CONTRIBUTION AND SALE AGREEMENT

Exhibit 10.1

 

Execution Version

 

CONTRIBUTION AND SALE AGREEMENT

 

Among

 

W. COPLEY BOSTON CORPORATION,

a Delaware corporation

 

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SCG COPLEY SQUARE LLC,

a Delaware limited liability company

 

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LASALLE HOTEL OPERATING PARTNERSHIP, L.P.,

a Delaware limited partnership

 

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LASALLE HOTEL PROPERTIES,

a Maryland real estate investment trust

 

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LASALLE HOTEL LESSEE, INC.

an Illinois corporation

 

August 12, 2005

TABLE OF CONTENTS

 

 

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CONTRIBUTION AND SALE AGREEMENT

 

THIS CONTRIBUTION AND SALE AGREEMENT is made as of the 12 ^th day of August, 2005, by and among W. COPLEY BOSTON CORPORATION, a Delaware corporation (“ WCBC ”), SCG COPLEY SQUARE LLC, a Delaware limited liability company (“ SCG ” and, together with WCBC, the “ Transferors ”), LASALLE HOTEL OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “ Partnership ”), LASALLE HOTEL PROPERTIES, a Maryland real estate investment trust (the “ REIT ”), and LASALLE HOTEL LESSEE, INC., an Illinois corporation (“ LaSalle Lessee ”).

 

W I T N E S S E T H:

 

WHEREAS, initially capitalized terms used in these Recitals and not otherwise defined herein have the meanings ascribed to them in Section 1.1 of this Agreement;

 

WHEREAS, the Transferors, together with Urban (collectively, the “ Current Owners ”), are the indirect owners of all of the outstanding limited liability company interests in Westban Hotel Investors, LLC, a Delaware limited liability company (the “ Company ”);

 

WHEREAS, the Company is the tenant under the Master Lease relating to, and is the owner of, the hotel known as The Westin Copley Place in Boston, Massachusetts;

 

WHEREAS, upon completion of the pre-closing transactions contemplated by Section 2.1 of this Agreement (the “ Restructuring ”), including the liquidation of Westin Copley Place Hotel Venture, the redemption (the “ Redemption ”) of the interest in Westban Hotel Venture, a Massachusetts general partnership (“ Westban Venture ”), held by Urban, and the liquidation of the Westban Venture, the Transferors will be the direct owners of all of the outstanding limited liability company interests in the Company;

 

WHEREAS, following completion of the Restructuring, the Transferors desire to contribute to the Partnership and LaSalle Lessee, and the Partnership and LaSalle Lessee desire to acquire from the Transferors, all of the outstanding limited liability company interests in the Company (the “ Transferred Interests ”), following which the Partnership and LaSalle Lessee shall become the sole owners of all of the outstanding limited liability company interests in the Company, in each case on the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the premises and the respective undertakings of the parties hereinafter set forth, it is hereby agreed:

 

ARTICLE 1. INTERPRETATION.

 

1.1 Defined Terms . Wherever used in this Agreement, the words and phrases set forth below shall have the meanings set forth below, unless the context clearly requires otherwise:

 

“ 1933 Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

“ 1934 Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

“ Accounts Receivable Statement ” has the meaning ascribed thereto in Section 2.6(a).

 

“ Accredited Investor ” means a Person who qualifies as an “accredited investor” as defined in relevant securities laws, including under Rule 501 of the 1933 Act.

 

“ Affiliate ” means, when used with reference to a specified Person, (i) if such Person is an individual, any member of the immediate family of such Person or any trust for the benefit of such Person or any member of the immediate family of such Person, or (ii) any Person directly or indirectly controlled by, controlling or under common control with the Person in question. The term “ control ” means, for purposes of this definition, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“ Business Day ” means any day other than a Saturday, Sunday or other day on which banks in The City of New York are permitted or required to be closed.

 

“ Chilled Water Agreement ” means the Chilled Water Agreement entered into as of February 3, 1982 by and between Marriott Urban Boston Venture and UIDC of Massachusetts, Inc., a Delaware corporation.

 

“ Claim Notice ” has the meaning ascribed thereto in Section 8.3.

 

“ Class C Preferred Units ” means the Class C Preferred Units of the Partnership having the terms, including the redemption right, set forth in Schedule 7.5(a), to be issued by the Partnership to SCG pursuant to this Agreement.

 

“ Closing ” means the closing at which the Transferors convey title to the Transferred Interests to the Partnership, and the Partnership pays the Transferors the consideration specified herein, in each case on the terms set forth in Article 2.

 

“ Closing Date ” means August 31, 2005, or such other date as shall otherwise be agreed upon by the parties for the Closing; provided, however, that the Closing Date shall not be later than October 3, 2005 and that, at the request of the

 

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Transferors made on or prior to August 26, 2005, the Closing Date may be changed to September 1, 2005 (it being understood and agreed that the Closing Date shall in any event be the day following the “Closing Date” under the Redemption Agreement).

 

“ Closing Date Consideration ” has the meaning ascribed thereto in Section 2.2.

 

“ Closing Working Capital ” has the meaning ascribed thereto in Section 2.4(b).

 

“ Closing Working Capital Statement ” has the meaning ascribed thereto in Section 2.4(b).

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Collected Accounts ” has the meaning ascribed thereto in Section 2.6(a).

 

“ Company ” has the meaning ascribed thereto in the Recitals to this Agreement.

 

“ Confidentiality Agreement ” means the confidentiality agreement dated May 17, 2005 made between the Partnership and the Current Owners.

 

“ Consumables ” shall mean, collectively, all (i) food and beverages (including alcoholic and non-alcoholic beverages) owned by the Company, (ii) engineering, maintenance and housekeeping supplies (including soap, cleaning materials and matches) owned by the Company, and (iii) stationery, printing supplies and other supplies of any kind owned by the Company.

 

“ Contribution Events ” has the meaning ascribed thereto in Section 2.1.

 

“ Current Assets ” has the meaning ascribed thereto in Section 2.4(g).

 

“ Current Liabilities ” has the meaning ascribed thereto in Section 2.4(g).

 

“ Current Owners ” has the meaning ascribed thereto in the Recitals to this Agreement.

 

“ Defeasance ” means the defeasance of the indebtedness incurred under and evidenced by the Existing Financing Documents to be completed immediately prior to the consummation of the transactions contemplated by the Redemption Agreement.

 

“ Earnest Money ” has the meaning ascribed thereto in Section 2.7.

 

“ Earnest Money Escrow Agreement ” means the escrow agreement of even date herewith made among the Partnership, as depositor, the Title Company, as escrow agent, and the Transferors.

 

“ Effective Time ” has the meaning ascribed thereto in Section 2.4(a).

 

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“ Equipment Leases ” has the meaning ascribed thereto in Section 3.1(m).

 

“ ERISA ” has the meaning ascribed thereto in Section 3.1(q).

 

“ Escrow Fund ” has the meaning ascribed thereto in the Indemnity Escrow Agreement.

 

“ Estimated Closing Working Capital ” has the meaning ascribed thereto in Section 2.4(a).

 

“ Estimated Working Capital Statement ” has the meaning ascribed thereto in Section 2.4(a).

 

“ Existing Financing Documents ” means, collectively, the promissory note dated August 14, 2003 in the original principal amount of $82,000,000 issued by the Company in favor of Merrill Lynch, together with the security agreements and other agreements entered into in connection therewith, including the mortgage, security agreement and assignment of leases and rents made as of August 14, 2003 by the Company in favor of Merrill Lynch.

 

“ Expenses ” has the meaning ascribed thereto in Section 8.2(e).

 

“ Furniture, Fixtures and Equipment ” or “ FF&E ” means, collectively, all tangible personal property, excluding the Consumables, owned by the Company, located at the Project and used in connection with the ownership, operation and maintenance of the Project. The FF&E shall include all fixtures, furniture, furnishings, fittings, televisions, art work, vehicles, equipment, computer hardware and non-proprietary software, machinery, apparatus, appliances, china, glassware, linens, silverware, keys and uniforms owned by the Company and used in connection with the ownership, operation and maintenance of the Project.

 

“ GAAP ” means U.S. generally accepted accounting principles and practices consistently applied for all periods.

 

“ Governmental Authority ” means any federal, state, county or municipal court, tribunal, government, or any department, agency, bureau, board or commission, regulatory authority, or other governmental or similar type body, subdivision or instrumentality obtaining authority therefrom or created pursuant to any Law.

 

“ Improvements ” means all buildings, structures, fixtures and other improvements located or erected on the Land, including the hotel which is commonly known as “The Westin Copley Place.”

 

“ Indemnified Party ” has the meaning ascribed thereto in Section 8.3.

 

“ Indemnifying Party ” has the meaning ascribed thereto in Section 8.3.

 

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“ Indemnity Escrow Agent ” means an escrow agent under the Indemnity Escrow Agreement jointly selected by the Transferors and the Partnership, which Indemnity Escrow Agent shall be the same agent as the escrow agent under the “Indemnity Escrow Agreement” under the Redemption Agreement.

 

“ Indemnity Escrow Agreement ” means the indemnity escrow agreement, substantially in the form of Schedule B hereto, to be executed and delivered by the Transferors, the Partnership and the Indemnity Escrow Agent on the Closing Date.

 

“ Independent Auditor ” has the meaning ascribed thereto in Section 2.4(c).

 

“ Interest Rate Option Agreement ” has the meaning ascribed thereto in Section 2.5(k).

 

“ Knowledge of the Partnership ”, or words of similar import, means the actual knowledge, without duty of inquiry, of Michael Barnello, Alfred Young or Hans Weger.

 

“ Knowledge of the Transferors ”, or words of similar import, means the actual knowledge, without duty of inquiry, of Robert French, Gerard Teto, Rick Kleeman, Madison Grose or Patrick Meara.

 

“ Land ” means the interests of the Company under the Master Lease relating to the real property located at 10 Huntington Avenue in Boston, Massachusetts, more particularly described on Schedule A hereto, including all adjacent roadways, rights-of-way and alleys and any other rights appurtenant to any such real property, in each case to the extent the Company, as lessee under the Master Lease, has an interest therein.

 

“ Law ” or “ Laws ” means any applicable federal, state, foreign or local law, statute, ordinance, rule, code, regulation, order, judgment or decree.

 

“ Lien ” means any lien, mortgage, charge, option, security interest, tax lien (other than for Taxes not yet due and payable), pledge, encumbrance, conditional sale or title retention arrangement or any agreement to create or confer any of the foregoing, in each case whether arising by agreement or under any statute or law or otherwise.

 

“ Loan Opinions ” has the meaning ascribed thereto in Section 6.2(h).

 

“ Management Agreement ” means the management agreement dated October 30, 1980 made between Westban Venture, as owner, and Westin Hotel Company, as operator, as amended by the first amendment dated July 15, 1981, the second amendment dated January 1, 1992 and the third amendment dated December 20, 1995, and assigned by the two-tier assignment and assumption of agreements dated December 31, 1997 made between Westin Hotel Company, as assignor, Westin Boston Management Holding Co., as first tier assignee, and Westin

 

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Boston Management Co., as second tier assignee and predecessor-in-interest to the Operator, as assigned by the Assignment and Assumption of Management Agreement, dated as of August 14, 2003, between Westban Venture and the Company, as amended by the fourth amendment thereto, dated as of August 12, 2005.

 

“ Management Agreement Amendment ” means the fourth amendment to the Management Agreement, dated August 12, 2005.

 

“ Master Lease ” means the Lease of Air Rights and Certain Easements dated as of December 22, 1978 by and between the Massachusetts Turnpike Authority, as Landlord and Urban, as Tenant; as amended and restated as of January 31, 1980 and modified by Technical Memoranda dated November 12,1980, December 15, 1980 and May 18, 1981, notice of which is recorded with the Suffolk Registry of Deeds in Book 9804, Page 1 and filed with the Suffolk Registry District of the Land Court as Document No. 356809; the Sublease dated July 15, 1981 by and between Urban, as Landlord, and Westban Venture, as Tenant, notice of which is recorded with said Deeds in Book 9805, Page 129 and filed with said Registry District as Document No. 356834; as affected by a Non-Disturbance, Recognition and Direct Leasing Agreement dated July 15, 1981 by and among the Massachusetts Turnpike Authority, Urban and Westban Venture, recorded with said Deeds in Book 9805, Page 141, and filed with said Registry District as Document No. 356835; as further affected by a Notice of Direct Lease and Reconstitution Agreement dated November 20, 1986 by and among the Massachusetts Turnpike Authority, Urban, Westban Venture and Westin Copley Place Hotel Venture, recorded with said Deeds in Book 13145, Page 295, and filed with said Registry District as Document No. 414687; as assigned by Assignment and Assumption of Ground Lease dated as of August 14, 2003 by and between Westban Venture and the Company, recorded with said Deeds on August 15, 2003 in Book 32456, Page 56, and filed with said Registry District on August 15, 2003 as Document No. 663899.

 

“ Merrill Lynch ” means Merrill Lynch Mortgage Lending, Inc.

 

“ NYSE ” means the New York Stock Exchange.

 

“ Operator ” means Westin North America Management Company, as successor-in-interest to Westin Boston Management Co.

 

“ Ownership Limit Waiver Certification ” has the meaning ascribed in Section 7.5(g).

 

“ Partnership Agreement ” has the meaning ascribed thereto in Section 3.2(a).

 

“ Partnership Indemnified Parties ” has the meaning ascribed thereto in Section 8.1.

 

“ Permitted Exceptions ” has the meaning ascribed thereto in Section 5.1(b).

 

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“ Person ” means any natural person, corporation, limited partnership, limited liability company, limited liability partnership, general partnership, joint stock company, joint venture, real estate investment trust, association, company, trust, bank, trust company, land trust, vehicle trust, business trust or other organization irrespective of whether it is a legal entity, or any government or agency or political subdivision thereof.

 

“ Personal Property ” means, subject to Permitted Exceptions and the rights of third parties under the Master Lease and the Management Agreement, all tangible and intangible personal property now or hereafter located at the Project and used in connection with the operation of the Project, including (i) all building and construction materials, equipment, appliances, machinery and personal property owned by the Company and used in connection with the operation of the Project, (ii) the Consumables, (iii) the Furniture, Fixtures and Equipment, (iv) all permits, licenses, certificates and approvals issued to the Company in connection with the Project, (v) all rights of the Company, the Current Owners and Westban Venture to use the name of the Project and all other names, logos and designs used in connection with the Project, including the Project’s bars, restaurants, banquet rooms and meeting rooms, (vi) the right to use the Project’s telephone numbers and post office boxes, (vii) all booking agreements, (viii) all service marks and trademarks, (ix) all prepaid assets, including prepaid advertising and sales materials, (x) all plans and specifications, operating manuals, guaranties and warranties and any other items used in the operation of the Project, (xi) all books and records pertaining to the Project, including all documents relating to guests at the Project and employees at the Project, and (xii) any vehicles used in the operation of the Project; provided, however, the Personal Property does not include (a) any personal property owned by tenants under the Tenant Leases, (b) any personal property owned by the Operator, (c) any personal property owned by utility companies servicing the Project, (d) any personal property owned by lessors under the Equipment Leases, and (e) tools and equipment used by vendors in providing services under the Service and Supply Contracts.

 

“ Pinnacle ” means Pinnacle Realty Investments.

 

“ Pro-forma Title Policy ” has the meaning ascribed thereto in Section 5.1(b).

 

“ Pro Rata Portion ” means, with respect to a Transferor, the respective percentage set forth opposite the name of such Transferor under the caption “Pro Rata Portion” on Schedule C hereto.

 

“ Project ” means, collectively, the Land, the Personal Property and the Improvements.

 

“ Project Agreements ” means, collectively, the Existing Financing Documents, the Service and Supply Contracts, the Permitted Exceptions, the Tenant Leases, the Equipment Leases and any other lease, rental agreement, loan agreement, loan commitment, mortgage, deed of trust, easement, covenant or agreement affecting the Company’s interest in the Project or any part thereof.

 

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“ Project Material Adverse Change ” or “ Project Material Adverse Effect ” means (i) when used to qualify a representation or warranty of the Transferors contained herein, an adverse change or effect on the business, financial condition or results of operations of the Company and the Project, taken as a whole, which, together with all other breaches of such representation or warranty, would result in costs or damages to the Company, the Project or the Partnership in an amount exceeding one hundred thousand dollars ($100,000) and (ii) as used in the condition to the obligation of the Partnership set forth in Section 5.2(b), an adverse change or effect on the business, financial condition or results of operations of the Company and the Project, taken as a whole, which, when taken with all other Material Adverse Changes or Material Adverse Effects on the Partnership, the Company and the Project, would result in costs or damages to the Partnership, the Company or the Project in an amount exceeding five million dollars ($5,000,000).

 

“ Project Pro Rata Portion ” means, with respect to a Current Owner, the respective percentage set forth opposite the name of such Current Owner under the caption “Project Pro Rata Portion” on Schedule D hereto.

 

“ REA Agreement ” means, collectively, the Easement Agreement made as of February 22, 1982 by and among Urban Investment and Development Co., a Delaware corporation, UIDC of Massachusetts, Inc., a Delaware corporation, Westban Hotel Venture, a Massachusetts general partnership, and Marriott Urban Boston Venture, a Massachusetts general partnership.

 

“ Recipient Units ” has the meaning ascribed thereto in Section 4.2(a).

 

“ Redemption ” has the meaning ascribed thereto in the Recitals to this Agreement.

 

“ Redemption Agreement ” means the redemption agreement, dated as of the date hereof, between Urban and Westban Venture.

 

“ Refinancing Debt ” means the mortgage loan to be incurred by the Company and provided by a third-party unrelated to the Partnership or the REIT prior to the Closing in connection with the Defeasance and the transactions contemplated by the Redemption Agreement.

 

“ Refinancing Documents ” means the loan agreement, promissory note, mortgage and other security and other agreements to be entered into in connection with the Refinancing Debt.

 

“ Registration Rights Agreement ” has the meaning ascribed thereto in Section 7.5(e).

 

“ REIT Class C Preferred Shares ” means the Class C Preferred Shares of beneficial interest, $0.01 par value per share, of the REIT, having the terms set forth on Schedule 7.5(a) issuable in exchange for the Class C Preferred Units in accordance with the terms thereof.

 

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“ REIT Group Material Adverse Change ” or “ REIT Group Material Adverse Effect ” means a material adverse change or effect on the business, financial condition or results of operations of the REIT Group, taken as a whole.

 

“ REIT Group ” means, collectively, the REIT, the Partnership and LaSalle Lessee.

 

“ REIT Reports ” has the meaning ascribed thereto in Section 4.2(b).

 

“ Reorganization Events ” has the meaning ascribed thereto in Section 2.1.

 

“ Restructuring ” has the meaning ascribed thereto in the Recitals to this Agreement.

 

“ SCG Closing Date Consideration ” has the meaning ascribed thereto in Section 2.3(a).

 

“ SEC ” means the Securities and Exchange Commission.

 

“ Section 1445 ” has the meaning ascribed thereto in Section 3.1(u)(i).

 

“ Service and Supply Contracts ” has the meaning ascribed thereto in Section 3.1(l).

 

“ Special Finance Counsel ” has the meaning ascribed thereto in Section 6.2(h).

 

“ Subsequent REIT Reports ” has the meaning ascribed thereto in Section 4.2(b).

 

“ Subsidiary ” means (a) any entity of which the REIT owns directly or indirectly (x) at least a majority of the outstanding capital stock (or other shares of beneficial interest) or (y) at least a majority of the partnership, membership or other similar equity interests; or (b) any entity in which any member of the REIT Group (or other specified entity) is a general partner, including the Partnership.

 

“ Survey ” has the meaning ascribed thereto in Section 5.1(b).

 

“ Taking ” has the meaning ascribed thereto in Section 9.2.

 

“ Tax Protection Agreement ” has the meaning ascribed thereto in Section 7.5(f).

 

“ Tax Return ” means all federal, state, local and foreign income, franchise, sales and other tax returns.

 

“ Taxes ” means all taxes, charges, fees, levies or other assessments, including all net income, gross income, gross receipts, sales, use, service, service use, ad valorem , transfer, franchise, profits, license, lease, withholding, social security, payroll, employment, excise, estimated, severance, stamp, recording, occupation,

 

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real and personal property, gift, windfall profits or other taxes, customs, duties, fees, assessments or charges of any kind whatsoever, whether computed on a separate, consolidated, unitary, combined or other basis, together with any interest, fines, penalties, additions to tax or other additional amounts imposed thereon or with respect thereto imposed by any taxing authority (domestic or foreign).

 

“ Tenant Leases ” has the meaning ascribed thereto in Section 3.1(n).

 

“ Title Commitment ” has the meaning ascribed thereto in Section 5.1(b).

 

“ Title Company ” means First American Title Insurance Company (Chicago office).

 

“ Transaction Agreements ” means, collectively, this Agreement and each other agreement entered into in connection with the implementation of the transactions (other than the Restructuring) contemplated hereby, including the Registration Rights Agreement and the Tax Protection Agreement.

 

“ Transaction Events ” has the meaning ascribed thereto in Section 2.1.

 

“ Transferor Indemnified Parties ” has the meaning ascribed thereto in Section 8.2(a).

 

“ Transferors ” has the meaning ascribed thereto in the first paragraph of this Agreement.

 

“ Transferred Interests ” has the meaning ascribed thereto in the Recitals to this Agreement.

 

“ Urban ” means Urban Investment and Development Co., an Illinois general partnership.

 

“ WCBC Closing Date Consideration ” has the meaning ascribed thereto in Section 2.3(b).

 

“ Westban Venture ” has the meaning ascribed thereto in the Recitals to this Agreement.

 

“ Working Capital ” has the meaning ascribed thereto in Section 2.4(g).

 

“ Working Capital Statements ” has the meaning ascribed thereto in Section 2.5.

 

1.2 Interpretation . For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

 

(a)

the terms defined in this Agreement have the meanings ascribed to them herein and include the plural as well as the singular and the use of any gender herein shall include the other gender;

 

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(b)

the captions used in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define or limit the scope or content of this Agreement or any provision hereof;

 

(c)

the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision;

 

(d)

the term “include” or “including” shall mean without limitation by reason of enumeration and shall not be interpreted restrictively;

 

(e)

each reference to an “Article” of this Agreement shall include all Sections of such Article and, similarly, each reference to a “Section” shall include all subsections of such Section;

 

(f)

unless otherwise expressly provided in this Agreement, all monetary amounts used herein are expressed in US dollars; and

 

(g)

the words “ordinary course of business consistent with past practice” (or words of similar import), when used in respect of the Company, mean and refer to the nature, manner and extent of the business and operations of such entity, as such business and operations have been conducted prior to the date hereof.

 

1.3 Schedules . The following Schedules are attached to and form part of this Agreement:

 

 

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ARTICLE 2. CONTRIBUTION AND REDEMPTION; ADJUSTMENTS; EARNEST MONEY.

 

2.1 Pre-Closing Restructuring . As of the day immediately prior to the consummation of the transactions contemplated by this Agreement, the Transferors shall, subject to the terms and conditions set forth herein and subject to the completion of the Defeasance, the incurrence of the Refinancing Debt and the receipt of the consents and approvals set forth in Schedule 2.1-A hereto, cause the Redemption to occur. Each of the Transferors, the Partnership and the REIT agrees that, subject to the terms and conditions of this Agreement, they will cooperate with, and provide reasonable assistance to, each other with a view to causing each of the events contemplated by the Redemption Agreement to occur prior to the Redemption (the “ Reorganization Events ”) to be completed with legal effect prior to the Closing under the Redemption Agreement. Immediately following the completion of the Reorganization Events, the Redemption will be completed and, on the Closing Date the distribution of the limited liability company interests in the Company held by Westban Venture to SCG and WCBC will occur and, subject to the terms and conditions of this Agreement, the parties shall cause the actions described in steps 1-7 of Schedule 2.1-B, and the other transactions contemplated by this Agreement (the “ Contribution Events ”), to be completed. Each of the Transferors, the Partnership and the REIT further agrees that the consummation of the Reorganization Events, the Redemption and the Contribution Events (collectively, the “Transaction Events”) will be initiated only if the parties are reasonably certain that all of the

 

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conditions to the occurrence of each of them will be satisfied and that it is reasonably likely that such Transaction Events will be consummated. Accordingly, each of the Transferors, the Partnership and the REIT agrees that it will provide to the other parties hereto, on the Closing Date and prior to the release of the documents and funds from escrow, an acknowledgement that all of the conditions to its obligations to consummate the transactions contemplated by this Agreement have been satisfied, and that each of the parties shall be entitled to rely on such acknowledgement. Without limitation of the foregoing, each of the Transferors, the Partnership and the REIT agrees that upon the effectiveness of any one of the Transaction Events hereunder or under the Redemption Agreement (including as set forth in the penultimate paragraph of Section 2.2 of the Redemption Agreement), they will make all commercially reasonable efforts to ensure the completion of all other Transaction Events and will not take any steps to adjourn, delay or interfere with the process in any way.

 

2.2 Acquisition of Interests in the Company by the Partnership. As of the day immediately following completion of the Redemption and the other pre-closing transactions described in Section 2.1, on the Closing Date, the Partnership will acquire from the Transferors ninety-nine percent (99%) of the outstanding Transferred Interests, and LaSalle Lessee will acquire one percent (1%) of the outstanding Transferred Interests from WCBC, through the consummation of the contribution or assignment of the Transferred Interests pursuant to Section 2.3. The aggregate amount to be received by the Transferors on Closing in connection with such transactions (the “ Closing Date Consideration ”) shall be an amount equal to the sum of the following:

 

(a)

$119,086,462.05 being the agreed aggregate equity value of the limited liability company interests in the Company held by the Transferors after giving effect to the Redemption (which agreed net equity value shall not, except as expressly set forth in the penultimate paragraph of this Section 2.2, be subject to adjustment), assuming that the outstanding principal amount of the indebtedness of the Company under the Existing Financing Documents immediately prior to the Defeasance is $78,791,908.24 and without giving effect to the incurrence of the Refinancing Debt or the receipt or the application of the proceeds thereof; and

 

(b)

the Transferors’ aggregate Project Pro Rata Portions of the Estimated Closing Working Capital (which may be negative) shown on the Estimated Working Capital Statement.

 

In the event that the outstanding principal amount of the indebtedness of the Company under the Existing Financing Documents immediately prior to the Defeasance exceeds $78,791,908.24, then the Closing Date Consideration shall be decreased by an amount equal to the Transferors’ aggregate Project Pro Rata Portions of such excess. In the event that the outstanding principal amount of the indebtedness of the Company under the Existing Financing Documents immediately prior to the Defeasance is less than $78,791,908.24, then the Closing Date Consideration shall be increased by an amount equal to the Transferors’ aggregate Project Pro Rata Portions of such shortfall. The amount of any such adjustment to the Closing Date Consideration shall be allocated

 

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between the Transferors in accordance with their respective Pro Rata Portions and shall be in the same form of consideration as set out in Section 2.3 (immediately available funds in the case of WCBC, and Class C Preferred Units in the case of SCG, with the number of such Class C Preferred Units to be calculated by using a value per Class C Preferred Unit of $25.00).

 

The Closing Date Consideration shall be paid in accordance with Section 2.3 and shall, to the extent provided therein, be adjusted in accordance with Sections 2.4, 2.5, 2.6 and 2.7 or as otherwise provided in this Agreement.

 

2.3 Closing Date Transactions and Payment of the Closing Date Consideration . Upon the terms and subject to the conditions of this Agreement, at the Closing the Partnership and LaSalle Lessee, neither of which is a disregarded entity under the Code, shall acquire from the Transferors, and the Transferors shall contribute or assign to the Partnership and LaSalle Lessee (it being understood and agreed that the Transferors will contribute ninety-nine percent (99%) of the Transferred Interests to the Partnership and that WCBC will assign one percent (1%) of the Transferred Interests to LaSalle Lessee), all of such Transferor’s Transferred Interest (i.e., on a collective basis, 100% of the outstanding limited liability company interests in the Company on the Closing Date) in exchange for the delivery of the Closing Date Consideration in the following manner:

 

(a)

to SCG, (i) a number of Class C Preferred Units equal to the result obtained by dividing (A) $58,543,231.02 (the “ SCG Closing Date Consideration ”) by (B) $25.00; and

 

(b)

to WCBC, an amount in cash equal to $60,543,231.03, 98% of which will be paid by the Partnership and 2% of which will be paid by LaSalle Lessee (the “ WCBC Closing Date Consideration ”).

 

The obligation of the Partnership and LaSalle Lessee (it being understood that all references in the remainder of this Article 2 to “the Partnership” shall, where the context requires, also be deemed to include LaSalle Lessee) to proceed with each of the foregoing transactions is subject to the conditions set forth herein, and if the conditions to the obligations of the Partnership to consummate the transactions contemplated hereby shall not have been satisfied, the Partnership shall have the right to terminate this Agreement and obtain a refund of the Earnest Money in addition to any other remedies it may have under the terms of this Agreement; provided, however, that such conditions shall be deemed to have been waived if the failure of such condition to be satisfied results from any act or omission of the Partnership in violation of this Agreement. Without limitation of the foregoing, each of the Transferors, the Partnership and REIT agrees that none of the transactions contemplated by this Agreement (including the contribution and sale of the Transferred Interests) shall be deemed to have occurred unless all such transactions and all of the transactions contemplated by the Redemption Agreement (including the Defeasance, the incurrence of the Refinancing Debt and the Redemption) shall have been consummated.

 

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2.4 Working Capital Adjustments .

 

(a) At least two (2) Business Days prior to the Closing, the Transferors in good faith shall prepare an unaudited estimated consolidated net Working Capital statement of the Company as of the Closing Date (the “ Estimated Working Capital Statement ”) setting forth an estimate of the Working Capital of the Company (the “ Estimated Closing Working Capital ”) as of 12:01 a.m. (Eastern Daylight Time) on the Closing Date (the “ Effective Time ”). The information contained in the Estimated Working Capital Statement shall be prepared in accordance with the principles set out in Sections 2.4(g) and 2.5 and on Schedule 2.5 hereto and shall be based on the books and records of the Company and Westban Venture and other information then available.

 

(b) As promptly as practicable, but in no event later than one hundred eighty (180) days after the Closing, the Partnership will deliver to the Transferors an unaudited consolidated Working Capital statement of the Company as of the Effective Time (the “ Closing Working Capital Statement ”) prepared by the Partnership on a basis consistent with the example calculation of Working Capital attached hereto as Schedule 2.5 and in accordance with the principles set out in Sections 2.4(f) and 2.5 and on Schedule 2.5 hereto, which Closing Working Capital Statement will reflect the Partnership’s determination of the actual Working Capital of the Company as of the Effective Time (the “ Closing Working Capital ”). Notwithstanding anything contained herein to the contrary, in the event that the final amount of real estate taxes that are actually payable in respect of the Project for the period ending at the Effective Time, the amount of rent under a Tenant Lease that is actually payable in respect of the Project for the period ending at the Effective Time or the amount of a specified payment due under the Chilled Water Agreement or the REA Agreement cannot be finally determined as of the date that is 180 days after the Closing, the amounts of such items shall be included on the Closing Working Capital Statement at the same level as the amounts of such items were included on the Estimated Working Capital Statement and when the amounts of such items are capable of finally being determined, the amounts of such items shall be adjusted in accordance with the procedures set forth in this Section 2.4.

 

(c) Following delivery of the Closing Working Capital Statement, the Transferors and their representatives and advisors will be permitted to review all books and records, documents and working papers and will have access to employees of the REIT and the Partnership that are required in connection with their review of the Closing Working Capital Statement. If the Transferors disagree with the Partnership’s determination of the Closing Working Capital, the Transferors shall notify the Partnership in writing of such disagreement (such notice setting forth the basis for such disagreement in reasonable detail) within fifteen (15) Business Days after receipt of the Closing Working Capital Statement and the Transferors and the Partnership thereafter shall negotiate in good faith to resolve any such disagreement. If the Transferors do not notify the Partnership of any such disagreement within such fifteen (15) Business Day period the Transferors shall be deemed to have waived any right to object to the Closing Working Capital Statement. If the Transferors and the Partnership are unable to resolve any such disagreement within thirty (30) days after the Partnership delivers the Closing Working Capital Statement to the Transferors, the Transferors and the Partnership shall submit the dispute to a “Big

 

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Four” public accounting firm jointly selected by the Transferors and the Partnership (the “ Independent Auditor ”) for resolution. If the Transferors and the Partnership are unable to agree upon an Independent Auditor, the Independent Auditor shall be selected by lot from the “Big Four” accounting firms (but excluding any firm which has previously audited the Westban Venture’s or the Partnership’s or the REIT’s financial statements). The Independent Auditor selected under this Section 2.4(c) shall also be the “Independent Auditor” selected under Section 2.3(c) of the Redemption Agreement.

 

(d) The Transferors and the Partnership shall use all reasonable efforts to cause the Independent Auditor to resolve all disagreements over the Closing Working Capital as soon as practicable, but in any event within 60 days after submission of the dispute to the Independent Auditor. The resolution of such disagreements and the determination of Closing Working Capital by the Independent Auditor shall be final and binding on the Transferors and the Partnership.

 

(e) The Independent Auditor will determine the allocation of its costs and expenses in determining the Closing Working Capital based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. For example, if the Transferors claim the Closing Working Capital is $500 greater than the amount determined by the Partnership in the Closing Working Capital Statement, and if the Independent Auditor ultimately resolves the dispute by awarding the Partnership $300 of the $500 contested, then the costs and expenses of arbitration will be allocated 30.12% (i.e., the product of (i) the Transferors’ aggregate Project Pro Rata Portions and (ii) 300 divided by 500) to the Transferors and 20.08% (i.e., the Product of (i) the Transferors’ aggregate Project Pro Rata Portions and (ii) 200 divided by 500) to the Partnership.

 

(f) If the Closing Working Capital (as finally determined pursuant to this Section 2.4) is greater than the Estimated Closing Working Capital, the Partnership shall, within three (3) Business Days after the Closing Working Capital is finally determined pursuant to this Section 2.4, pay to each of the Transferors, in the same form of consideration as set out in Section 2.3 (immediately available funds, in the case of WCBC, or Class C Preferred Units in the case of SCG, with the number of such Class C Preferred Units to be calculated by using a value per Class C Preferred Unit of $25.00) (such form of consideration for each of WCBC and SCG being the “ Agreed Form of Consideration ”), such Transferor’s Project Pro Rata Portion of the difference between the Closing Working Capital and the Estimated Closing Working Capital. If the Closing Working Capital is less than the Estimated Closing Working Capital, each of the Transferors shall, within three (3) Business Days after the Closing Working Capital is finally determined pursuant to this Section 2.4, pay to the Partnership, in the Agreed Form of Consideration, an amount equal to such Transferor’s Project Pro Rata Portion of the difference between the Closing Working Capital and the Estimated Closing Working Capital.

 

(g) For purposes of this Section 2.4, the following terms have the meanings set forth below:

 

(i)

“ Current Assets ” means, without duplication, all current assets of the Company determined in accordance with the principles set out in Section 2.5 and Schedule 2.5.

 

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(ii)

“ Current Liabilities ” means, without duplication, all current liabilities of the Company determined in accordance with the principles set out in Section 2.5 and Schedule 2.5 excluding any reserves for contingent liabilities relating to litigation matters.

 

(iii)

“ Working Capital ” means Current Assets minus Current Liabilities.

 

(h) Any adjustment paid pursuant to this Section 2.4 shall be treated by all of the parties as an adjustment to the Closing Date Consideration for all purposes.

 

(i) The Estimated Closing Working Capital and the Closing Working Capital used for purposes of this Section 2.4 shall, for all purposes, be the same as the “Estimated Closing Working Capital” and “Closing Working Capital” that are used for purposes of Section 2.3 of the Redemption Agreement. Without limitation of the foregoing, (i) a disagreement with respect to the “Closing Working Capital” under this Agreement shall also constitute a disagreement with respect to the “Closing Working Capital” under the Redemption Agreement, a disagreement with respect to the “Closing Working Capital” under the Redemption Agreement shall also constitute a disagreement with respect to the Closing Working Capital under this Agreement, and disagreements with respect to the Closing Working Capital shall be resolved in the same manner, and in the same amount, under both this Agreement and the Redemption Agreement; (ii) the Partnership agrees to take, and to cause the Company to take, identical positions and actions, including actions with respect to settlement of any contested amount, under each of this Agreement and the Redemption Agreement with respect to the calculation of Closing Working Capital; and (iii) the Transferors agree to take identical positions and actions, including actions with respect to settlement of any contested amount, under this Agreement with respect to the calculation of Closing Working Capital as Urban takes under the Redemption Agreement with respect to the calculation of Closing Working Capital.

 

(j) Notwithstanding anything to the contrary contained herein but without duplication of any other adjustment to the amounts paid to the Transferors hereunder, (i) if the amount of the incentive management fee for the year-to-date period ended at the Effective Time included in the Closing Working Capital Statement exceeds the amount of such incentive fee for such period finally determined to be actually payable to the Operator under the Management Agreement, the Partnership shall, within fifteen days of such determination, pay to each of the Transferors an amount equal to such Transferor’s Project Pro Rata Portion of such excess and (ii) if the amount of the incentive management fee for the year-to-date period ended on the Closing Date included in the Closing Working Capital Statement is less than the amount of such incentive fee for such period finally determined to be actually payable to the Operator under the Management Agreement, each of the Transferors shall, within fifteen days of such determination, pay to the Partnership an amount equal to such Transferor’s Project Pro Rata Portion of such shortfall. The amount of any payment made to a Transferor pursuant to this Section 2.4(j) shall be in the Agreed Form of Consideration.

 

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2.5 Principles for Preparation of Working Capital Statements . The Estimated Working Capital Statement and the Closing Working Capital Statement (collectively, the “ Working Capital Statements ”) shall each be prepared as at the Effective Time and each component of such Working Capital Statements described in this Section 2.5 shall be reflected in accordance with the following principles and in accordance with Schedule 2.5 (and the calculation of each such item shall be made without duplication of any other item):

 

(a)

Cash . The Working Capital Statements shall record all petty cash funds at the Project, all cash in any operating or other accounts of the Project (including any accounts of, or held by, the Operator in respect of the Project) and the Company at the Effective Time (collectively, the “ Closing Cash ”). All Closing Cash shall, except as otherwise provided herein, constitute a Current Asset for purposes of calculating Working Capital hereunder. The Partnership and the Transferors shall make reasonable mutually satisfactory arrangements for counting such cash and determining the balances in the operating accounts as of the Effective Time. The Working Capital Statements shall also record the following adjustments to such Closing Cash to the extent required:

 

(i)

the Closing Cash shall only take account of one-half (  1 / 2 ) of the revenue from hotel rooms and parking at the Project for the night preceding the Closing;

 

(ii)

the Closing Cash shall be decreased by the amount of any outstanding tenant improvement obligations, outstanding leasing commissions or other outstanding landlord expenses in connection with any Tenant Leases as of the Effective Time, to the extent such amount is not included as a Current Liability; provided, however, that any outstanding tenant improvement obligations, leasing commissions or other outstanding landlord expenses in connection with (A) any Tenant Leases that are approved by the Partnership and entered into after the date of this Agreement or (B) the renewal or extension at the option of the tenant under a Tenant Lease which are payable pursuant to the terms of a Tenant Lease or any commission agreement that is listed on a Schedule to this Agreement shall be for the account of the Partnership and shall not decrease Closing Cash or constitute a Current Liability; and

 

(iii)

Closing Cash shall include all escrows held under the Existing Financing Documents immediately prior to the Defeasance and the Partnership shall be entitled to receive, directly or indirectly, all such escrows.

 

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(b)

Accounts Receivable . The Working Capital Statements shall include, as a Current Asset, the amount of 98% of all accounts receivable of the Company that have been outstanding for fewer than sixty (60) days as of the Effective Time (excluding any overdue payments from tenants under the Tenant Leases, which shall be paid to the Transferors as collected, it being understood and agreed that any payments received from a tenant under a Tenant Lease in respect of which there is an overdue payment as of the Effective Time shall be applied to the invoice attached to, or to the invoice or period referred to in, such payment, or if no such invoice or period is so attached or referred to, such payments will be applied to the amounts outstanding in respect of the period prior to the Effective Time and to amounts outstanding in respect of the period after the Effective Time in the respective pro rata portions of such outstanding amounts). The Closing Date Consideration shall be subject to adjustment in respect of accounts receivable of the Company as provided in Section 2.6 hereof.

 

(c)

Accounts Payable . The Working Capital Statements shall reflect a Current Liability at Closing for all accounts payable of the Company which have accrued prior to the Effective Time with respect to purchases of goods and services delivered prior to the Effective Time but not with respect to purchases of goods or services to be delivered on or after the Effective Time. Accounts payable shall mean the following items, in each case to the extent incurred by or for the benefit of the Company or the Project: (i) open accounts payable to trade vendors or suppliers of the Project’s hotel, restaurants, bars or similar facilities, (ii) amounts payable under any Service and Supply Contracts and Equipment Leases, (iii) amounts payable in respect of real estate taxes and utility charges (including charges for steam, water, electricity, gas and oil relating to the Project), and (iv) management fees payable under the Management Agreement, including any incentive management fees.

 

(d)

Employee Expenses . The Working Capital Statement shall reflect a Current Liability for any accrued and unpaid sick, personal and vacation days of the Company’s employees or for such obligations with respect to employees of the Operator for which the owner of the Project is responsible which have accrued prior to the Effective Time and any unfunded or underfunded pension obligations with respect to the Company’s employees or for such obligations with respect to employees of the Operator for which the owner of the Project is responsible which have accrued prior to the Effective Time.

 

(e)

No Duplication . All calculations of Estimated Closing Working Capital and Closing Working Capital shall be made without duplication of any item. For example, if an item is included as a Current Liability on a Working Capital Statement, such item shall not also be reduced from, or otherwise reduce, the amount of cash reflected on such Working Capital Statement. In no event shall any accounts payable in respect of goods or

 

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services to be delivered on or after the Effective Time constitute a Current Liability or a deduction to Current Assets unless any such payment is made to restore aggregate levels of Consumables or FF&E to within the range of the historical aggregate levels at which Consumables or FF&E have been maintained (as evidenced by the Operator’s books and records).

 

(f)

Exclusion of Debt Under Existing Financing Documents, Refinancing Debt and Defeasance. Each of the Estimated Closing Working Capital and the Closing Working Capital shall be prepared as of the time immediately before the consummation of, and without giving effect to, the transactions contemplated by this Agreement and the Redemption Agreement, including the Restructuring, the incurrence of the Refinancing Debt, the Defeasance and the Redemption. Accordingly, the indebtedness outstanding under the Existing Financing Documents, the Defeasance (including all costs incurred in connection therewith) and the incurrence of the Refinancing Debt, including any liabilities relating to the Defeasance or liabilities and escrows relating to the Refinancing Debt, and the receipt and application of the proceeds therefrom and the Redemption and all payments (whether or not the source of such payment is the Refinancing Debt) made to Urban in connection therewith shall be ignored and excluded for all purposes of calculating the Estimated Closing Working Capital and Closing Working Capital. Without limitation of the foregoing, in the event the proceeds of the Refinancing Debt are insufficient to pay in full the Defeasance, the costs relating to the incurrence of the Refinancing Debt and the payment of all amounts to be paid to Urban (including any amounts in respect of the Estimated Closing Working Capital) under the Redemption Agreement on the closing of the transactions contemplated by the Redemption Agreement, part of the Current Assets may be used to pay any such amounts, but no reduction in the amount of the Estimated Closing Working Capital or Closing Working Capital shall be made in respect of such payment. Except as set forth in the immediately preceding sentence, there shall be no distribution of Working Capital of the Company to the members of the Company during the period beginning as of the time as of which the Estimated Working Capital Statement is prepared and ending at the Closing, and in no event shall any amount included as a Current Asset on a Working Capital Statement be used to pay any expenses for which the Transferors are responsible pursuant to Section 7.6.

 

(g)

Brokerage Commission . The brokerage commission payable to Pinnacle in connection with the transactions contemplated by this Agreement shall constitute a Current Liability for purposes of the Estimated Closing Working Capital and the Closing Working Capital.

 

(h)

Certain Cancellations . Estimated Closing Working Capital and Closing Working Capital shall be reduced by any amounts received by the Operator or the Company prior to the Effective Time in respect of cancellations of room nights booked for nights on and after the Closing Date or other events booked for the Closing Date or thereafter.

 

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(i)

Capital Expenditures . If the capital expenditure projects listed on Schedule 2.5(i) are not completed and paid for prior to the Effective Time, the amount required to complete and pay for such projects shall constitute a Current Liability for purposes of the Estimated Closing Working Capital and the Closing Working Capital.

 

(j)

Starwood Marketing Adjustment . Estimated Closing Working Capital and Closing Working Capital shall be increased by an amount equal to 0.4% of the revenues for the Project during the period beginning on January 1, 2005 and ending on the Closing Date to the extent that the Operator has not already paid any such amount to the Company prior to the Closing Date.

 

(k)

Interest Rate Option Agreement . If, as of the Closing Date, the interest rate option agreement, dated August 3, 2005, purchased by the Company in connection with the transactions contemplated by this Agreement (the “ Interest Rate Option Agreement ”) affects the interest rate that would otherwise be payable on the Refinancing Debt, the Estimated Closing Working Capital and Closing Working capital shall be increased by an amount equal to $19,000. The Transferors agree that they will not permit the Company to amend, modify or terminate the Interest Rate Option Agreement without the prior consent of the Partnership prior to the Closing Date.

 

2.6 Adjustment for Accounts Receivable .

 

(a) On the date that is one hundred eighty (180) days after the Closing Date, the Partnership shall deliver to the Transferors a statement, dated as of such date (the “ Accounts Receivable Statement ”), setting forth, with respect to each account receivable included in the calculation of the Closing Working Capital, the amount of such account receivable that has been collected as of the date of the Accounts Receivable Statement (the “ Collected Accounts ”). In the event that the Transferors disagree with the Accounts Receivable Statement, the dispute resolution provisions of Section 2.4 relating to the Closing Working Capital Statement shall apply to the resolution of any disputes regarding the Accounts Receivable Statement.

 

(b) If the amount of the Collected Accounts (as finally determined pursuant to this Section 2.6) is greater than the credit for accounts receivable made in connection with the calculation of Working Capital (i.e., 98% of such accounts receivable), then the Partnership shall pay to each of the Transferors an amount equal to such Transferor’s Project Pro Rata Portion of the amount of such excess. If the amount of the Collected Accounts (as finally determined pursuant to this Section 2.6) is less than the credit for accounts receivable made in connection with the calculation of Working Capital (i.e., 98% of such accounts receivable), then each of the Transferors shall pay to the

 

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Partnership an amount equal to such Transferor’s Project Pro Rata Portion of the amount of such shortfall. The amount of any such payments made pursuant to this Section 2.6 shall be in the Agreed Form of Consideration.

 

(c) The Partnership shall instruct the Operator to use commercially reasonable efforts (with no obligation to sue) in accordance with the Operator’s past practice to collect any overdue payments from tenants under Tenant Leases and from accounts receivable that have been outstanding for sixty (60) days or more as of the Effective Time (which accounts receivable shall not constitute Current Assets) and any “attrition income” or cancellation fees payable in respect of any shortfalls against guaranteed bookings relating to nights preceding the Effective Time (it being understood and agreed that no amount of such “attrition income” or cancellation fees shall be included as a Current Asset on any Working Capital Statement) and remit such payments to the Transferors promptly upon receipt thereof.

 

(d) Without limitation of the foregoing, the Partnership will instruct the Operator to use commercially reasonable efforts in accordance with the Operator’s past practice (with no obligation to sue) to collect any amounts owing under any accounts receivable that remain unpaid as of the date of the Accounts Receivable Statement, and remit such amounts to the Transferors in their Pro Rata Portions promptly upon receipt thereof.

 

(e) No adjustment pursuant to this Section 2.6 of any amounts payable under this Agreement shall duplicate any adjustment made pursuant to any other Section of this Agreement.

 

(f) Any adjustment paid pursuant to this Section 2.6 shall be treated by all of the parties as an adjustment to the Closing Date Consideration for all purposes.

 

2.7 Earnest Money .

 

(a) Within two (2) Business Days after the execution of this Agreement, the Partnership shall deposit $5,000,000 (the “ Earnest Money ”) with the Title Company. The Earnest Money shall be held by the Title Company in accordance with the terms hereof and in accordance with the terms of the Earnest Money Escrow Agreement.

 

(b) If this Agreement is terminated due to the Partnership’s, the REIT’s or LaSalle Lessee’s default hereunder, the Earnest Money, together with all accrued interest thereon, shall be paid to the Company, as liquidated damages and as the Transferors’ sole and exclusive remedy. If the Closing occurs hereunder, the Earnest Money, together with all accrued interest thereon, shall be paid to WCBC and credited against the WCBC Closing Date Consideration. If the Closing does not occur hereunder or if the Redemption does not occur under the Redemption Agreement for any reason other than the Partnership’s or the REIT’s default hereunder, the Earnest Money, together with all accrued interest thereon, shall be refunded to the Partnership as liquidated damages, such remedy shall be the sole and exclusive remedy of the Partnership, the REIT and LaSalle Lessee unless the Closing has not occurred solely as a result of a default by the Transferors or the Redemption under the Redemption Agreement has not occurred solely as a result of a

 

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default by a party thereto, in each of which case the Partnership shall have the right, at its option, either (i) to seek specific performance of this Agreement in a judicial proceeding (it being understood and agreed, however, that (A) specific performance may not be effected under either this Agreement or the Redemption Agreement unless specific performance is effected under both this Agreement and the Redemption Agreement and (B) that the remedy of specific performance under this Agreement and the Redemption Agreement may be granted only if the Defeasance and the incurrence of the Refinancing Debt are effected on the terms and in the manner contemplated by this Agreement and the Redemption Agreement), or (ii) to receive a refund of the Earnest Money, together with all interest thereon, and to require the Transferors to reimburse the Partnership, in their respective Pro Rata Portions, for up to $500,000 of its out-of-pocket expenses incurred in connection with the transactions contemplated hereby; (it being understood and agreed that any such selected remedy specified in clause (i) or (ii) shall constitute liquidated damages and be the sole and exclusive remedy of the Partnership, REIT and LaSalle Lessee).

 

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE TRANSFERORS .

 

3.1 General Representations and Warranties . Each Transferor hereby represents and warrants to the Partnership and the REIT as of the date hereof and as of the Closing as follows (all of which representations and warranties shall be deemed automatically remade as of the Closing), it being understood and agreed that each Transferor makes the representations and warranties contained in Sections 3.1(a), (b), (c), (q) and (u) as to itself only and that the inclusion of any item on any Schedule qualifying any of the representations and warranties shall not constitute an admission that such item is material or would result in a Project Material Adverse Effect:

 

(a)

Due Organization . Such Transferor is duly organized as a corporation or limited liability company, as applicable, and validly existing under the laws of its jurisdiction of incorporation or formation, as applicable. Such Transferor has full power and authority, and is duly authorized, to execute, enter into, deliver and perform this Agreement and its obligations hereunder.

 

(b)

Power . This Agreement and all other agreements, instruments and documents required to be executed or delivered by such Transferor pursuant hereto have been or (if and when executed) will be duly executed and delivered by such Transferor, and are or will be legal, valid and binding obligations of such Transferor. Except as set forth on Schedule 3.1(b), no consents and permissions are required to be obtained by such Transferor for the execution and performance of this Agreement and the other documents to be executed by such Transferor hereunder. Except as set forth on Schedule 3.1(b), the consummation of the transactions contemplated herein and the fulfillment of the terms hereof will not result in a breach of any of the terms or provisions of, or constitute a default under, any agreement or document to which such Transferor is a party or

 

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by which it is bound, or any order, rule or regulation of any court or of any Governmental Authority having jurisdiction over such Transferor, the Company or the Project.

 

(c)

Title . On the Closing Date, such Transferor will own good and marketable, legal and beneficial, title in and to its Transferred Interest which as of the Closing Date will be held free of any Liens, other than any Liens restricting transfer of the Transferred Interest that might arise out of the indebtedness under the Existing Financing Documents or under the Refinancing Debt.

 

(d)

Interests . On the Closing Date, the Transferred Interests will constitute all of the issued and outstanding limited liability company interests in the Company. Immediately prior to the Redemption, the Westban Venture will own all of the outstanding interest in the Company.

 

(e)

Corporate Existence . The Company is a limited liability company duly formed and in good standing under the laws of the State of Delaware, with the power and authority to own its properties and to conduct its business as conducted on the Closing Date.

 

(f)

Operating Statements . The Transferors have provided to the Partnership copies of each of the monthly unaudited operating statements relating to the Project for calendar year 2005 that have been delivered to the Transferors by the Operator prior to the date hereof. To the Knowledge of the Transferors, each of such operating statements has been prepared in accordance with the terms of the Management Agreement.

 

(g)

Condition of Project . Except as disclosed in the engineering reports listed on Schedule 3.1(g) or in any engineering reports obtained by the Partnership or any potential lender of the Refinancing Debt, the Transferors have not received any unsatisfied requirements for repairs, restorations or improvements with respect to the Project pursuant to the Existing Financing Documents, from any insurer of the Project (or any part thereof), from any tenant under a Tenant Lease or from any Governmental Authority, the failure of which to satisfy could reasonably be expected to have a Project Material Adverse Effect.

 

(h)

Permits and Legal Compliance . To the Knowledge of the Transferors, except as set forth on Schedule 3.1(h), the Company, the Operator or their respective Affiliates have all licenses, permits and certificates necessary for the use, occupancy and operation of the Project as currently conducted, including all certificates of occupancy and hotel, restaurant and liquor licenses, except where the failure to have any such licenses, permits or certificates could not reasonably be expected to have a Project Material Adverse Effect. To the Knowledge of the Transferors, the Project, including the use thereof, substantially complies with all material Project

 

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Agreements and all applicable laws, rules and regulations having the force of law, except for such non-compliance as could not reasonably be expected to have a Project Material Adverse Effect.

 

(i)

No Proceedings . There is not now pending or, to the Knowledge of the Transferors, threatened, any action, suit or proceeding before any court or governmental agency or body against the Project, the Company or the Transferors except as set forth in Schedule 3.1(i).

 

(j)

Eminent Domain . There are no pending or, to the Knowledge of the Transferors, threatened condemnation, eminent domain or similar proceedings relating to the Project or any portion thereof or any interest (whether legal, beneficial or otherwise) or estate therein.

 

(k)

Taxes . There are, to the Knowledge of the Transferors, no pending or threatened reassessments or special tax assessments against the Project, and the Project is separately assessed for real estate tax purposes.

 

(l)

Service and Supply Contracts . Attached hereto as Schedule 3.1(l) is a list of all contracts or agreements to which the Company (acting on its own) or, to the Knowledge of the Transferors, the Operator or the Company (where the Operator has acted as agent for the Company), is a party for the providing of services or supplies solely to, or management solely of, the Project, including all amendments and modifications thereto and assignments thereof (which contracts and agreements, together with the contracts and agreements entered into with respect to the Project after the date hereof with the consent of the Partnership pursuant to Article 6 below, are herein referred to collectively as the “ Service and Supply Contracts ”). The Transferors have delivered to the Partnership true and correct copies of the Service and Supply Contracts. Except as may be shown in Schedule 3.1(l), all of the Service and Supply Contracts are, to the Knowledge of the Transferors, in full force and effect and, to the Knowledge of the Transferors, there is no default under any of the Service and Supply Contracts which could reasonably be expected to have a Project Material Adverse Effect.

 

(m)

Equipment Leases . Attached hereto as Schedule 3.1(m) is a list of all equipment leases to which the Company (acting on its own) or, to the Knowledge of the Transferors, the Operator or the Company (where the Operator has acted as agent for the Company) is a party for the leasing of equipment solely for the Project, including a list of all amendments and modifications thereto and assignments thereof (which leases, together with the equipment leases entered into with respect to the Project after the date hereof pursuant to Article 6 below, are herein referred to collectively as the “ Equipment Leases ”). The Transferors have delivered to the Partnership true and correct copies of the Equipment Leases. Except as may be shown on Schedule 3.1(m), all of the Equipment Leases are, to the

 

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Knowledge of the Transferors, in full force and effect and, to the Knowledge of the Transferors, there is no existing default under the Equipment Leases which could reasonably be expected to have a Project Material Adverse Effect.

 

(n)

Tenant Leases . Attached hereto as Schedule 3.1(n) is a list of all outstanding leases or agreements to which the Company (acting on its own) or, to the Knowledge of the Transferors, the Operator or the Company (where the Operator has acted as agent for the Company) is a party, pursuant to which any person occupies, or has the right to occupy, space in the Project, other than subleases or agreements of lessees to which the Company is not a party and other than the rights of transient guests in connection with any hotel room or convention/meeting space booking or reservation, including all amendments and modifications thereto and assignments and guaranties thereof (which leases, agreements and other documents, together with the lease documents entered into after the date hereof with the consent of the Purchaser pursuant to Article 6 are referred to collectively as the “ Tenant Leases ”). The Transferors have delivered to the Partnership true and correct copies of the Tenant Leases. Except as shown on Schedule 3.1(n) or as set forth in the Tenant Leases or in any commission agreements listed on a Schedule to this Agreement, to the Knowledge of the Transferors: (a) the Tenant Leases are in full force and effect and there are no defaults under the Tenant Leases which could reasonably be expected to have a Project Material Adverse Effect; (b) there are no security deposits nor any rights to refunds of rents previously paid under the Tenant Leases, and all rents due to date have been paid on the Tenant Leases; (c) there are no brokerage commissions or fees due now or payable in the future in connection with the Tenant Leases (other than any Tenant Leases that are approved by the Partnership in accordance with the terms hereof); (d) all of the landlord’s concessions under the Tenant Leases (other than any Tenant Leases that are approved by the Partnership in accordance with the terms hereof) have been paid and performed in full (other than any unexpired rent abatement set forth in the Tenant Leases); and (e) no tenant currently in possession has notified the Transferors of any material, uncured defect or alleged defects in its premises or the common areas of the Project which remains uncured. In the event any such notices are received by the Company between the date of this Agreement and Closing, copies thereof shall be furnished to the Partnership.

 

(o)

Labor Contracts . To the Knowledge of the Transferors, attached hereto as Schedule 3.1(o) is a list of all employment contracts and collective bargaining contracts with respect to personnel employed by the Company. There are no unfair labor proceedings or strikes pending or, to the Knowledge of the Transferors, threatened with respect to the Project.

 

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(p)

Hazardous Wastes . To the Knowledge of the Transferors, except as set forth on any environmental study or report set forth on Schedule 3.1(p) or obtained by the Partnership or any potential lender of the Refinancing Debt, the Project is free of asbestos, PCBs, toxic wastes and other hazardous materials in amounts that exceed the maximum amounts permitted by Law or that are not in substantial compliance with all applicable environmental Laws, except for any such non-compliance as could not reasonably be expected to have a Project Material Adverse Effect. For purposes of this paragraph, “toxic wastes and other hazardous materials” shall include any hazardous, toxic or dangerous waste, substance or material defined as such in (or for purposes of) the Comprehensive Environmental Response, Compensation, and Liability Act, and so-called “Superfund” or “Superlien” law, or any Law regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect.

 

(q)

ERISA . Such Transferor is not and is not acting on behalf of an “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”) that is subject to ERISA, a “plan” within the meaning of Section 4975 of the Code or an entity deemed to hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of any such employee benefit plan or plans subject to ERISA.

 

(r)

Management Agreement . The Management Agreement is in full force and effect and, except as contemplated by the definition thereof, has not been amended. The Transferors have previously delivered to the Partnership a true, correct and complete copy of the Management Agreement. To the Knowledge of the Transferors, there are no defaults under the Management Agreement that could reasonably be expected to have a Project Material Adverse Effect. Attached as Schedule 3.1(r) is a true and correct copy of an estoppel from the Operator relating to the Management Agreement.

 

(s)

Master Lease . The Master Lease is in full force and effect and, except as contemplated by the definition thereof, has not been amended. The Transferors have previously delivered to the Partnership a true, correct and complete copy of the Master Lease. Since August 31, 2003, the Company had not received, and to the Knowledge of the Transferors, prior to August 31, 2003, the Company did not receive, any notices from the lessor under the Master Lease alleging any defaults, claims, set-offs or defenses under the Master Lease that have not been cured or resolved. Except as set forth on Schedule 3.1(s), there are no material uncured defaults, claims, set-offs or defenses under, or events which, with the giving of notice or the passage of time or both could reasonably be expected to become material defaults under, the Master Lease.

 

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(t)

Existing Financing Documents . Attached hereto as Schedule 3.1(t) is a complete list of the Existing Financing Documents, including all amendments and modifications thereto. The Existing Financing Documents are in full force and effect. As of the date hereof, there is