.

1.1.27            Surviving
Obligations.  The provisions of this Section
4.4 shall survive the Closing for a period of one (1) year, but shall not
otherwise be subject to the limitations set forth in Section 9.2.1
hereof.

Condemnation or
Destruction of Property.

Condemnation.  Seller agrees to give Buyer prompt notice of
any notice it receives of any taking by condemnation (actual, pending or
threatened) of any part of or rights appurtenant to the Property.  Buyer shall have the right to terminate this
Agreement in the event of an actual, pending or threatened condemnation or
temporary condemnation of longer than six (6) months that has or reasonably
would be expected to have a material adverse impact on the operations of the
Property, in which event the Escrow Deposit shall be returned to Buyer.  If Buyer does not so elect to terminate this
Agreement, then the Closing shall take place as provided herein, and Seller
shall assign to Buyer at the Closing all of Seller’s interest in any
condemnation award which may be payable to Seller on account of any such
condemnation and, at Closing, Seller shall credit to the amount of the Purchase
Price payable by Buyer the amount, if any, of condemnation proceeds received by
Seller between the date of this Agreement and Closing less any amounts which
are reasonably allocated to lost earnings reasonably allocated or attributed to
the period of time prior to Closing or which are used to repair or restore the
applicable property prior to Closing. 
Provided Buyer has not exercised its right to terminate this Agreement,
Seller shall notify Buyer in advance regarding any proceeding or negotiation
with respect to the condemnation and Buyer shall have the right, at its own
cost and expense, to appear and participate in any such proceeding or
negotiation.

Fire or Other
Casualty.  Seller shall give Buyer prompt
notice of any fire or other casualty to the Property costing more than
$100,000.00 to repair and occurring between the date of this Agreement and the
Closing.  If, prior to Closing, the
Property is damaged by fire or other casualty which is insured (without regard
to deductibles) to an extent as would not cost (as to the damaged property)
more than $8,000,000.00 and would not take longer than six (6) months to
repair, and if the holders of the existing loans to Seller permit insurance
proceeds to be used to repair and restore the Property, then the Closing shall
take place without abatement of the Purchase Price, but Seller shall assign to
Buyer at Closing all of Seller’s interest in any insurance proceeds (except
only, rent loss and business interruption insurance, and any similar insurance
attributable to the period preceding the Closing Date) that may be payable to
Seller on account of any such fire or other casualty, plus Seller shall credit
the amount of any deductibles under any policies related to such proceeds to
the Purchase Price to the extent such deductibles or insurance proceeds have
not been previously expended or are otherwise required to reimburse Seller for
actual expenditures of restoration.  If
any such damage due to fire or other casualty is insured and is to such an
extent as would cost more than $8,000,000.00 or would take longer than six (6)
months to repair, or if such holders will not permit insurance proceeds to be
used to repair and restore the Property then, at Buyer’s option, Buyer may
terminate this Agreement and the Escrow Deposit shall be returned to
Buyer.  Should Buyer nevertheless elect
to proceed to

 26
 

 

Closing, the
Closing shall take place without abatement of the Purchase Price and at Closing
Seller shall assign to Buyer all of Seller’s interest in any insurance proceeds
(except only, rent loss and business interruption insurance, and any similar
insurance, in each case, attributable to the period preceding the Closing Date)
that may be payable to Seller on account of any such fire or other casualty,
and Seller shall grant to Buyer a credit against the Purchase Price equal to
the amount of the applicable deductible, to the extent such deductibles or
insurance proceeds have not been previously expended or are otherwise required
to reimburse Owner for actual expenditures of restoration.  If, prior to Closing, the Property is damaged
by fire or other casualty which is uninsured and would cost more than
$8,000,000.00 to repair or would take longer than six (6) months to repair,
then, at Buyer’s option, Buyer may terminate this Agreement and the Escrow
Deposit shall be returned to Buyer.  If
Buyer does not elect to terminate this Agreement with respect to such uninsured
casualty in the immediately preceding sentence, or if any uninsured casualty
would not cost more than $8,000,000.00 to repair and would not take longer than
six (6) months to repair, then the Closing shall take place as provided herein,
and the Purchase Price shall be reduced by the estimated amount to repair
casualty not to exceed such $8,000,000.00.

Representations,
Warranties and Covenants.

Representations,
Warranties and Covenants of Seller.

1.1.28            General Disclaimer.  Except as specifically set forth in Section
6.1.2 below or elsewhere in this Agreement or in the Ground Lease
Assignments, the sale of the Property hereunder is and will be made on an “as
is” basis, without representations and warranties of any kind or nature,
express, implied or otherwise, including any representation or warranty
concerning title to the Property, the physical condition of the Property, the
environmental condition of the Property (including the presence or absence of hazardous
substances on or respecting the Property), the compliance of the Property with
applicable laws and regulations (including zoning and building codes or the
status of development or use rights respecting the Property), the financial
condition of the Property (whether historic or projected in pro forma figures
or otherwise made available by Seller, Manager or any other Person) or any
other representation or warranty respecting any income, expenses, charges,
liens or encumbrances, rights or claims on, affecting or pertaining to the
Property or any part thereof.  Buyer
acknowledges that, during the Due Diligence Period, Buyer will examine, review
and inspect all matters which in Buyer’s judgment bear upon the Property and
their respective values and suitability for Buyer’s purposes.  Except as to matters specifically set forth
in Section 6.1.2 below or elsewhere in this Agreement or in the Ground
Lease Assignments or other closing documents, Buyer will acquire the Property
solely on the basis of its own physical and financial examinations, reviews and
inspections and the title insurance protection afforded by the Owner’s Policy.

1.1.29            Limited
Representations and Warranties of Seller. 
Seller hereby represents and warrants to Buyer as set forth in this Section
6.1.2.  For the purposes of this
Agreement and the documents to be delivered pursuant hereto, references to “To
Seller’s knowledge” or “Seller’s actual knowledge” or “Seller has no knowledge”
shall mean the actual, present, conscious knowledge of Joseph Fallon, Stephen
R. Karp or Steven S. Fischman (collectively, the “Seller
Knowledge Individuals”), such individuals being the executives,
other

 27
 

 

than persons working on behalf
of the Manager, working on behalf of Seller who have the most knowledge regarding
the Property on the date of this Agreement without any investigation or
inquiry, but such individuals shall not have any individual liability in
connection herewith.  Without limiting
the foregoing, Buyer acknowledges that the Seller Knowledge Individuals have
not performed and are not obligated to perform any investigation or review of
any files or other information in the possession of Seller, or to make any
inquiry of any persons, or to take any other actions in connection with the
representations and warranties of Seller set forth in this Agreement.  Neither the actual, present, conscious
knowledge of any other individual or entity, nor the constructive knowledge of
the Seller Knowledge Individuals or of any other individual or entity, shall be
imputed to the Seller Knowledge Individuals:

(i)            Due
Organization and Authority.  Seller
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware and is qualified to do
business in the Commonwealth of Massachusetts. 
Seller has full power and lawful authority to enter into and carry out
the terms and provisions of this Agreement and to execute and deliver all
documents which are contemplated by this Agreement, and all actions of Seller
necessary to confer such power and authority upon the persons executing this
Agreement (and all documents which are contemplated by this Agreement) on
behalf of Seller have been taken and this Agreement constitutes a valid and
legally binding obligation of Seller enforceable against Seller in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent conveyance or other similar laws affecting
the rights of creditors generally and to principles of equity.

(ii)           No
Consent.  Other than the consent of
the Ground Lessor and the Manager, Seller’s execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
performance of Seller’s obligations under the instruments required to be
delivered by Seller at the Closing, do not and will not require the consent,
approval or other authorization of any Person under Seller’s organizational
documents, or to Seller’s knowledge, of any other Person or governmental
authority, or the registration, declaration or filing with, or payment of any
premium, fee or penalty to any governmental authority (excepting the payment of
Transaction Rent in accordance with the Hotel Ground Lease and interest
reserved for the remainder of the term of the loan made by the City of Boston
which Seller shall pay at Closing, and the recordation of Closing documents to
the extent contemplated in this Agreement and any transfer taxes payable in
connection therewith) and, except for the potential lien for real estate taxes
not overdue as provided in the PILOT Agreement, do not and will not result in
the creation of or claim of any lien, charge or encumbrance upon the Property
or any portion thereof or any violation of, or default under, any law,
regulation, rule, order or judgment of any governmental authority or any term
or provision of any agreement, instrument, mortgage, loan agreement or similar
document to which Seller is a party or by which Seller is bound, excepting only
where any of the foregoing matters in this item (ii) would not have a Material
Adverse Affect.

(iii)          Litigation.  Seller has not received written notice of any
(nor has, to Seller’s knowledge, Manager received any written notice of any)
material litigation, investigation or proceeding pending nor, to Seller’s
knowledge, is any contemplated or threatened against Seller.

(iv)          Foreign
Person.  Seller is not a “foreign
person” as defined in Section 1445(1)(3)
of the Code.

 28
 

 

(v)           Anti-Terrorism.  Neither Seller nor to Seller’s knowledge, any
of its respective constituent owners or affiliates are in violation of any laws
relating to terrorism or money laundering (collectively, the “Anti-Terrorism Laws”), including without
limitation Executive Order No. 13224 on Terrorist Financing, effective September
24, 2001 and relating to Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”) and/or the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (Public Law 107-56) (the “USA Patriot Act”).

(vi)          Bankruptcy
Proceedings.  Seller is not the
subject debtor under any federal, state or local bankruptcy or insolvency
proceeding, or any other proceeding for dissolution, liquidation or winding up
of its assets.  Seller is not insolvent,
and the consummation of the transactions contemplated by this Agreement shall
not render Seller insolvent.

(vii)         Leases. 
There are no leases of or licenses or concessions for space in the
Property which will be in force after the Closing and under which Seller is the
landlord (whether by it or its agent entering into the leases or acquiring the
Property subject to the leases) other than the Leases.  All of the Leases are in full force and
effect and none of them has been amended except as set forth in Exhibit E.  Except as set forth on Exhibit E,
there are no security deposits under the Leases.  There are no construction allowances,
brokerage commissions, or fees or similar inducements due now or payable in the
future in connection with the Leases.  To
Seller’s knowledge, Seller has performed all material work required to be
performed by Seller under the Leases.  To
Seller’s knowledge, Seller has delivered to Buyer true, correct and complete
copies of the Leases.  To Seller’s
knowledge, Seller is not in default in any material respect under the Leases
and there is no existing condition that, with notice or passage of time or
both, would constitute a material default by Seller under any of the
Leases.  To Seller’s knowledge, no other
party to a Lease is in default in any material respect under such Lease and
there is not existing condition that, with notice or passage of time or both,
would constitute a material default by such party under any Lease.

(viii)        Service Agreements and Equipment Leases.  Seller has not entered into and, to Seller’s
knowledge, there are not, any service, supply, maintenance, capital
improvement, equipment leasing, employment, collective bargaining, union or
similar contracts relating to the Property which will be in force after the
Closing, except for the Service Agreements, Equipment Leases, and New
Collective Bargaining Agreement.  By not
later than January 10, 2007, Seller shall have provided Buyer with access to
true, correct and complete copies of all Service Agreements and Equipment
Leases which require payment in excess of $10,000.00 per year (the “Material Contracts”).  Except as may be set forth on the Exhibit to
be provided by Seller on or before January 10, 2007, all Service Agreements and
Equipment Leases which are not Material Contracts (i) are terminable by Seller
upon 30 days notice, (ii) are freely transferable to Buyer and (iii) do not
contain any rights in favor of third parties to purchase, occupy or encumber
all or any portion of the Property.  To
Seller’s knowledge, all of the Service Agreements and Equipment Leases are in
full force and effect, Seller is not in default in any material respect under
the Service Agreements and Equipment Leases and there is no existing condition
that, with notice or the passage of time would constitute a material default by
Seller under any Service Agreement or Equipment Lease.  To Seller’s knowledge, no other party to a
Service Agreement

 29
 

 

or Equipment Lease
is in default in any material respect under any of the Service Agreements or
Equipment Leases.

(ix)           Hotel
Ground Lease.  The Hotel Ground Lease
is comprised solely of the following documents: 
Hotel Ground Lease, Reciprocal Easement Agreement between Boston Convention
Center Hotel LLC and BCCH Retail LLC dated May 27, 2004, including Limited
Joinder of Massachusetts Convention Center Authority; Room Block Commitment
Agreement by and among Massachusetts Convention Center Authority, Boston
Convention Center Hotel LLC, and Westin Management Company East, dated May 27,
2004; Agreement Regarding Service Contracts and Permit among Starwood Hotels
and Resorts Worldwide, Inc., Starwood Carpenter Convention Hotel LLC, Boston
Convention Associates, LLC, and Boston Convention Center Hotel LLC dated May
27, 2004; and Letter Agreement dated September 19, 2006 regarding Additional Improvements
for Headquarters Hotel.  Except as set
forth in such documents, neither Ground Lessor nor Hotel Seller, as ground
lessee, has any rights or obligations in respect of the Hotel Land and the
Improvements.  Hotel Seller has delivered
true, correct and complete copies of the Hotel Ground Lease to Buyer and
neither Ground Lessor nor Hotel Seller, as ground lessee, has waived, canceled
or surrendered any of its rights thereunder. 
The Hotel Ground Lease is in full force and effect.  Hotel Seller has not received written notice
of default by it, nor, to Seller’s knowledge, is it or the Ground Lessor in
default in the performance of any of its obligations thereunder, nor is Seller
aware of any event which could or may give either party thereunder the right to
give a notice of default to the other; no litigation or, to Hotel Seller’s
knowledge, any threat thereof, exists between Hotel Seller, as lessee, and
Ground Lessor, or between the Ground Lessor or Hotel Seller as lessee and any
third parties, with respect to the Hotel Ground Lease; and the Hotel Ground
Lease has not been further modified, supplemented or amended in any respect.  All rent, charges or other payments due
lessor from Hotel Seller as lessee under the Hotel Ground Lease have been paid
to the extent they are payable through the date of this Agreement.

(x)            Retail
Ground Lease.  The Retail Ground
Lease is comprised solely of the following documents:  Retail Ground Lease, Reciprocal Easement
Agreement between Boston Convention Center Hotel LLC and BCCH Retail LLC dated
May 27, 2004, including Limited Joinder of Massachusetts Convention Center
Authority.  Except as set forth in such
documents, neither Ground Lessor nor Retail Seller, as ground lessee, has any
rights or obligations in respect of the Retail Land and the Improvements.  Retail Seller has delivered true, correct and
complete copies of the Retail Ground Lease to Buyer and neither Ground Lessor
nor Retail Seller, as ground lessee, has waived, canceled or surrendered any of
its rights thereunder.  The Retail Ground
Lease is in full force and effect. 
Retail Seller has not received written notice of default by it, nor, to
Seller’s knowledge, is it or the Ground Lessor in default in the performance of
any of its obligations thereunder, nor is Seller aware of any event which could
or may give either party thereunder the right to give a notice of default to
the other; no litigation or, to Retail Seller’s knowledge, any threat thereof,
exists between Retail Seller, as lessee, and Ground Lessor, or between the
Ground Lessor or Retail Seller as lessee and any third parties, with respect to
the Retail Ground Lease; and the Retail Ground Lease has not been further
modified, supplemented or amended in any respect.  All rent, charges or other payments due
lessor from Retail Seller as lessee under the Retail Ground Lease have been
paid to the extent they are payable through the date of this Agreement.

 30
 

 

(xi)           License
Agreement.  Seller has delivered
true, correct and complete copies of the License Agreement and neither Ground
Lessor, as licensor, nor Hotel Seller, as licensee, has waived, canceled or
surrendered any of its rights thereunder. 
The License Agreement is in full force and effect Hotel Seller has not
received written notice of default by it, nor, to Seller’s knowledge, is it or
the Ground Lessor in default in the performance of any of its obligations
thereunder, nor is Seller aware of any event which could or may give either
party thereunder the right to give a notice of default to the other; no
litigation or, to Hotel Seller’s knowledge, any threat thereof, exists between
Hotel Seller, as licensee, and Ground Lessor, as licensor, or between the
Ground Lessor or Hotel Seller as licensee and any third parties, with respect
to the License Agreement; and the License Agreement has not been further
modified, supplemented or amended in any respect.  All rent, charges or other payments due
Ground Lessor from Hotel Seller as licensee under the License Agreement have
been paid to the extent they are payable through the date of this Agreement.

(xii)          Option Agreement.  Seller has delivered true, correct and
complete copies of the Option Agreement and neither Ground Lessor, as optionor,
nor Hotel Seller, as optionee, has waived, canceled or surrendered any of its
rights thereunder.  The Option Agreement
is in full force and effect.  Hotel
Seller has not received written notice of default by it, nor, to Seller’s
knowledge, is it or the Ground Lessor in default in the performance of any of
its obligations thereunder, nor is Seller aware of any event which could or may
give either party thereunder the right to give a notice of default to the
other; no litigation or, to Hotel Seller’s knowledge, any threat thereof,
exists between Hotel Seller, as optionee, and Ground Lessor, as optionor, or
between the Ground Lessor or Hotel Seller as optionee and any third parties,
with respect to the Option Agreement; and the Option Agreement has not been
further modified, supplemented or amended in any respect.  Hotel Seller, as optionee, has not exercised
the option granted pursuant to the Option Agreement.

(xiii)         Environmental Matters.  The Environmental Reports represent all of
the environmental reports with respect to the Property in the possession or
control of Seller.  Except for any and
all matters that are disclosed in the Environmental Reports, Seller has not
received written notice from any governmental authority, and Seller has no
knowledge, of violations of environmental laws, ordinances or regulations with
respect to the Property.  Except for any
and all matters that are disclosed in the Environmental Reports, to Seller’s
knowledge, there is no presence of any hazardous materials, hazardous
substances, toxic substances or wastes (as defined in or regulated by any
federal, state or local laws, ordinances or regulations) on, under, in, at or
emanating from the Property except in compliance with such laws, ordinances and
regulations.

(xiv)        Condemnations and Assessments.  There is no condemnation either instituted
or, to Seller’s knowledge, threatened, which would affect the Property, and
neither Seller nor, to Seller’s knowledge, Manager has received written notice
of any special assessment affecting the Property.

(xv)         Insurance.  Neither Seller nor, to Seller’s knowledge,
Manager has received written notice from any insurance company of any defects
or inadequacies in the Property that would affect adversely its insurability or
increase the cost of insurance.

 31
 

 

(xvi)        Legal Requirements.  Seller and, to Seller’s knowledge, Manager,
have not received written notice from any governmental authority alleging a
violation of any legal requirement or absence, suspension, revocation or
non-renewal of any license or permit that has not been corrected, cured or
otherwise resolved or seeking to audit or investigate compliance of the Hotel
with any applicable legal requirement, which audit or investigation has not
been completed or otherwise resolved.

(xvii)       Financial Information.  Seller has delivered to Buyer true and
accurate copies of the Financial Information.

(xviii)      No Options.  Seller has not granted any option, right of
first offer or refusal or similar right in favor of any person to purchase or
otherwise acquire the Property, the Hotel, any portion thereof or any interest
therein.

(xix)         Audits. 
Seller and, to Seller’s knowledge, Manager, has not received any written
notice of any audit of any taxes payable or tax delinquency with respect to the
Property which has not been resolved or completed.

(xx)          Personal
Property.  Seller has good and
marketable title to or a valid leasehold interest in its interest in all its
Personal Property and, subject to any equipment leases listed in the schedule
of Service Agreements, all such Personal Property shall be free and clear of
all encumbrances at Closing.  Seller has
not transferred any Personal Property (including the Personal Property it
acquired when Seller first acquired the Property), except in the ordinary
course of Seller’s business.

(xxi)         Employees.  Seller has no employees working at the
Property, and all employees working at the Property on behalf of Seller are
employees of Manager.  Seller has not
itself established any retirement, health insurance, vacation, pension, profit
sharing or other benefit plans relating to the operation or maintenance of the
Property.  To Seller’s knowledge as of
the date of this Agreement, Seller has not received any written notice nor to
Seller’s knowledge has Manager informed Seller of any actual or threatened
union strikes, work stoppages or slow downs or any other labor disputes
concerning individuals employed at the Property.  Manager has informed Seller that Manager’s
current collective bargaining agreement is due to expire February 1, 2007 and
that Manager is engaged in negotiations regarding the replacement, extension or
renewal of the collective bargaining agreement (a “New Collective Bargaining Agreement”).

(xxii)        Taxes. 
Within the times and in the manner prescribed by law, Seller has filed
all federal, state and local tax returns required by law and has paid all
applicable sales, use, withholding, real and personal property, income, FICA,
employment and other taxes, assessments and penalties due and payable, in
connection with the Property.  There are
no proceedings pending, or to the best of Seller’s knowledge, threatened with
or by any taxing authorities as to taxes of any nature payable by Seller or its
affiliates in connection with the Property.

Representations and
Warranties of Buyer.  Buyer hereby
represents and warrants to and covenants with Seller that:

 32
 

 

1.1.30            Due Organization
and Authority.  Buyer is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware.  Buyer has full
power and lawful authority to enter into and carry out the terms and provisions
of this Agreement and to execute and deliver all documents which are
contemplated by this Agreement, and all actions of Buyer necessary to confer
such power and authority upon the persons executing this Agreement (and all
documents which are contemplated by this Agreement) on behalf of Buyer have
been taken and this Agreement constitutes a valid and legally binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance or other similar laws affecting the rights of
creditors generally and to principles of equity.

1.1.31            OFAC.

(a)           Buyer and, to Buyer’s knowledge, its
beneficial, controlling constituent owners and affiliates, are in compliance
with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept.
25, 2001)  (the “Order”)
and other similar requirements contained in the rules and regulations of the
Office of Foreign Asset Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive
Orders in respect thereof (the Order and such other rules, regulations, legislation,
or orders are collectively called the “Orders”).

(b)           Neither Buyer nor, to Buyer’s knowledge, its
beneficial, controlling constituent owners and affiliates:

(i)            is listed on the
Specially Designated Nationals and Blocked Persons List maintained by OFAC
pursuant to the Order and/or on any other list of terrorists or terrorist
organizations maintained pursuant to any of the rules and regulations of OFAC
or pursuant to any other applicable Orders (such lists are collectively
referred to as the “Lists”);

(ii)           has been arrested for
money laundering or for predicate crimes to money laundering, convicted or pled
nolo contendere to charges involving money laundering or predicate crimes to
money laundering;

(iii)          has been determined by
competent authority to be subject to the prohibitions contained in the Orders;

(iv)          is owned or controlled
by, nor acts for or on behalf of, any Person on the Lists or any other Person
who has been determined by competent authority to be subject to the
prohibitions contained in the Orders;

(v)           shall transfer any
interest in Buyer or such parties to any Person who is, or whose beneficial
owners are, listed on the Lists; or

(vi)          shall assign this
Agreement or any interest herein, to any Person who is listed on the Lists or
who is engaged in illegal money laundering.

 33
 

 

If Buyer or any
constituent owner or affiliate of Buyer becomes listed on the Lists or is
indicted, arraigned, or custodially detained on charges involving money
laundering or predicate crimes to money laundering, Buyer shall immediately
notify Seller upon Buyer’s obtaining knowledge thereof.  Buyer shall have ten (10) business days to
remove such party from any interest in Buyer or Seller may terminate this
Agreement upon written notice to Buyer, whereupon the Escrow Deposit shall be
returned to Buyer and neither party shall have any further obligation hereunder
except for those obligations which expressly survive a termination of this
Agreement.

1.1.32            Liquor License.
Buyer understands that, among the requirements of the state in which the
Property is located, that govern the issuance of the liquor licenses with which
it will be required to comply, are the following:  Buyer will be required to submit personal
background information, including social security numbers and driving records,
on Buyer’s managers and Buyer will further be required to submit such
information on the owners and managers of any company which directly or
indirectly controls Buyer.  Buyer shall
comply with these requirements.

1.1.33            Bankruptcy Proceedings.  Buyer is not the subject debtor under any
federal, state or local bankruptcy or insolvency proceeding, or any other
proceeding for dissolution, liquidation or winding up of its assets.  Buyer is not insolvent, and the consummation
of the transactions contemplated by this Agreement shall not render Buyer
insolvent.

1.1.34            No Violation.  Buyer’s execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
performance of Buyer’s obligations under the instruments required to be
delivered by Buyer on the Closing Date, do not and will not result in any
violation of, or default under, any term or provision of any agreement,
instrument, mortgage, loan agreement or similar document to which Buyer is a
party or by which Buyer is bound.

1.1.35            Litigation.  Buyer has not received written notice of any
litigation, investigation or proceeding pending nor, to the best of Buyer’s
knowledge, is any contemplated or threatened against Buyer that would
materially impair or materially adversely affect Buyer’s ability to perform its
obligations under this Agreement or any other instrument or document related
hereto.

1.1.36            ERISA.  Neither (i) any assets of Buyer, nor
(ii) any funds to be used by Buyer with respect to the transactions
contemplated pursuant to this Agreement, are, or at Closing will be, pursuant
to “ERISA” (as hereinafter defined) or the “Code” (as hereinafter defined)
considered for any purpose of ERISA or Section 4975 of the Code to be assets of
a “Plan” (as hereinafter defined).  Buyer
is not executing this Agreement and will not be performing its obligations or
exercising its rights or remedies under the Agreement on behalf of or for the
benefit of any Plan.  Neither the
execution or delivery of this Agreement by Seller, nor the performance by
Seller of its obligations or the exercise of its rights or remedies under this
Agreement, nor any transaction contemplated under this Agreement, is or will be
a “prohibited transaction” within the meaning of Section 406 of ERISA or
Section 4975 of the Code.  For the
purposes hereof the following terms shall have the following meanings:  “Code” shall mean the Internal Revenue Code
of 1986, as amended; “ERISA” shall mean the Employee Retirement

 34
 

 

Income Security Act of 1974, as
amended (and any successor statute and any applicable regulations or guidance
promulgated thereunder); and “Plan” shall mean a “plan” as that term is defined
in Section 3(3) of ERISA or Section 4975 of the Code.

1.1.37            Qualified
Transferee.  Buyer knows of no
reasonable basis upon which Ground Lessor could withhold its consent to the
assignment of either of the Hotel Ground Lease or the Retail Ground Lease to
Buyer or its proposed assignee or nominee. 
Buyer hereby covenants and agrees to provide to Seller and Ground Lessor
all of the information and documentation that Ground Lessor may reasonably
require or that is expressly required in the Hotel Ground Lease or the Retail
Ground Lease as a basis for evaluating a requested consent to assignment.  Buyer and its proposed assignee or nominee
meet the criteria set forth in Section 9.3.1 of the Management Agreement with
respect to assignments to Persons not requiring the Manager’s consent.  Buyer hereby covenants and agrees to provide
to Seller and Manager all of the information and documentation that Manager may
reasonably require or that is expressly required in the Management Agreement as
a basis for making a determination that Buyer and its proposed assignee or
nominee meet the criteria set forth in Section 9.3.1 of the Management
Agreement.

1.1.38            No Reliance on
Seller’s Warranties.  BUYER
ACKNOWLEDGES AND AGREES THAT ITS OBLIGATIONS UNDER THIS AGREEMENT SHALL NOT BE
SUBJECT TO ANY FINANCING CONTINGENCY. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT AND ANY DOCUMENTS EXECUTED BY SELLER AT CLOSING, THE SALE AND
TRANSFER OF THE PROPERTY HEREUNDER IS AND WILL BE MADE ON AN “AS IS” BASIS,
WITHOUT REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE, EXPRESS, IMPLIED
OR OTHERWISE, INCLUDING ANY REPRESENTATION OR WARRANTY CONCERNING TITLE TO THE
PROPERTY, THE PHYSICAL CONDITION OF THE PROPERTY (INCLUDING THE CONDITION OF
THE SOIL OR THE IMPROVEMENTS), THE ENVIRONMENTAL CONDITION OF THE PROPERTY
(INCLUDING THE PRESENCE OR ABSENCE OF HAZARDOUS SUBSTANCES ON OR RESPECTING THE
PROPERTY), THE COMPLIANCE OF THE PROPERTY WITH APPLICABLE LAWS, ENCUMBRANCES
AND REGULATIONS (INCLUDING ZONING, SIGNAGE, PARKING AND BUILDING CODES OR THE
STATUS OF DEVELOPMENT, SIGNAGE AND USE RIGHTS RESPECTING THE PROPERTY), THE
FINANCIAL CONDITION OF THE PROPERTY, OR ANY OTHER REPRESENTATION OR WARRANTY
RESPECTING ANY INCOME, EXPENSES, CHARGES, LIENS OR ENCUMBRANCES, RIGHTS OR
CLAIMS ON, AFFECTING OR PERTAINING TO THE PROPERTY OR ANY PART THEREOF.  BUYER ACKNOWLEDGES THAT DURING THE DUE
DILIGENCE PERIOD, BUYER SHALL EXAMINE, REVIEW AND INSPECT ALL MATTERS WHICH IN
BUYER’S JUDGMENT BEAR UPON THE PROPERTY AND THEIR VALUE AND SUITABILITY FOR
BUYER’S PURPOSES.  EXCEPT AS TO MATTERS
EXPRESSLY SET FORTH IN THIS AGREEMENT ANY DOCUMENTS EXECUTED BY SELLER AT
CLOSING, BUYER WILL ACQUIRE THE PROPERTY SOLELY ON THE BASIS OF ITS OWN
PHYSICAL AND FINANCIAL EXAMINATIONS, REVIEWS AND INSPECTIONS AND THE TITLE
INSURANCE PROTECTION AFFORDED BY THE OWNER’S POLICY.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE PARTIES SPECIFICALLY ACKNOWLEDGE THAT BUYER HAS HAD, AND, DURING
THE DUE DILIGENCE

 35
 

 

PERIOD, SHALL HAVE, AN
OPPORTUNITY TO FULLY INSPECT THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, THE
PHYSICAL CONDITION OF THE REAL PROPERTY AND THE PERSONAL PROPERTY (INCLUDING
ALL ENVIRONMENTAL CONCERNS), AND THE PURCHASE PRICE HAS BEEN NEGOTIATED TO
ELIMINATE ALL CLAIMS, WHETHER KNOWN OR UNKNOWN, RELATING TO THE CONDITION OF
THE PROPERTY AND ALL ASPECTS AND ATTRIBUTES THEREOF, INCLUDING, WITHOUT
LIMITATION, ALL ENVIRONMENTAL MATTERS. 
CONSEQUENTLY, EXCEPT AS MAY BE EXPRESSLY PROVIDED HEREIN, THIS CLAUSE
BARS ALL CLAIMS, WHETHER OR NOT PRESENTLY KNOWN, BROUGHT BY BUYER CONCERNING
THE CONDITION OF THE PROPERTY AND ALL ASPECTS AND ATTRIBUTES THEREOF,
SPECIFICALLY INCLUDING, WITHOUT LIMITATION, ALL CLAIMS PURSUANT TO ANY
ENVIRONMENTAL LAW, RULE OR REGULATION OR OTHERWISE.  NOTWITHSTANDING THE PARTIES’ INTENT THAT ALL
SUCH CLAIMS BE BARRED, SHOULD A COURT OF COMPETENT JURISDICTION DEEM OTHERWISE,
THE PRESENCE OF THIS SECTION IS INTENDED BY THE PARTIES TO SERVE, AND SHALL
SERVE, AS THE OVERWHELMING, PRIMARY FACTOR IN ANY EQUITABLE APPORTIONMENT OF
DAMAGES UNDER ANY APPLICABLE ENVIRONMENTAL LAW, RULE OR REGULATION OR
OTHERWISE.  MOLD OCCURS NATURALLY IN
ALMOST ALL INDOOR ENVIRONMENTS.  MOLD
SPORES MAY ALSO ENTER A STRUCTURE THROUGH OPEN DOORWAYS, WINDOWS OR A VARIETY
OF OTHER SOURCES.  BUYER ACKNOWLEDGES
THAT THE IMPROVEMENTS MAY BE LOCATED IN A CLIMATE WHICH MAY BE CONDUCIVE TO THE
GROWTH OF MOLD AND/OR MILDEW, AND THAT IT IS NECESSARY TO PROVIDE ONGOING
PROPER VENTILATION AND DEHUMIDIFICATION OF THE IMPROVEMENTS TO RETARD OR
PREVENT THE GROWTH OF MOLD AND/OR MILDEW. 
MOLD AND/OR MILDEW MAY BE PRESENT DURING OR AFTER CONSTRUCTION IN THE
INDOOR AIR AND/OR ON THE INTERIOR SURFACES OF THE IMPROVEMENTS, INCLUDING, BUT
NOT LIMITED TO, WALL CAVITIES, ATTICS, WINDOWS AND/OR ON THE EXTERIOR SURFACES
OF THE IMPROVEMENTS OR ANY PART THEREOF. 
BUYER AND SELLERS HEREBY SPECIFICALLY AGREE THAT SELLERS SHALL NOT BE
RESPONSIBLE FOR THE PREVENTION OF MOLD AND/OR MILDEW OR ANY DAMAGE, PERSONAL
INJURY, LOSS OF INCOME, EMOTIONAL DISTRESS, DEATH, LOSS OF USE, DIMINUTION OR
LOSS OF VALUE OF THE PROPERTY, ECONOMIC DAMAGES, PROPERTY DAMAGE, PERSONAL
INJURY, OR ADVERSE HEALTH EFFECTS RELATING TO, ARISING FROM, RESULTING FROM OR
CAUSED BY MOLD AND/OR MILDEW ACCUMULATION REGARDLESS OF THE CAUSE OF SAID MOLD
AND/OR MILDEW.

1.1.39             Buyer Knowledge
Individuals.  For the purposes of
this Agreement and the documents to be delivered pursuant hereto, references to
“To Buyer’s knowledge” or “Buyer’s actual knowledge” or “Buyer has no knowledge”
shall mean the actual, present, conscious knowledge of Michael D. Schecter,
John Williams or Mark Brugger (collectively, the “Buyer
Knowledge Individuals”), such individuals being the executives
working on behalf of Buyer who have the best knowledge of the business and
affairs of Buyer and the transactions contemplated under this Agreement on the
date of this Agreement without any investigation or inquiry, but such
individuals shall not have any individual liability in connection
herewith.  Without limiting the
foregoing, Seller acknowledges that the Buyer

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Knowledge Individuals have not
performed and are not obligated to perform any investigation or review of any
files or other information in the possession of Buyer, or to make any inquiry
of any persons, or to take any other actions in connection with the
representations and warranties of Buyer set forth in this Agreement.  Neither the actual, present, conscious
knowledge of any other individual or entity, nor the constructive knowledge of
the Buyer Knowledge Individuals or of any other individual or entity, shall be
imputed to the Buyer Knowledge Individuals

Survival.  The representations, warranties and covenants
of Seller under this Agreement applicable only to the Retail Ground Lease and
the Retail Closing, and those applicable to Hotel and Option Closing and to the
remainder of the Property, and in any certificate or document delivered
pursuant hereto or in connection herewith, shall survive the applicable Closing
for a period of twelve (12) months from the applicable Closing Date (being
herein called the “Survival Period”).  Each such representation and warranty of
Seller shall automatically be null and void and of no further force and effect
on the first day following the expiration of the applicable Survival Period as
to such representation and warranty, unless, prior to the expiration of such
Survival Period as to such representation and warranty, Buyer shall have
provided Seller with a notice alleging that Seller is in breach of such
representation or warranty and specifying in reasonable detail the nature of
such breach.  Buyer shall allow Seller
sixty (60) days after its notice within which to cure such breach or if such
breach cannot be cured within such sixty (60) day period, and Seller notifies
Buyer it wishes to extend its cure period (the “Cure Extension Notice”), such additional reasonable period of
time (not to exceed an additional sixty (60) days) as is required to cure the
same so long as such cure has been commenced within such sixty (60) day period
and is being diligently pursued to completion. 
The applicable representations, warranties and covenants of Buyer under
this Agreement, and in any certificate or document delivered pursuant hereto or
in connection herewith, shall survive the applicable Closing for a period of
twelve (12) months from the applicable Closing Date.

Interim Covenants of
Seller.  Until the Closing Date or the
sooner termination of this Agreement:

1.1.40            Maintenance/Operation.  Seller shall cause the Property to be
maintained, repaired and operated in all material respects in the same manner
as prior hereto pursuant to its normal course of business (including making
capital expenditures and expenditures of FF&E reserves in such normal
course of business).  Such continuing
operation shall include delivering the Property to Buyer at Closing with such
levels of inventories and supplies as Seller has found sufficient in its
operation of its business at the Property.

1.1.41            Service Contracts.  Seller shall not enter into (and, subject to
clause (2) below, shall not permit Manager to enter into) any additional
Service Agreements or other similar agreements without the prior consent of
Buyer, which shall not be unreasonably withheld, except for (1) those deemed
reasonably necessary by Seller which are cancelable on thirty (30) days’ notice
without penalty and (2) those entered into by Manager which do not require
Seller’s consent.

1.1.42            Leases.  Except to the extent required under the
Management Agreement without Seller’s consent, Seller shall not enter into (and
shall not permit Manager to enter into) any new Leases or material
modifications of Leases or terminate any Leases without

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Buyer’s express written consent
which shall not be unreasonably withheld or delayed and shall be deemed given
if Buyer, within seven (7) business days after Seller requests Buyer’s approval
to a proposed new lease or material modification or termination of a Lease and
provides Buyer with such information as is reasonable and appropriate for Buyer
to determine whether to grant or withhold approval, fails to give Seller
written notice of its disapproval thereof and the reasons therefor.  Notwithstanding anything herein to the contrary,
if the Closing occurs, Buyer shall bear all costs and expenses related to any
new Leases or modifications, extensions, expansions, options or renewals of
existing Leases entered into after the date hereof pursuant to this subsection
(including tenant improvement costs and leasing commissions, but excluding free
rent allocable to any period prior to the Closing Date) and, without limitation
on the foregoing, the prorations at Closing shall include an appropriate credit
to Seller consistent with the foregoing.

1.1.43            Hotel Ground Lease
Covenants.

(a)           Hotel Seller shall pay the rent and all
other sums and charges mentioned in, and payable under, the Hotel Ground Lease
when due.

(b)           Hotel Seller shall perform and observe all
of the terms, covenants and conditions required to be performed and observed by
the lessee under the Hotel Ground Lease, the breach of which would permit any
party to the Hotel Ground Lease, and shall not do any act which would permit
any party to the Hotel Ground Lease, validly to terminate the Hotel Ground
Lease (including, without limitation, all payment obligations), and shall not
waive, excuse or discharge any of the obligations of Ground Lessor without
Buyer’s prior written consent in each instance.

(c)           Promptly following the expiration of the Due
Diligence Period, Seller shall request the consent or approval of Ground Lessor
of the transactions contemplated hereby to the extent required pursuant to the
terms of the Hotel Ground Lease.

(d)           Except with respect to the Hotel Ground
Lease Amendment, Hotel Seller shall not cancel, terminate, surrender, modify or
amend or in any way alter, sublet or surrender all or any portion of the Hotel
Land or the Improvements, agree to the alteration of any of the provisions of
the Hotel Ground Lease or agree to any termination, amendment, modification or
surrender of the Hotel Ground Lease without Buyer’s prior written consent in
each instance.

(e)           Hotel Seller shall deliver to Buyer copies
of any notice of default by any party under the Hotel Ground Lease, or of any
notice from Ground Lessor of its intention to terminate the Hotel Ground Lease
or to re-enter and take possession of the Hotel Land and the Improvements,
immediately upon delivery or receipt of such notice, as the case may be.

(f)            Hotel Seller shall promptly furnish to
Buyer copies of such information and evidence as Buyer may reasonably request
concerning Hotel Seller’s due observance, performance and compliance with the
terms, covenants and conditions of the Hotel Ground Lease.

 38
 

 

(g)           Hotel Seller shall use commercially
reasonable efforts, not including the payment of any money to Ground Lessor or
the initiation of any legal proceeding, to obtain and deliver to Buyer, the
Hotel Ground Lease Estoppel and Consent duly executed by Ground Lessor.

1.1.44            Retail Ground Lease
Covenants.

(a)           Retail Seller shall pay the rent and all
other sums and charges mentioned in, and payable under, the Retail Ground Lease
when due.

(b)           Retail Seller shall perform and observe all
of the terms, covenants and conditions required to be performed and observed by
the lessee under the Retail Ground Lease, the breach of which would permit any
party to the Retail Ground Lease, and shall not do any act which would permit
any party to the Retail Ground Lease, validly to terminate the Retail Ground
Lease (including, without limitation, all payment obligations), and  shall not waive, excuse or discharge any of
the obligations of Ground Lessor without Buyer’s prior written consent in each
instance.

(c)           Promptly following the expiration of the Due
Diligence Period, Seller shall request the consent or approval of Ground Lessor
of the transactions contemplated hereby to the extent required pursuant to the
terms of the Retail Ground Lease.

(d)           Except with respect to the Retail Ground
Lease Amendment, Retail Seller shall not cancel, terminate, surrender, modify
or amend or in any way alter, sublet or surrender all or any portion of the
Retail Land or the Improvements, agree to the alteration of any of the
provisions of the Retail Ground Lease or agree to any termination, amendment,
modification or surrender of the Retail Ground Lease without Buyer’s prior
written consent in each instance.

(e)           Retail Seller shall deliver to Buyer copies
of any notice of default by any party under the Retail Ground Lease, or of any
notice from Ground Lessor of its intention to terminate the Retail Ground Lease
or to re-enter and take possession of the Retail Land and the Improvements,
immediately upon delivery or receipt of such notice, as the case may be.

(f)            Retail Seller shall promptly furnish to
Buyer copies of such information and evidence as Buyer may reasonably request
concerning Retail Seller’s due observance, performance and compliance with the
terms, covenants and conditions of the Retail Ground Lease.

(g)           Retail Seller shall use commercially
reasonable efforts, not including the payment of any money to Ground Lessor or
the initiation of any legal proceeding, to obtain and deliver to Buyer the
Retail Ground Lease Estoppel and Consent duly executed by Ground Lessor.

1.1.45            Hotel Management
Agreement Indemnity.  Buyer shall
indemnify, defend and hold harmless Seller from and against any claim by
Manager (and all obligations, claims, liabilities, damages, losses, cost or
expenses, including reasonable attorneys’

 39
 

 

fees and court costs, resulting
therefrom) by reason of a default by the owner under the Management Agreement
occurring and attributable to the period on or after the Closing Date.  Seller shall indemnify, defend and hold
harmless Buyer from and against any claim by Manager (and all obligations,
claims, liabilities, damages, losses, cost or expenses, including reasonable
attorneys’ fees and court costs, resulting therefrom) by reason of a default by
the owner under the Management Agreement occurring or attributable to the
period prior to the Closing Date.  The
indemnity obligations set forth in this Section 6.4.6 shall be subject,
in the case of Seller, to the limitations of Section 9.2, and shall
survive the Closing in the case of both parties.

1.1.46            Reservations and
Bookings.  Seller shall use
commercially reasonable efforts to cause Manager to continue to take guest room
reservations and to book functions and meetings and otherwise to market and
promote the business of the Hotel in accordance with the terms of the
Management Agreement; and all advance room bookings and reservations and all
meetings and function bookings shall be booked at rates, prices and charges
charged by Seller and Manager for such purposes in the ordinary course of business
consistent with the Management Agreement.

1.1.47            Notice of
Proceedings.  Seller shall promptly
advise Buyer of any litigation, arbitration or administrative hearing, or any
written threat to commence any of the foregoing, concerning or relating to the
Property or the operation thereof, of which Seller obtains knowledge.

1.1.48            Removal of Property.  Seller shall refrain and use commercially
reasonable efforts to cause Manager to refrain from removing any portion of the
Property without the prior written consent of Buyer, except in the normal
course of business as to personal property that is no longer needed or useful
or is replaced, prior to Closing, with similar items of at least equal
suitability, quality and value, free and clear of any liens or security
interests.

1.1.49            Insurance.  Seller shall not affirmatively cancel any
existing insurance carried on the Property, shall use commercially reasonable
efforts to maintain or, to the extent Manager maintains the insurance, cause
Manager to maintain, all existing insurance carried on the Property by Seller
or Manager, and shall use commercially reasonable efforts to renew any such
insurance which comes up for renewal prior to the Closing.

1.1.50            Material
Alteration; Additional Renovation. 
Without Buyer’s consent, which shall not be unreasonably withheld,
delayed or conditioned, (i) Seller shall not make or obligate itself to make,
and Seller shall request Manager not to make, or obligate itself to make any
material alterations or modifications to the Property except in the case of
emergencies and except those contemplated in the capital expenditure and
FF&E budgets provided to Buyer during the Due Diligence Period, and (ii)
Seller shall not enter into, and Seller shall cause Manager not to enter into,
any agreement for renovation of the Property which is not expressly permitted
by the terms of the Management Agreement.

1.1.51            Transfer of Permits.  Seller shall cooperate with Buyer (with no
out-of-pocket cost to Seller) in all reasonable respects in connection with the
transfer (if any) of any permits, licenses, certificates and approvals issued
with respect to the Property to Buyer or the issuance of any new permits,
licenses, certificates or approvals (if any) to Buyer, each to be

 40
 

 

effective no earlier than
Closing, and Seller shall and shall cause Manager to use commercially
reasonable efforts to (i) preserve and keep in force existing permits,
licenses, certificates and approvals issued with respect to the Property, and
(ii) cause all those expiring during the period between the date of this
Agreement and the Closing to be renewed prior to the Closing Date.

1.1.52            No Further
Marketing.  Seller shall not market,
sell, convey or offer to sell any portion of the Property (nor permit Manager
to do any of the same), except for items of Personal Property sold or consumed
in the ordinary course of business.

1.1.53            Management
Agreement Consents; New Collective Bargaining Agreement.  Seller shall not grant any material consent
requested by Manager pursuant to the Management Agreement without first
consulting with Buyer and obtaining Buyer’s consent, which shall not be
unreasonably withheld, delayed or conditioned. 
In particular, Seller shall neither execute nor give its consent to the
execution of, any New Collective Bargaining Agreement without first giving
Buyer adequate opportunity to advise and consult on the terms thereof and
thereafter obtaining Buyer’s consent, which shall not be unreasonably withheld,
delayed or conditioned.  If Buyer elects
reasonably to withhold its consent to the execution of any New Collective
Bargaining Agreement, then Seller may nevertheless decide to execute or consent
to the execution of the New Collective Bargaining Agreement, whereupon it shall
so notify Buyer.  If Seller so notifies
Buyer, Buyer may then elect to terminate this Agreement by written notice to
Seller on or before the Closing Date, whereupon the Agreement shall be void
(but for provisions which expressly survive termination) and the Escrow Deposit
shall be refunded to Buyer.  Seller
covenants to keep Buyer reasonably informed of the process of the New
Collective Bargaining Agreement negotiation.

1.1.54            Baggage Inventory.  The representatives of Seller and Buyer shall
prepare the inventory as of the day immediately preceding the Closing Date
(which inventory shall be binding on all parties thereto) of (a) all luggage,
valises and trunks checked or left in the care of the Hotel by guests then or
formerly in the Hotel, (b) parcels, laundry, valet packages and other property
of guests checked or left in the care of the Hotel by guests then or formerly
in the Hotel (excluding, however, property in the Hotel safe deposit boxes),
(c) all luggage or other property of guests retained by Buyer, and (d) all
items contained in the Hotel lost and found. 
Buyer shall be responsible from and after the Closing Date for all
baggage, and other items listed in such inventory.  Seller hereby agrees to indemnify and hold
Buyer harmless from and against any and all liability for claims arising prior
to the Closing Date relating to such items not listed on the inventory.  The provisions of this Section 6.4.16
shall survive the Closing.

1.1.55            Safe Deposit Boxes.  Prior to the Closing Date, Seller shall
endeavor to send written notice to guests or tenants or other persons who to
Seller’s or its Manager’s knowledge have possessions locked in safe-deposit
boxes at the Hotel advising them of the sale of the Hotel (excluding in-room
safes) to Buyer and requesting removal of the contents thereof or the removal
thereof and concurrent re-deposit of such contents pursuant to new safe deposit
agreements with Buyer.  Seller and Buyer
shall have representatives present when the boxes are opened and the contents
thereof shall be inventoried.  If the
guest does not timely respond to Seller’s notice, the safe deposit box may, if
Seller, in its sole discretion, so agrees, be broken open in the presence of
Seller and Buyer and the contents inventoried and re-deposited in a new “safe
deposit” box.  Buyer shall be solely
responsible for all items in the

 41

 

Hotel’s safe deposit boxes which had been so inventoried, removed and
re-deposited and Buyer hereby agrees to indemnify, defend and hold Seller
harmless from and against any and all liability therefor.  Seller hereby agrees to indemnify and hold
Buyer harmless from and against any and all liability for claims arising prior
to the Closing Date relating to such items not listed on the inventory.  The provisions of this Section 6.4.17
shall survive the Closing.

1.1.56            Cooperation
and Transition.  For a period not to
exceed thirty (30) days post-Closing, Seller will reasonably cooperate with
Buyer in Buyer’s efforts to ensure that from and after the Closing, the
operations of the Property shall continue in an efficient manner.  Buyer shall cooperate with Seller, and shall
exercise commercially reasonable diligence to assure that all actions are taken
in order to achieve the efficient transition contemplated hereunder in a timely
manner at the Closing.  Seller will
reasonably cooperate with Buyer to provide any information required by any
prospective lender in connection with Buyer’s financing of the transaction
contemplated hereunder.

1.1.57            Option
Agreement.  Seller shall not exercise
the option granted pursuant to the Option Agreement and shall not amend, modify,
terminate or waive any rights or obligations of Seller or Ground Lessor under
the Option Agreement without the prior written consent of Buyer in each
instance.  Seller shall not do, permit or
suffer any event or omission as a result of which there could occur a default
under the Option Agreement or any event which, with the giving of notice or the
passage or time, or both, would constitute a default under the Option Agreement
which could permit any party to the Option Agreement validly to terminate the Option
Agreement.

1.1.58            License
Agreement.  Seller shall not amend,
modify, terminate or waive any rights or obligations of Seller or Ground Lessor
under the License Agreement without the prior written consent of Buyer in each
instance.  Seller shall not do, permit or
suffer any event or omission as a result of which there could occur a default
under the License Agreement or any event which, with the giving of notice or
the passage or time, or both, would constitute a default under the License
Agreement which could permit any party to the License Agreement validly to
terminate the License Agreement.

Additional
Retail Ground Lease Covenants and Agreements.

1.1.59            During
the period from the Hotel and Option Closing Date until the Retail Closing Date
or the sooner termination of this Agreement:

(a)           Seller shall use commercially
reasonable efforts (not including (i) the payment of money directly to Ground
Lessor or any governmental authority in consideration for a favorable outcome
with respect to the Retail Special Conditions Precedent or (ii) the initiation
of any legal proceeding) to satisfy the Retail Special Conditions Precedent.

(b)           Seller shall comply with the
covenants set forth in Section 6.4 above to the extent such covenants
relate to the Retail Ground Lease and/or the Retail Land.

(c)           If the Retail Closing has not
occurred on or before March 15, 2007, Seller shall use commercially
reasonable efforts to enter into Leases for space at the Retail Land 

 42
 

 

with
third-party tenants at commercially reasonable market terms (the “Retail Land Lease-Up”); provided, that,
notwithstanding anything to the contrary in Section 6.4.3 above, Seller
shall not enter into any Leases for space at the Retail Land without Buyer’s
express written consent which may be granted or withheld at Buyer’s sole
discretion.  Seller shall provide Buyer
with such information as is reasonable and appropriate (including, without
limitation, a copy of the proposed Lease and financial information as to any
prospective tenants) for Buyer to determine whether to grant or withhold such
approval.

(d)           Until the Retail Closing Date, Seller
shall undertake and pursue the construction of any build-out on the Retail Land
required in accordance with the terms of any Lease for space in the Retail Land
approved by Buyer in accordance with Section 6.5.2(a) above (any such
construction, a “Retail Land Build-Out”)
pursuant to a budget first reasonably approved by the Buyer and a contract
requiring that such construction shall be performed free from defects, lien-free,
using only new building materials and in compliance with all applicable laws
(in each case, a “Retail Land Build-Out
Contract”).  Any Retail Land
Build-Out shall be bid in accordance with competitive bidding procedures
reasonably approved by Buyer.  Buyer
shall have the right to (X) participate in the formulation of such bidding
procedures, (Y) reasonably approve all contractors and sub-contractors and (Z)
reasonably approve all Retail Land Build-Out Contract (including, without
limitation, general contractor agreements, architect agreements and other
similar agreements), and all such agreements shall be at market terms and with
non-affiliated third parties.  In
connection therewith, Seller shall (i) deliver to Buyer for Buyer’s reasonable
approval a budget and all plans and specifications for any Retail Land
Build-Out, (ii) reasonably cooperate and consult with Buyer with respect to any
Retail Land Build-Out and (iii) use commercially reasonable efforts to ensure
that any Retail Land Build-Out occurs in accordance with such plans and
specifications and with the relevant Lease and is otherwise reasonably
satisfactory to Buyer.  At the Retail
Closing, Seller shall assign and Buyer shall assume all applicable warranties
and Retail Land Build-Out Contracts, together with any ancillary agreements
related to any Retail Land Build-Out covered by the relevant approved
budget.  Until the Retail Closing Date,
Seller shall cause all punch list items related to any Retail Land Build-Out to
be completed and shall repair any defects in any Retail Land Build-Out
performed prior to the Retail Closing and reasonably identified by Buyer.  The last sentence of this Section 6.5.2(b)
shall survive the Retail Closing.

1.1.60            Notwithstanding
anything to the contrary contained in Section 4.4 above, on the Retail
Closing Date the Retail Purchase Price shall be adjusted to reflect that one
hundred percent (100%) of all hard and soft costs approved in advance in
accordance with Section 6.5.1 above (including legal fees, leasing commissions,
architectural fees and construction costs), together with interest at 30 day
LIBOR + 100bps from the date the cost was incurred to Retail Closing incurred
by Seller prior to the Retail Closing Date with respect to the Retail Land
Build-Out and the Retail Land Lease-Up shall be credited to Seller, and one
hundred percent (100%) of any rent or other income generated by the Retail Land
prior to the Retail Closing Date shall be credited to Buyer.  Unless and until all Retail Special
Conditions are satisfied or the Retail Closing occurs, all costs incurred by
Seller with respect to the Retail Land Build-Out and the Retail Land Lease-Up
shall be borne by Seller.

 43
 

 

DISCLAIMER,
RELEASE AND ASSUMPTION.  AS AN ESSENTIAL
INDUCEMENT TO SELLER TO ENTER INTO THIS AGREEMENT, AND AS PART OF THE
DETERMINATION OF THE GROSS CONTRIBUTION CONSIDERATION, BUYER ACKNOWLEDGES,
UNDERSTANDS AND AGREES AS OF THE DATE HEREOF AND AS OF THE CLOSING DATE AS
FOLLOWS:

DISCLAIMER.

1.1.61            AS-IS,
WHERE-IS.  EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN SECTION 7.1 OR ELSEWHERE IN THIS AGREEMENT OR IN
THE GROUND LEASE ASSIGNMENTS OR OTHER CLOSING DOCUMENTS, THE SALE OF THE
PROPERTY HEREUNDER IS AND WILL BE MADE ON AN “AS IS, WHERE IS” BASIS AND SELLER
HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS,  WARRANTIES OR
GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED,
ORAL OR WRITTEN, PAST, PRESENT OR FUTURE OF, AS TO, CONCERNING OR WITH RESPECT
TO THE PROPERTY OR ANY OTHER MATTER WHATSOEVER.

1.1.62            SOPHISTICATION
OF BUYER.  BUYER IS A SOPHISTICATED
BUYER WHO IS FAMILIAR WITH THE OWNERSHIP AND OPERATION OF REAL ESTATE PROJECTS
SIMILAR TO THE PROPERTY AND BUYER HAS OR WILL HAVE ADEQUATE OPPORTUNITY TO
COMPLETE ALL PHYSICAL AND FINANCIAL EXAMINATIONS (INCLUDING ALL OF THE
EXAMINATIONS, REVIEWS AND INVESTIGATIONS REFERRED TO IN SECTION 3) RELATING TO
THE ACQUISITION OF THE PROPERTY HEREUNDER IT DEEMS NECESSARY, AND WILL ACQUIRE
THE SAME SOLELY ON THE BASIS OF AND IN RELIANCE UPON SUCH EXAMINATIONS AND THE
TITLE INSURANCE PROTECTION AFFORDED BY THE OWNER’S POLICY AND NOT ON ANY
INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER (OTHER THAN AS EXPRESSLY
PROVIDED IN SECTION 7.1 OR ELSEWHERE IN THIS AGREEMENT OR IN THE GROUND
LEASE ASSIGNMENTS OR OTHER CLOSING DOCUMENTS).

1.1.63            PASSIVE
OWNER.  SELLER HAS DELEGATED THE
DAY-TO-DAY MANAGEMENT OF THE PROPERTY TO A THIRD PARTY MANAGER.

1.1.64            DUE
DILIGENCE MATERIALS.  ANY INFORMATION
PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY IS SOLELY FOR BUYER’S
CONVENIENCE AND WAS OR WILL BE OBTAINED FROM A VARIETY OF SOURCES AND THAT
SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH
INFORMATION AND MAKES NO (AND EXPRESSLY DISCLAIMS ALL) REPRESENTATIONS AS TO
THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION (EXCEPT TO THE EXTENT PROVIDED
IN SECTION 7.1 OR ELSEWHERE IN THIS AGREEMENT AND IN THE DEED OR OTHER
CLOSING DOCUMENTS).  EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN SECTION 7.1 OR ELSEWHERE IN THIS AGREEMENT OR IN
THE GROUND LEASE ASSIGNMENTS OR OTHER CLOSING DOCUMENTS, SELLER SHALL NOT BE
LIABLE 

 44
 

 

FOR ANY MISTAKES, OMISSIONS, MISREPRESENTATION OR ANY FAILURE TO
INVESTIGATE THE PROPERTY NOR EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION
7.1 OR ELSEWHERE IN THIS AGREEMENT OR IN THE GROUND LEASE ASSIGNMENTS OR
OTHER CLOSING DOCUMENTS SHALL SELLER BE BOUND IN ANY MANNER BY ANY VERBAL OR
WRITTEN STATEMENTS, REPRESENTATIONS, APPRAISALS, ENVIRONMENTAL ASSESSMENT
REPORTS, OR OTHER INFORMATION PERTAINING TO THE PROPERTY OR THE OPERATION
THEREOF, FURNISHED BY SELLER, MANAGER, OR BY ANY REAL ESTATE BROKER, AGENT,
REPRESENTATIVE, AFFILIATE, DIRECTOR, OFFICER, SHAREHOLDER, EMPLOYEE, SERVANT OR
OTHER PERSON OR ENTITY ACTING ON SELLER’S BEHALF (COLLECTIVELY, “SELLER RELATED PARTIES”).

1.1.65            RELEASE.  BUYER RELEASES SELLER AND ALL SELLER RELATED
PARTIES FROM ALL CLAIMS WHICH ANY BUYER OR ANY PARTY RELATED TO OR AFFILIATED
WITH BUYER (A “BUYER RELATED PARTY”)
HAS OR MAY HAVE ARISING FROM OR RELATED TO ANY MATTER OR THING RELATED TO OR IN
CONNECTION WITH THE PROPERTY INCLUDING THE DOCUMENTS AND INFORMATION REFERRED
TO HEREIN, THE MANAGEMENT AGREEMENT, THE LEASES AND THE TENANTS THEREUNDER, ANY
CONSTRUCTION DEFECTS, ERRORS OR OMISSIONS IN THE DESIGN OR CONSTRUCTION AND ANY
ENVIRONMENTAL CONDITIONS, AND BUYER SHALL NOT LOOK TO ANY SELLER RELATED
PARTIES IN CONNECTION WITH THE FOREGOING FOR ANY REDRESS OR RELIEF.  THIS RELEASE SHALL BE GIVEN FULL FORCE AND
EFFECT ACCORDING TO EACH OF ITS EXPRESSED TERMS AND PROVISIONS, INCLUDING THOSE
RELATING TO UNKNOWN AND UNSUSPECTED CLAIMS, DAMAGES AND CAUSES OF ACTION.  HOWEVER, THE FOREGOING PROVISIONS OF THIS SECTION
7.1 SHALL NOT AFFECT, APPLY OR LIMIT SELLER’S EXPRESS OBLIGATIONS UNDER
THIS AGREEMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH.

SURVIVAL.  THIS SECTION SHALL SURVIVE ANY TERMINATION OF
THIS AGREEMENT AND THE CLOSING.

Disposition
Of Escrow Deposit.

Default
by Seller.  If the Closing fails to occur
by reason of Seller’s default under this Agreement in a material respect or the
failure of satisfaction of conditions benefiting Buyer under Section 3, which
is not cured or satisfied on or before thirty (30) days after written notice
thereof by Buyer to Seller, then the Escrow Deposit shall be returned to Buyer,
and neither party shall have any further obligation or liability to the other
(other than those obligations that expressly survive a termination of this
Agreement); provided, however, if the transactions hereunder shall fail to
close solely by reason of Seller’s default, in a material respect, which is not
cured within the thirty (30) day period set forth above in this Section 8.1,
and Buyer is not in default in any material respect, then Buyer shall be
entitled to (i) specifically enforce this Agreement as its sole and exclusive
remedy or (ii) terminate this Agreement, in which event the Escrow Deposit
shall be returned to Buyer and neither party shall have any further rights or
obligations hereunder, excepting those which survive termination.  As provided above in the 

 45
 

 

immediately preceding clause, the Closing Date shall
be extended for a period of time, up to thirty (30) days, as necessary to
enable Seller to cure and, if at of the end of such period Seller has not cured
such default and Buyer chooses to specifically enforce this Agreement, the
Closing Date for such purpose (and for any obligation to tender performance by
Buyer as a condition to seeking specific performance) shall be agreed to be as
of the last day of such thirty (30) day period. 
Notwithstanding the foregoing, if Buyer elects to terminate this
Agreement as a result of Seller’s default in a material respect or as a result
of a representation and warranty that was not true in a material respect as of
the date when made and was not known by Buyer prior to the expiration of the Due
Diligence Period to be untrue in a material respect, or which became materially
untrue after the date when made as a result of Seller’s actions or omissions,
Seller shall reimburse Buyer for its documented, reasonable out-of-pocket
expenses incurred by Buyer in connection with this transaction up to a maximum
aggregate of $500,000.  If as a result of
any extension of the Closing Date under this Section 8.1, Buyer incurs or
suffers any additional out-of-pocket expense on account of any rate lock,
commitment extension or the like, Seller will at Closing reimburse Buyer
therefor up to a maximum aggregate of $500,000.

Default
By Buyer.  In the event that Buyer shall
fail in breach of this Agreement to pay the Purchase Price and accept the
Property on the Closing Date, then the Escrow Deposit shall be delivered to
Seller as full compensation and liquidated damages under this Agreement for
such failure to close.  Notwithstanding
the foregoing, in the event that the Buyer consummates the purchase of all but
the Retail Ground Lease on the Hotel and Option Closing Date and fails in
breach of this Agreement to pay the Retail Purchase Price and accept the Retail
Ground Lease on the Retail Closing Date, the Seller may at its option elect to
(a) enforce specific performance of this Agreement or (b) receive payment of
the Retail Escrow Deposit (hereinafter defined) as full compensation and
liquidated damages under the Agreement for such failure to close.  In connection with the foregoing, the parties
recognize that Seller will incur expense in connection with the transaction
contemplated by this Agreement and that the Property will be removed from the
market; further, in the case of the Retail Ground Lease, that the Seller will
have no adequate remedy at law in the event of Buyer’s breach; and further,
that it is extremely difficult and impracticable to ascertain the extent of
detriment to Seller caused by the breach by Buyer under this Agreement and the
failure of the consummation of the transaction contemplated by this Agreement
or the amount of compensation Seller should receive as a result of Buyer’s
breach or default.  The foregoing
provisions of this Section 8.2 shall not limit or affect Buyer’s liability to
Seller under any of Buyer’s indemnities which survive Closing or termination of
the Agreement, with respect to which Seller shall have available to it all
remedies at law or in equity.

Closing.  In the event the transaction herein provided
shall close, the Escrow Deposit shall be applied as a partial payment of the
Purchase Price.  Notwithstanding the
foregoing, in the event that a Retail Conditions Failure occurs and the Hotel
and Option Closing takes place prior to the Retail Closing, (a) Two Million
Dollars ($2,000,000.00) of the Escrow Deposit (the “Retail Escrow Deposit”) shall be retained by the Escrow Agent
on the Hotel and Option Closing Date in accordance with the terms of the
Interim Deposit Agreement and (b) the balance of the Escrow Deposit shall be
applied as a partial payment of the Purchase Price at the Hotel and Option
Closing.  In such event, the Retail
Escrow Deposit shall be treated for all purposes in accordance with the
provisions of Section 8.1 and 8.2 above, provided that all references to the “Escrow
Deposit”, the “Closing” and the “Closing Date” shall be deemed references to
the “Retail Escrow Deposit,” the “Retail Closing” and the “Retail Closing Date,”
as 

 46
 

 

the case may be. 
In the event that the Retail Closing occurs, the Retail Escrow Deposit
shall be applied as a partial payment of the Retail Purchase Price, and in the
event the Retail Closing does not occur the Retail Escrow Deposit shall be paid
to the party entitled thereto pursuant to the terms of this Agreement and in
accordance with Sections 8.1 and 8.2 hereof.

Miscellaneous.

Brokers.

1.1.66            Except
as provided in Section 9.1.2 below, Seller represents and warrants to
Buyer, and Buyer represents and warrants to Seller, that no broker or finder
has been engaged by it, respectively, in connection with the sale contemplated
by this Agreement.  In the event of a
claim for broker’s or finder’s fee or commissions in connection with the sale
contemplated by this Agreement, then Seller shall indemnify, defend and hold
harmless Buyer from the same if it shall be based upon any statement or agreement
alleged to have been made by Seller, and Buyer shall indemnify, defend and hold
harmless Seller from the same if it shall be based upon any statement or
agreement alleged to have been made by Buyer. 
The provisions of this Section 9.1 shall survive the Closing and
shall not be subject to the limitations on survival in Section 6.3 or
the limitations on liability in Section 9.2.

1.1.67            If
and only if the sale contemplated herein closes, Seller has agreed to pay a
brokerage commission to Broker pursuant to a separate written agreement between
Seller and Broker.

Limitation
of Liability.

1.1.68            Notwithstanding
anything to the contrary contained herein, if the Closing of the transactions
hereunder shall have occurred: 
(1) Seller shall have no liability (and Buyer shall make no claim
against Seller) for indemnity or for breach of any representation or warranty
under this Agreement unless the valid claims for indemnity and all such
breaches collectively aggregate (taking into account claims relating to both the
Hotel and Option Closing and the Retail Closing, in the aggregate) to more than
$250,000, (2) the liability of the Seller under this Agreement for
indemnity and all breaches of representations and warranties under this
Agreement shall not exceed, in the aggregate (i) with respect to claims
relating only to the Hotel and Option Closing an amount equal to $7,000,000.00,
and (ii) with respect to claims relating only to the Retail Closing, an amount
equal to $500,000.00.  In no event shall
Seller be liable for any consequential or punitive damages.  As used herein, the term “Maximum Liability Amount” shall refer, if there is no
separate Retail Closing, to the sum of $7,500,000.00, or, if there is a
separate Retail Closing to the sum of $7,000,000.00 or the sum of $500,000.00
(as applicable as set forth above in this Section 9.7.1) Seller
covenants that it will retain and not distribute sales proceeds equal to the
Maximum Liability Amount until the expiration of the applicable Survival
Period, whereupon it may distribute the same, less the amount of any then
pending claims.

1.1.69            Except
in accordance with the joinder attached hereto (the “Joinder”), no constituent member or partner in or agent of
Seller, nor any advisor, trustee, director, officer, employee, beneficiary,
shareholder, member, partner, participant, representative 

 47
 

 

or agent of any partnership, limited liability company, corporation,
trust or other entity that has or acquires a direct or indirect interest in
Seller, shall have any personal liability, directly or indirectly, under or in
connection with this Agreement or any agreement made or entered into under or
pursuant to the provisions of this Agreement, or any amendment or amendments to
any of the foregoing made at any time or times, heretofore or hereafter, and
Buyer and its successors and assigns and, without limitation, all other persons
and entities, shall look solely to Seller’s assets for the payment of any claim
or for any performance, and Buyer, on behalf of itself and its successors and
assigns, hereby waives any and all such personal liability.  Notwithstanding anything to the contrary
contained in this Agreement, neither the negative capital account of any
constituent member or partner in Seller (or in any other constituent member or
partner of Seller), nor any obligation of any constituent member or partner in
Seller (or in any other constituent member or partner of Seller) to restore a
negative capital account or to contribute capital to Seller (or to any other
constituent member or partner of Seller), shall at any time be deemed to be the
property or an asset of Seller or any such other constituent member or partner
(and neither Buyer nor any of its successors or assigns shall have any right to
collect, enforce or proceed against or with respect to any such negative
capital account or a member’s or partner’s obligation to restore or contribute)
but shall have the right to pursue any distribution of the Purchase Price to
such members in violation of the Joinder.

1.1.70            The
foregoing shall be in addition to, and not in limitation of, any further
limitation of liability that might otherwise apply (whether by reason of Buyer’s
waiver, relinquishment or release of any applicable rights or otherwise).  Notwithstanding anything herein to the contrary,
the liability of each party hereto resulting from the breach or default by
either party shall be limited to actual damages incurred by the injured party
and the parties hereto hereby waive their rights to recover from the other
party consequential, punitive, exemplary, and speculative damages.  The representations and warranties of Seller
are also subject to the following express limitations:

(a)                  The
amendment, expiration or termination of any Lease, Equipment Lease, Rooms
Agreement, Booking or Service Agreement or the entering into of any new such
agreement occurring in compliance with the terms of this Agreement that does
not materially adversely affect the operation of the Hotel and the Property
shall not affect the obligations of Buyer hereunder or render any
representation or warranty of Seller untrue.

(b)                 To
the extent that Buyer actually knows prior to the Closing Date that any of
Seller’s representations and warranties are inaccurate, untrue or incorrect in
any way, and Buyer nevertheless elects to proceed to Closing, such
representations and warranties shall be deemed modified to reflect Buyer’s
actual knowledge.

1.1.71            The
provisions of this Section 9.2 shall survive the Closing.

Exhibits;
Entire Agreement; Modification.  All
exhibits attached and referred to in this Agreement are hereby incorporated
herein as if fully set forth in (and shall be deemed to be a part of) this
Agreement.  This Agreement contains the
entire agreement between the parties respecting the matters herein set forth
and supersedes all prior agreements between the parties hereto respecting such
matters; provided, however, that the existing Confidentiality Agreement 

 48
 

 

between the parties shall remain in effect and be
binding upon the parties until Closing. 
This Agreement may not be modified or amended except by written
agreement signed by both parties.

Time
of the Essence.  Time is of the essence
of this Agreement.  However, whenever
action must be taken (including the giving of notice or the delivery of
documents) under this Agreement during a certain period of time (or by a
particular date) that ends (or occurs) on a non business day, then such period
(or date) shall be extended until the immediately following business day.  As used herein, “business day” means any day
other than a Saturday, Sunday, a federal holiday, or a state holiday in
Massachusetts.

Interpretation.  Section headings shall not be used in
construing this Agreement.  Each party
acknowledges that such party and its counsel, after negotiation and
consultation, have reviewed and revised this Agreement.  As such, the terms of this Agreement shall be
fairly construed and the usual rule of construction, to the effect that any
ambiguities herein should be resolved against the drafting party, shall not be
employed in the interpretation of this Agreement or any amendments,
modifications or exhibits hereto or thereto. 
The words “herein”, “hereof”, “hereunder”, “hereby”, “this Agreement”
and other similar references shall be construed to mean and include this
Agreement and all amendments and supplements hereto unless the context shall
clearly indicate or require otherwise. 
Whenever the words “including”, “include” or “includes” are used in this
Agreement, they shall be interpreted in a non-exclusive manner.  Except as otherwise indicated, all Exhibit
and Section references in this Agreement shall be deemed to refer to the
Exhibits and Sections in this Agreement.

Governing
Law.  This Agreement shall be construed
and enforced in accordance with the laws of the Commonwealth of Massachusetts.

Successors
and Assigns.  Buyer may not assign or
transfer its rights or obligations under this Agreement or nominate any other
Person to accept Seller’s performance without the prior written consent of
Seller either directly or indirectly (whether by outright transfer, transfer of
ownership interests or otherwise); provided, however, so long as the same has
already received the consent of Ground Lessor and Manager, if and to the extent
required under the Retail Ground Lease, the Hotel Ground Lease, the Option
Agreement and/or the Management Agreement, as applicable, Buyer may assign its
interest in this Agreement on or before the Closing Date to, or may nominate,
an entity in which Buyer has direct or indirect control and has more than a 50%
direct or indirect ownership interest so long as Buyer and the assignee execute
and deliver an assignment and assumption agreement in form reasonably
satisfactory to Seller.  In the event of
a transfer, the transferee shall assume in writing all of the transferor’s
obligations hereunder, but such transferor shall not be released from its
obligations hereunder unless and until the Closing occurs.  No consent given by Seller to any transfer or
assignment of Buyer’s rights or obligations hereunder shall be construed as a
consent to any other transfer or assignment of Buyer’s rights or obligations
hereunder.  No transfer or assignment in
violation of the provisions hereof shall be valid or enforceable.  Subject to the foregoing, this Agreement and
the terms and provisions hereof shall inure to the benefit of and be binding
upon the successors and assigns of the parties. 
Seller acknowledges that certain items of tangible and/or intangible
personal property may need to be assigned to Buyer’s operating lessee and the
applicable closing documents shall be modified accordingly as requested by
Buyer including through the use of separate bills of sale and assignments or
otherwise as reasonably requested by Buyer. 

 49
 

 

Notwithstanding the foregoing, transfers of publicly
traded interests in entities which are listed on a nationally recognized
exchange shall not be considered assignments or transfers for purposes of this
Section 9.7.  Either party may upon
notice to the other elect to arrange the sale or acquisition of the Property as
a like-kind exchange (“LKE”)
pursuant to 26 U.S.C. §1031 and the Treasury. 
Notwithstanding anything to the contrary contained in this Section 9.7,
in structuring the transaction as an LKE, so long as all requisite third party
consents have been obtained (which Seller shall use reasonable efforts, not
including the payment of money or the bringing of any law suit, to cooperate in
obtaining), either party shall have the right to assign to a qualified
intermediary all of its rights (but not its duties and obligations) under this
Agreement.  Neither party shall be
required to take title to any other property or to incur any out-of-pocket cost
on account of the LKE.  The party
proposing an LKE shall indemnify and hold the other party harmless from and
against any liability, loss, claim, cost or damage the other party may suffer
arising out of the LKE.

Notices.  Any notice which a party is required or may
desire to give the other shall be in writing and may be sent by personal
delivery, by mail (either [i] by United States registered or certified mail,
return receipt requested, postage prepaid, or [ii] by Federal Express or
similar generally recognized overnight carrier regularly providing proof of
delivery or by telecopy (with a copy by mail), addressed as follows (subject to
the right of a party to designate a different address for itself by notice
similarly given):

To Seller:

c/o The Fallon
Company LLC

Two Seaport Lane, Suite 410

Boston, MA  02210

Attention:  Mr. Joseph Fallon

Telecopier:            (617) 737-4101

Telephone:            (617) 737-4100

With Copies To:

New England
Development LLC

One Wells Avenue

Newton, MA  02459-3211

Attention:  Mr. Steven S. Fischman

Telecopier:            (617) 243-7329

Telephone:            (617) 243-7007

and:

Goulston &
Storrs, P.C.

400 Atlantic Avenue

Boston, MA  02110-333

Attn:  Alan W. Rottenberg, Esq.

Telecopier:            (617) 574-7628

Telephone:            (617) 574-4084

 50
 

 

To Buyer:

DiamondRock
Hospitality Limited Partnership

6903 Rockledge Drive

Suite 800

Bethesda, Maryland  20817

Attention:  Michael Schecter 

Telecopier:            (240) 744-1199

Telephone:            (240) 744-1170

With a copy to:

Willkie Farr &
Gallagher 

787 Seventh Avenue 

New York, New York 10019 

Attention:  Steven D. Klein 

Telecopier:            (212) 728 9221 

Telephone:            (212) 728 8221

Any notice so given by mail shall be deemed to have
been given as of the date of delivery (whether accepted or refused) established
by U.S. Post Office return receipt or the overnight carrier’s proof of
delivery, as the case may be.  Any such
notice not so given shall be deemed given upon receipt of the same by the party
to whom the same is to be given.

Third
Parties.  Nothing in this Agreement,
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any person other than the parties
hereto and their respective successors and assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third persons to any party to this Agreement, nor shall any provision give any
third parties any right of subrogation or action over or against any party to
this Agreement.  This Agreement is not
intended to and does not create any third party beneficiary rights whatsoever.

Legal
Costs.  The parties hereto agree that
they shall pay directly any and all legal costs which they have incurred on
their own behalf in the preparation of this Agreement, all deeds and other
agreements pertaining to this transaction and that such legal costs shall not
be part of the Closing costs.  In
addition, if either Buyer or Seller brings any suit or other proceeding,
including an arbitration proceeding, with respect to the subject matter or the
enforcement of this Agreement, the prevailing party (as determined by the
court, agency, arbitrator or other authority before which such suit or
proceeding is commenced), in addition to such other relief as may be awarded,
shall be entitled to recover reasonable attorneys’ fees, expenses and costs of
investigation actually incurred.  The
foregoing includes attorneys’ fees, expenses and costs of investigation
(including those incurred in appellate proceedings), costs incurred in
establishing the right to indemnification, or in any action or participation
in, or in connection with, any case or proceeding under Chapter 7, 11 or 13 of
the Bankruptcy Code (11 United States Code Sections 101 et seq.), or any
successor statutes.  The provisions of
this Section 9.10 shall survive the Closing and any termination of this
Agreement.

 51
 

 

No
Recordation.  Except on or after Closing
with respect to instruments expressly intended to be recorded on or after
Closing, in no event shall this Agreement or any document or other memorandum
related to the subject matter of this Agreement (other than a lis pendens
giving notice of an arbitration or legal proceeding to specifically enforce
Seller’s obligations under this Agreement) be recorded without the consent of
Seller.

Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document. 
Delivery by facsimile, or e-mail of a PDF copy, of a counterpart of this
Agreement executed by a party shall constitute delivery by such party of such
party’s executed counterpart of this Agreement.

Effectiveness.  In no event shall any draft of this Agreement
create any obligation or liability, it being understood that this Agreement
shall be effective and binding only when a counterpart hereof has been executed
and delivered by each party hereto.

Press
Releases or other Disclosure.  Seller and
Buyer agree not to disclose or make any public announcements with respect to
the subject matter of this Agreement or the existence of this Agreement without
the consent of the other party.  If
either party desires to issue a press release or other public announcement
regarding this Agreement or the transaction set forth herein, subject to the
immediately preceding sentence, such party shall obtain the approval of the
other party, which approval shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, no such
disclosure shall be made by either party, nor shall any such consent be sought
by either party, prior to the expiration of the Due Diligence Period; provided,
however, that at any time any one or more of Joseph Fallon, Stephen R. Karp or
Steven S. Fischman may communicate with senior governmental officials and
senior executives of Manager for purposes of alerting them to the transaction
and preparing them for the requests that will be made of them in accordance
with the terms hereof.  On or after
January 10, 2007 Buyer may publicly disclose the transaction in connection with
its efforts to underwrite a public offering of equity in connection with the
financing of the transaction and Buyer may communicate at any time with its
accountants, legal counsel, prospective underwriters and prospective
underwriter’s counsel so long as it instructs such parties to keep any such
communication confidential.  The
provisions of this Section 9.14 shall survive the closing and any termination
of this Agreement.

Indemnities.

1.1.72            Agreement
to Indemnify.  (i) Seller shall
indemnify and hold harmless Buyer and any partner, member, manager officer,
director, trustee, beneficiary, employee or agent of Buyer (collectively, the “Buyer Indemnitees”) from and against any and all
obligations, claims, losses, damages, liabilities, and expenses (including,
without limitation, reasonable attorneys’ and accountants’ fees and
disbursements (collectively, “Damages”) to
the extent arising out of (A) any loss or damage to property or injury to
or death of any person occurring on or about or in connection with the Property
or any portion thereof at any time or times prior to the applicable Closing
Date (other than as to and excluding Damages of or to a governmental authority
arising out of the physical or environmental condition of the Property prior to
the applicable Closing Date and other than as to Damages for remediation
pertaining to 

 52
 

 

the physical or environmental condition of the Property prior to the applicable
Closing Date), (B) subject to the limitations set forth herein, a breach
of any representation or warranty made by Seller hereunder or in any
certificate delivered by Seller hereunder, or (C) obligations and liabilities
of Seller accruing or arising prior to the applicable Closing under any of the
Hotel Ground Lease, the Retail Ground Lease, the Option Agreement, the PILOT
Agreement, the License Agreement, the Management Agreement or the matters
assigned under the Other Assignment and Assumption Agreement (collectively, the
“Assigned Matters”)
and (ii) Buyer shall indemnify and hold harmless Seller and any partner,
member, manager, officer, director, trustee, beneficiary, employee or agent of
Seller (collectively, the “Seller Indemnitees”)
from and against any and all Damages to the extent arising out of (A) any
loss or damage to property or injury to or death of any person occurring on or
about the Property or any portion thereof on or at any time or times after the
applicable Closing Date (other than as to and excluding Damages of or to a
Governmental Authority arising out of or resulting from or relating to the
physical or environmental condition of the Property prior to the applicable
Closing Date and other than as to Damages for remediation pertaining to the
physical or environmental condition of the Property prior to the applicable
Closing Date), (B) a breach of any representation or warranty made by Buyer
hereunder or in any certificate delivered by Buyer hereunder or a breach of
Buyer’s covenant to use commercially reasonable best efforts to agree on a form
of Hotel Sublease to the extent set forth in Section 3.13.6 above, or
(C) obligations or liabilities of Buyer accruing or arising on or after the
applicable Closing under any of the Assigned Matters.  The provisions of this Section 9.15.1
shall survive the Closing and the termination of this Agreement.  Seller’s liabilities under this Section
9.15 shall not extend the applicable Survival Period stated in Section 6.3
hereof or exceed the Maximum Liability Amount provided in Section 9.2.1
hereof, to the extent not covered by insurance.

1.1.73            Indemnification
Procedure for Third Party Claims.  In
the case of any claim asserted by a third party which claim is subject to
indemnification by either party hereunder, ( a “Third-Party Claim”), the party seeking indemnification (the “Indemnitee”) shall notify the other party (the “Indemnitor”) promptly after has actual knowledge of any such
Third-Party Claim as to which indemnity may be sought (provided that failure to
so notify shall not affect the Indemnitor’s obligations hereunder except to the
extent materially prejudiced by such failure), and Indemnitee shall permit the
Indemnitor, at its sole expense, to assume the defense of any such Third-Party
Claim, provided that Indemnitee may participate in such defense or
administration at Indemnitee’s sole expense (provided, however, that if a
conflict of interest exists such that separate counsel must be engaged by
Indemnitee and the Indemnitor, the Indemnitor shall be responsible for the
reasonable fees and costs for such counsel for Indemnitee bug only for one
separate counsel for all Indemnitees). 
The Indemnitor, in the defense of any such Third-Party Claim, shall not,
except with the consent of Indemnitee, which Indemnitee agrees will not be
unreasonably withheld, conditioned or delayed with respect to a monetary
settlement, judgment or relief, (a) consent to entry of any judgment or
enter into any settlement that provides for injunctive or other non-monetary
relief against Indemnitee or (b) pursue any course of defense of any such
Third-Party Claim subject to indemnification hereunder if Indemnitee shall
reasonably and in good faith determine that the conduct of such defense could
be expected to adversely affect in any material respect Indemnitee, its direct
or indirect owners, the use of the Property to which the Third-Party Claim
relates.  In addition, if the Indemnitor
obtains and desires to accept from a party to any such Third-Party Claim an
offer to settle the Third-Party Claim solely for an amount certain, then
Indemnitee agrees that if requested by the 

 53
 

 

Indemnitor, Indemnitee will, at its sole expense, assume defense of
such Third-Party Claim and thereafter the Indemnitor’s obligation with respect
to such Third-Party Claim shall not exceed the costs of defense then incurred
and the dollar amount of the settlement the Indemnitor proposed to accept
immediately prior to such assumption by Indemnitee, it being agreed between
Indemnitee and the Indemnitor that Indemnitee will pay any greater amounts
owing and bear any other impositions in excess of those contemplated in the
proposed settlement arrangement.  In the
event that the Indemnitor does not accept the defense of any matter as above
provided, Indemnitee shall have the full right to defend against any such
Third-Party Claim or demand and shall be entitled to settle or agree to pay in
full such Third-Party Claim or demand, in its sole discretion.  In any event, the Indemnitor and Indemnitee
shall cooperate in the defense of any action or claim subject to this Agreement
and each agrees to make its records available to the other with respect to such
defense as reasonably requested and to the extent doing so does not compromise
any claim of privilege or any other defense available to it.  Acceptance of the defense of any Third-Party
Claim or of the administration of any Third-Party Claim by the Indemnitor shall
be without prejudice to the Indemnitor’s right to assert at any time before or
after accepting such defense or administration that it is not obligated to
provide an indemnity, either in whole or in part, with respect to such
Third-Party Claim.  In the event that the
Indemnitor asserts that it is not obligated to provide an indemnity to
Indemnitee with respect to a Third-Party Claim, Indemnitee shall have the right
to defend such Third-Party Claim, and if the Indemnitor is adjudicated liable
for indemnifying Indemnitee, the Indemnitor shall reimburse Indemnitee for its
out-of-pocket expenses in defending such Third-Party Claim and all settlements
and judgments reasonably incurred as a result of such Third-Party Claim.

[Remainder of page
intentionally left blank]

 54
 

 

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

SELLER:

BOSTON CONVENTION
CENTER HOTEL LLC,

a Delaware limited liability company

	
  By: 

  	
  /s/ Joseph Fallon

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Joseph Fallon

  	
   

  	
   

  
	
   

  	
  Title: Manager

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Stephen S. Fischman

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Stephen S. Fischman

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Manager

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BCCH RETAIL LLC, a Delaware

  	
   

  	
   

  
	
  limited liability company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Joseph Fallon

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Joseph Fallon

  	
   

  	
   

  
	
   

  	
  Title: Manager

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Stephen S. Fischman

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Stephen S. Fischman

  	
   

  	
   

  
	
   

  	
  Title: Manager

  	
   

  	
   

  	
   

  
						

 

 55
 

 

BUYER:

DIAMONDROCK HOSPITALITY
LIMITED

PARTNERSHIP,

a Delaware limited partnership

	
  By:

  	
  DIAMONDROCK HOSPITALITY COMPANY,

  
	
   

  	
  a Maryland corporation

  	
   

  
	
   

  	
  its sole General Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael D. Schecter

  	
   

  
	
   

  	
  Name:

  	
  Michael D. Schecter

  
	
   

  	
  Title:

  	
  Executive Vice President, General Counsel and
  Corporate Secretary

  
					

 

 56

JOINDER

Joseph Fallon, Stephen R.
Karp and Steven S. Fischman (each a “Principal” and collectively, the “Principals”),
hereby join in the foregoing Purchase Agreement (the “Purchase Agreement”)
for the purpose of guaranteeing, and do hereby agree to be liable for, as a
primary obligor, the full and faithful payment and performance (and not merely
collection) of the Obligations (as hereinafter defined).  Any capitalized term not defined herein shall
have the meaning ascribed to such term in the Purchase Agreement.

1.  The following paragraphs (a) and (b) are
referred to herein as the “Obligations.”:

(a)  Principals covenant and guarantee to Buyer
that as of the date of the applicable Closing (i.e. the Hotel and Option
Closing and/or the Retail Closing) through the end of the applicable Survival
Period (and, if a claim is made by Buyer under the Purchase Agreement during
the applicable Survival Period, then until such claim is resolved), Principals
shall (a) cause Hotel Seller and Retail Seller to have, in the aggregate, a
tangible aggregate net worth of, and no less than, the applicable Maximum
Liability Amount (less the aggregate amount actually paid to Buyer Indemnitees
pursuant to Section 9.15.1 of the Purchase Agreement) in unrestricted
cash or cash equivalents on hand, such sums to be held in unblocked accounts
owned solely by Hotel Seller and Retail Seller, as applicable, which sums shall
be not be encumbered by any liens, security interests or other third-party
interests (the “Minimum Cash Requirement”).  Principals covenant and guarantee to Buyer
that each Principal will not, and will not cause Hotel Seller or Retail Seller
to (1) engage in any activities that will materially decrease the Minimum Cash
Requirement held by Hotel Seller and Retail Seller, or (2) without just cause
to do so based upon a defense to payment or performance, delay or otherwise
hinder or impair Buyer’s ability to recover from Seller under the Purchase
Agreement or from Principals under this Joinder.  From time to time, promptly upon Buyer’s
request, Principals shall provide documentation reasonably acceptable to Buyer
demonstrating that Seller is in compliance with the provisions of this
paragraph.

(b)  To the extent the Hotel Seller and the Retail
Seller do not maintain, through the applicable Survival Period (or, if a claim
is made by Buyer under the Purchase Agreement during the applicable Survival
Period, until such claim is resolved), the Minimum Cash Requirement, the
Principals hereby guarantee, and do hereby agree to be liable for, jointly and
severally, the payment and performance of each and all of the obligations of
Seller under the Purchase Agreement up to the amount by which the Minimum Cash
Requirement exceeds the amount of unrestricted cash or cash equivalent on hand
held by Seller.

2.  Buyer shall have the right from time to time
to demand payment from Principals of such sums for which Principals may become
liable hereunder, which demand shall be in writing and which payment shall be
in lawful money of the United States.

3.  The obligations of Principals hereunder are
independent of the obligations of Seller, or the obligations of any other
person who may be liable to Buyer, in whole or in part for the Obligations, or
any part thereof, and a separate action or actions may be brought and
prosecuted against Principals whether or not an action is brought against
Seller and whether or not Seller is joined in such action or actions.

 1
 

 

4.  Principals authorize Buyer and Seller,
without notice or consent and without affecting, impairing or discharging
Principals’ liability hereunder, to from time to time (a) renew, modify, amend,
extend or discharge any other term contained within the Purchase Agreement, (b)
exercise or refrain from exercising any of their rights or obligations under
the Purchase Agreement, at law or in equity, or (c) release in whole or in part
Seller or any member in Seller from liability. 
Buyer may not assign its interest under this Joinder, except to an
entity to which Buyer expressly is permitted under the Purchase Agreement to
assign its interest in the Purchase Agreement. 
Principals may not assign their obligations under the Joinder.

4.  This Joinder shall not be affected in any way
by (a) the genuineness, validity, regularity or enforceability of the Purchase
Agreement, (b) any change in the existence or structure of Seller, (c) the
actual or purported assignment by Principals of any of their obligations,
covenants and agreements contained in this Joinder, or (d) by any other
circumstance (other than by complete, irrevocable payment) that might otherwise
discharge the Obligations or might otherwise constitute a legal or equitable
discharge or defense of a guarantor.

5.  Buyer may, without notice or demand and
without affecting Principals’ liability hereunder waive compliance with, or any
default under, or grant any other indulgences with respect to, the Purchase
Agreement and/or the Obligations or deal in all respects with Seller as if this
Joinder were not in effect.

6.  Principals, to the extent permitted by law,
waive any right to require Buyer to (a) proceed with or exhaust remedies
against any other party, including Seller, or (b) pursue any other remedy
whatsoever to which Seller may be entitled. 
Principals waives any defense arising by reason of any disability or
other defense of  Seller or by reason of
the cessation or modification from any cause whatsoever of the liability
of  Seller.  Without limiting the preceding sentence, the
obligations of Principals shall remain in full force and effect without regard
to, and shall not be affected or impaired by, the following, nor shall the
following create a defense by Principals with respect to such obligations, or
give Principals any recourse or right of action against Buyer: any bankruptcy,
insolvency, reorganization, dissolution, liquidation, moratorium or other like
proceeding relating to Seller, any member or affiliate of Seller, or any action
taken with respect to this Joinder or the Purchase Agreement by any trustee,
owner in possession, receiver or court, in or pursuant to any such
proceeding.  The Principal are fully
aware of the financial condition, business and prospects of Seller and assume
full responsibility for obtaining any additional information now or hereafter
related thereto.  Principals waive
diligence, all presentments and demands for performance, required to be given
by Buyer under the Purchase Agreement or applicable laws, notices of
non-performance or default, protests, notices of protest, notices of dishonor,
notices of acceptance of this Joinder, and all other notices of every and any
kind.

7.  Each party agrees to pay, upon demand
therefor, reasonable attorneys’ fees and all other costs and expenses that may
be incurred by the other party (if such other party is the prevailing party) in
the enforcement of this Joinder and/or the Purchase Agreement and all attorneys’
fees and other costs and expenses incurred by such other prevailing party in
pursuing or enforcing rights under this Joinder, or with respect to the
Obligations or this Joinder, whether in litigation, or in administrative,
bankruptcy or reorganization proceedings.

 2
 

 

8.  Each Principal represents and warrants to
Buyer that the Principals own, directly or indirectly, a majority of the direct
and indirect ownership interests in Seller and the Principals have the right to
control Seller.

[Remainder of page
intentionally left blank]

 3
 

 

IN WITNESS WHEREOF, each of the undersigned has caused
this Joinder to be duly signed as of the date first above written.

	
  /s/ Joseph Fallon

  	
   

  
	
  Joseph Fallon

  	
   

  
	
   

  	
   

  
	
  /s/ Stephen R.
  Karp

  	
   

  
	
  Stephen R. Karp

  	
   

  
	
   

  	
   

  
	
  /s/ Steven S.
  Fischman

  	
   

  
	
  Steven S.
  Fischman

  	
   

  
					

 

 4Exhibit 10.1

AMENDMENT AGREEMENT

AMENDMENT AGREEMENT (the “Agreement”)
dated as of January 9, 2007, by and between iParty Corp. a Delaware
Corporation, with headquarters located at 270 Bridge Street, Dedham,
Massachusetts 02026 (the “Company”) and
Highbridge International LLC (the “Investor”).

WHEREAS,

A.            The
parties hereto are parties to that certain Securities Purchase Agreement dated
as of September 15, 2006 (the “Securities  Purchase Agreement”) pursuant to which the Investor
purchased a Warrant (the “Existing Warrant”)
exercisable for shares of common stock of the Company (the “Warrant Shares”) in accordance with the terms of the
Existing Warrant.

B.            Contemporaneously
with the execution and delivery of the Securities Purchase Agreement, the
Company and the Investor entered into a Registration Rights Agreement, dated as
of September 15, 2006 (the “Registration Rights
Agreement”) pursuant to which the Company agreed to provide certain
registration rights in respect of the Warrant Shares under the Securities Act
of 1933, as amended (the “1933 Act”), and
the rules and regulations promulgated thereunder and applicable state
securities law.

C.            The
Company and the Investor desire to enter into this Agreement, pursuant to
which, among other things, to amend the Purchase Agreement, the Registration
Rights Agreement and the Existing Warrant each as set forth herein.

D.            Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings ascribed to them in the Securities Purchase Agreement.

NOW, THEREFORE, in consideration of the foregoing
recitals and the material promises hereinafter set forth, the Company and the
Investor hereby agree as follows:

1.                                       AMENDMENTS
TO TRANSACTION DOCUMENTS.

1.1.          Securities
Purchase Agreement; Registration Rights Agreement.  The Securities Purchase Agreement and the
Registration Rights Agreement and each of the other Transaction Documents are
each hereby amended as follows:

(a)           All references to
“Warrants” shall mean, and are hereby replaced with, the “Warrants and the
Amended Warrant (as defined in that certain Amendment Agreement, dated as of
January 9, 2007, between the Company and Highbridge International LLC)”; and

(b)           The defined term
“Transaction Documents” is hereby amended to include this Agreement and the
Amended Warrant.

 2
 

 

 

(c)           Amended
Warrant.  The Existing Warrant, is
amended and restated in its entirety as set forth in Exhibit A hereto
(as so amended, the “Amended Warrant”)
..

1.2.          Exchange
of Warrants.  Simultaneous herewith,
the Investor shall surrender the Existing Warrant to the Company, and the
Company shall issue to the Investor the Amended Warrant in replacement thereof.

2.                                       REPRESENTATIONS
AND WARRANTIES

2.1.          Investor
Representations.  The Investor hereby
represents and warrants to the Company:

(a)           Ownership of
Warrant.  The Investor owns all
right, title and interest (legal and beneficial) in and to all of the Warrant.

(b)           Authorization.  The execution and delivery of this Agreement,
the performance of all obligations of the Investor hereunder, have been duly
authorized by the Investor.  This
Agreement constitutes the valid and legally binding obligation of the Investor,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors’ rights generally and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.

(c)           Governmental
Consents.  No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state, local or other governmental
authority on the part of the Investor is required in connection with the
consummation of the transactions contemplated by this Agreement.

(d)           Compliance with
Other Instruments.  The execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby will not result in a violation of, or default
under, any instrument, judgment, order, writ, decree or contract known and
applicable to the Investor.

2.2.          Company
Representations.  The Company represents and warrants
to the Investor:

(a)           Authorization.  The execution and delivery of this Agreement,
the performance of all obligations of the Company hereunder, have been duly
authorized by the Company.  This
Agreement constitutes the valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors’ rights generally and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.

 3
 

 

(b)           Governmental
Consents.  No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state, local or other governmental
authority on the part of the Company is required in connection with the
consummation of the transactions contemplated by this Agreement.

(c)           Compliance with
Other Instruments.  The execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby will not result in a violation of, or default
under, any instrument, judgment, order, writ, decree or contract known and
applicable to the Company.

(d)           Holding Period.  For the purposes of Rule 144, the Company
acknowledges that, as of the date hereof, the holding period of the Amended
Warrant (including the corresponding Warrant Shares) may be tacked onto the
holding period of the Existing Warrant (in the case of Cashless Exercise (as
defined in the Amended Warrants)), and, in the absence of any applicable change
in the SEC rules, regulations or staff interpretation, the Company agrees not
to take a position contrary to this Section 3(d).

3.                                       MISCELLANEOUS.

3.1.          Governing
Law; Jurisdiction; Jury Trial.  All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the
State of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for
such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by
law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

3.2.          Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding

 4
 

 

upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

3.3.          Headings.  The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.

3.4.          Severability.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

3.5.          No
Third Party Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person.

3.6.          Further
Assurances.  Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

3.7.          No
Strict Construction.  The language
used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be
applied against any party.

3.8.          Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns.  The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of at least a majority of the
aggregate number of Registrable Securities issued and issuable hereunder,
including by way of a Fundamental Transaction (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions
set forth in the Amended Warrant).  The
Investor may assign some or all of its rights hereunder without the consent of
the Company in connection with a transfer by the Investor of any of the
Securities, in which event such assignee shall be deemed to be the Investor
hereunder with respect to such assigned rights.

3.9.          Notices.  Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same.  The addresses and facsimile
numbers for such communications shall be:

If to the Company:

 

iParty Corp.

270 Bridge Street,
Suite 301

 

 5
 

 

 

Dedham, Massachusetts 02026

Telephone:(781)
329-3952

Facsimile:(781)
326-7143

Attention:Sal
Perisano, CEO

 

With a copy to:

 

 Posternak Blankstein & Lund LLP
  Prudential Tower
  800 Boylston Street
 Boston, Massachusetts 02199-800

Telephone:(617)
973-6100

Facsimile:(617)
367-2315

Attention:Donald
H. Siegel, P.C.

 

If to the
Investor,

 

Highbridge International LLC

c/o Highbridge Capital Management, LLC

9 West 57th Street, 27th Floor

New York, New York 1001

Attention:Ari
J. Storc

Adam
J. Chill

Facsimile:(212)
751-0755

Telephone:(212)
287-4720

 

with a copy (for
informational purposes only) to:

 

Schulte Roth & Zabel LLP

919 Third AvenueNew
York, New York 10022

Telephone:(212)
756-2000

Facsimile:(212)
593-5955

Attention:Eleazer
N. Klein, Esq.

 

or to such other address
and/or facsimile number and/or to the attention of such other Person as the
recipient party has specified by written notice given to each other party five
(5) days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by
the recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt
from an overnight courier service in accordance with clause (i), (ii) or (iii)
above, respectively.

3.10.        Remedies.  The Investor and each holder of the
Securities shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law.  Any Person
having any rights under any

 6
 

 

provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. 
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under this Agreement, any
remedy at law may prove to be inadequate relief to the Investor.  The Company therefore agrees that the
Investor shall be entitled to seek temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages and without
posting a bond or other security.

[Signature Page Follows]

 7
 

 

IN WITNESS WHEREOF,
the Investor and the Company have caused their respective signature page to
this Amendment Agreement to be duly executed as of the date first written
above.

 

	
  

  	
   

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  IPARTY CORP.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ SAL V. PERISANO

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Sal V. Perisano

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
							

 

 

 

	
  

  	
  INVESTOR:

  	 

	
   

  	
   

  	
   

  
	
   

  	
  HIGHBRIDGE INTERNATIONAL LLC

  	 

	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  HIGHBRIDGE CAPITAL

  	 

	
   

  	
  MANAGEMENT, LLC

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ ADAM J. CHILL

  	 

	
   

  	
   

  	
  Name:

  	
  Adam J. Chill

  	 

	
   

  	
   

  	
  Title:

  	
  Managing Director

  	 

								

 

 8

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