Document:

Exhibit
4.1

 

SETTLEMENT AGREEMENT AND RELEASE

 

This Settlement Agreement and Release (the “Agreement”), dated as of
April 8, 2004, is entered into by and between The Riverview Group LLC
(“Riverview”) and Vaso Active Pharmaceuticals, Inc. (the “Company”), a Delaware
corporation (collectively the “Parties” or individually as “Party”).

 

I.  RECITALS

 

WHEREAS, the Parties entered into a Securities Purchase Agreement dated
as of March 16, 2004 by and among Vaso Active Pharmaceuticals, Inc. and
the investors identified on the signature pages thereto (“Purchase Agreement”),
pursuant to which the Company issued to Riverview the Convertible Note dated as
of March 16, 2004 in the principal amount of $7,500,000 (the “Note”) and
the Warrant dated as of March 16, 2004 for the purchase of shares of the
Company’s Common Stock thereunder.

 

WHEREAS, Section 4(a)(ii) of the Note provides that the
“suspension from trading or failure of the Common Stock to be listed on the
Principal Market, the NASDAQ National Market or The New York Stock Exchange,
Inc. for a period of five consecutive days or for more than an aggregate of 10
days in any 365-day period” shall constitute an “Event of Default.”

 

WHEREAS, the Company is in default under the Note because the Common
Stock is not so listed and the SEC temporarily suspended trading of the Common
Stock on April 1, 2004 and such suspension has continued for more than
five consecutive days.

 

WHEREAS, the Parties desire to fully and finally settle, resolve and
specifically release each other from all claims arising under the Transaction
Documents on the terms set forth below, without admitting or denying liability.

 

II.  AGREEMENT

 

THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, it is hereby agreed by and between the Parties
hereto as follows:

 

1.                                       Capitalized Terms:  Capitalized terms that are used but not defined in this Agreement
shall have the respective meanings ascribed thereto in the Purchase Agreement
or the Note.

 

2.                                       Settlement Obligations:  In consideration of the
Agreement and the Parties’ agreement to perform the obligations required
hereunder, including, specifically, Riverview not sending an Event of Default
Notice to the Company and not demanding all remedies to which Riverview may be entitled
under the Transaction Documents, the Company hereby agrees to deliver, by wire
transfer, in immediately available funds, the sum of U.S. $7,500,000,with no
accrued interest to date and no Redemption Premium, Event of Default Redemption
Price or any other premium or penalties, plus an expense reimbursement in
connection with entering into this Agreement of U.S. $15,000, for a total of
U.S. $7,515,000, to Riverview by no later than 4 PM EST on Thursday,
April 8, 2004.  The obligations set
forth in

 

 

this paragraph together with
the Company’s other obligations hereunder may be referred to as the “Settlement
Obligations.”

 

3.                                       No Assignment:  The parties represent and warrant that they
have not assigned, conveyed, or otherwise transferred to any other person or
entity, any claim or portion thereof or interest therein relating to any of the
matters that are the subject of this Agreement, nor shall they hereafter do so.

 

4.                                       Specific Release by the Company:  Subject to performance of the Settlement
Obligations, the Company does for itself and each of the other Company
Indemnitees hereby fully, finally, and forever release, remise, discharge, and
acquit Riverview, its affiliates and subsidiaries, predecessor and successor
corporations or entities, and any and all of their past, present and future
managers, investors, shareholders, partners, officers, directors, employees,
agents, representatives, accountants, auditors and attorneys, and any and all
other persons, firms, corporations, or entities that could or might act on its
behalf (collectively, the “Riverview Indemnitees”) from and against any and all
claims, actions, causes of action, debts, damages, demands, offsets, payments,
costs, attorneys’ fees, obligations of every kind and nature, rights, liabilities,
charges, expenses, contracts, promises, or agreements, direct or indirect,
regardless of the legal theory upon which they are based, whether known or
unknown, now existing, liquidated or unliquidated.

 

5.                                       Specific Release by Riverview:  Subject to performance of the Settlement
Obligations, Riverview does for itself and each of the other Riverview
Indemnitees hereby fully, finally, and forever release, remise, discharge, and
acquit the Company, its past, present and future investors, shareholders, officers,
directors, employees, agents, representatives, accountants, auditors and
attorneys, and any and all other persons, firms, corporations, or entities that
could or might act on its behalf (collectively, the “Company Indemnitees”) from
and against any and all claims, actions, causes of action, debts, damages,
demands, offsets, payments, costs, attorneys’ fees, obligations of every kind
and nature, rights, liabilities, charges, expenses, contracts, promises, or
agreements, direct or indirect, regardless of the legal theory upon which they
are based, whether known or unknown, now existing or arising at any time in the
future, liquidated or unliquidated, solely arising out of or relating to the
Transaction Documents.  Riverview does
not release, nor does it intend to release, any claims, causes of action,
damages, liabilities, obligations, costs or expenses, other than those
specifically released herein.

 

6.                                       Sufficiency of Consideration:  Other than the satisfaction of the
Settlement Obligations and terms set forth in this Agreement, the Parties each
acknowledge and agree that no additional consideration is required or owing to
the other and that sufficient consideration has passed between them by virtue
of this Agreement to render this Agreement, including the releases herein,
valid and enforceable.

 

7.                                       Construction:  The Parties agree that in the event of any
dispute concerning the interpretation or construction of this Agreement, no
presumption shall exist with respect to the Party initially drafting the Agreement.  The Parties agree they have had ample
opportunity to influence the choice of language and terms of this Agreement.

 

2

 

8.                                       Governing Law and Venue:  This Agreement shall be governed by and
construed according to the laws of the state of New York without reference to
any conflicts of law principles that might specify the application of any other
jurisdiction’s laws.  The Parties also
irrevocably consent to the jurisdiction of the federal and state courts in New
York, NY for the purposes of enforcing this Agreement and irrevocably waive any
objection or defense to the jurisdiction of such courts, including, but not
limited to, subject matter jurisdiction, personal jurisdiction, venue, forum non conveniens or any other similar
objection or defense.

 

9.                                       Heirs, Successors and Assigns:  This Agreement shall bind the heirs,
personal representatives, successors, assigns, executors and administrators of
each Party, and inure to the benefit of each Party, its heirs, successors and
assigns.

 

10.                                 Duty to Effectuate:  The Parties agree to perform any lawful
additional acts, including the execution of additional agreements, as are
reasonably necessary to effectuate the purpose of this Agreement.

 

11.                                 Entire Agreement:  This Agreement constitutes the entire
agreement between the Parties regarding the settlement of claims arising from
or relating to the Transaction Documents. 
Each Party acknowledges that it has not executed this Agreement in
reliance on any representation, inducement, promise, agreement, or warranty
that is not contained in this Agreement.

 

12.                                 Warranty of Capacity to Execute Agreement:  The Parties represent and
warrant that they have the legal power and authority to enter into and bind the
Parties to the terms and conditions contained in this Agreement.

 

13.                                 Voluntarily and Knowingly:  Each Party represents and agrees:  (i) that it has fully reviewed this
Agreement and has had the opportunity to seek advice by independent counsel of
its choosing in that regard; (ii) that it fully understands the terms of this
Agreement and has entered into this Agreement voluntarily and knowingly,
without any coercion or duress on the part of any person or entity; (iii) that
it was given adequate time to consider all implications of this Agreement prior
to entering into it; and (iv) that this Agreement shall not be construed more
strictly against any Party because that Party or its counsel participated in
drafting it.

 

14.                                 Effective Date:  This Agreement is effective on the later of
the dates that each Party signed this Agreement (“Effective Date”).

 

15.                                 Counterparts:  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

16.                                 Waiver:  No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be an estoppel against the enforcement of any
provision of this Agreement, except by written instruments signed by the Party
charged with the waiver or estoppel; no written waiver shall be deemed a
continuing waiver unless specifically stated therein and the written waiver
shall operate only as to the specific term or condition waived, and not for the
future or as to any other act than that specifically waived.

 

3

 

17.                                 Survival of Rights:  If for any reason the Parties do not get the
benefit of their bargain contemplated by this Agreement, then the Parties will
be restored to their original positions with all their rights preserved and
enforceable, as if such Agreement had never been signed, and all releases
exchanged hereunder shall be null and void.

 

18.                                 Severable:  The provisions of this Agreement are
severable, and if any of the provisions of this Agreement shall be held by any
court of competent jurisdiction to be unenforceable, such holding shall not
affect or impair any other provision of this Agreement.

 

19.                                 Enforce According to Terms:  The Parties intend this Agreement to be enforced
according to its terms.

 

20.                                 Public Disclosure:  Unless required by law, the Parties agree to
keep the terms of this Agreement (including the Agreement itself) confidential
and not to disclose such to anyone other than the Parties hereto and their legal,
accounting and investment-banking advisors. 
In the event that public disclosure of this Agreement or the terms of
this Agreement are required by law, prior to making any such disclosure,
including, but not limited to, issuing any press release or other public
announcement concerning this Agreement, the Party proposing to make such
disclosure or issue such press release or public announcement shall provide a
copy of such disclosure, press release or public announcement to the other
Party hereto and shall not make such disclosure, press release or public
announcement without the consent of the other Party, such consent not to be
unreasonably withheld.  Notwithstanding
the foregoing, Riverview hereby approves the disclosure of this Agreement as an
attachment to a Form 8K to be filed with the Company along with the Company’s
issuance of the press release attached hereto as Exhibit A.

 

21.                                 Additional Remedies:  Notwithstanding any other provision under
this Agreement, including the Releases in paragraph five (5), to the extent
that the Company fails to perform its Settlement Obligations under this
Agreement, or to the extent that Riverview fails to receive the benefit of its
bargain as provided in paragraph seventeen (17), then under those circumstances
for the avoidance of doubt Riverview shall retain all rights under the
Transaction Documents that it has ever had.

 

* * *

 

[Remainder of page intentionally left blank.]

 

4

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by themselves or their duly authorized representatives as of the date
hereof.

 

ACCEPTED AND AGREED:

 

	
  THE RIVERVIEW GROUP LLC

  
	
   

  
	
  By:

  
	
   

  
	
  /s/ David Nolan

  	
   

  
	
  Name: David Nolan

  
	
  Title: Vice Chairman

  
	
  Date: 4-8-04

  
	
   

  
	
  VASO ACTIVE PHARMACEUTICALS, INC.

  
	
   

  
	
  By:

  
	
   

  
	
  /s/ John J. Masiz

  	
   

  
	
  Name: John J. Masiz

  
	
  Title: President

  
	
  Date: 4-8-04

  

 

5<PAGE>

                                                                    Exhibit 10.2

                                                                  Execution Copy

                     STRUCTURING AND CONTRIBUTION AGREEMENT

                  THIS STRUCTURING AND CONTRIBUTION AGREEMENT (the "Agreement")
is made as of February 13, 2004 by and among STRATEGIC HOTEL FUNDING, L.L.C., a
Delaware limited liability company (the "SHC Funding"); STRATEGIC HOTEL CAPITAL,
L.L.C., a Delaware limited liability company ("SHC LLC"); STRATEGIC HOTEL
CAPITAL LIMITED PARTNERSHIP, a Delaware limited partnership ("SHC LP");
STRATEGIC HOTEL CAPITAL LIMITED PARTNERSHIP-II, a Delaware limited partnership
("SHC LP II"); SANTA MONICA HOTEL ASSOCIATES, LLC, a California limited
liability company ("SMHA"); THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey corporation, PIC REALTY CORPORATION, a Delaware corporation, STRATEGIC
VALUE INVESTORS, LLC, a Delaware limited liability company, PRUDENTIAL ASSETS,
LLC, a Delaware limited liability company, PRUDENTIAL INVESTMENT MANAGEMENT,
INC., a Delaware corporation, (SHC/OLAYAN) REDEMPTION VEHICLE, LLC, a Delaware
limited liability company and SVI (SHC/HOUSTON) REDEMPTION VEHICLE, LLC, a
Delaware limited liability company (together, the "Prudential Entities");
Whitehall Street Real Estate Limited Partnership VII, a Delaware limited
partnership, and Whitehall Street Real Estate Limited Partnership IX, a Delaware
limited partnership (together, "Whitehall"); and ROCKMARK CORPORATION, a
Delaware corporation, on its own behalf and as the Investor Representative (as
defined in the Fourth Amended and Restated Agreement of Limited Partnership of
SHC LP) ("Rockmark") (SHC LLC, SHC LP, SHC LP II, SMHA, the Prudential Entities,
Whitehall and Rockmark each, an "Interested Party" and collectively, "Interested
Parties").

                  WHEREAS, SHC LLC has formed Strategic Hotel Capital, Inc., a
Maryland corporation ("SHC Inc."), to be the sole managing member of SHC
Funding;

                  WHEREAS, in connection with the initial public offering (the
"IPO") of the common stock, par value $.01 per share (the "Common Stock"), of
SHC Inc. pursuant to a registration statement to be filed on Form S-11 with the
Securities and Exchange Commission, the parties hereto desire to effect certain
formation and structuring transactions outlined in Exhibit A hereto (the
"Formation and Structuring Transactions") under the terms and conditions set
forth herein;

                  NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, SHC Funding and the
Interested Parties agree as follows:

                                   ARTICLE I.

                            STRUCTURING TRANSACTIONS

                  1.1 Consent and Waiver. Subject to the terms and conditions of
this Agreement, SHC Funding and each of the Interested Parties hereby (i)
consent to each of the Formation and Structuring Transactions, (ii) waive any
restrictions set forth under any agreement to which it is party and rights that
it may have to object to any of the Formation and Structuring Transactions and
(iii) agree to take all actions reasonably necessary or advisable to consummate
the Formation and Structuring Transactions.
<PAGE>

                  1.2 Unit Transactions. Subject to the terms and conditions of
this Agreement, SHC Funding and each of the Interested Parties hereby agree to
perform the following transactions (the "Unit Transactions") with respect to the
issuance, distribution or exchange of membership units of SHC Funding ("SHC
Funding Units") as an integral part of the Formation and Structuring
Transactions:

                  (a) Hotel Contributions. SHC LP is a 99% partner in the
Poydras Plaza Joint Venture, which owns the property and improvements commonly
known as the Hyatt Regency New Orleans, and is a 100% equity member of SHC
Lincolnshire Preferred, L.L.C., which has a leasehold interest in the property
and improvements commonly known as the Marriott Lincolnshire Resort (together,
the "Contributed Hotel Interests"). SHC LP shall contribute, transfer, assign
and convey to SHC Funding, and SHC Funding shall (i) acquire and accept from SHC
LP all right, title and interest of SHC LP in the Contributed Hotel Interests
and (ii) deliver to SHC LP an aggregate number of SHC Funding Units equal to
26.6% of the SHC Funding units initially owned by SHC LLC, which units are
exchangeable into Common Stock on a one-to-one basis;

                  (b) Distribution Transactions.

                  (i) As contemplated by step (4) of Exhibit A, SHC LLC, as sole
         managing member of SHC Funding, shall own SHC Funding Units, which
         units are exchangeable into Common Stock on a one-to-one basis;

                  (ii) As contemplated by steps (8) and (13) of Exhibit A, SHC
         LLC shall distribute all of SHC Funding Units it owns to its beneficial
         owners on a pro rata basis.

                  (c) Exchange Transactions. As contemplated by steps (11) and
         (14) of Exhibit A, Whitehall and the Prudential Entities each shall
         exchange all of SHC Funding Units that they receive in the
         distributions from SHC LLC for Common Stock; and

                  (d) Amendment to Operating Agreement. SMHA and SHC Funding
shall amend the Amended and Restated Operating Agreement of SHCI Santa Monica
Beach Hotel, L.L.C. (the "Santa Monica Operating Agreement") such that:

                  (i) the Class A Units held by SMHA shall be convertible into
         SHC Funding Units, rather than membership units of SHC LLC, and such
         SHC Funding Units shall be exchangeable into Common Stock on a
         one-to-one basis; and

                  (ii) the allocation of Net Income to SMHA as set forth in
         Section 6.1(a)(ii)(A) of the Santa Monica Operating Agreement shall be
         based on the amount of net income allocated to SHC Funding Units,
         rather than membership units of SHC LLC.

                  1.3 Simultaneous Closing. The Unit Transactions shall close
simultaneously with the closing of the IPO (the "Closing").

                                      2
<PAGE>

                  1.4 Further Acts. SHC Funding and the Interested Parties shall
perform, execute, and deliver or cause to be performed, executed, and delivered
at the Closing or after the Closing, any and all further acts, instruments, and
agreements and provide such further assurances as the other parties may
reasonably require to consummate the Formation and Structuring Transactions
contemplated hereunder.

                                  ARTICLE II.

                              CONDITIONS TO CLOSING

                  2.1 Conditions to Closing. The obligations of each Interested
Party and SHC Funding hereunder are subject to the satisfaction of the
conditions set forth below on or before the Closing. If for any reason any of
the conditions set forth in this Section 2.1 are not satisfied or waived by each
party entitled to the benefit of such conditions at or prior to the Closing, or
if the Closing shall not have occurred by December 31, 2004, then each party
hereto by written notice given to the other parties hereto shall have the right
to elect to terminate this Agreement and each party shall be released from their
obligations hereunder and shall have no further liability hereunder except that
nothing herein shall relieve any party from liability for any breach of this
Agreement prior to such termination.

                  (a) Representations and Warranties True and Correct. The
representations and warranties of each other party hereto shall be true and
correct in all material respects as of the date of the Closing;

                  (b) Closing of Unit Transactions. The closing of each of the
Unit Transactions applicable to each other party hereto shall occur
simultaneously therewith and all obligations of each other party hereto shall
have been performed or complied with in all material respects; and

                  (c) Closing of IPO. The IPO shall have been consummated
simultaneously with the closing of the Unit Transactions therewith.

                  (d) Registration Rights. SHC Inc. shall have assumed the
obligations of SHC LLC relating to registration rights under those certain
Transfer and Registration Agreements, each dated as of October 31, 1999, by and
among SHC LLC and the parties thereto (the "Registration Rights Agreements"),
such that the parties thereto have the same registration rights in respect of
their SHC Funding Units and shares of Common Stock as they currently have in
respect of their equity interests in SHC LLC under the Registration Rights
Agreements with conforming adjustments. SHC Inc. shall use its reasonable
efforts to file beginning one year after the IPO and continuously maintain a
shelf registration on behalf of the Prudential Entities, Whitehall, and Rockmark
(including the parties for whom Rockmark is the Investor Representative).
Rockmark (and the respective parties for whom Rockmark is the Investor
Representative) shall be entitled to utilize that registration statement until
all registrable securities of Rockmark and each of the respective parties for
whom Rockmark is the Investor Representative may be immediately sold under the
Resale Rules (as defined in the Registration Rights Agreement).

                                       3
<PAGE>

                  2.2 Abandonment of IPO. If at any time SHC Inc. determines in
good faith to abandon the IPO, SHC Funding shall so advise each Interested Party
in writing and thereupon each party shall be released from its obligations
hereunder and shall have no further liability hereunder.

                                  ARTICLE III.

                         REPRESENTATIONS AND WARRANTIES

                  3.1 Representations by SHC Funding. SHC Funding hereby
represents and warrants to the Interested Parties that each and every one of the
following statements is true, correct, and complete in every material respect as
of the date of this Agreement and will be true, correct, and complete as of the
date of Closing:

                  (a) Organization and Power. SHC Funding is duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
and has full right, power, and authority to enter into this Agreement and to
assume and perform all of its obligations under this Agreement. The execution,
delivery and performance of this Agreement have been duly authorized by SHC
Funding, and this Agreement constitutes the legal, valid and binding obligation
of SHC Funding, enforceable against SHC Funding in accordance with its terms,
subject to bankruptcy, reorganization, insolvency and other similar laws
affecting the enforcement of creditors' rights generally and to general
principles of equity.

                  (b) Litigation. There is no action, suit, or proceeding,
pending or known to be threatened, against SHC Funding in any court or before
any arbitrator or before any federal, state, municipal, or other governmental
department, commission, board, bureau, agency or instrumentality that could
materially and adversely affect the business, financial position, or results of
operations of SHC Funding or the ability of SHC Funding to perform its
obligations hereunder.

                  (c) Consents. Each consent, approval, authorization, order,
license, certificate, permit, registration, designation, or filing by or with
any governmental agency or body necessary for the execution, delivery, and
performance of this Agreement or the transactions contemplated hereby by SHC
Funding will be obtained as of Closing.

                  3.2 Representations by Interested Parties. Each Interested
Party hereby severally and not jointly represents and warrants to SHC Funding
that each and every one of the following statements is true, correct, and
complete in every material respect as of the date of this Agreement and/or will
be true, correct, and complete as of the date of Closing:

                  (a) Organization and Power. Such Interested Party is duly
organized, validly existing and in good standing under the laws of the state of
its formation and has full right, power, and authority to enter into this
Agreement and to assume and perform all of its obligations under this Agreement.
The execution, delivery and performance of this Agreement have been duly
authorized by such Interested Party, and this Agreement constitutes the legal,
valid and binding obligation of such Interested Party, enforceable against such
Interested Party in accordance with its terms, subject to bankruptcy,
reorganization, insolvency and other similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity.

                                       4
<PAGE>

                  (b) Litigation. There is no action, suit, claim, or proceeding
pending or, to the Interested Party's knowledge, threatened against such
Interested Party or such Interested Party's interests in any court, before any
arbitrator, or before or by any governmental body or other regulatory authority
that would materially and adversely affect the ability of such Interested Party
to perform its obligations hereunder or otherwise delay the consummation of any
of the transactions contemplated hereby. Such Interested Party is not subject to
any judgment, decree, injunction, rule, or order of any court relating to such
Interested Party's participation in the transactions contemplated by this
Agreement.

                  (c) No Consents. No authorization, consent, approval, permit,
or license of, or filing with, any governmental or public body or authority, or
any other person or entity is required to authorize, or is required in
connection with, the execution, delivery, and performance of this Agreement on
the part of such Interested Party other than as may be required under the
provisions the following agreements, which shall be deemed to have been provided
pursuant to Section 1.1 hereof: (i) Amended and Restated Limited Liability
Company Agreement of Strategic Hotel Capital, L.L.C., (ii) Fourth Amended and
Restated Agreement of Limited Partnership of Strategic Hotel Capital Limited
Partnership, (iii) Second Amended and Restated Agreement of Limited Partnership
of Strategic Hotel Capital Limited Partnership-II and (iv) Amended and Restated
Operating Agreement of SHCI Santa Monica Beach Hotel, L.L.C.

                  (d) Securities Law Matters. (i) In acquiring SHC Funding Units
and/or Common Stock, such Interested Party is not relying upon any
representations made to it by SHC Funding or SHC Inc., or any of their officers,
employees, or agents that are not contained herein. The Interested Party is
aware of the risks involved in investing in SHC Funding Units and/or Common
Stock. Such Interested Party has had an opportunity to ask questions of, and to
receive answers from SHC Funding and SHC Inc., or a person or persons authorized
to act on their behalf, concerning the terms and conditions of this investment
and the financial condition, affairs, and business of SHC Inc., including SHC
Inc.'s intent to qualify as a real estate investment trust under federal income
tax laws and the associated restrictions that will apply to holders of the
Common Stock under federal tax laws and under SHC Inc.'s charter and bylaws.
Such Interested Party confirms that all documents, records, and information
pertaining to its investment in SHC Funding Units and/or Common Stock that have
been requested by it, have been made available or delivered to it prior to the
date hereof.

                  (ii) Such Interested Party understands that SHC Funding Units
and/or Common Stock issuable to such Interested Party hereunder has not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities laws and is instead being offered and sold in reliance
on an exemption from such registration requirements. SHC Funding Units and/or
Common Stock issuable to such Interested Party is being acquired solely for the
Interested Party's own account, for investment, and is not being acquired with a
view to, or for resale in connection with, any distribution, subdivision, or
fractionalization thereof, in violation of such laws, and such Interested Party
does not have any present intention to enter into any contract, undertaking,
agreement, or arrangement with respect to any such resale. The Prudential
Entities and Whitehall understand that the certificates representing the Common
Stock issuable to such Interested Party will contain appropriate legends
reflecting the requirement that the Common Stock not be resold by such
Interested Party without registration under such laws or the availability of an
exemption from such registration.

                                       5
<PAGE>

                  (e) Investment Decision. Such Interested Party is capable of
making an informed investment decision based on its knowledge, sophistication
and experience in financial and business matters together with the business and
financial experience of those persons, if any, retained by it, and other
relevant information it may have received with respect to the matters set forth
in this Agreement.

                   (f) Brokers. Such Interested Party has not engaged the
services of any agent, broker, finder or any other person or entity for any
brokerage or finder's fee, commission or other amount with respect to the
transactions described herein.

                  3.3 Additional Representations by SHC LP--Good Title. SHC LP
hereby represents and warrants to SHC Funding that it holds the equity interests
in the Contributed Hotel Interests free and clear of all liens, encumbrances,
security interests, prior assignments or conveyances, conditions, restrictions,
and any other adverse right, interest, charge or claim of any kind whatsoever
other than the transfer restrictions set forth under Section 7.12 of the Fourth
Amended and Restated Agreement of Limited Partnership of SHC LP.

                                  ARTICLE IV.

                                  MISCELLANEOUS

                  4.1 Survival and Indemnity. The representations and warranties
contained herein shall survive the Closing. Each Interested Party, severally and
not jointly, agrees to indemnify, defend and hold harmless SHC Funding and each
other party hereto and SHC Funding agrees to indemnify, defend and hold harmless
each Interested Party from and against all costs, expenses, losses and damages
(including, without limitation, reasonable attorney's fees and expenses, but
excluding consequential damages) incurred by SHC Funding or such other party
resulting from any misrepresentation or breach of warranty made by it.

                  4.2 Entire Agreement; Modifications and Waivers; Cumulative
Remedies. This Agreement supersedes any existing letter of intent between the
parties, constitutes the entire agreement among the parties hereto and may not
be modified or amended except by instrument in writing signed by the parties
hereto, and no provisions or conditions may be waived other than by a writing
signed by the party waiving such provisions or conditions. No delay or omission
in the exercise of any right or remedy accruing to SHC Funding or an Interested
Party upon any breach under this Agreement shall impair such right or remedy or
be construed as a waiver of any such breach theretofore or thereafter occurring.
The waiver by SHC Funding or an Interested Party of any breach of any term,
covenant, or condition herein stated shall not be deemed to be a waiver of any
other breach, or of a subsequent breach of the same or any other term, covenant,
or condition herein contained. All rights, powers, options, or remedies afforded
to SHC Funding or an Interested Party either hereunder or by law shall be
cumulative and not alternative, and the exercise of one right, power, option, or
remedy shall not bar other rights, powers, options, or remedies allowed herein
or by law, unless expressly provided to the contrary herein.

                                       6
<PAGE>

                  4.3 Notices. Any notice provided for by this Agreement and any
other notice, demand, or communication which any party may wish to send to
another shall be in writing and either delivered in person (including by
confirmed facsimile transmission) or sent by registered or certified mail or
overnight courier, return receipt requested, in a sealed envelope, postage
prepaid, and addressed to the party for which such notice, demand or
communication is intended at such party's address as set forth in this Section.
SHC Funding's address for all purposes under this Agreement shall be as follows:

                  77 West Wacker Drive, Suite 4600
                  Chicago, Illinois  60601
                  Fax No: (312) 658-5799

The address of each of the Interested Parties for all purposes under this
Agreement shall be as follows:

                  SHC LLC:

                  Attn: General Counsel
                  Strategic Hotel Capital, L.L.C.
                  77 West Wacker Drive, Suite 4600
                  Chicago, Illinois  60601
                  Fax No: (312) 658-5799

                  SHC LP:

                  Attn: General Counsel
                  Strategic Hotel Capital Limited Partnership
                  77 West Wacker Drive, Suite 4600
                  Chicago, Illinois  60601
                  Fax No: (312) 658-5799

                  SHC LP II:

                  Attn: General Counsel
                  Strategic Hotel Capital Limited Partnership-II
                  77 West Wacker Drive, Suite 4600
                  Chicago, Illinois  60601
                  Fax No: (312) 658-5799

                                       7
<PAGE>

                  SMHA:

                  Attn: General Counsel
                  Santa Monica Hotel Associates, Ltd.
                  1572 Ventura Boulevard, Suite 221
                  Encino, California 91436

                  Prudential Entities:

                  c/o The Prudential Insurance Company of America
                  8 Campus Drive, 4th Floor
                  Parsippany, New Jersey 07054-4493

                  Whitehall:

                  Whitehall Street Real Estate Limited Partnership VII
                  c/o 85 Broad Street
                  New York, New York 10004

                  Whitehall Street Real Estate Limited Partnership IX
                  c/o 85 Broad Street
                  New York, New York 10004

                  Rockmark:

                  Rockmark Corporation
                  c/o Richard E. Salomon
                  610 Fifth Avenue, 7th Floor
                  New York, New York 10020

                  Any address or name specified above may be changed by a notice
given by the addressee to the other parties. Any notice, demand or other
communication shall be deemed given and effective as of the date of delivery in
person or receipt set forth on the return receipt. The inability to deliver
because of changed address of which no notice was given, or rejection or other
refusal to accept any notice, demand or other communication, shall be deemed to
be receipt of the notice, demand or other communication as of the date of such
attempt to deliver or rejection or refusal to accept.

                  4.4 Exhibits. All exhibits referred to in this Agreement and
attached hereto are hereby incorporated in this Agreement by reference.

                  4.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of laws principles.

                  4.6 Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal, or unenforceable provision had
never been contained herein.

                                       8
<PAGE>

                  4.7 Successors and Assigns. This Agreement may not be assigned
by SHC Funding or any Interested Party without the prior approval of SHC Funding
or Interested Party, as applicable; provided, however, that SHC Funding may
assign its rights under this Agreement (but not its obligations) to a direct or
indirect wholly-owned subsidiary of SHC Funding without the prior approval of
the Interested Parties. This Agreement shall be binding upon, and inure to the
benefit of, SHC Funding, the Interested Parties, and their respective legal
representatives, successors, and permitted assigns.

                  4.8 Headings. Article headings and article and section numbers
are inserted herein only as a matter of convenience and in no way define, limit,
or prescribe the scope or intent of this Agreement or any part hereof and shall
not be considered in interpreting or construing this Agreement.

                  4.9 Recitals. The recital and introductory paragraphs hereof
are a part hereof, form a basis for this Agreement and shall be considered prima
facie evidence of the facts and documents referred to therein.

                  4.10 Counterparts. This Agreement may be executed in any
number of counterparts and by any party hereto on a separate counterpart, each
of which when so executed and delivered shall be deemed an original and all of
which taken together shall constitute but one and the same instrument. Copies of
executed counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed counterparts.

                  4.11 Specific Performance. Each party to this Agreement agrees
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. Each party to this Agreement agrees that each other
party hereto will be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the provisions of this
Agreement in any federal or state court located in the State of New York (as to
which each party to this Agreement agrees to submit to jurisdiction for purposes
of such action), this being in addition to any other remedies to which such
party may be entitled under this Agreement or otherwise at law or in equity.

                  4.12 Time of the Essence. Time is of the essence with respect
to all obligations of each party under this Agreement.

                            [Signature pages follow.]

                                       9
<PAGE>

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

                                STRATEGIC HOTEL FUNDING, L.L.C.

                                By:      Strategic Hotel Capital, L.L.C.,
                                         its sole member

                                         By:  /s/ Laurence S. Geller
                                             -------------------------------
                                              Name: Laurence S. Geller
                                              Title: Chairman, President and
                                                     Chief Executive Officer

                                STRATEGIC HOTEL CAPITAL, L.L.C.

                                By:   /s/ Laurence S. Geller
                                     ----------------------------------------
                                      Name: Laurence S. Geller
                                      Title: Chairman, President and
                                             Chief Executive Officer

<PAGE>

                                STRATEGIC HOTEL CAPITAL LIMITED PARTNERSHIP

                                By:  Strategic Hotel Funding, L.L.C.,
                                      its general partner

                                      By:  Strategic Hotel Capital, L.L.C.,
                                            its sole member

                                         By:  /s/ Laurence S. Geller
                                             -------------------------------
                                              Name: Laurence S. Geller
                                              Title: Chairman, President and
                                                     Chief Executive Officer

                                STRATEGIC HOTEL CAPITAL LIMITED PARTNERSHIP - II

                                By:  Strategic Hotel Funding, L.L.C.,
                                      its general partner

                                      By:  Strategic Hotel Capital, L.L.C.,
                                            its sole member

                                         By:  /s/ Laurence S. Geller
                                             -------------------------------
                                              Name: Laurence S. Geller
                                              Title: Chairman, President and
                                                     Chief Executive Officer

<PAGE>

                                SANTA MONICA HOTEL ASSOCIATES, LLC

                                By:      /s/ Sidney W. Caplan
                                         --------------------------------------
                                         Name:  Sidney W. Caplan
                                         Title:  Managing Member

<PAGE>

                                THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

                                By:      /s/ Robert M. Falzon
                                         --------------------------------------
                                         Name: Robert M. Falzon
                                         Title: Vice President

                                PIC REALTY CORPORATION

                                By:      /s/ Robert M. Falzon
                                         --------------------------------------
                                         Name: Robert M. Falzon
                                         Title: Vice President

                                STRATEGIC VALUE INVESTORS, LLC

                                By: Prudential Investment Management, Inc.,
                                     its Attorney-in-Fact

                                         By:  /s/ Robert M. Falzon
                                              --------------------------------
                                              Name: Robert M. Falzon
                                              Title: Vice President

                                PRUDENTIAL ASSETS, LLC

                                By:      /s/ Robert M. Falzon
                                         -------------------------------------
                                         Name: Robert M. Falzon
                                         Title: Manager

                                       10
<PAGE>

                                PRUDENTIAL INVESTMENT MANAGEMENT, INC.

                                By:      /s/ Robert M. Falzon
                                         -------------------------------------
                                         Name: Robert M. Falzon
                                         Title: Vice President

                              (SHC/OLAYAN) REDEPTION VEHICLE, LLC
                              By: Prudential Investment Management, Inc., its
                                   Attorney-in-Fact

                                         By:  /s/  Robert M. Falzon
                                              --------------------------------
                                              Name:  Robert M. Falzon
                                              Title: Vice President

                                SVI (SHC/HOUSTON) REDEPTION VEHICLE, LLC
                                By: Prudential Investment Management, Inc.,
                                its Attorney-in-Fact

                                         By:  /s/  Robert M. Falzon
                                              ------------------------------
                                              Name:  Robert M. Falzon
                                              Title: Vice President

<PAGE>

                                WHITEHALL STREET REAL ESTATE
                                LIMITED PARTNERSHIP VII

                                By:  WH Advisors, L.L.C. VII, general partner

                                      By: /s/ Alan S. Kava
                                          -----------------------------
                                          Name: Alan S. Kava
                                          Title: Vice President

                                WHITEHALL STREET REAL ESTATE
                                LIMITED PARTNERSHIP IX

                                By:  WH Advisors, L.L.C. IX, general partner

                                      By: /s/ Alan S. Kava
                                          --------------------------------
                                          Name: Alan S. Kava
                                          Title: Vice President

<PAGE>

                                ROCKMARK CORPORATION, on its own
                                behalf and as the Investor
                                Representative

                                By: /s/ Richard E. Salomon
                                    ----------------------------------------
                                    Name: Richard E. Salomon
                                    Title: President

<PAGE>

                                  EXHIBIT A(1)

1.       Each of the Prudential Entities will convert its limited partnership
         interests in SHC LP and SHC LP II into membership units in SHC LLC
         pursuant to Section 4.2 of the Fourth Amended and Restated Agreement of
         Limited Partnership SHC LP, as amended, and the Second Amended and
         Restated Agreement of Limited Partnership of SHC LP II, as amended. As
         a result, the Prudential Entities will receive 31,961,982 membership
         units in SHC LLC and SHC LLC will have a total of 100,449,681
         membership units outstanding.

2.       SHC LP II will be merged with and into SHC LP with SHC LP being the
         surviving entity. The Fourth Amended and Restated Agreement of Limited
         Partnership of SHC LP will be amended and restated to reflect:

         o        SHC Funding, as the general partner, and the limited partners
                  (other than the Prudential Entities) that are limited partners
                  in SHC LP and SHC LP II immediately prior to the merger, as
                  the limited partners;

         o        that the limited partners in SHC LP will have the same
                  indirect interest in the SHC Funding Units held by SHC LP as
                  such limited partners would have had if (i) such limited
                  partners would have converted their limited partnership
                  interests in SHC LP and SHC LP II into membership units of SHC
                  LLC, (ii) SHC LLC would have received all SHC Funding Units
                  received by SHC LP and SHC LLC, and (iii) SHC LLC would have
                  distributed such SHC Funding Units received by it in
                  accordance with steps (8) and (13) below.

         o        that the limited partners in SHC LP will have no right to
                  share in a distribution of SHC Funding Units by SHC LLC;

         o        existing tax protection provisions in SHC LP and SHC LP II
                  applicable to Rockmark and the investors it represents will be
                  retained in SHC LP;

         o        the contribution of the Lincolnshire Marriott Resort and the
                  New Orleans Hyatt Regency to SHC Funding will be specifically
                  permitted.

3.       SHC Funding and SHC LP will refinance their existing debt ($1.29
         billion) so that the debt follows the assets with the debt separately
         allocated to the Private Pool Properties (as defined below) ($725.0
         million) and the Public Pool Properties (as defined below) ($402.6
         million).

--------------------
1        Except as otherwise indicated, each transaction shall be consummated
         contemporaneously on the closing date for the initial public offering
         of the Common Stock.

<PAGE>

4.       SHC Funding will adopt a limited liability company operating agreement
         in substantially the same form as that included in Exhibit H to the
         Amended and Restated Limited Liability Company Agreement of SHC LLC
         (dated as of September 1999), with such changes as necessary to permit
         the transactions described herein, including the distribution by SHC
         Funding to SHC LLC of:

         o        SHC Funding's general partnership interests in SHC LP,

         o        SHC Funding's interests in the Private Pool Properties and
                  related assets,

         o        All cash and cash equivalents, other than the restricted cash
                  and cash equivalents held at the hotel property level.

         Under the SHC Funding limited liability company agreement, SHC LLC will
         own SHC Funding Units, which units are exchangeable for Common Stock on
         a one-to-one basis.

5.       SHC Funding will distribute to SHC LLC its general partnership
         interests in SHC LP, the Private Pool Properties and related assets and
         all cash and cash equivalents, other than the restricted cash and cash
         equivalents held at the hotel property level. The Private Pool
         Properties will include:

         o        Hyatt Regency San Francisco
         o        Park Hyatt San Francisco
         o        Loews Beverly Hills
         o        Ritz-Carlton, Laguna Niguel
         o        Westin Santa Clara
         o        Westin Essex House
         o        Marriott East Side

6.       SHC LP will contribute the Lincolnshire Marriott Resort and the New
         Orleans Hyatt Regency to SHC Funding in exchange for an aggregate
         number of SHC Funding Units equal to 26.6% of the SHC Funding units
         owned by SHC LLC, which units are exchangeable for Common Stock on a
         one-to-one basis.

7.       SHC Funding's interests in the Public Pool Properties will be
         restructured to allow SHC Inc. to qualify as a REIT for U.S. Federal
         income tax purposes. The Public Pool Properties will include:

         o        Embassy Suites Lake Buena Vista
         o        Four Seasons Mexico City
         o        Four Seasons Punta Mita
         o        Hilton Burbank Airport
         o        Hyatt Regency La Jolla
         o        Hyatt Regency New Orleans
         o        Hyatt Regency Phoenix
         o        Intercontinental Prague
         o        Loews Santa Monica
         o        Marriott Lincolnshire Resort
         o        Marriott Rancho Las Palmas
         o        Marriott Schaumburg
         o        Marriott Champs Elysees
         o        Marriott Hamburg

<PAGE>

8.       SHC LLC will distribute all of the SHC Funding Units it owns (except
         for an amount of SHC Funding Units necessary for it to include in the
         pro rata distribution any holders of SHC LLC convertible debentures who
         convert their debentures for SHC LLC membership units in step (13)
         below) to its beneficial owners on a pro rata basis. As described
         above, partners in SHC LP will not participate in this distribution.

9.       The Amended and Restated Operating Agreement of SHCI Santa Monica Beach
         Hotel, L.L.C. will be amended to provide (i) for the non-managing
         membership interests to be exchangeable for SHC Funding Units with a
         value of $1.2 million based on the IPO price, which are exchangeable
         for Common Stock on a one-to-one basis, rather than membership units of
         SHC LLC and (ii) for the allocation of net income to non-managing
         membership interests to be calculated with respect to SHC Funding Units
         rather than membership units of SHC LLC.

10.      SHC Inc. will complete its IPO and contribute the net proceeds (after
         deducting the underwriters' compensation) to SHC Funding in exchange
         for SHC Funding Units.

11.      Whitehall and the Prudential Entities will exchange the SHC Funding
         Units that they receive in the distribution outlined in step (8) for
         Common Stock.

12.      Upon completion of SHC Inc.'s IPO, SHC LLC will deliver a redemption
         notice to holders of its convertible debentures, calling for a
         redemption 60 days later.

13.      60 days following the delivery of the redemption notice, SHC LLC will
         redeem any outstanding convertible debenture holders who did not
         convert from cash on hand and distribute the remaining SHC Funding
         Units as follows:

         o        to debenture holders who converted into SHC LLC membership
                  units an amount that equals their aggregate pro rata share of
                  SHC Funding Units from the earlier distribution in step (8);

         o        any remaining SHC Funding Units to all the beneficial owners
                  of SHC LLC (including debenture holders who converted) on a
                  pro rata basis.

14.      Whitehall and the Prudential Entities will exchange SHC Funding Units
         that they receive in the distribution outlined in step (13) for shares
         of Common Stock.

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