Exhibit 10.3

AGREEMENT OF PURCHASE AND SALE

by and between

NEW RANCHO, L.L.C.

a Delaware limited liability company

“Seller”

and

KSL RLP HOLDINGS, LLC

a Delaware limited liability company

“Purchaser”

for

MARRIOTT RANCHO LAS PALMAS RESORT & SPA

“Resort”

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

          Page

1.

   AGREEMENT OF PURCHASE AND SALE    1

2.

   PURCHASE PRICE    4

3.

   PURCHASER’S INSPECTION RIGHTS / CONTINGENCY PERIOD    5

4.

   TITLE    7

5.

   CLOSING    9

6.

   TRANSITION MANAGEMENT    11

7.

   SELLER’S CLOSING DOCUMENTS    11

8.

   PURCHASER’S CLOSING ITEMS    12

9.

   CONDITIONS PRECEDENT TO CLOSING    13

10.

   PRORATIONS, CLOSING ADJUSTMENTS AND POST CLOSING SETTLEMENT    15

11.

   AS-IS PURCHASE    19

12.

   SELLER’S REPRESENTATIONS AND WARRANTIES    22

13.

   PURCHASER’S REPRESENTATIONS AND WARRANTIES    28

14.

   COVENANTS OF SELLER AND PURCHASER    29

15.

   LOSS BY FIRE, OTHER CASUALTY OR CONDEMNATION    34

16.

   DEFAULT; TERMINATION    36

17.

   MISCELLANEOUS    38

 

-i-

--------------------------------------------------------------------------------

EXHIBIT & SCHEDULE LIST

 

Exhibit A    Legal Description Exhibit B    Assignment and Assumption of
Contracts Exhibit C    Title Commitment Exhibit D    Deed Exhibit E    Bill of
Sale Exhibit F    Assignment of Intangible Property Exhibit G    Non-Foreign
Affidavit Exhibit H    Scope of Work Exhibit I    Owner’s Declaration Exhibit J
   HOA Estoppel

 

Schedule 1(a)(vi)    Contracts Schedule 1(b)    Excluded Assets
Schedule 11(a)(viii)    Pending Property Tax Appeals Schedule 11(a)(ix)   
Insurance Schedule 11(a)(x)    Condemnation Proceedings Schedule 11(a)(xi)   
Actions or Proceedings

 

-ii-

--------------------------------------------------------------------------------

SUMMARY OF BASIC PURCHASE AND SALE TERMS

This Summary is hereby incorporated into and made a part of the attached
Agreement of Purchase and Sale (this Summary and the Agreement of Purchase and
Sale to be known collectively as this “Agreement”). Each reference in the
Agreement of Purchase and Sale to any term of this Summary shall have the
meaning as set forth in this Summary for such term. In the event of a conflict
between the terms of this Summary and the Agreement of Purchase and Sale, the
terms of this Summary shall prevail.

 

Effective Date

   May 7, 2006

Seller

   New Rancho, L.L.C., a Delaware limited liability company

Purchaser

   KSL RLP Holdings, LLC, a Delaware limited liability company

Resort

   Marriott’s Rancho Las Palmas Resort & Spa, as more particularly described on
Exhibit A, attached hereto

Purchase Price

   Fifty Six Million Dollars ($56,000,000)

Deposit

   Three Million Five Hundred Thousand Dollars ($3,500,000)

Due Diligence Date

   N/A

Closing Date

   July 14, 2006

Existing Management Agreement

   The Management Agreement between SHC Rancho, L.L.C., and Marriott Hotel
Services, Inc., dated January 22, 1998, as amended

Title Company

   Fidelity National Title Company of California

Escrow Holder

   Fidelity National Title Escrow

Cut-Off Time

   12:01 a.m. Central Daylight Time on the Closing Date

Seller’s Address

  

Strategic Hotels & Resorts, Inc.

77 West Wacker Drive

Suite 4600

Chicago, Il 60606

Telephone No.: 312.658.5000

Facsimile No.: 312.658.5797

Attention: Laurence S. Geller,

Chief Executive Officer

  

With copies to:

Paul Hastings, Janofsky & Walker, LLP

515 South Flower Street, 26th Floor

Los Angeles, CA 90017

Telephone No.: 213.683.6261

Facsimile No.: 213.996.3261

Attention: Rick S. Kirkbride

 

Initial Here:  

 

  

 

 

 

  

 

  Seller    Purchaser

--------------------------------------------------------------------------------

Purchaser’s Address   

KSL Capital Partners, LLC

50-905 Avenido Bermudas

La Quinta, CA 92253

Telephone No.: 760-564-8039

Facsimile No.: 760-564-8005

Attention: Steven S. Siegel,

        Chief Operating Officer

  

With copies to:

Brownstein Hyatt & Farber, P.C.

410 17th Street

Denver, CO 80202

Telephone No.: 303-223-1167

Facsimile: No. 303-223-1111

Attention: Bruce James

 

Initial Here:  

 

  

 

 

 

  

 

  Seller    Purchaser

 

-2-

--------------------------------------------------------------------------------

AGREEMENT OF PURCHASE AND SALE

This Agreement of Purchase and Sale (this “Agreement”) is entered into as of the
Effective Date, by and between Seller and Purchaser.

RECITALS:

A. Seller is the current owner of the hotel and resort currently known as
“Marriott’s Rancho Las Palmas Resort and Spa,” consisting of guest rooms, a
ballroom and restaurant facilities (collectively, the “Hotel”), golf courses,
pools, country club facilities, tennis courts, and other facilities and
amenities associated therewith (collectively, together with the Hotel, the
“Resort”); and

B. Purchaser desires to purchase, and Seller desires to sell, convey, assign and
transfer to Purchaser, all of Seller’s rights, title and interests in and to the
assets, tangible and intangible, real and personal, constituting the Resort
excluding the Excluded Assets (defined below).

NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by both parties, Seller and Purchaser hereby agree as follows:

1. Agreement of Purchase and Sale. At the Closing, Seller and Purchaser agree to
simultaneously effect and consummate all of the following interdependent
transactions:

(a) Purchase and Sale of the Property. Subject to and upon the terms and
conditions herein, Seller hereby agrees to sell, convey, assign and transfer to
Purchaser, without representation or warranty of any kind, and without recourse,
except as otherwise expressly set forth in this Agreement, and Purchaser hereby
agrees to purchase from Seller, all of Seller’s and, if applicable, any of its
affiliate’s, if any, right, title and interest, if any, in the Resort, including
without limitation:

(i) All of Seller’s and, if applicable, any of its affiliate’s, if any, right,
title and interest, if any, in that certain real property, more particularly
described in Exhibit A attached hereto (the “Land”);

(ii) All of Seller’s and, if applicable, any of its affiliate’s, if any, right,
title and interest, if any, in all buildings, structures, walls, fences,
landscaping, improvements and fixtures situated on the Land (the
“Improvements”), including the Hotel, the golf course, tennis courts and country
club clubhouse;

(iii) All of Seller’s and, if applicable, any of its affiliate’s, if any, right,
title and interest, if any, right, privileges, title and interest in and to the
land lying in the bed of any street or highway adjoining the Land and all other
appurtenances to the Land and Improvements, and all right, title and interest of
Seller or its affiliate in and to any award made or to be made in lieu thereof
and in and to any unpaid award for damages to the Land and Improvements by
reason of change of grade of any street (the “Appurtenances”);

--------------------------------------------------------------------------------

(iv) All of Seller’s and, if applicable, any of its affiliate’s, if any, right,
title and interest, if any, in all tangible personal property, (the “Personal
Property”) owned or leased by Seller or its affiliate and located on or used in
connection with the ownership, operation and management of the Resort,
including, but not limited to the following: all fixtures, attachments,
computers and computer equipment, computer software, furnishings, art work,
machinery, laundry facilities, and other articles attached to or located upon
the Real Property (as defined herein), all goods, machinery, tools, equipment
(including fire sprinklers and alarm systems, air conditioning, heating,
boilers, refrigerating, electronic monitoring, water, lighting, power,
sanitation, waste removal, entertainment, recreational, fitness and maintenance
equipment, window or structural cleaning rigs and all other equipment of every
kind), motor vehicles, machinery, lawn mowers, swimming pool equipment, all
indoor or outdoor furniture (including tables, chairs, beds, planters, desks,
sofas, shelves, lockers and cabinets), furnishings, appliances, televisions,
radios, refrigerators, mini-bars, rugs, carpets and other floor coverings,
china, glassware, bar equipment and furnishings, linens, silverware, uniforms,
paintings, pictures, decorations, sculptures, draperies, drapery rods and
brackets, awnings, blinds, partitions, chandeliers and all other indoor and
outdoor lighting fixtures;

(v) All of Seller’s and, if applicable, any of its affiliate’s, if any, right,
title and interest, if any, in all engineering, maintenance, housekeeping, food
and beverage and spa department supplies, inventory, merchandise and goods
available for sale or for consumption in the ordinary course, including soap,
cleaning materials, beverage items (alcoholic and non-alcoholic) that is held
for sale in the mini-bars in the guest rooms and other supplies, inventory,
merchandise or goods of all kinds, used, unused, or held in reserve storage for
future use in connection with the maintenance and operation of the Resort that
are on hand as of the Closing Date (“Inventories”);

(vi) All of Seller’s and, if applicable, any of its affiliate’s, if any, right,
title and interest, if any, in (a) all contracts, agreements, and leases that
are described on Schedule 1(a)(vi) which do not have the designations described
in clauses (b) and (c) below; (b) all contracts, agreements and leases that are
described on Schedule 1(a)(vi) which have designations indicating that they have
not been provided to Purchaser prior to the Effective Date but are (1) provided
to Purchaser prior to Closing and (2) entered into in the ordinary course of
business of the Resort; (c) all contracts, agreements and leases that are
described on Schedule 1(a)(vi), which have designations indicating that they are
to be terminated by Seller, to the extent that such contracts, agreements or
leases cannot be terminated without payment of a termination fee, penalty, cost
or other charge; (d) all contracts and agreements not listed on Schedule
1(a)(vi) in effect with respect to the Resort as of the Closing that were
entered into in the ordinary course of business and are terminable upon ninety
(90) day’s or less prior notice; (e) any Capital Improvements Contracts (as
defined in Section 14(k)) to be assigned to Purchaser pursuant to Section 14(k);
and (f) to the extent assignable without the consent of Manager or any third
party, the rights of Seller, if any, under agreements, at law or in equity,
which survive the termination of the Management Agreement, including, without
limitation, any rights

 

-2-

--------------------------------------------------------------------------------

under the Termination Agreement, dated March 12, 2006, between Seller or its
affiliates and Manager or Manager’s affiliates (in no event shall Seller or its
affiliates be obligated to release a copy of the Termination Agreement to
Purchaser to the extent that such release violates such agreement or any other
agreements), to require Manager to (1) transfer or assign its liquor license to,
or allow Purchaser to use, the liquor license of Manager currently in place for
the Resort, and (2) transfer to Purchaser all customer data for future
reservations at the Resort, including tentative reservations (all such leases,
contracts, agreements and rights are, collectively, the “Contracts”), all of
which have been provided to Purchaser as part of the Property Information
(defined below)) (With respect to any Contracts which cannot be assigned by
Seller without the consent of the other party thereunder and such consent is not
obtained by the Closing, Seller and Purchaser shall cooperate with each other to
nevertheless assign to Purchaser the benefits, and Purchaser will assume the
obligations, and, in the event that any such fee, penalty or similar cost is due
to obtain the benefits of such contracts or to obtain the assignment of such
contracts, Purchaser will pay all such termination fees, costs and similar
charges associated with the assignment of such Contracts);

(vii) To the extent assignable, all of Seller’s and, if applicable, any of its
affiliate’s, if any, right, title and interest, if any, in all rights,
warranties, guaranties, approvals (governmental or otherwise), licenses,
permits, authorizations, entitlements, surveys, plans, drawings and
specifications, Property Marks (as defined herein), registered copyrights,
patents and other intellectual property owned by Seller, and other intangible
rights relating to the construction, ownership, operation, use and management of
the Property (as defined herein), including without limitation all operations
and businesses conducted on or from the Real Property (the “Intangible
Property”); and

(viii) All of Seller’s and, if applicable, any of its affiliate’s, if any,
right, title and interest, if any, right, title and interest, if any, in and to
all books, records, ledgers, files, information, work-product and data that are
transferable and are in the possession of Seller or its affiliate relating to
the ownership and operation of the Property, excluding, however, (i) information
that is subject to the attorney-client privilege, (ii) attorney work-product,
(iii) any information that is proprietary to Manager (defined in Section 1(b)
below), (iv) any information that Seller required to keep confidential under
existing agreements, other arrangements or applicable law, (v) all litigation
files and documents for matters that will not materially affect the Resort after
Closing, (vi) any and all other files that contain information or trade secrets
that are related to the proprietary and/or confidential manner in which Seller
or its affiliates make their investment decisions and/or conduct their
operations, and (vii) such items that are Excluded Assets (as defined in
Section 1(b) below) (“Hotel Books and Records”).

The Land, the Appurtenances and the Improvements are referred to collectively
herein as the “Real Property.” The Real Property, the Personal Property, the
Inventories, the Contracts, the Intangible Property, and the Hotels Books and
Records are referred to collectively herein as the “Property.” “Property Marks”
shall mean the trade names, trademarks, service marks, logos, copyrighted
identifying materials, domain names and other forms of identification used to
identify the Resort, Hotel or any of its facilities or operations, including the
names “Rancho Las Palmas,” “Rancho Las Palmas Resort & Spa,” “Rancho Las Palmas
County Club” and all

 

-3-

--------------------------------------------------------------------------------

variations thereof, and the names used to designate the restaurant and bar
facilities within the Resort, but shall exclude the Marriott Trademarks (as
defined in Section 1(b)). Seller makes no representation or warranty of any kind
related to the Property Marks, including, without limitation, whether or not
Purchaser will have the right to use any Property Mark after Closing. In no
event shall Seller assign to Purchaser any Contracts that Manager or its
affiliates have entered into under its own name and/or with respect to all its
hotels or a particular flag or segment of hotels (“Unassignable Contracts”). In
addition, Seller makes no representation or warranty regarding any of the rights
described in clause Section 1(a)(vi)(e), including, without limitation, whether
such rights exist.

(b) Excluded Property. The following assets and systems are not included in the
Property and shall be retained by Seller (the “Excluded Assets”): (i) any
computer system and software which is proprietary to Manager or its affiliates
under the terms of the Existing Management Agreement, other legally enforceable
documents, or applicable laws, (ii) all proprietary customer lists and customer
information related to Marriott and Marriott branded properties other than
customer lists, contact information and booking information specifically related
to the Resort, including, without limitation, lists and information related to
future and past bookings, prospects, sales contacts and other solicitations,
(iii) any item in use at the Hotel that is the personal property or intangible
property of Marriott Hotel Services, Inc., the manager of the Hotel or its
affiliates (the “Manager”), (iv) any system or other item primarily related to
any trade secret or proprietary business method of Manager or Seller or their
respective affiliates, (v) the tax appeals described on Schedule 11(a)(viii) and
all rights, benefits and proceeds associated therewith; (vi) all of Manager’s
and, if applicable, its affiliates’ right, title and interest, if any, in and to
any Property Marks, and (vii) all of Manager’s right, title and interest in the
trade names, copyrights, trademarks, logos, insignia, emblems, symbols, designs,
slogans, distinguishing characteristics, trade names, domain names, and all
other marks or characteristics associated or used with or in connection with
“Marriott” or other brand name owned by Marriott Hotel Services, Inc., or any
affiliate of Marriott Hotel Services, Inc., other than the Property Marks
(“Marriott Trademarks”). The Excluded Assets include, without limitation, those
items listed on Schedule 1(b) attached to this Agreement.

2. Purchase Price. The Purchase Price shall be paid to Seller by Purchaser as
follows:

(a) Deposit. On May 8, 2006, Purchaser shall deliver to the Escrow Holder a
deposit in the amount of Three Million Five Hundred Thousand Dollars
($3,500,000) (such deposit, together with all interest accrued thereon, is the
“Deposit”) either by wire-transfer or cashier’s check drawn on a financial
institution located in the United States. Should Purchaser fail to deliver the
Deposit by such date, Seller shall have the right to immediately terminate this
Agreement upon delivery of written notice to Purchaser. The Deposit shall be
held by Escrow Holder and, if applicable, invested in an interest bearing bank
account at money market rates in a commercial bank or banks acceptable to Seller
and Purchaser, or in such other investments as shall be approved in writing by
Seller and Purchaser. The Deposit shall be held, and disbursed by Escrow Holder
in strict accordance with the terms and provisions of this Agreement. Except as
otherwise expressly provided herein the Deposit is non-refundable to Purchaser.
Except as otherwise expressly provided in this Agreement, in the event the
purchase of the Property is not consummated for any reason other than (i) a
default under this Agreement by Seller, or

 

-4-

--------------------------------------------------------------------------------

(ii) failure of a condition set forth in Section 9(b) to be satisfied, then
pursuant to Section 16(c), the Deposit shall be disbursed by Escrow Holder to
Seller and shall constitute liquidated damages of Seller as its sole and
exclusive remedy hereunder.

(b) Allocation. Prior to Closing, Seller and Purchaser shall negotiate in good
faith the allocation of the Purchase Price for title insurance, tax and other
reporting purposes. Such agreed allocation shall be used by the parties for all
purposes, including Section 1060 of the Internal Revenue Code of 1986, as
amended (the “Code”), and the regulations thereunder. Although the parties are
committed to negotiate such allocation of the Purchase Price in good faith, in
the event that they fail to reach agreement on such allocation prior to Closing,
then each of Seller and Purchaser shall apply their own allocation of the
Purchase Price for the foregoing purposes in accordance with applicable laws,
including, without limitation, the Code.

(c) Balance of the Purchase Price. On the Closing Date, or such earlier date as
may be required to record the Deed (as defined below) and effect the Close of
Escrow on the Closing Date, Purchaser shall deposit the balance of the Purchase
Price, as well as all sums sufficient to pay Purchaser’s costs, expenses and
pro-rations as provided in this Agreement, after crediting (i) the Deposit and
(ii) any other pro-rations and other amounts to which Purchaser is entitled as a
credit against the Purchase Price as expressly provided in this Agreement, into
Escrow (as defined in Section 5(a)) by wire transfer or cashier’s check
sufficiently early to allow Seller to receive the proceeds from the sale on the
Closing Date. If Purchaser does not deliver the balance of the Purchase Price
into Escrow as required under this Section by the last business day immediately
preceding the Closing Date, Seller shall have the right to terminate this
Agreement and retain the Deposit as liquidated damages in accordance with
Section 16(c) of this Agreement.

3. Purchaser’s Inspection Rights / Contingency Period.

(a) Receipt of Contracts and Documents. Seller has delivered to the extent in
its possession, and, to the extent that Seller in good faith believes that it
has the right to do so under the Existing Management Agreement, Seller has used
commercially reasonable efforts to cause Manager to deliver to the extent in
Manager’s possession, the following to Purchaser for review at the Hotel:
(i) copies of all Contracts other than the Contracts designated as not yet
delivered on Schedule 1(a)(vi), (ii) hotel management documents, material third
party reports and all applicable tax and legal documents related to the Property
and in possession of Seller or to which Seller has reasonable access,
(iii) copies of development agreements, to the extent Seller has any such
agreements, and (iv) other documents reasonably requested by Purchaser, to the
extent that such documents pertain to the Property and the business conducted
thereon or relating thereto, to the extent that such materials are (1) in
Seller’s or Manager’s possession, and (2) do not constitute (aa) information
that is subject to the attorney-client privilege, (bb) attorney work-product,
(cc) information that is proprietary to Manager, (dd) information that Seller is
required to keep confidential under existing agreements, other arrangements or
applicable law, (ee) litigation files and/or documents for matters that will not
materially affect the Resort after Closing, (ff) any and all other files that
contain information or trade secrets that are related to the proprietary and/or
confidential manner in which Seller or its affiliates make their investment
decisions and/or conduct their operations, and (gg) are not otherwise Excluded
Assets.

 

-5-

--------------------------------------------------------------------------------

(b) Review Completed. Purchaser has completed its review of the materials
provided by Seller, and conducted such other due diligence, studies, tests,
inspections and investigations of the Property, interviews of employees and
other persons as Purchaser deems appropriate under the circumstances
(collectively, “Due Diligence Matters”). Purchaser’s investigations have
included examination of each of the items delivered to Purchaser by Seller and
one or more on-site physical inspections of the Real Property.

(c) Rights of Entry/Diligence Insurance. Purchaser acknowledges that during its
investigations, Purchaser and its agents and contractors, at Purchaser’s sole
cost and expense, entered onto the Resort for the purpose of making such tests,
inspections, surveys or other inquiries as Purchaser deemed necessary or
desirable in connection with this Agreement. Purchaser hereby represents and
warrants the following: (i) that it did not conduct any invasive testing or
inspections, including, but not limited to, drilling or boring, without the
express written consent of Seller; and (ii) that it did not represent to any
governmental authority that Purchaser had the authority to bind Seller in any
manner nor did Purchaser represent to any governmental agency that it is an
agent or affiliate of Seller. At all times during its entry upon the Property,
and for a period of one (1) year following the date of this Agreement, Purchaser
maintained and shall continue maintaining liability insurance coverage
applicable to such tests and inspections with coverage in an amount equal to
Three Million Dollars ($3,000,000) (“Purchasers Liability Insurance”) per
occurrence and has provided Seller with certificates of such insurance naming
Seller as an additional insured prior to any entry, test or inspection. So long
as Purchaser maintains the Purchaser’s Liability Insurance, Purchaser shall
continue to have the right to enter the Resort from time to time following the
Effective Date upon reasonable prior notice that explains the parameters of each
such inspection for the purpose of performing inspections of the Real Property.
During any such inspection, Purchaser shall not unreasonably disturb the
Manager, the tenants, occupants, guests, licensees, permittees, patrons or other
visitors of the Resort or, to the extent that Seller provides Purchaser with
written notice that any aspect of such inspection violates the Existing
Management Agreement, or Purchaser otherwise has actual knowledge that any
aspect of such inspection violates the Existing Management Agreement, then
Seller shall not perform the inspection in a manner that causes Seller to
violate the Existing Management Agreement as specified in such written notice or
as part of Purchaser’s actual knowledge, as applicable. After making any such
tests and inspections described in this Section 3(c), whether occurring prior
to, on or after the Effective Date, Purchaser shall be obligated to restore the
Real Property to its condition prior to such tests and inspections. Purchaser
hereby agrees to indemnify, defend and hold Seller, Manager and their respective
principals, officers, directors, employees, agents, contractors and other
representatives (collectively, the “Seller Parties”) harmless from any loss,
damage, cost (including without limitation attorneys fees) or liability incurred
by Seller or caused by Purchaser or its agents or contractors for a breach of
the representations and warranties, and/or in exercising its rights, under this
Section 3(c), and/or its past due diligence, studies, tests, inspections,
investigations of the Property and other Due Diligence Matters occurring prior
to the Effective Date. This Indemnity shall survive the Close of Escrow or the
termination of this Agreement. Notwithstanding anything to the contrary set
forth herein, in no event shall Seller have any right to terminate this
Agreement based upon the investigations which Purchaser has conducted at the
Property prior to the execution of this Agreement.

 

-6-

--------------------------------------------------------------------------------

(d) Confidentiality. Purchaser agrees to protect and safeguard, and to instruct
all other Qualified Persons (as defined below) to protect and safeguard, all
Property Information (as defined in Section 11) and other information delivered
to Purchaser in connection with its inspection and review of the Property
(“Confidential Information”) against unauthorized use, publication or
disclosure. Confidential Information that is provided to Purchaser in written
form will, at Seller’s election, be destroyed or returned to Seller immediately
upon Seller’s request. Purchaser acknowledges that Seller shall be entitled to
exercise any and all remedies, in law or in equity, which Seller may have
against Purchaser for a breach of Purchaser’s obligations in this paragraph.
Seller shall be entitled to recover its attorneys fees reasonably incurred in
connection with enforcement of its rights hereunder. “Qualified Persons” shall
mean employees, agents, attorneys, accountants, lenders, investors or other
consultants to whom it is necessary to show the Confidential Information for the
purposes of completing Purchaser’s inspection and review. The provisions of this
Section 3(d) shall survive the termination of this Agreement.

(e) Shadow Management. To the extent permitted pursuant to the terms and
conditions of any transition agreement entered into between Manager and
Purchaser prior to Closing (a copy of which is provided to Seller)(the
“Transition Agreement”), Seller shall permit Purchaser or an affiliate of
Purchaser to observe the management and operations of the Resort (“Shadow
Management”) from and after the date authorized under the Transition Agreement
through the Closing Date; provided, however, that neither refusal of Manager to
permit Purchaser to institute Shadow Management, nor Seller’s refusal to permit
Purchaser to institute Shadow Management in a manner that Seller believes in
good faith violates the Existing Management Agreement, shall in no way relieve
Purchaser of any of its obligations under this Agreement. Shadow Management
shall mean the right to have an authorized individual, selected by Purchaser and
approved by Seller, observe the management of the Resort by Manager in a manner
that does not disrupt the management or operation of the Resort or the use of
the Resort by tenants, occupants, guests, licenses, permittees, patrons and
visitors, and does not otherwise materially adversely affect the Hotel or any
other portion of the Property. Purchaser shall indemnify and hold harmless
Seller and its principals, officers, directors, employees, agents, contractors,
and other representatives from and against any loss, damage, cost (including
without limitation attorneys fees) or liability incurred by any of them caused
by Purchaser, such authorized individual, or their agents or contractors in
exercising rights under this Section 3(e). This indemnity shall survive the
Close of Escrow (as defined in Section 5 below) or the termination of this
Agreement.

4. Title. Purchaser acknowledges that it has received and reviewed the Title
Insurance Commitment issued by the Title Company under File No. 9870220,
covering the Land, a copy of which is attached to this Agreement as Exhibit C
(collectively, the “Title Commitment”), as well as copies of all documents
identified in the Title Commitment as exceptions to title. Purchaser further
acknowledges that Purchaser has received and reviewed a current ALTA/ACSM survey
of the Real Property (the “Survey”). Seller agrees, as a condition precedent to
Purchaser’s obligation to purchase the Property under this Agreement, to attempt
to satisfy the “Requirements” set forth in Item Numbers (B), (C), (E), (F),
(G) and (J) (a), (b), (d) and (e) of the Title Commitment by delivering the
following items to Title Company by the Closing Date (collectively, the “Title
Commitment Items”):

(i) for Item No. (B), the Deed (as defined below);

 

-7-

--------------------------------------------------------------------------------

(ii) for Item No. (C), sufficient funds to secure payment of the title exception
described in Exception No. 3 of the Title Commitment;

(iii) For Item No. (D), Seller and Purchaser have been advised that Manager will
execute a termination agreement to release such item. However, if Manager does
not timely execute and deliver the termination agreement, Seller shall modify
the Owner’s Declaration, as defined below, to confirm to the Title Company that
the lease has expired or otherwise terminated, without any knowledge qualifier;
provided, however, that it shall thereafter be Purchaser’s responsibility to
cause the Title Company to accept the Owner’s Declaration, as modified, to
eliminated Exception 28;

(iv) for Item No. (E), sufficient funds to secure payment of and the release
thereof, all documents shown as Exception Nos. 39 through 44 of the Title
Commitment;

(v) for Item (F), the Owner’s Declaration (“Owner’s Declaration”) in the form of
Exhibit I incorporating a current rent roll for the Resort;

(vi) for Item (G), the Owners’ Declaration;

(vii) for Item (J)(a), at Seller’s election, either the operating agreement of
Seller or an authorization to sell the Property to Purchaser signed by the
members of Seller;

(viii) for Item J(b), a copy of Seller’s Certificate of Formation certified by
the Delaware Secretary of State;

(ix) For Item J(d), a certificate of good standing for Seller issued by the
Delaware Secretary of State; and

(x) For Item J(e), certificate of good standing for Seller issued by the
California Secretary of State.

The delivery of the Title Commitment Items by Seller to the Title Company by the
Closing Date shall be a condition precedent to Purchaser’s obligation to
purchase the Property in accordance with this Agreement. At the Closing,
Purchaser may cause the Title Company to issue to Purchaser, in accordance with
the Title Commitment, an owner’s title insurance policy on the most recent
standard American Land Title Association form for the Property in an amount
equal to the Purchase Price (the “Title Policy”) in the form provided for in the
Title Commitment. The issuance of the Title Policy, however, shall not be a
condition precedent to any of Purchaser’s obligations under this Agreement,
including, without limitation, Purchaser’s obligation to acquire the Property.

(a) Permitted Title Exceptions. The Deed (as defined in Section 7(a)) delivered
pursuant to this Agreement shall be subject to all of the title exceptions
listed in the Title Commitment (the “Permitted Title Exceptions”). The Permitted
Title Exceptions shall in no event include any monetary liens, including,
without limitation, mechanics’ liens and taxes due and payable with respect to
the period preceding Closing (“Monetary Title Encumbrances”).

 

-8-

--------------------------------------------------------------------------------

(b) Monetary Title Encumbrances. If any matters described in the Title
Commitment consist of Monetary Title Encumbrances, then, to that extent,
notwithstanding anything herein to the contrary, Seller shall be obligated to
either (i) pay and discharge or (ii) bond against in a manner legally sufficient
to cause to be released (collectively, a “Monetary Encumbrance Release”). For
such purposes, Seller may use all or a portion of the Purchase Price to
effectuate a Monetary Encumbrance Release with respect to any such Monetary
Title Encumbrances at Closing.

(c) Voluntary Encumbrances. From and after the Effective Date, Seller shall not
voluntarily encumber the Property without the prior written consent of Purchaser
(except with a Monetary Title Encumbrance which will be covered by a Monetary
Encumbrance Release at Closing).

5. Closing.

(a) Escrow. The parties have opened an escrow (the “Escrow”) with the Escrow
Holder. This Agreement, together with such further instructions, if any, as the
parties shall provide to the Escrow Holder, shall constitute the escrow
instructions to the Escrow Holder. Upon Escrow Holder’s receipt of any notice
from Seller or Purchaser directing the disposition of the Deposit, Escrow Holder
shall only deliver the Deposit pursuant to such notice after Escrow Holder first
sends written notice to Seller and Purchaser stating that Escrow Holder intends
to deliver the Deposit as so directed, and neither Seller nor Purchaser provide
a written notice to Escrow Holder objecting to such proposed delivery within
four (4) business days thereafter. If neither Seller nor Purchaser provides such
written objection to Escrow Holder within such four (4) business day period,
Escrow Holder shall deliver the Deposit as so directed. If either Seller or
Purchaser provide such written objection to Escrow Holder within such four
(4) business day period or the parties give the Escrow Holder contradictory
instructions, the Escrow Holder shall have the right at its election to file an
action in interpleader requiring the parties to answer and litigate their
several claims and rights among themselves, and the Escrow Holder is authorized
to deposit with the clerk of court all documents and funds held in this Escrow.
In the event such action is filed, each of the parties agree to pay one-half
(1/2) of the Escrow Holder’s cancellation charges and costs, expenses and
reasonable attorney’s fees that the Escrow Holder is required to expend or incur
in the interpleader action, the amount thereof to be fixed and judgment therefor
to be rendered by the court. Upon the filing of such an action, the Escrow
Holder shall thereupon be fully released and discharged from all obligations to
further perform any duties or obligations otherwise imposed by the terms of
Escrow.

(b) Reportable Real Estate. The purchase and sale of the Property is the sale of
“reportable real estate” within the meaning of U.S. Treasury Regulations
Section 1.6045-4 (the “Regulations”). The Escrow Holder is the “real estate
reporting person” within the meaning of the Regulations and shall make all
reports to the federal government as required by the Regulations.

(c) Timing of Closing. Subject to the terms and conditions of this Agreement,
the purchase and sale contemplated herein shall close (the “Closing”) on
July 14, 2006, or such earlier or later date as Seller and Purchaser mutually
agree upon in writing (the “Closing Date”). If the Closing does not occur by the
Closing Date, this Agreement shall terminate and neither

 

-9-

--------------------------------------------------------------------------------

party shall have any further liability or obligation hereunder other than those
obligations that expressly survive the termination of this Agreement, except
that, (i) Purchaser and Seller shall each be responsible for one-half of any
title or escrow cancellation fee; (ii) Purchaser shall remain obligated to
observe the confidentiality provisions of Section 3(e); (iii) the Deposit shall
be delivered as provided elsewhere in this Agreement; and (iv) nothing herein
contained is intended to relieve either party of liability arising as a result
of a breach of this Agreement by such party. As used in this Agreement, the
“Closing”, “Close of Escrow” or “Closing Date” means the date and time that the
deed to the Property (the “Deed”) is recorded in the official recorder’s office
of the county in which the Property is located. Closing shall occur through the
Escrow with Escrow Holder in accordance with the general provisions of the usual
form of escrow agreement used by Escrow Holder in similar transactions to the
extent not inconsistent herewith (with such special provisions inserted as may
be required to conform to this Agreement). If the Closing does not occur as
provided in this Section 5, the provisions Section 16 set forth the sole and
exclusive remedies of the parties hereto.

(d) Closing Costs. Seller shall pay (i) the premium of a CLTA basic policy of
title insurance issued in accordance with the Title Policy; (ii) 50% of all
state, county and local documentary and real estate transfer taxes applicable to
the Real Property, (iii) 50% of any sales and use tax payable in connection with
the sale of the Personal Property, (iv) 50% of the escrow charges of Escrow
Holder, and (v) any additional costs and charges customarily charged to sellers
in accordance with common escrow practices in the county in which the Property
is located, other than those costs and charges specifically required to be paid
by Purchaser hereunder. Purchaser shall pay: (i) the premium for any excess
premium charged for an ALTA standard coverage policy, the premium for a loan
policy, the premium for extended coverage and for any other endorsements desired
by Purchaser, (ii) the recording fees required in connection with the transfer
of the Property to Buyer and Buyer’s financing, (iii) 50% of all state, county
and local documentary and real estate transfer taxes applicable to the Real
Property, (iv) 50% of any sales and use tax payable in connection with the sale
of the Personal Property, (v) 50% of the escrow charges of Escrow Holder and
(vi) any additional costs and charges customarily charged to buyers in
accordance with common escrow practices in the county in which the Property is
located, other than those costs and charges specifically required to be paid by
Seller hereunder. The update to the Survey shall be paid for by Purchaser. Each
party shall bear the expense of its own counsel and other consultants.

(e) Actions of Escrow Holder. On the Closing Date, provided that Escrow Holder
has received all the items described in Sections 7 and 8 below, or Seller or
Purchaser, as applicable, has otherwise waived its right to receive any such
item, Escrow Holder shall take the following actions in the order indicated
below:

(i) Record the Deed (as defined in Section 6(a)) in the official recorder of
Riverside County, California;

(ii) Deliver to Seller, in immediately available funds, the Purchase Price as
adjusted by the pro rations provided for in Section 10;

(iii) Cause the Title Company to issue to Purchaser the Title Policy within
ten (10) days after Closing (this shall not be a condition precedent to any of
Purchaser’s obligations under this Agreement, including, without limitation, the
obligation to purchase the Property);

 

-10-

--------------------------------------------------------------------------------

(iv) Consolidate the executed counterparts of all the documents executed by
Purchaser and Seller in conditions with this Agreement and deliver to each party
thereto one (1) fully compiled execution copy of each such document containing
the original counterpart signatures of each of Seller and Purchaser; and

(v) Deliver to Purchaser the original FIRPTA Certificate executed by Seller.

6. Transition Management.

(a) Transition Management. Seller shall use good faith efforts to urge Manager
to discuss and implement arrangements for a smooth transition of management
services for the Resort from and after the Close of Escrow. Seller shall have no
other obligation with respect to such a transition. Purchaser, at its option and
to the extent that Manager willing to participate, may negotiate a management
transition arrangement with Manager prior to the Close of Escrow; provided,
however, that Seller will not enter into any agreements, nor have any
obligations, related to any such arrangement. No meeting of any kind, nor any
transition management arrangement of any kind, between Manager and Purchaser
shall be a condition to any of Purchaser’s obligations under this Agreement,
including, without limitation, the obligation to acquire the Property. Any
documents regarding transition management arrangements between Purchaser and
Manager shall be executed exclusively by and between Purchaser and Manager and
shall not expose Seller to any additional costs, fees, charges or liabilities of
any kind whatsoever. Purchaser shall indemnify and hold harmless Seller and its
principals, directors, officers, employees, agents and other representatives
from and against any losses, damages, liabilities and costs (including, without
limitation, reasonable attorneys fees and costs) incurred by Seller and such
other parties arising out of any transition management arrangements with
Manager. The foregoing indemnity shall survive the Close of Escrow.

(b) Termination Agreement; Payment of Termination Fees. Under no circumstances
shall Seller be obligated to pay Manager any amounts due in connection with any
transition management arrangements that Purchaser agrees to with Manager.

7. Seller’s Closing Documents. On or before Closing, Seller shall deliver or
cause to be delivered to Purchaser or Escrow Holder, as appropriate, the
following (“Seller’s Closing Documents”), in form and substance reasonably
acceptable to Purchaser:

(a) Deed. A Deed in the form and content of Exhibit D attached hereto (the
“Deed”) duly executed, with acknowledgment, by Seller;

(b) Bill of Sale. A Bill of Sale (the “Bill of Sale”) to the Personal Property,
in the form and content of Exhibit E attached hereto duly executed by Seller,
conveying the Personal Property to Purchaser;

(c) Intangible Property Assignment. An assignment of the Intangible Property
(the “Intangible Property Assignment”), in the form and content of Exhibit F
attached hereto duly executed by executed by Seller or Manager, conveying the
Intangible Property to Purchaser;

 

-11-

--------------------------------------------------------------------------------

(d) Contract Assignment. An Assignment and Assumption of Contracts (the
“Contract Assignment”) in the form attached hereto as Exhibit B, and duly
executed by Seller or Manager, as the case may be;

(e) Non-Foreign Affidavit. A Non-Foreign Affidavit in the form attached hereto
as Exhibit G, duly executed by Seller;

(f) Marriott. Reasonable evidence that Seller has (i) given notice to Marriott
terminating the Existing Management Agreement as of the Closing Date (which may
be in the form of a copy of the written notice from Seller to Manager
terminating the Existing Management Agreement), and (ii) paid Manager any
portion of any termination fees due and payable at or before the Close of Escrow
under the Existing Management Agreement;

(g) Certificate. A certificate from Seller that the representations and
warranties of Seller set forth in Section 12(a) are true and correct in all
material respects as of the Closing Date as if then made, subject to matters
disclosed in such certificate;

(h) Title Commitment Items. The Title Commitment Items; and

(i) Other Items. Any other document or instrument specifically required by this
Agreement and such other and further documents, papers and instruments as are
required from Seller by the Title Company under the terms of the Title
Commitment, and other documents reasonably required by the Title Company that
are not inconsistent with this Agreement or the closing documents and do no
subject Seller to additional cost or liability.

8. Purchaser’s Closing Items. Except as provided below, on or before the
Closing, Purchaser shall deliver to Seller or Escrow Holder, as appropriate, the
following (“Purchaser’s Closing Items”), in form and substance reasonably
acceptable to Seller:

(a) Purchase Price. The balance of the Purchase Price, after crediting the
Deposit;

(b) Intangible Property Assignment. The Intangible Property Assignment duly
executed by Purchaser;

(c) Contract Assignment. The Contract Assignment duly executed by Purchaser; and

(d) Certificate. A certificate from Purchaser that the representations and
warranties of Purchaser set forth in Section 13 are true and correct in all
material respects as of the Closing Date as if then made; and

(e) Other Items. Any other document or instrument specifically required by this
Agreement and such other and further documents, papers and instruments as may be
reasonably required by the Title Company which are not inconsistent with this
Agreement or other closing documents and do no subject Purchaser to additional
cost or liability.

 

-12-

--------------------------------------------------------------------------------

9. Conditions Precedent to Closing.

(a) Seller’s Conditions Precedent to Closing. Seller shall have no obligation to
sell the Property unless the following conditions (“Seller’s Conditions
Precedent”) have been satisfied or waived in writing by Seller at or prior to
the Closing (unless the failure to satisfy such condition is caused by the
default of Seller under this Agreement):

(i) Performance. Purchaser shall have timely performed, in all material
respects, all of the obligations required to be performed by Purchaser by the
terms of this Agreement;

(ii) Representations and Warranties. The representations and warranties made in
this Agreement by Purchaser shall be true and correct in all material respects,
in each case as of the Effective Date and as of the Closing Date to the extent
provided in Section 13 (unless by their terms they relate to an earlier date, in
which case such representations shall be true and correct in all material
respects as of such earlier date); and

(iii) Deliveries. Purchaser shall have executed and delivered, or caused to be
executed and delivered, the Purchaser’s Closing Items (as defined in Section 8
above).

(iv) Manager Termination. Concurrently with the Close of Escrow, Manager shall
have vacated (or shall have taken all steps reasonably necessary to be prepared
to, immediately after the Close of Escrow, vacate) the Property (provided,
however, if Purchaser enters into a transition management arrangement with
Manager, then Manager’s vacation of the Property shall not be a condition
precedent to Seller’s obligation to sell the Property).

Seller’s conditions are solely for the benefit of Seller and may be waived only
by Seller. Any such waiver or waivers shall be in writing and shall be delivered
to Purchaser and Escrow Holder. Seller shall not act or fail to act for the
purpose of permitting or causing any of Seller’s conditions to fail. Nothing
contained in this Agreement shall require or permit Purchaser or Seller to
postpone the Closing Date or to bring any suit or other proceeding or, except as
otherwise expressly required by this Agreement, to pay any substantial sum, to
satisfy any of Seller’s conditions. Notwithstanding anything to the contrary set
forth in this Agreement, in the event that any of the foregoing conditions to
Seller’s obligations hereunder are not satisfied by the Close of Escrow, Seller
shall have the right (1) in the event such failure of a condition arises as a
result of a default of Purchaser, to exercise its rights under Section 16(b) of
this Agreement, or (2) in the event such failure of a condition arises for any
reason other than a result of a default of Purchaser, either (A) terminate this
Agreement, in which event the parties shall not have any obligations to the
other except for their obligations that expressly survive a termination of this
Agreement, all other rights and obligations of the parties hereunder (except
those set forth in this clause (A)) shall terminate immediately, and the Deposit
shall be returned to Purchaser; or (B) to irrevocably waive such condition and
proceed to Closing.

 

-13-

--------------------------------------------------------------------------------

(b) Purchaser’s Conditions Precedent to Closing. Purchaser shall have no
obligation to purchase the Property unless the following additional conditions
(“Purchaser’s Conditions Precedent”) have been satisfied or waived in writing by
Purchaser at or prior to the Closing;

(i) Performance. Seller shall have timely performed, in all material respects,
all of the obligations required to be performed by Seller by the terms of this
Agreement;

(ii) Representations and Warranties. The representations and warranties made in
this Agreement by Seller shall be true and correct in all material respects, in
each case as of the Effective Date and as of the Closing Date to the extent
provided in Section 12 (unless by their terms they relate to an earlier date, in
which case such representations shall be true and correct in all material
respects as of such earlier date);

(iii) Deliveries. Seller shall have executed and delivered, or caused to be
executed and delivered, the Seller’s Closing Documents (as defined in
Section 7);

(iv) Repairs and Improvements. Seller shall have complied with the provisions of
Section 14(k)).

(v) Manager Termination. Concurrently with the Close of Escrow, Manager shall
have vacated (or shall have taken all steps reasonably necessary to be prepared
to, immediately after the Close of Escrow, vacate) the Property (provided,
however, if Purchaser enters into a transition management arrangement with
Manager, then Manager’s vacation of the Property shall not be a condition
precedent to Purchaser’s obligation to acquire the Property).

Purchaser’s conditions are solely for the benefit of Purchaser and may be waived
only by Purchaser. Any such waiver or waivers shall be in writing and shall be
delivered to Seller and Escrow Holder. Purchaser shall not act or fail to act
for the purpose of permitting or causing any of Purchaser’s conditions to fail.
Nothing contained in this Agreement shall require or permit Purchaser or Seller
to postpone the Closing Date or to bring any suit or other proceeding or, except
as otherwise expressly required by this Agreement, to pay any substantial sum,
to satisfy any of Purchaser’s conditions. In the event that any of the foregoing
conditions to Purchaser’s obligations hereunder are not satisfied by the Close
of Escrow, Purchaser shall have the right (1) in the event such failure of a
condition arises as a result of a default of Seller, to exercise its rights
under Section 16(a) of this Agreement, or (2) in the event such failure of a
condition arises for any reason other than a result of a default of Seller,
either (A) terminate this Agreement, in which event the parties shall not have
any obligations to the other except for their obligations that expressly survive
a termination of this Agreement, all other rights and obligations of the parties
hereunder (except those set forth in this clause (A)) shall terminate
immediately, and the Deposit shall be returned to Purchaser; or (B) to
irrevocably waive such condition and proceed to

 

-14-

--------------------------------------------------------------------------------

Closing; provided, however, notwithstanding anything to the contrary set forth
in this Agreement, in no event shall Seller be deemed to have breached or
defaulted under this Agreement in the event Manager shall have failed (for any
reason or no reason) to vacate (or shall have failed to have taken all steps
reasonably necessary to be prepared to, immediately after the Close of Escrow,
vacate) the Property so long as Seller shall have satisfied the requirements of
Section 7(f) of this Agreement.

(c) Notification of Certain Matters. Until the Closing, each party hereto shall
promptly notify the other party in writing of any fact, change, condition,
circumstance or occurrence or nonoccurrence of any event of which it is aware
that will or is reasonably likely to result in any of the conditions set forth
in this Section 9 becoming incapable of being satisfied.

10. Prorations, Closing Adjustments and Post Closing Settlement. The following
items shall be apportioned in respect of the Property in question between
Purchaser and Seller on a per diem basis as of the Cut-Off Time (except as
otherwise specified in this Section 10):

(a) Taxes and Assessments. Real estate taxes and annual municipal or special
district assessments and personal property or use taxes.

(b) Rent. Rent paid to and received by Seller under any Contracts at the
Property. Any payments received by Purchaser after the date of closing from a
tenant under any Contract on account of rentals which are applicable to periods
prior to closing and on account of sums which are attributable to expenses
incurred by the lessor for periods of time prior to closing, shall be
apportioned by Purchaser upon receipt and the portion thereof attributable to
periods or expenses prior to Close of Escrow shall immediately be paid by
Purchaser to Seller.

(c) Revenues. Guest, convention, room, food, beverage, and all other charges and
revenues for services rendered and the operation of all departments of the
Property, including, but not limited to, advance payments under booking
agreements for rooms, facilities and services of such Property and any other
revenues shall be apportioned, as follows: (1) all food, room service and
restaurant revenue as of the closing of dinner service hours at each restaurant
on the evening preceding the Closing Date, and bar revenues as of 2:00 a.m. on
the Closing Date, shall be retained by Seller and (2) the guest (tray) ledger
for guests staying in such Property as of 12:01 a.m. on the Closing Date shall
be counted and such room revenue and associated taxes, shall be retained by
Seller. Purchaser shall also receive a credit for all deposits and gift
certificates for which payment has been made prior to 12:01 a.m. on the Closing
Date. Except as hereinabove provided, all revenues for the Property for days
preceding the Closing Date shall be attributed to Seller and all revenues for
the Property for the Closing Date and days following the Closing Date shall
accrue to the benefit of Purchaser after Closing.

(d) Accounts Receivable. Purchaser shall purchase all accounts receivable for
the Property. Seller shall receive a credit for one hundred percent (100%) of
the outstanding balance due for all accounts receivables at Closing net of any
fees, costs or other deductions that Manager charges in connection with the
collection of any such accounts receivable. So long as Purchaser uses
commercially reasonable efforts to collect the amounts due under the accounts
receivables that were more than sixty (60) days past due (“Plus Sixty-Days
Receivables”) as of the Closing Date for a period of one-hundred twenty
(120) days following the Closing Date, then

 

-15-

--------------------------------------------------------------------------------

upon the expiration of such period, Purchaser may deliver written notice
containing evidence reasonably satisfactory to Seller of the uncollected portion
of the Plus Sixty-Days Receivables. Upon receipt of such notice, Seller shall
promptly pay to Purchaser an amount equal to the difference, if any, of the
amount of Plus Sixty-Day Receivables credited to Seller at Closing less the
amount of the Plus Sixty-Day Receivables actually collected by Purchaser. The
provisions of this Section 10(d) shall survive the Close of Escrow.

(e) Accounts Payable. Purchaser shall assume and be responsible for paying all
accounts payable owing as of the Closing Date, provided, however, that
(i) Seller shall receive a credit at Closing at Closing, equal to the portion of
accounts payable applicable to goods and services that are to be utilized by
and/or delivered to Purchaser on or after the Closing Date, and (ii) Purchaser
shall receive a credit at Closing, equal to the portion, if any, of accounts
payable applicable to goods and services that will be utilized by and/or
delivered to Seller prior to the Closing Date. The provisions of this
Section 10(e) shall survive the Close of Escrow.

(f) Operating Costs. All costs and expenses of operating the Property, and
amounts paid or payable under the Contracts. All expenses that have been prepaid
by Seller shall be prorated as of the Closing Date and Seller shall receive a
credit at the Closing for the portion of such prepaid expenses applicable to
periods following the Closing Date.

(g) Country Club and Other Facilities Fees. All monthly and other membership
dues and fees associated with membership in the country club and/or other
facilities located within upon the Resort. Any payments of dues or other fees
received by Purchaser after the date of Closing from a member of the country
club or other facilities which are applicable to periods prior to Closing shall
be apportioned by Purchaser upon receipt and the portion thereof attributable to
periods prior to the Close of Escrow shall immediately be paid by Purchaser to
Seller. Any transfer fees due in connection with the sales of single family
homes, condominiums or other dwelling units located within the Resort that occur
prior to the Cut-Off Time shall be allocated to Seller. Purchaser shall retain
any transfer fees related to the sales of any such homes, condominiums or other
dwelling units that occur on and after the Close of Escrow.

(h) Miscellaneous. Fees and expenses for music, entertainment, trade association
dues, trade subscriptions, coin machine income, and washroom and checkroom
income.

(i) No Tax Bill. If, on the Closing Date, bills for the real estate taxes
imposed upon the Property for the tax year in which closing occurs have been
issued but shall not have been paid, the prorations shall be made on the basis
thereof. If such bills shall not have been issued on the date of Closing, the
amount of the taxes shall be reasonably ascertained by Seller and Purchaser
based upon the then current assessment and anticipated tax rate, and the
prorations shall be made on the basis of such estimate and in the event the
taxes for the year in which the closing occurs are more or less than such
estimated amount, Seller or Purchaser shall promptly pay the amount necessary to
adjust for the correct proration as soon as the actual tax amount becomes
available. The provisions of this Section 10(i) shall survive the Close of
Escrow.

(j) Tenant Security Deposits. At Closing, Purchaser shall receive a credit
against the Purchase Price for the Property in question in an amount equal to
all cash security

 

-16-

--------------------------------------------------------------------------------

deposits, if any, then held by or for Seller and not applied under any
Contracts. Purchaser will cause such amount to be maintained after closing as a
security deposit in accordance with the requirements of applicable law and the
leases and shall indemnify and hold harmless Seller and the other Released
Parties from and against all losses, damages, costs (including reasonable
attorney’s fees and costs), and liabilities arising out of claims of tenants
with respect thereto.

(k) Utilities. The parties shall switch all utilities into Purchaser’s name as
of the Close of Escrow so no prorations shall be necessary.

(l) Sales Taxes. All sales, use and occupancy taxes, if any, due or to become
due in connection with revenues received from the Property prior to the Closing
Date will be paid by Seller. Seller shall be entitled to receive any rebates or
refunds with respect to any such taxes paid by such Seller prior to Closing.

(m) Supplies. At Closing, there shall be an adjustment to the Purchase Price
equal to the actual cost paid by Seller for all of Seller’s unopened inventory
of bottles of liquor and wine in storage at the Property in question, all other
food and beverage supplies including mini-bar inventories and linen supplies in
unopened cases, cartons or similar containers and all sides and shells of meat
(in any storage freezer at such Property) that are still in their unopened
sacks, cartons, packages or other original containers, and are not aged beyond
their respective marked expiration dates. There shall be no adjustment for
consumable inventory for which their sacks, cartons, packages or other original
containers are opened or partially used.

(n) Cash. All cash in the Hotel’s various bank accounts at financial
institutions as of the Cut-Off Time (“Outside Bank Accounts”) shall remain the
sole and exclusive property of Seller. Purchaser shall open its own separate
accounts in house banks at the Hotel (“House Banks”) prior to the Cut-Off Time
and shall receive cash deposited in said House Banks from and after the Cut-Off
Time.

(o) Cash Deposits. Seller shall receive a credit for all cash deposits of the
Hotel as of the Close of Escrow, including deposits with utilities and providers
of goods and services (“Cash Deposits”). Seller shall leave all cash that is “on
hand” at the Hotel at Closing for which Seller shall receive a credit at
Closing.

(p) Advanced Booking Deposit. At the Closing Seller shall provide Purchaser with
a current list of Advance Bookings (as defined herein), and Purchaser shall
receive a credit and Seller a corresponding debit in the amount of all Advanced
Booking deposits paid to Seller and not earned with respect to the period prior
to the Closing. “Advance Bookings” shall mean reservations and agreements made
or entered into by Manager in the ordinary course of business prior to Closing
for Hotel rooms or meeting rooms to be utilized after Closing, or for special
events, catering services or other hotel services to be provided after Closing
at or by the Hotel

(q) Employees. With respect to employee wages and benefits, Seller shall be
solely responsible for any liability for payment of employees’ wages, workers’
compensation claims, pension benefits (including any 401K employer
contributions), due to or accrued to employees at the Property through the
Cut-Off Time, together with F.I.C.A., unemployment and other taxes and benefits
due with respect to the employment of such employees, including earned

 

-17-

--------------------------------------------------------------------------------

and accrued vacation and sick pay and any other obligations in the nature of
wages, due through the Cut-Off Time. From and after the Cut-Off Time, Purchaser
hereby assumes all liability and obligations with respect to employees wages and
benefits for employees at the Property after the Cut-Off time hired by Purchaser
or Purchaser’s manager or agent, Purchaser being solely responsible for any
liability for the payment of employees’ wages, workers’ compensation claims,
pension benefits (including any 401K employer contributions) due to or accrued
to employees at the Property after the Cut-Off Time, together with F.I.C.A.,
unemployment and other taxes and benefits due after the Cut-Off Time with
respect to the employment of such employees hired by Purchaser, its affiliates
or its agents. Notwithstanding the foregoing, Purchaser is not assuming the
workers’ compensation insurance liability of Seller and Seller shall be solely
responsible for adjustment and payment of all claims for compensation in
connection with such insurance and shall retain any and all rebates,
reimbursements or other payments due from the insurer in connection with such
policies. Notwithstanding the foregoing, Purchaser shall pay all severance
payments due and payable to any terminated employees who were not temporary
employees. The provisions of this Section 10(q) shall survive the Close of
Escrow.

(r) Gift Certificates. Purchaser shall receive a credit at Closing for one
hundred percent (100%) of the amount received by Seller for all “gift
certificates” for free or reduced rate room charges or other goods and services,
to the extent such gift certificates were purchased from Seller by third parties
and further provided that Seller has received payment for such purchases. At
Closing, Seller shall furnish Purchaser with a listing or other detailed
description of the combined monetary amount of outstanding gift certificates
represented by Purchaser’s credit. Following the Closing, Purchaser shall honor
all outstanding gift certificates.

(s) Reconciliation and Final Payment. A detailed closing statement shall be
prepared at closing for the Property setting forth the manner of computation of
the aforesaid proration adjustments. All prorations shall be made on the basis
of a 360 day year and a 30 day month. The apportionments described herein at
such Closing shall be based on the actual figures to the extent available. If
any of the prorations cannot be calculated based on actual figures, then they
shall be calculated based on the mutual good faith agreement of Seller and
Purchaser. Seller and Purchaser shall cooperate in good faith and act
commercially reasonable after closing to make a final determination of the
prorations required hereunder. Within ninety (90) days following the Close of
Escrow for the Property (or such other time as Seller and Purchaser may agree),
there shall be a final one-time reconciliation of the proration adjustments
other than for the reconciliation of the Plus Sixty-Day Receivables which shall
be reconciled in accordance with Section 10(d) above. The provisions of this
Section 10(s) shall survive the Close of Escrow.

Purchaser shall have a representative available at the Hotel beginning at
10 p.m. on the night prior to the Closing Date who will cooperate with Seller in
calculating the apportionment discussed in this Section 10 and who will be
authorized to sign the pro-ration schedule on behalf of Purchaser upon
completion.

 

-18-

--------------------------------------------------------------------------------

11. AS-IS PURCHASE.

EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN
SECTION 12 BELOW, THE PROPERTY IS BEING SOLD TO PURCHASER IN ITS “AS-IS”
CONDITION WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, SUBJECT
TO THE FOLLOWING:

(a) PURCHASER ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT, EXCEPT AS EXPRESSLY
PROVIDED OTHERWISE IN SECTION 12 BELOW, IF AT ALL, ANY INFORMATION (“PROPERTY
INFORMATION”) SUPPLIED OR MADE AVAILABLE BY SELLER OF ANY KIND OR CHARACTER
WHATSOEVER, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, OR IN THE FORM OF MAPS,
SURVEYS, PLATS, SOIL REPORTS, ENGINEERING STUDIES, ENVIRONMENTAL STUDIES,
INSPECTION REPORTS, PLANS, SPECIFICATIONS, OR ANY OTHER PROPERTY INFORMATION
WHATSOEVER, WITHOUT EXCEPTION PERTAINING TO THE PROPERTY, ANY AND ALL RECORDS,
RENT ROLLS, AND OTHER DOCUMENTS PERTAINING TO THE USE AND OCCUPANCY OF THE
PROPERTY, INCOME THEREOF, THE COST AND EXPENSES OF MAINTENANCE THEREOF, AND ANY
AND ALL OTHER MATTERS CONCERNING THE CONDITION, SUITABILITY, INTEGRITY,
MARKETABILITY, COMPLIANCE WITH LAW, OR OTHER ATTRIBUTES OR ASPECTS OF THE
PROPERTY, OR A PART THEREOF, IS FURNISHED TO PURCHASER FOR INFORMATIONAL
PURPOSES WITHOUT RECOURSE AND SELLER MAKES NO REPRESENTATION, EXPRESS OR
IMPLIED, OR ARISING BY OPERATION OF LAW, WITH RESPECT TO THE ACCURACY,
COMPLETENESS OR ANY OTHER ASPECT OF THE PROPERTY INFORMATION, NOR AS A RESULT OF
THE DELIVERY OF THIS PROPERTY INFORMATION.

(b) ON THE CLOSING DATE, PURCHASER WILL BE FAMILIAR WITH THE PROPERTY AND WILL
HAVE MADE SUCH INDEPENDENT INVESTIGATIONS AS PURCHASER DEEMS NECESSARY OR
APPROPRIATE CONCERNING THE PROPERTY. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 12
BELOW, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES AND SPECIFICALLY DISCLAIMS
ANY REPRESENTATION, WARRANTY, OR GUARANTY, ORAL OR WRITTEN, EXPRESS OR IMPLIED,
PAST, PRESENT OR FUTURE WITH RESPECT TO THE PHYSICAL CONDITION OR ANY OTHER
ASPECT OF THE PROPERTY, INCLUDING WITHOUT LIMITATION THE STRUCTURAL INTEGRITY OF
THE IMPROVEMENTS, THE MANNER, CONSTRUCTION, CONDITION, AND STATE OF REPAIR OR
LACK OF REPAIR OF ANY OF THE IMPROVEMENTS, THE CONFORMITY OF THE IMPROVEMENTS TO
ANY PLANS OR SPECIFICATIONS FOR THE PROPERTY (INCLUDING BUT NOT LIMITED TO, ANY
PLANS AND SPECIFICATIONS THAT MAY HAVE BEEN OR WHICH MAY BE PROVIDED TO
PURCHASER), THE CONFORMITY OF THE PROPERTY TO PAST, CURRENT OR FUTURE APPLICABLE
ZONING OR BUILDING CODE REQUIREMENTS OR THE COMPLIANCE WITH ANY OTHER LAWS,
RULES, ORDINANCES, OR REGULATIONS OF ANY GOVERNMENT OR OTHER BODY, INCLUDING BUT
NOT LIMITED TO TITLE III OF THE AMERICANS WITH DISABILITIES ACT OF 1900, THE
FEDERAL WATER POLLUTION CONTROL ACT, THE FEDERAL RESOURCE CONSERVATION AND
RECOVERY ACT, THE HAZARDOUS MATERIALS TRANSPORTATION ACT, THE TOXIC SUBSTANCE
CONTROL ACT, THE FINANCIAL EARNING CAPACITY OR HISTORY OR EXPENSE HISTORY OF THE

 

-19-

--------------------------------------------------------------------------------

OPERATION OF THE PROPERTY, THE NATURE AND EXTENT OF ANY RIGHT-OF-WAY, LEASE,
POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION, OR OTHERWISE,
THE EXISTENCE OF SOIL INSTABILITY, PAST SOIL REPAIRS, SOIL ADDITIONS OR
CONDITIONS OF SOIL FILL, SUSCEPTIBILITY TO LANDSLIDES, SUFFICIENCY OF
UNDERSHORING, SUFFICIENCY OF DRAINAGE, WHETHER THE PROPERTY IS LOCATED WHOLLY OR
PARTIALLY IN A FLOOD PLAIN OR A FLOOD HAZARD BOUNDARY OR SIMILAR AREA, THE
EXISTENCE OR NON-EXISTENCE OF HAZARDOUS WASTE OR OTHER TOXIC MATERIALS OF ANY
KIND (INCLUDING, WITHOUT LIMITATION, ASBESTOS), THE RIGHT TO FURTHER DEVELOP THE
PROPERTY, OR ANY OTHER MATTER AFFECTING THE STABILITY OR INTEGRITY OF THE LAND
AND/OR THE IMPROVEMENTS.

PURCHASER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS SPECIFICALLY PROVIDED
IN SECTION 12 BELOW, SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES
AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS
OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED,
ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT
TO THE PROPERTY OR ANY MATTER RELATED THERETO, INCLUDING, WITHOUT LIMITATION,
THE HABITABILITY, MERCHANTABILITY, USE, OPERATION, VALUE, MARKETABILITY,
PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY OR ANY ASPECT
OR PORTION THEREOF, INCLUDING STRUCTURAL ELEMENTS, FOUNDATION, ROOF,
APPURTENANCES, ACCESS, LANDSCAPING, PARKING FACILITIES, ELECTRICAL, MECHANICAL,
HVAC, PLUMBING, SEWAGE, AND UTILITY SYSTEMS, AND COMPLIANCE WITH ANY
ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATION, ORDERS
OR REQUIREMENTS. EXCEPT AS PROVIDED IN SECTION 12 BELOW, PURCHASER ACKNOWLEDGES
AND AGREES THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY
AS PROVIDED FOR HEREIN IS MADE ON AN “AS IS” CONDITION AND BASIS WITH ALL
FAULTS, AND THAT SELLER HAS NO OBLIGATIONS TO MAKE REPAIRS, REPLACEMENTS OR
IMPROVEMENTS EXCEPT AS MAY OTHERWISE BE EXPRESSLY STATED HEREIN.

PURCHASER ACKNOWLEDGES THAT (I) SELLER HAS DISCLOSED THAT ASBESTOS IS PRESENT
WITHIN THE REAL PROPERTY AND (II) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES
REGARDING THE LOCATION, STATUS OR CONDITION OF SUCH ASBESTOS, OR THE SELLER’S
COMPLIANCE OR NON-COMPLIANCE WITH ANY LAWS OR REGULATIONS RELATED TO THE
MAINTENANCE OF, NOTIFICATIONS REGARDING, OR ANY OTHER MATTERS RELATED TO SUCH
ASBESTOS.

ANY REPORTS, REPAIRS OR WORK REQUIRED BY PURCHASER, WITH THE SOLE EXCEPTION OF
THOSE LISTED IN SECTION 14(K), ARE THE SOLE RESPONSIBILITY OF PURCHASER.
PURCHASER AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, THERE IS NO
OBLIGATION ON THE PART OF SELLER TO MAKE ANY

 

-20-

--------------------------------------------------------------------------------

CHANGES, ALTERATIONS OR REPAIRS OR TO CURE ANY VIOLATIONS OR APPLICABLE LAW OR
TO COMPLY WITH THE REQUIREMENTS OF ANY INSURER.

 

 

  

 

SELLER’S INITIALS    PURCHASER’S INITIALS

(c) RELEASE. EXCEPT AS EXPRESSLY SET FORTH HEREIN, PURCHASER AND ANYONE CLAIMING
BY, THROUGH OR UNDER PURCHASER HEREBY WAIVES ITS RIGHT TO RECOVER FROM AND FULLY
AND IRREVOCABLY RELEASES SELLER AND ITS EMPLOYEES, OFFICERS, DIRECTORS,
REPRESENTATIVES, AGENTS, SERVANTS, ATTORNEYS, AFFILIATES, PARENT, SUBSIDIARIES,
SUCCESSORS AND ASSIGNS, AND ALL PERSONS, FIRMS, CORPORATIONS AND ORGANIZATIONS
IN ITS BEHALF (COLLECTIVELY, THE “RELEASED PARTIES”) FROM ANY AND ALL CLAIMS
(“CLAIMS”) THAT IT MAY NOW HAVE OR HEREAFTER ACQUIRE AGAINST ANY OF THE RELEASED
PARTIES FOR ANY COSTS, LOSS, LIABILITY, DAMAGE, EXPENSES, DEMAND, ACTION OR
CAUSE OF ACTION ARISING FROM OR RELATED TO ANY MATTERS AFFECTING THE PROPERTY,
OR ANY PORTION THEREOF. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN,
PURCHASER HEREBY AGREES NOT TO ASSERT ANY CLAIMS, FOR DAMAGE, LOSS,
COMPENSATION, CONTRIBUTION, COST RECOVERY OR OTHERWISE, AGAINST SELLER OR ANY OF
THE RELEASED PARTIES, WHETHER UNDER ANY STATUTORY, INCLUDING WITHOUT LIMITATION
UNDER ANY PROVISION OF FEDERAL, STATE OR LOCAL LAW, CONTRACTUAL, COMMON LAW,
EQUITABLE OR OTHER THEORY OF LAW, INCLUDING WITHOUT LIMITATION, TORT LAW CLAIMS
AND HEALTH AND MEDICAL CLAIMS ARISING FROM OR IN CONNECTION WITH (I) THE
CONDITION OF THE PROPERTY OR ANY PORTION THEREOF, INCLUDING, WITHOUT LIMITATION,
(A) THE EXISTENCE OF ASBESTOS OR OTHER HAZARDOUS MATERIALS ON, OR ENVIRONMENTAL
CONDITIONS PERTAINING TO, THE PROPERTY OR ANY PORTION THEREOF, OR MATTERS
ARISING UNDER LAW, OR RELATING IN ANY WAY TO THE QUALITY OF THE INDOOR OR
OUTDOOR ENVIRONMENT AT THE PROPERTY OR ANY PORTION THEREOF, (B) ANY LATENT OR
PATENT CONSTRUCTION DEFECTS OR OTHER LATENT OR PATENT DEFECTS IN OR TO THE
IMPROVEMENTS, (C) CLAIMS RELATING TO MOLD, FUNGUS, BACTERIA AND/OR OTHER
BIOLOGICAL GROWTH OR BIOLOGICAL GROWTH FACTORS, OR ANY OTHER TYPE OF INDOOR
CONTAMINANTS THAT MAY EXIST ON THE PROPERTY, (D) CLAIMS ATTRIBUTABLE TO INDOOR
AIR QUALITY ISSUES, RELEASES FROM BUILDING MATERIAL AND FURNISHINGS, RELEASES
FROM CLEANING, REPAIRING, OR DECORATING ACTIVITIES, AND THE OPERATING OF HEATING
AND COOLING SYSTEMS AND HUMIDIFIERS, OR (II) ANY ACTS, OCCURRENCES OR MATTERS OF
WHATEVER KIND OR NATURE IN ANY WAY RELATED TO THE PROPERTY OR ANY PORTION
THEREOF. THIS RELEASE INCLUDES CLAIMS OF WHICH PURCHASER IS PRESENTLY UNAWARE OR
WHICH PURCHASER DOES NOT PRESENTLY SUSPECT TO EXIST WHICH, IF KNOWN BY
PURCHASER, WOULD MATERIALLY AFFECT PURCHASER’S RELEASE TO SELLER. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, PURCHASER EXPRESSLY WAIVES ANY AND ALL
RIGHTS CONFERRED UPON IT BY ANY STATUTE OR RULE OF LAW WHICH PROVIDES

 

-21-

--------------------------------------------------------------------------------

THAT A RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CLAIMANT DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE RELEASED
PARTY, AND PURCHASER HEREBY WAIVES ANY AND ALL RIGHTS AND BENEFITS WHICH IT NOW
HAS, OR IN THE FUTURE MAY HAVE, CONFERRED UPON PURCHASER BY VIRTUE OF THE
PROVISIONS OF SECTION 1542 OF THE CALIFORNIA CIVIL CODE, WHICH PROVIDES:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
EXPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN TO HIM MUST HAVE MATERIALLY AFFECTED THE SETTLEMENT WITH THE DEBTOR.”

IN THIS CONNECTION AND TO THE FULLEST EXTENT PERMITTED BY LAW, PURCHASER HEREBY
AGREES, REPRESENTS AND WARRANTS THAT PURCHASER REALIZES AND ACKNOWLEDGES THAT
FACTUAL MATTERS NOW UNKNOWN TO IT MAY HAVE GIVEN OR MAY HEREAFTER GIVE RISE TO
CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES, COSTS, LOSSES
AND EXPENSES WHICH ARE PRESENTLY UNKNOWN, UNANTICIPATED AND UNSUSPECTED, AND
PURCHASER FURTHER AGREES, REPRESENTS AND WARRANTS THAT THE WAIVERS AND RELEASES
HEREIN HAVE BEEN NEGOTIATED AND AGREED UPON IN LIGHT OF THAT REALIZATION AND
THAT PURCHASER NEVERTHELESS HEREBY INTENDS TO RELEASE, DISCHARGE AND ACQUIT
SELLER FROM ANY SUCH UNKNOWN CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS,
CONTROVERSIES, DAMAGES, COSTS, LOSSES AND EXPENSES.

SELLER HAS GIVEN PURCHASER MATERIAL CONCESSIONS REGARDING THIS TRANSACTION IN
EXCHANGE FOR PURCHASER AGREEING TO THE PROVISIONS OF THIS SECTION 11(C). SELLER
AND PURCHASER HAVE EACH INITIALED THIS SECTION 11(C) TO FURTHER INDICATE THEIR
AWARENESS AND ACCEPTANCE OF EACH AND EVERY PROVISION HEREOF.

 

 

  

 

SELLER’S INITIALS    PURCHASER’S INITIALS

12. Seller’s Representations and Warranties.

(a) As an inducement to Purchaser to enter into this Agreement and to consummate
the transactions contemplated herein, Seller represents and warrants to
Purchaser as of the date hereof and as of the Closing Date as follows:

(i) Organization. Seller is a limited liability company duly organized, validly
existing in good standing in the state of its formation and is authorized to do
business in the state in which the Resort is located.

 

-22-

--------------------------------------------------------------------------------

(ii) Power and Authority of Seller. Except with respect to any consent which may
be required in connection with the assignment of any Contract pursuant to the
terms and conditions hereof, Seller has the requisite right, power and authority
to sell, convey and transfer the Property to Purchaser, as provided herein, and
to enter into and carry out the terms of this Agreement and the execution and
delivery hereof and of all other instruments referred to herein. All proceedings
required to be taken by or on behalf of Seller to authorize it to make, deliver
and carry out the terms of this Agreement have been duly and properly taken. No
further consent of any person or entity is required in connection with the
execution and delivery of, or performance by, Seller of its obligations under
this Agreement.

(iii) Validity of Agreement. This Agreement executed by Seller constitutes, and
all other documents required by this Agreement to be executed by Seller shall
constitute when so executed, the valid and binding obligation of Seller,
enforceable against Seller in accordance with their respective terms. The
persons executing this Agreement on behalf of Seller have the authority to do
so.

(iv) Seller Non-Contravention. The execution and delivery of, and the
performance by Seller of its obligations under, this Agreement do not and will
not contravene, or constitute a default under, (1) its limited liability company
agreement or other organizational documents, (2) any material agreement (subject
to obtaining any required consents under the Contracts assumed by Purchaser), or
(3) any judgment, injunction, order, decree or other material instrument to
which it is a party or otherwise binding upon it or result in the creation of
any lien, encumbrance, security interest, charge or mortgage of any nature (a
“Lien”) on any asset of Seller. Other than in connection with approvals required
pursuant to a Monetary Title Encumbrance which will be covered by a Monetary
Encumbrance Release at Closing, no consent or approval of any Person is required
for the execution, delivery and performance by Seller of this Agreement.

(v) Non-Foreign Status. Seller is not a “foreign person” as defined in
Section 1445(f)(3) of the Internal Revenue Code.

(vi) Compliance with Existing Laws. To Seller’s knowledge, Seller has not
received from any federal, state, county, municipal or other government or any
governmental or quasi-governmental agency, department, commission, court, board,
bureau, officer or instrumentality, foreign or domestic, or any of them (a
“Governmental Authority”) written notice (1) of any violation of any material
provision of any Law with respect to the ownership, operation, use, maintenance
or condition of the Property which violation has not been remedied, or (2) that
Seller lacks any permit, license, certificate or authority necessary for the
present use and occupancy of the Resort which has not been obtained.

 

-23-

--------------------------------------------------------------------------------

(vii) Contracts.

(i) There are no leases, contracts or agreements that Seller, and/or Manager on
behalf of Seller, has entered into that will affect the Property following the
Closing Date, except (a) the Contracts set forth on Schedule 1(a)(vi),
(b) Contracts entered into after the Effective Date in accordance with this
Agreement by Seller or Manager in the ordinary course of business, (c) such
contracts for the rental of a Hotel room, suite, banquet or meeting room or
convention facilities in the ordinary course of business, (d) such contracts, if
any, that appear in the title exceptions set forth in the Tile Commitment other
than title exceptions set forth in Exceptions Nos. 39 through 44 thereof,
(e) such contracts that constitute a purchase order for any Inventory in the
ordinary course of business, and (f) such contracts that are entered into in the
ordinary course and terminable by Purchaser with 90 days or less prior notice.
To Seller’s knowledge, each Contract is in full force and effect, and, there are
no defaults or events that, with notice or lapse of time or both, that
constitute a default by Seller under such Contracts and, to Seller’s knowledge,
by any other party thereto.

(ii) Except as set forth on Schedule 1(a)(vi), to Seller’s knowledge, (i) there
are no leases, concessions or occupancy agreements in effect with respect to the
Real Property other than those provided to Purchaser as part of the Property
Information; (ii) no tenant or concessionaire is entitled to any rebates,
allowances, free rent or rent abatement for any period after the Closing of the
transaction contemplated hereby, and no rent has been prepaid thereunder for any
period longer than one month in advance (other than as security for the first or
last month’s rent); (iii) Seller has not received written notice of any
intention by any of the parties to any Contracts listed on Schedule 1(a)(vi) to
cancel the same nor has Seller canceled any of same; and (iv) to the extent that
any of the Contracts listed on Schedule 1(a)(vi) calls for security, such
security has not been applied towards any payment due under said Contract.

(viii) Taxes. To Seller’s knowledge, Seller has not received any written notice
of any proposed special Taxes or assessments relating to the Property or any
part thereof or any planned public improvements that will result in a special
Tax or assessment against the Property or any portion thereof; and except as
otherwise set forth on Schedule 11(a)(viii), there are no pending ad valorem
property tax appeals that have been filed by Seller or Manager with respect to
the Property.

(ix) Insurance. Schedule 11(a)(ix) is a true, correct and complete list of the
insurance policies maintained by Seller (or its parent or affiliates on Seller’s
behalf) for the Property. Such policies are blanket coverage policies that also
insure numerous other properties owned by affiliates of Seller. To Seller’s
knowledge, Seller has not received written notice from any insurance company
that (a) any such insurance policy has been terminated or (b) Seller or any
person has failed to comply with any material requirements thereof which failure
has not been remedied. Seller has disclosed, and Purchaser acknowledges and
understands, that some or all of the insurance policies listed on Schedule
11(a)(ix) will terminate on or about June 30, 2006, and that Seller will
thereafter insure the Property under different policies with coverage types and
amounts that are consistent with the insurance coverage types and amounts that
then insure similarly situated properties of similar type, size and nature as
the Resort Property owned by affiliates of Seller.

 

-24-

--------------------------------------------------------------------------------

(x) Condemnation Proceedings; Roadways. To Seller’s knowledge, except as set
forth on Schedule 11(a)(x) hereto, Seller has not received written notice of
(a) any pending or threatened condemnation, expropriation, eminent domain or
similar proceeding against all or any part of the Property, nor (b) any plan to
close, relocate, widen, repave or reconfigure any public or private street,
alley, highway or other roadway adjacent to the Property, or any turn lane,
median break, curb cut or other vehicular access point through which ingress or
egress to or from the Property is gained from any such roadway.

(xi) Actions or Proceedings. To Seller’s knowledge, except as set forth on
Schedule 11(a)(xi), Seller has not received written notice of any suit or
proceeding pending or threatened in any court, before any arbitrator, or before
or by any Governmental Authority which (a) in any manner raises any question
affecting the validity or enforceability of this Agreement or any other material
agreement or instrument to which any Seller is a party or by which it or the
Property is bound and that is or is to be used in connection with, or is
contemplated by, this Agreement, or (b) would materially and adversely affect
the ability of Seller to perform its obligations under this Agreement or under
any document to be delivered pursuant hereto.

(xii) Environmental. To Seller’s knowledge, Seller has not received written
notice from any Governmental Authority (1) of any pending proceeding or
investigation concerning any alleged or suspected violation of Laws regarding
the use, storage, transportation, release or disposal of Hazardous Materials
(“Environmental Laws”) or (2) of any alleged violation of Environmental Laws at
the Property that remains uncured. Neither Seller nor Manager has installed, nor
are there currently in use at the Property, any underground storage tanks.
“Hazardous Materials” shall mean any chemical substance (a) which is defined as
a “hazardous substance,” “hazardous waste,” “hazardous material,” “pollutant,”
“contaminant” or “toxic,” “explosive,” “corrosive,” “flammable,” “infectious,”
“radioactive,” “carcinogenic,” or “mutagenic” material under any Laws regarding
the protection of human health or the environment from such chemical substances;
(b) diesel fuel or other petroleum hydrocarbons; (c) asbestos or
asbestos-containing materials or urea formaldehyde foam insulation,
(d) polychlorinated biphenyls, or (e) radon gas. Hazardous Materials shall not
include substances of kinds and in amounts ordinarily and customarily used or
stored in properties similar to the Resort for the purposes of cleaning, dry
cleaning, and other maintenance or operations and otherwise in substantial
compliance with Laws. As further detailed in Section 11, Seller has disclosed to
Purchaser that asbestos exists within the Real Property and Seller has made no
representations or warranties regarding any matter related to such asbestos.

(xiii) Labor. None of the employees of the Resort are covered by a collective
bargaining agreement or within any bargaining unit certified under the National
Labor Relations Act or any similar state law, statute, rule, ordinance or
regulation (a “Law”).

(xiv) Bankruptcy. Seller is not subject to any pending, or to the knowledge of
Seller, threatened bankruptcy proceeding, receivership proceeding or other
insolvency, dissolution, reorganization or similar proceeding.

 

-25-

--------------------------------------------------------------------------------

(xv) No Options. Seller has not entered into any outstanding agreements (written
or oral) agreeing to sell, lease all or substantially all, or granting an option
or right of first refusal to purchase or lease all or any part of the Property.

(xvi) Title to Personal and Intangible Property. Seller has not placed any liens
on the Personal or Intangible Property and will transfer whatever title it has,
if any, in such Property to Purchaser at Closing. No liens placed on such
Property by Seller will be in effect as of the Closing Date.

The foregoing representations and warranties of Seller made in this Agreement
shall not merge into any instrument or conveyance delivered at the Closing, but
shall survive the Closing for a period of twelve (12) months. Each of the
representations and warranties contained in this Section 12 is intended for the
benefit of Purchaser and may be waived in whole or in part, in writing, by
Purchaser. Seller has delivered or made available, or will deliver or make
available, the Property Information to Purchaser, and, by accepting the Deed,
Purchaser acknowledges its receipt and acceptance or the availability to it
thereof and that Purchaser has reviewed the same to its satisfaction. To the
extent that the Property Information furnished or made available to Purchaser,
or Property Information or other information otherwise obtained by Purchaser,
prior to the Effective Date contains provisions or information that are
inconsistent with the foregoing representations and warranties, and Purchaser or
Purchaser’s affiliates’, respective principals, directors, officers, employees,
attorneys, independent contractors, or other representatives has actual
knowledge of such inconsistency as of the Close of Escrow, then such
representations and warranties shall be deemed modified to the extent necessary
to eliminate such inconsistency and to conform such representations and
warranties to such Property Information or other information. In any instance
where Purchaser’s actual knowledge is at issue under this Agreement, Seller
shall bear the burden of proving in any particular instance that Purchaser had
the actual knowledge at issue. Each of the representations and warranties
contained in this Section 12 shall be deemed made as of the Effective Date, and
remade as of the Closing Date. As used in this Agreement, the words “Seller’s
knowledge” or words of similar import shall be deemed to mean, and shall be
limited to, the actual (as distinguished from implied, imputed or constructive)
knowledge of Seller after, and based solely upon the actual knowledge of Paula
Maggio (General Counsel), Richard Moraeu (Executive Vice President – Asset
Management) and Paul White (Vice President – Asset Management), without such
individual(s) (collectively the “Inquiry Individuals”) having any obligation to
make any independent inquiry or investigation. Purchaser acknowledges that the
Inquiry Individuals named solely for the purpose of defining and narrowing the
scope of Seller’s knowledge and not for the purpose of imposing any liability on
or creating any duties running from the Inquiry Individuals, or any of its
members, employees, officers, directors, partners, shareholders, fiduciaries,
representatives, agents, servants, attorneys, affiliates, parent, or
subsidiaries to Purchaser. Purchaser covenants that it will bring no action of
any kind against any of the Inquiry Individuals or Seller’s members, employees,
officers, directors, partners, shareholders, fiduciaries, representatives,
agents, servants, attorneys, affiliates, parent or subsidiaries related to or
arising out of the representations and warranties set forth in this Section 12.

 

-26-

--------------------------------------------------------------------------------

(b) Purchaser’s Remedies For Seller’s Breach of Representations and Warranties.

(i) Pre-Closing Remedies. If prior to the Closing, (A) Purchaser shall become
aware (whether through its own efforts, by notice from Seller or otherwise) that
any of the representations or warranties made herein by Seller are untrue,
inaccurate or incorrect and shall promptly give Seller notice thereof prior to
the Closing, or (B) Seller shall notify Purchaser that a representation or
warranty made herein by Seller is untrue, inaccurate or incorrect, then Seller
may, at its election exercised in its sole discretion with no obligation to do
so, attempt to cure the applicable breach within the lesser of (i) the time
remaining between the date on which Seller receives such notice or discovers the
applicable breach and the Closing Date, and (ii) thirty (30) days. If Seller
elects not to cure such breach, or attempts but fails to cure any such breach
within the applicable time period, for any reason, and Purchaser would suffer
damages as a result thereof, then the provisions of Section 16 from and after
the second sentence thereof shall apply.

(ii) Post-Closing Remedies. Notwithstanding anything to the contrary contained
in this Agreement, in the event the Closing occurs, Purchaser hereby expressly
waives, relinquishes and releases any right or remedy available to it at law, in
equity or under this Agreement to make a claim against Seller for damages that
Purchaser may incur, or to rescind this Agreement and the transactions
contemplated hereby, as the result of any of Seller’s representations or
warranties being untrue, inaccurate or incorrect if (1) Purchaser actually knew
that such representation or warranty was untrue, inaccurate or incorrect at the
time of the Closing and Purchaser nevertheless Closes, or (2) Purchaser’s
damages as a result of such representations or warranties being untrue,
inaccurate or incorrect are, together with all other damages for defaults of
Seller under this Agreement claimed by Purchaser under Section 16(a), in the
aggregate (not on a per-claim basis), less than Five Hundred Sixty Thousand
Dollars ($560,000). Purchaser shall be deemed to have actual knowledge that a
representation or warranty was untrue, inaccurate or incorrect at the time of
the Closing to the extent that any of Purchaser’s, or Purchaser’s affiliates’,
respective principals, directors, officers, employees, attorneys, independent
contractors, or other representatives has actual knowledge of any facts or
circumstances, whether obtained from Property Information, other information
furnished or made available to or otherwise obtained by Purchaser, of any
information which is inconsistent with such representation or warranty.
Purchaser’s right to recover damages for any cause of action arising, directly
or indirectly, out of (a) Seller’s breach of any representations or warranties
or any other provision of this Agreement, (b) together with all other damages
for defaults of Seller under this Agreement claimed by Purchaser under
Section 16(a), and (c) any other cause of action arising in connection with the
transactions contemplated under any other provision of this Agreement, in excess
of Five Hundred Sixty Thousand Dollars ($560,000) shall be subject to
Section 16. In any instance where Purchaser’s actual knowledge is at issue under
this Agreement, Seller shall bear the burden of proving in any particular
instance that Purchaser had the actual knowledge at issue.

Notwithstanding anything to the contrary in this Section 12(h)(ii), Seller’s
liability under this Section 12 shall be in addition to, and not exclusive of or
limited by, any other liability that such party may have at law or equity to the
extent based on such party’s fraudulent acts or omissions. To the fullest extent
allowed by applicable law, Purchaser hereby waives any right that it may have to
file any claim based upon the fraudulent acts or omissions of Seller after the
date that is twelve (12) months after the Closing.

 

-27-

--------------------------------------------------------------------------------

13. Purchaser’s Representations and Warranties. As an inducement to Seller to
enter into this Agreement and to consummate the transactions contemplated
herein, Purchaser represents and warrants to Seller as of the date hereof and as
of the Closing as follows:

(a) Power and Authority of Purchaser. Purchaser is a limited liability company
duly organized and validly existing in good standing in the state of its
formation and is authorized to do business in the state in which the Hotel is
located. Purchaser has the requisite right, power and authority to purchase the
Property from Seller, as provided herein, and to enter into and carry out the
terms of this Agreement and the execution and delivery hereof and of all other
instruments referred to herein. All proceedings required to be taken by or on
behalf of Purchaser to authorize it to make, deliver and carry out the terms of
this Agreement have been duly and properly taken. No further consent of any
person or entity is required in connection with the execution and delivery of,
or performance by, Purchaser of its obligations under this Agreement.

(b) Validity of Agreement. This Agreement executed by Purchaser constitutes, and
all other documents required by this Agreement to be executed, by Purchaser
shall so constitute when so executed the valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with their respective
terms. The persons executing this Agreement on behalf of Purchaser has the
authority to do so.

(c) Purchaser Non-Contravention. The execution and delivery of, and the
performance by Purchaser of its obligations under, this Agreement do not and
will not contravene, or constitute a default under, (1) its limited liability
company agreement or other organizational documents, (2) any material agreement
(subject to obtaining any required consents under the Assumed Contracts), or
(3) any judgment, injunction, order, decree or other material instrument to
which it is a party or otherwise binding upon it or result in the creation of
any Lien on any asset of Purchaser. No consent or approval of any Person is
required for the execution, delivery and performance by Purchaser of this
Agreement.

(d) Bankruptcy. Purchase is not subject to any pending, or to the knowledge of
Purchaser, threatened bankruptcy proceeding, receivership proceeding or other
insolvency, resolution, reorganization or similar proceeding.

(e) Litigation. There is no action, suit or proceeding, pending or known to be
threatened, against or affecting Purchaser in any court or before any arbitrator
or before any governmental authority that (i) in any manner raises any question
affecting the validity or enforceability of this Agreement or any other
agreement or instrument to which Purchaser is a party or by which it is bound
and that is to be used in connection with, or is contemplated by, this Agreement
(ii) would materially and adversely affect the business, financial position or
results of operations of Purchaser, or (iii) would materially and adversely
affect the ability of Purchaser to perform its obligations under this Agreement
or under any document to be delivered pursuant hereto.

 

-28-

--------------------------------------------------------------------------------

(f) Financing. Purchaser shall have at the Closing sufficient funds to permit
Purchaser to consummate the transaction contemplated by this Agreement. The
parties acknowledge and agree that it shall not be a condition to the
obligations of Purchaser to consummate the transaction contemplated hereby that
Purchaser have sufficient funds for payment of the Purchase Price and any
Closing or post Closing adjustments thereto.

(g) Non-contravention. The execution and delivery of this Agreement and the
performance by Purchaser of its obligations hereunder do not and will not
contravene, constitute a default under, any provisions of applicable law,
Purchaser’s organizational documents, or any agreement, judgment, injunction,
order, decree or other instrument binding upon Purchaser or result in the
creation of any lien on any asset of Purchaser.

14. Covenants of Seller and Purchaser. Seller shall comply with the respective
covenants of Seller set forth below; and Purchaser shall comply with the
respective covenants of Purchaser set forth below.

(a) Exclusivity. Prior to the Closing Date, Seller shall not, directly or
indirectly through any officer, director, employee, member, agent, partner,
affiliate or otherwise (i) enter into any agreement, agreement in principle or
other commitment (whether or not legally binding) relating to any business
combination with, recapitalization of, or acquisition or purchase of all or a
significant portion of the assets of, or any material equity interest in, Seller
or relating to any other similar transaction (a “Competing Transaction”);
(ii) solicit, initiate or encourage the submission of any proposal or offer from
any person or entity (including any of its officers, directors, employees and
agents) relating to any Competing Transaction, or (iii) participate in any
discussions or negotiations regarding, furnish to any other person or entity any
information with respect to, or otherwise cooperate with, assist, participate
in, facilitate or encourage, any effort or attempt by any person or entity to
effect a Competing Transaction.

(b) Filings; Applications. Where applicable, Seller and Purchaser shall promptly
prepare or cause to be prepared and submit all filings and applications, and pay
all fees and make all deposits required to consummate the Closing, on or before
the Closing Date, and reasonably conduct negotiations with governmental
agencies, and reasonably participate in all hearings before such agencies, in
connection with the transactions contemplated by this Agreement, including but
not limited to filings required in connection with workers’ taxes and benefits,
sales tax resale certificate and other matters relating to the operation of the
Resort.

(c) Insurance. Seller shall pay all premiums on, and not cancel or voluntarily
allow to expire prior to on or about June 29, 2006, any Insurance Policies
unless such policy is replaced, without any lapse of coverage, by another policy
or policies providing coverage (but only to the extent deemed commercially
reasonable by Seller in good faith) at least as extensive as the policy or
policies being replaced. On or about June 29, 2006, the Insurance Policies will
terminate and Seller will thereafter insure the Property under different
policies with coverage types and amounts that are consistent with the insurance
coverage types and amounts that then insure similarly situated properties of
similar type, size and nature as the Resort Property owned by affiliates of
Seller. Following the execution of this Agreement, Seller shall use commercially
reasonable efforts to name Purchaser as an additional insured on Seller’s or its
affiliates’ insurance policies solely with respect to the Resort and solely to
the extent necessary so that

 

-29-

--------------------------------------------------------------------------------

Purchaser shall have the right to receive any proceeds of insurance, including
business interruption insurance, for any event for which Purchaser is entitled
to receive the proceeds of any such insurance policies under Section 15;
provided, however, that Purchaser shall not be so named an additional insured if
doing so increases the costs of such insurance for Seller or its affiliates or
adversely affects such policies or Seller. Seller makes no representation or
warranty regarding whether Purchaser can be added to Seller’s insurance policies
in the foregoing manner.

(d) Operation of Resort Prior to Closing. Subject to the Existing Management
Agreement, between the Effective Date and the Closing Date:

(i) Seller shall use commercially reasonable efforts to cause Manager (to the
extent such matters are within the scope of Manager’s duties under the Existing
Management Agreement), to operate (including with respect to the execution of
contracts) and maintain, but not repair or replace, the Resort in substantially
the same manner in which it operated and maintained the Resort as of the
Effective Date.

(ii) Seller shall use commercially reasonable efforts to cause Manager (to the
extent such matters are within the scope of Manager’s duties under the Existing
Management Agreement) to continue to take, guest room reservations and to book
functions and meetings and otherwise to promote the business of the Resort in
generally the same manner as it did as of the Effective Date; and to cause all
Advance Bookings to be booked at rates, prices and charges customarily charged
by Seller or Manager, as applicable, for such purposes in the ordinary course of
business of the Resort consistent with past practices.

(iii) Seller shall use commercially reasonable efforts to cause Manager to
refrain, from removing or causing or permitting to be removed from the Resort
any part or portion of the Improvements or the Personal Property owned by
Seller, other than in the normal course of business consistent with past
practices, without the prior written consent of Purchaser which consent shall
not be unreasonably withheld, conditioned or delayed, unless the same is no
longer needed or useful or the same is replaced, prior to Closing, with similar
items of at least equal suitability, quality and value, free and clear of any
Liens, except Monetary Title Encumbrances to be released at Closing.

(iv) Seller shall cause the Manager to, or to the extent Manager refuses to do
so Seller shall, promptly deliver to Purchaser copies of all reports generated
by the Manager on a weekly, monthly or longer periodic basis showing the revenue
and expenses of the Resort and all departments thereof, together with such
periodic information with respect to room reservations and other bookings, as is
customarily kept or received internally. Manager shall not deliver any reports
that may be delivered by Manager to Seller more frequently than on a weekly
basis.

(e) Lots 18 and 22. Seller’s legal counsel, Shepard Mullin Richter and Hampton,
has informed Seller that under that certain Assignment and Amendment of Real
Estate Lease (“Assignment and Amendment”), dated (by last affixed signature)
May 31, 1988, by and among Marriott Corporation, a Delaware corporation, William
Bone, an individual, Rancho Las Palmas Association, Inc., a California
corporation, and Equitable Life Assurance Society of

 

-30-

--------------------------------------------------------------------------------

the United States, a New York corporation, Seller is required to transfer Lots
18 and 22 of the Land (collectively, “Lots 18 and 22”) to the homeowners’
association of the Resort (the “HOA”). Purchaser acknowledges that this transfer
requires city approvals and other necessary steps that are not completed as of
the Effective Date. From and after the Effective Date, Seller shall stop all
work related to the transfer of Lots 18 and 22 to the HOA. Concurrently with the
Close of Escrow, (a) Seller shall have delivered to Purchaser copies of all
documents in Seller’s possession related to such transfer of Lots 18 and 22 that
have been prepared to date (each a “Transfer Documentation”), and (b) Purchaser,
concurrently with and conditioned upon, the Close of Escrow, hereby assumes all
obligations of Seller to transfer Lots 18 and 22 to the HOA under the Assignment
and Amendment, any other applicable documents, if any, and applicable law. After
the Close of Escrow, Purchaser shall complete such transfer to the HOA at its
sole cost and expense. Purchaser shall have no obligation to reimburse Seller
for the costs incurred by Seller through the Effective Date in connection with
the pending transfer of Lots 18 and 22. Purchaser shall indemnify and hold
harmless Seller and its principals, officers, directors, employees, agents,
contractors, and other representatives from and against any loss, damage, cost
(including without limitation attorneys fees) or liabilities incurred by any of
them caused by Purchaser’s failure to complete the transfer of Lots 18 or 22 to
the HOA in accordance with applicable contracts, agreements or other documents,
and/or applicable law. This Section 14(e) shall survive the Close of Escrow.

(f) Material Claims. Seller shall promptly advise Purchaser of any material
claim, action, suit, arbitration, inquiry, or proceeding by or on behalf of any
Person or any claim, suit, arbitration, inquiry, proceeding or investigation by
or before any Governmental Authority (an “Action”) concerning or affecting the
Resort of which it obtains knowledge after the Effective Date.

(g) Liquor Licenses. Prior to the Close of Escrow, Seller shall execute any
documents reasonably required by the California Alcoholic Beverage Control Board
in connection with (i) the transfer of any liquor license to Purchaser, or
(ii) Purchaser’s attempts to obtain a newly issued temporary and/or permanent
liquor license, so long as in doing so Seller does not incur any cost and or any
liability or potential liability. Purchaser shall remain obligated to perform
its obligations under this Agreement, including, without limitation, its
obligation to acquire the Property, regardless of whether or not Purchaser
obtains the liquor license at or prior to Closing.

(h) Guest Baggage. Any baggage or other property of departed guests held by
Seller may be left at the Hotel for a period not to exceed ninety (90) days
following the Closing Date. At any time during such period, all such baggage or
property will, at the option of Seller, be removed by Seller and disposed of by
Seller or abandoned by Seller, in which case Purchaser shall dispose of such
baggage in any manner deemed appropriate by Purchaser. Seller shall indemnify,
defend and hold Purchaser harmless from and against all claims, losses, costs
(including reasonable attorney’s fees) and liabilities in connection with the
holding of such baggage or other property for the period occurring prior to the
Closing Date and the disposal of same by Seller. Purchaser shall indemnify,
defend and hold Seller and the other Seller Parties harmless from and against
all claims, losses, costs (including reasonable attorney’s fees) and liabilities
in connection with the holding of such baggage or other property for the period
occurring on or after the Closing Date and disposal of the same by Purchaser.
This Subsection 14(h) shall survive the Close of Escrow.

 

-31-

--------------------------------------------------------------------------------

(i) Safe Deposit Boxes. Seller shall indemnify defend and hold Purchaser
harmless from and against any losses, damages, costs (including reasonable
attorneys fees) and liabilities or responsibilities for any claims relating to
items deposited in safety deposit boxes prior to the Close of Escrow for which
any disappearance, theft or other loss of property is alleged by the depositor
to have occurred at or prior the Close of Escrow. Purchaser shall indemnify
defend and hold Seller and the other Released Parties harmless from and against
any losses, damages, costs (including reasonable attorneys fees) and liabilities
or responsibilities for items deposited in safety deposit boxes prior to or from
and after the Close of Escrow for which any disappearance, theft or other loss
of property is alleged by the depositor thereof to have occurred on and after
the Close of Escrow. This Subsection 14(i) shall survive the Close of Escrow.

(j) Employees.

(i) Termination of Employees / Rehiring. Seller shall direct Manager to
terminate the employment of all employees of the Resort (the “Resort Employees”)
as of the Closing Date, and Purchaser may offer employment to some or all of
such employees. Purchaser shall be responsible for paying any and all severance
costs for all Resort Employees who are not hired by Purchaser, excluding
temporary employees.

(ii) Delivery of Layoff Notice to Employees. The parties agree that promptly
(but in any event no later than May 8, 2006) following the Effective Date,
Seller shall direct Manager to provide all Resort Employees with notices as
required under the Worker Adjustment and Retraining Act, 29 USC §2101 et seq.,
or any similar state or local law (collectively, “WARN Act”).

(iii) Credit for Payment by Purchaser. Solely for the purposes of determining
the reduction of Seller’s liability pursuant to 29 U.S.C. § 2104(a)(2), but for
no other purpose, Purchaser’s payment of wages, benefits and other compensation
to Resort Employees during any period of time shall be deemed to have been paid
by Seller also.

The provisions of this Section 14(j) shall survive the Close of Escrow for a
period of twelve (12) months.

(k) Repairs and Improvements. Seller shall use commercially reasonable efforts
to complete, or provide for the completion of, by the Closing Date (a) the
repair of the roofs on eleven (11) buildings on the Property to the extent
reasonably allowed for an aggregate cost not to exceed Four Hundred Thirty-Two
Thousand Dollars ($432,000), (b) the replacement of certain ballroom carpeting
in the Resort, to the extent reasonably allowed for an aggregate cost not to
exceed One Hundred Ten Thousand Dollars ($110,000), and (c) the establishment of
a golf course irrigation lake on the Real Property, to the extent reasonably
allowed for an aggregate cost not to exceed One Hundred Twenty-Nine Thousand
Dollars ($129,000), all in accordance with the scope of work described in
Exhibit H attached to this Agreement and the

 

-32-

--------------------------------------------------------------------------------

contracts entered into prior to, on or after the Effective Date between Seller
and/or its affiliates and the contractors performing such works of improvements
(collectively, the “Capital Improvements Contracts”). If the cost of completion
of any of the work of improvements described in preceding clauses (a), (b) or
(c) is specified in the applicable Capital Improvements Contract to be in excess
of the cap amounts set forth above, then Purchaser shall be given a copy thereof
and reasonable time (not to exceed two (2) business days) to comment on such
contract prior to execution thereof by Seller; provided, however, that although
Seller shall consider Purchaser’s comments and, so long as they do not expose
Seller to additional cost or liability, attempt to negotiate those comments that
are reasonably approved by Seller into the final Capital Improvement Contract,
in the event that such comments are not in the final applicable contract,
Purchaser’s obligations under this Section 14(k) shall remain unchanged. In the
event that all or any portion of the work of improvements described in the
preceding clauses (a), (b) or (c) is not completed prior to the Closing Date in
accordance with such scope of work or the Capital Improvements Contracts, then
Seller shall credit Purchaser against the Purchase Price with an amount equal to
the actual costs remaining to complete the remaining portions of such work of
improvement up to but, not in excess of, the difference between the cap-amounts
referenced above for each such work of improvement less the costs incurred by
Seller through the Closing Date for each such work of improvement. The Closing
shall occur notwithstanding the fact that any portion of any such works of
improvement are not completed prior to the Closing Date and Seller shall
thereafter be relieved from any and all obligation to complete such works of
improvement. In the event that the actual amounts required to complete the scope
of work described in the Capital Improvements Contracts are in excess of the
cap-amounts set forth in clauses (a), (b) and (c) above for any or all such
projects, then, at Closing, Purchaser shall reimburse Seller such excess amount
to the extent Seller actually incurred such excess costs prior to Closing and
Purchaser shall assume the obligation to pay the excess costs to the extent
Seller has not actually incurred such excess costs as of such date. At Closing,
Seller shall assign to Purchaser all warranties and, if any work remains to be
completed after Closing, Seller shall assign its rights under the Capital
Improvements Contracts, and, in the event of an assignment of such Capital
Improvements Contracts to Purchaser, Purchaser shall assume all obligations of
Seller arising thereunder from and after the Closing Date (except for the
obligation to pay any amounts in excess of the cap amounts listed above to the
extent required under the Capital Improvements Contracts which obligations
Purchaser shall assume regardless of whether they arise prior to, on or after
Closing), all in accordance with the Assignment and Assumption of Contracts;
provided, however, that, notwithstanding anything set forth in Exhibit H that
may be construed to the contrary, in no event shall Seller be liable for any
defects, failure of contractors to follow the scope of work as described in
Exhibit H or perform in accordance with any Capital Improvements Contracts, or
any other adverse matters associated with any of the work described in Exhibit
H. Purchaser’s acceptance of the Deed shall be deemed conclusive evidence that
Purchaser waives any rights and claims against Seller in connection with such
work and that the releases set forth in Section 11(c) above apply to any claims
against Seller or any other Released Parties arising out of such work at any
time. Seller makes no representations or warranties regarding any aspect or
matter related to any portion of the works of improvements described in Exhibit
H or the Capital Improvements Contracts that are performed by Seller or its
agents or contractors. In the event of any conflict between the terms of the
Assignment and Assumption of Contracts and this Section 14(k), the terms of this
Section 14(k) shall control.

 

-33-

--------------------------------------------------------------------------------

(l) Assignment and Assumption of Contracts. All Contracts shall be assigned to
and assumed by Purchaser at the Close of Escrow pursuant to an Assignment and
Assumption of Contracts in the form attached to this Agreement as Exhibit B, and
Purchaser agrees to assume the liabilities and obligations arising under such
Contracts to the extent such liabilities and obligations arise or are incurred
and are first required to be performed on and after the Closing Date (or
Purchaser obtains a credit to the Purchase price as of the Closing), except in
the case of amounts due under the Capital Improvements Contracts in excess of
the cap amounts set forth in Section 14(k), which excess amounts, if any, shall
be paid by Purchaser regardless of whether they accrue prior to, on or after
Closing. Purchaser has accepted all Contracts, and, subject to the provisions
set forth below and in Section 1(a)(vi), Purchaser shall have no right to
disapprove any Contracts. If the assignment of any Contract to Purchaser,
regardless of whether such Contract was delivered to Purchaser prior to, on or
after the Effective Date, requires the consent of the other contracting party
and such other party disapproves the assignment to Purchaser or does not permit
Seller to be released from the obligations under such Contract, Seller shall
nevertheless assign the Contract to Purchaser under the Assignment and
Assumption of Contracts (as defined below) in which event such assignment shall
constitute an equitable assignment by Seller to Purchaser of all of Seller’s
rights, benefits, title and interest in and to the subject Contracts, and, under
the Assignment and Assumption of Contracts, Purchaser shall, as between
Purchaser and Seller, assume the obligations of Seller under such subject
Contract and indemnify and hold harmless Seller and the other Released Parties
(as defined below) from and against any loss, damage, cost (including without
limitation reasonable attorneys fees), or liability accruing or arising under or
from such subject Contract on or following the Close of Escrow or as a result of
the assignment of the subject Contract, except in the case of amounts due under
the Capital Improvements Contracts in excess of the cap amounts set forth in
Section 14(k), which excess amounts, if any, shall be paid by Purchaser
regardless of whether they accrue prior to, on or after Closing. Seller shall
pay all costs and expenses, if any, associated with the termination or
performance of any Unassignable Contracts and all contracts, agreements and
leases, not included in the defined term for Contracts, including, all costs and
expenses associated with terminating the Existing Management Agreement and any
other obligations of Seller or its affiliates to Marriott. In the event of any
conflict between the terms of the Assignment and Assumption of Contracts and
this Section 14(l), the terms of this Section 14(l) shall control.

(m) Estoppel. To the extent requested by Purchaser prior to Closing, Seller
deliver to the HOA an estoppel certificate in the form of Exhibit J attached
hereto to the HOA and will make reasonable inquires of the HOA requesting that
the HOA execute and return the estoppel certificate. In no event shall the
execution of the estoppel certificate by the HOA be a condition precedent to any
of Purchaser’s obligations hereunder, including, without limitation, any
Purchaser’s obligation to purchase the Property.

The provisions of this Section 14 (a) through (m) shall survive the Close of
Escrow.

15. Loss by Fire, Other Casualty or Condemnation.

(a) Material Damage. In the event that, prior to the Closing, the Property is
destroyed or materially damaged (as defined in Section 15(c) below) by casualty,
Purchaser shall have the right, exercisable by giving notice to Seller within
fifteen (15) days after receiving

 

-34-

--------------------------------------------------------------------------------

written notice of such casualty, either (i) to terminate this Agreement and
obtain a refund of the Deposit, in which case neither party shall have any
further rights or obligations hereunder other than those obligations that
expressly survive a termination of this Agreement and except that Purchaser and
Seller each shall be responsible for one-half (1/2) of any title or escrow
cancellation fee or (ii) to accept the Property in its then condition and to
proceed with the Closing with an abatement or reduction in the Purchase Price in
the amount of the deductible for the applicable insurance coverage, in which
case Purchaser shall be entitled to receive an assignment of all of Seller’s
rights to any insurance proceeds payable by reason of such damage or
destruction. If Purchaser elects to proceed under clause (ii) above, Seller
shall not compromise, settle or adjust any claims to such proceeds without
Purchaser’s prior written consent.

(b) Non-Material Damage. In the event that, prior to the Closing, there is any
non-material damage to the Property caused by casualty, Seller shall elect
either (i) to repair or replace such damage prior to the Closing and Purchaser
shall proceed with the Closing following completion of such repair or
replacement, or (ii) to proceed to Closing without repair or replacement of the
damage, in which case the Purchase Price shall be reduced by the amount of any
deductible for the applicable insurance coverage and Purchaser shall be entitled
to receive an assignment of all of Seller’s rights to any insurance proceeds
payable by reason of such damage or destruction; provided, however, that any
cost or expense incurred by Seller in connection with repairing or replacing
such damage shall not be included in any closing or post-closing proration or
adjustment of the Purchase Price or otherwise credited to Seller’s benefit in
connection with this transaction.

(c) Definition of Material Damage. For purposes of this Section 16, damage to
the Property shall be deemed to involve a material portion thereof if the
estimated cost of restoration or repair of such damage reasonably estimated by
Seller shall be $5,600,000.

(d) Condemnation. In the event that, prior to the Closing, the entire Property,
or any substantial portion thereof, is subject to a condemnation by a public
authority, then Purchaser shall have the right, exercisable by giving notice to
Seller within fifteen (15) days after receiving written notice of such taking,
either (i) to terminate this Agreement and obtain a refund of the Deposit, in
which case neither party shall have any further rights or obligations hereunder,
other than those obligations that expressly survive a termination of this
Agreement and except that Purchaser and Seller shall each be responsible for
one-half of any title or Escrow cancellation fee or (ii) to accept the Property
in its then condition and proceed to close this transaction, and to receive an
assignment of all of Seller’s rights to any condemnation awards payable by
reason of such condemnation. If Purchaser elects to proceed under clause
(ii) above, Seller shall not compromise, settle or adjust any claims to such
awards without Purchaser’s prior written consent. Seller agrees to give
Purchaser prompt notice of any threatened taking of the Property promptly after
Seller receives notice of the same. For the purposes of this Section 15(d)
“substantial portion” shall mean any portion of the Property (i) the value of
which, in the reasonable estimate of Seller, exceeds $5,600,000, (ii) which
reduces the available parking to an amount less than the minimum number of
spaces required by current law, or (iii) which results in a material reduction
in the access to the Resort from Bob Hope Drive.

 

-35-

--------------------------------------------------------------------------------

16. Default; Termination.

(a) Default by Seller.

(i) Discovered Prior to the Close of Escrow. In the event of any breach of any
representation or warranty of Seller contained in Section 12(a) that is
discovered prior to the Close of Escrow, then the provisions of Section 12(b)(i)
shall apply. In the event (a) of any breach by Seller of any provision of this
Agreement other than a breach of any representation or warranty under
Section 12(a), which is not cured within fifteen (15) days after notice thereof
from Purchaser (which fifteen (15) day period shall, if necessary, automatically
extend the Closing Date to the expiration date of such fifteen (15) day period),
or, (b) a breach of a representation or warranty of Seller contained in
Section 12(a) discovered prior to the Close of Escrow is not cured by Seller (at
Seller’s option, with no obligation to do so) in the manner specified in
Section 12(b)(i) for any reason, and if the reasonably estimated damages to be
incurred by Purchaser resulting from such breach, together with any damages for
any breach of any representation or warranty of Seller contained in
Section 12(a) (1) are equal to or are less than Five Hundred and Sixty Thousand
Dollars ($560,000) in the aggregate (not on a per claim basis) (the
“Deductible”), and so long as all conditions precedent to Purchaser’s
obligations hereunder have been satisfied (other than any conditions precedent
which are not satisfied due to the default by Seller), then Purchaser shall be
obligated to close escrow under this Agreement with no reduction or other
adjustment to the Purchase Price notwithstanding that Purchaser shall incur such
damages, or (2) are greater than the Deductible, then Purchaser, as its sole and
exclusive remedy, shall elect either (x) to terminate this Agreement, in which
event the parties shall not have any obligations to the other except for their
obligations that expressly survive a termination of this Agreement, the Deposit
shall be returned to Purchaser, and all other rights and obligations of the
parties hereunder (except those set forth in this clause (x)) shall terminate
immediately; or (y) to irrevocably waive such default, nonperformance,
inaccuracy or breach and proceed to Closing with a reduction in the Purchase
Price equal to the reasonably estimated Damages in excess of the Deductible; or
(z) to commence an action for specific performance of this Agreement; provided,
however, that the remedy of specific performance shall be available to Purchaser
only in the case of a willful refusal to close by Seller and in the event
Purchaser files a suit for specific performance within forty-five (45) days
following the Closing Date and does not include any claims for compensatory,
punitive or other monetary damages in such suit, failing which, Purchaser shall
be barred from enforcing Seller’s obligations in such manner and shall be deemed
to have elected to terminate this Agreement pursuant to clause (x).

(ii) Discovered After the Close of Escrow. In the event of any breach of any
representations or warranty of Seller contained in Section 12(a), or in the
event of any breach by Seller of any provision of this Agreement other than a
breach of any representation or warranty under Section 12(a), that is discovered
or occurs after the Close of Escrow shall be subject to the following: (i) no
such claim shall be made until the damages from such claim are at least equal to
the Deductible in the aggregate, (ii) any such claim must be made within 12
months after the Close of Escrow, and (iii) Purchaser shall be limited to its
actual compensatory damages not to exceed Three Million Three Hundred Sixty
Thousand Dollars ($3,360,000) in the aggregate (the “Cap”) from all claims in
the aggregate (not on a per-claim basis), but shall not be entitled to

 

-36-

--------------------------------------------------------------------------------

consequential or punitive damages or any lost rents, profits, “benefit of the
bargain,” or lost business opportunities. Notwithstanding the foregoing, the
Deductible, Cap, time limitations and the limitation on types of damages
contained herein shall not apply to any claim with respect to (a) an obligation
of Seller or its affiliates to pay the termination fees owing to Marriott
International, Inc., Manager or their affiliates, or (b) any fraudulent acts or
omissions by Seller.

The provisions of this Section 16(a) shall survive the Close of Escrow and any
earlier termination of this Agreement.

(b) Default by Purchaser. If the Closing does not occur due to Purchaser’s
failure or inability to perform any of its obligations hereunder, then Seller,
as its sole and exclusive remedy, shall elect either: (i) to terminate this
Agreement and receive the Deposit as liquidated damages for breaches occurring
prior to the Closing Date, in which event the parties shall not have any
obligations hereunder to the other except for the obligations that expressly
survive a termination of this Agreement; or (ii) to waive such matter or
condition and proceed to Closing. IF SELLER TERMINATES THIS AGREEMENT AS
PROVIDED IN SECTION 16(b)(i) AND HAS THE RIGHT TO RECEIVE THE DEPOSIT, THE
PARTIES ACKNOWLEDGE AND AGREE BY INITIALING BELOW THAT: (I) IN THE EVENT OF SUCH
A DEFAULT, SELLER WILL INCUR CERTAIN COSTS AND OTHER DAMAGES IN AN AMOUNT THAT
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO ASCERTAIN; AND (II) THE DEPOSIT,
TOGETHER WITH ALL INTEREST, IF ANY, EARNED THEREON, BEARS A REASONABLE
RELATIONSHIP TO THE DAMAGES WHICH THE PARTIES ESTIMATE MAY BE SUFFERED BY SELLER
BY REASON OF SUCH A DEFAULT, AND THE DEPOSIT AND INTEREST IS NOT AN AMOUNT WHICH
IS UNREASONABLE UNDER THE CIRCUMSTANCES EXISTING AT THE TIME THIS AGREEMENT IS
MADE (PURCHASER ACKNOWLEDGING AND AGREEING THAT PURCHASER HAS FULLY CONSIDERED
THE PROVISIONS OF THIS SECTION 16) AND SUCH CIRCUMSTANCES PRIOR TO ENTERING INTO
THIS AGREEMENT AND HAS CONSULTED WITH PURCHASER’S COUNSEL WITH RESPECT THERETO);
AND (III) UPON DELIVERY TO ESCROW AGENT BY SELLER OF WRITTEN NOTICE OF THEIR
ELECTION TO TERMINATE THIS AGREEMENT AS PROVIDED IN CLAUSE (i) OF SECTION 16(b)
SELLER SHALL BE ENTITLED TO RECEIVE AND RETAIN THE DEPOSIT, TOGETHER WITH ALL
INTEREST EARNED THEREON, AS LIQUIDATED DAMAGES, AND PURCHASER SHALL FORTHWITH
INSTRUCT ESCROW AGENT TO RELEASE THE DEPOSIT AND ALL INTEREST EARNED THEREON TO
SELLER AND TO RETURN TO SELLER ALL DOCUMENTS AND INSTRUMENTS THERETOFORE
DEPOSITED INTO THE ESCROW BY OR ON BEHALF OF THEM; PROVIDED, HOWEVER, THAT THE
DEPOSIT SHALL BE IN ADDITION TO AND NOT IN LIEU OF ANY AMOUNTS OWED TO SELLER BY
PURCHASER AS A RESULT OF INDEMNITIES AND OTHER PROVISIONS OF THIS AGREEMENT
WHICH EXPRESSLY SURVIVE ITS TERMINATION; AND PROVIDED FURTHER, THAT SELLER SHALL
BE ENTITLED TO RECOVER FROM PURCHASER ATTORNEYS’ FEES AND OTHER OUT OF POCKET
COSTS INCURRED BY THEM IN CONNECTION WITH THE ENFORCEMENT OR DEFENSE OF
OBLIGATIONS CONTAINED IN THIS SECTION 16. IN FURTHER

 

-37-

--------------------------------------------------------------------------------

EVIDENCE OF THEIR AGREEMENT TO THIS LIQUIDATED DAMAGES PROVISION, SELLER AND
PURCHASER HAVE INITIALED BELOW:

 

SELLER:                        PURCHASER:                            

17. Miscellaneous.

(a) Waiver of Performance. Either party may waive the satisfaction or
performance of any conditions or agreements in the Agreement which have been
inserted for its own and exclusive benefit, so long as the waiver is in writing
(unless this Agreement provided for a non-written waiver) and specifies the
waived condition or agreement and is delivered to the other party hereto and to
the Escrow Holder.

(b) Paragraph Headings. The paragraph headings of this Agreement are for
purposes of reference only and shall not be used for limiting or interpreting
the meaning of any paragraph.

(c) Notices. All notices under this Agreement shall be in writing and shall be
effective upon actual receipt whether delivered by personal delivery, legible
facsimile (for which receipt is confirmed) or nationally recognized overnight
courier (such as Federal Express or United Parcel Service) or, to the extent
required by applicable law, sent by United States registered or certified mail,
return receipt requested, postage prepaid, addressed to the respective parties
addresses indicated in the Summary. Any party hereto may change its address or
designate different or other persons or entities to receive copies by notifying
the other parties and Escrow Holder in advance in a manner described in this
Section 17(c).

(d) No Lis Pendens. As material consideration to Seller’s entering into this
Agreement with Purchaser, Purchaser expressly waives any right under California
Code of Civil Procedure, Part II, Title 4.5 (Sections 409 through 409.9), under
statutory law or at common law or otherwise to record or file a lis pendens or a
notice of pendency of action or similar notice or any type of lien against all
or any portion of the Property.

(e) Amendments. This Agreement may be amended only by written agreement signed
by both of the parties hereto.

(f) Time of the Essence. Time and each of the terms, covenants, conditions and
contingencies of this Agreement are hereby expressly made of the essence.

(g) Counterparts. This Agreement may be executed in several counterparts and all
such executed counterparts shall constitute one agreement, binding on all of the
parties hereto, notwithstanding that all of the parties hereto are not
signatories to the original or to the same counterpart.

(h) Governing Law. The validity, construction and operational effect of this
Agreement shall be governed by the laws of the State of California. To the
fullest extent allowed by applicable law, the parties hereby voluntarily and
intentionally waive trial by jury in any action, proceeding or counterclaim
(whether arising in tort or contract) brought by any of the parties hereto
against any other party in respect of any matter arising out of or in connection
with

 

-38-

--------------------------------------------------------------------------------

this Agreement. All disputes, litigation, proceedings or other legal actions by
a party to this Agreement in connection with or relating to this Agreement or
any matters described or contemplated in this Agreement shall be instituted in
the courts of the State of California sitting in Riverside County, California,
or of the United States sitting in the Central District of California. Each
party to this Agreement irrevocably submits to the exclusive jurisdiction of the
courts of the State of California sitting in Riverside County, California and of
the United States sitting in the Central District of California in connection
with any such dispute, litigation, action or proceeding arising out of or
relating to this Agreement. Each party further agrees that any service of
process or summons in connection with any such dispute, litigation, action or
proceeding may be served on it by mailing a copy of such process or summons in
the manner required by applicable law. The provisions of this Section 17(h)
shall survive the Close of Escrow.

(i) Assignments.

(i) Except to Purchaser’s lender for security for any financing provided in
connection with the transactions contemplated hereby, in which case no consent
is required, Purchaser may not assign its rights under this Agreement without
the prior written consent of Seller, and any such assignment shall not relieve
the assignor of its obligations under this Agreement. Notwithstanding the
foregoing, Purchaser may designate one or more Affiliates “controlled,” directly
or indirectly, by Purchaser to take title to the Property and to perform
Purchaser’s obligations with respect to the Closing, including execution and
delivery of documents provided that (1) no designation pursuant to the preceding
sentence shall relieve Purchaser from liability for performance of its
obligations under this Agreement and (2) Purchaser’s obligations under this
Agreement are assigned to and assumed by such affiliate pursuant to a form of
assignment and assumption reasonably approved by Seller. Such form of assignment
and assumption shall include provisions identical to those set forth in
Section 11 of this Agreement and assignee shall initial such provisions in the
same manner as Purchaser has initialed them hereunder. The term “Affiliate”
means (i) any Person which beneficially owns or holds 10% or more of any class
of voting securities of such designated Person or 10% or more of the equity
interest in such designated Person and (ii) any Person of which such designated
Person beneficially owns or holds 10% or more of any class of voting securities
or in which such designated Person beneficially owns or holds 10% or more of the
equity interest. The term “control” (including “controls,” “controlled by,” and
“under common control with”) means the ability through ownership, direct or
indirect, of voting stock or other equity interests, to direct or cause the
direction of the management and policies of a person, partnership, corporation,
limited liability company or other entity.

(ii) Except to the extent expressly allowed under this Agreement, Seller shall
have no right to assign or delegate any of its right, title and interest in, to
and under this Agreement without the prior written consent of Purchaser. No
assignment made by Seller shall be of any force or effect whatsoever unless and
the prior written consent of Purchaser shall have been obtained. Notwithstanding
anything to the contrary contained herein, no assignment to which Purchaser has
consented shall relieve the assigning party from its liability under this
Agreement. Any assignment made in violation hereof or which does not comply with
the provisions hereof is and shall be null and void.

 

-39-

--------------------------------------------------------------------------------

(iii) Subject to the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of the parties hereto.

(j) Attorneys’ Fees and Costs. In any action between the parties hereto seeking
the enforcement of any of the terms or provisions of this Agreement, or in
connection with the Property, the prevailing party in such action shall be
awarded, in addition to damages, injunctive or other relief, its reasonable
costs and expenses, not limited to taxable costs, and reasonable attorneys’
fees, charges and expenses.

(k) Prior Agreements. This Agreement supersedes any and all oral or written
agreements between the parties and their respective affiliates hereto regarding
the Property which are prior in time to this Agreement. Neither Purchaser nor
Seller shall be bound by any prior understanding, agreement, promise,
representation or stipulation, express or implied, not specified herein.

(l) Further Assurance. Purchaser and Seller agree to execute all documents and
instruments reasonably required in order to consummate the purchase and sale
herein contemplated.

(m) Possession. Seller shall deliver possession of the Property to Purchaser as
of 12:01 a.m. PDT on the Closing Date, including all keys and codes in Seller’s
possession, all Contracts, Permits, books and records relating to the Property,
and originals of documents delivered hereunder, such possession being subject
only to the rights of tenants and guests in possession.

(n) Severability. If any portion of this Agreement is held to be unenforceable
by a court of competent jurisdiction, the remainder of this Agreement shall
remain in full force and effect.

(o) Broker’s Fees and Commissions. Purchaser represents and warrants to Seller
that it has not entered into any agreement or taken any action which will result
in any obligation to pay any brokerage, finder’s fee or similar commission in
connection with the purchase and sale of the Property as herein contemplated,
other than to KSL Capital Partners, LLC. Seller represents and warrants to
Purchaser that it has not entered into any agreement or taken any action which
will result in any obligation to pay any brokerage, finder’s fee or similar
commission in connection with the purchase and sale of the Property as herein
contemplated, other than to Hodges, Ward & Elliott. Purchaser and Seller each
agrees to indemnify, defend and hold the other harmless from and against any and
all claims for brokerage commissions and fees or finder’s fees payable in
connection with the sale of the Property or the transactions covered and
contemplated by this Agreement resulting from the act or omission of such
indemnifying party, except that Purchaser shall not be indemnified for any
commissions or fees owing to KSL Capital Partners, LLC, and Seller shall not be
indemnified for any commissions or fees owing to Hodges, Ward & Elliott. Nothing
in this Agreement shall be construed to confer any third party benefit on any
broker or any other person not a party hereto with respect to this

 

-40-

--------------------------------------------------------------------------------

Agreement. Each party represents and warrants to the other that, except as
specified in this Section 17(o), it has not dealt with any brokers, agents or
others in connection with the transaction contemplated herein which would give
rise to any claim for a sales commission, finder’s fee, or fee or commission of
a similar kind or nature.

(p) Construction of Agreement. The language in all parts of this Agreement shall
be in all cases construed simply according to its fair meaning and not strictly
for or against any of the parties hereto. When required by the context, whenever
the singular number is used in this Agreement, the same shall include the
plural, and the plural shall include the singular, the masculine gender shall
include the feminine and neuter genders, and vice versa. As used in this
Agreement, the term “Seller” shall include the respective successors and assigns
of Seller, and the term “Purchaser” shall include the successors and permitted
assigns of Purchaser.

(q) Days. As used in this Agreement, “days” shall refer to calendar days and not
business days. However, should any expiration date, due date or other time
period fall on a Saturday, Sunday or holiday on which the New York Stock
Exchange is closed for business for the entire day, such expiration date, due
date or time period shall be extended to the next business day.

(r) Announcements. Seller and Purchaser shall consult with each other with
regard to all press releases and other announcements issued at or prior to the
Closing concerning this Agreement or the transactions contemplated hereby and,
except as may be required by applicable laws or the applicable rules and
regulations of any governmental agency or stock exchange, neither Seller nor
Purchaser shall issue any such press release or other such publicity prior to
the Closing without the prior consent of the other party.

(s) Exhibits. References in this Agreement to Exhibits means the exhibits
attached hereto, all of which are incorporated by reference into this Agreement

(t) Escrow Holder. Escrow Holder shall not be liable: (i) to any of the parties
for any act or omission to act, except for its own negligence or willful
misconduct; (ii) for any legal effect, insufficiency, or undesirability of any
instrument deposited with or delivered by Escrow Holder or exchanged by the
parties hereunder, whether or not Escrow Holder prepared such instrument;
(iii) for any loss or impairment of funds that have been deposited in escrow
while those funds are in the course of collection, or while those funds are on
deposit in a financial institution, if such loss or impairment results from the
failure, insolvency or suspension of a financial institution; (iv) for the
expiration of any time limit or other consequence of delay, unless such time
limit is expressly set forth in this Agreement or in a properly executed written
instruction, accepted by Escrow Holder, has instructed Escrow Holder to comply
with said time limit; and (v) for the default, error, action or omission of
either party to the escrow. Escrow Holder, in its capacity as escrow holder,
shall be entitled to rely on any document or paper received by it, believed by
such Escrow Holder, in good faith, to be bona fide and genuine. In the event of
any dispute as to the disposition of the Deposit or any other monies held in
escrow, or of any documents held in escrow, Escrow Holder may, if such Escrow
Holder so elects, interplead the matter by filing an interpleader action in a
court of competent jurisdiction in Riverside County, California, and pay into
the registry of the court the Deposit, or deposit any such documents with
respect to which there is a dispute in the registry of such court, whereupon

 

-41-

--------------------------------------------------------------------------------

such Escrow Holder shall be relieved and released from any further liability
with respect to the Deposit as Escrow Holder hereunder. Escrow Holder shall not
be liable for Escrow Holder’s compliance with any legal process, subpoena, writ,
order, judgment and decree of any court, whether issued with or without
jurisdiction, and whether or not subsequently vacated, modified, set aside or
reversed.

(u) No Partnership. This Agreement does not and shall not be construed to create
a partnership, joint venture or any other relationship between the parties
hereto except the relationship of seller and purchaser specifically established
hereby.

(v) Time of Essence. Time is of the essence with respect to every provision of
this Agreement.

(w) Signatory Exculpation. The individuals signing for the parties hereto are
executing this Agreement in their capacities as representatives of such parties
and not individually and, therefore, shall have no personal or individual
liability of any kind or nature in connection with the execution of this
Agreement and the documents contemplated by it.

(x) Rules of Construction. The following rules shall apply to the construction
and interpretation of this Agreement, unless otherwise indicated by the context:

(i) Singular words shall connote the plural number as well as the singular and
vice versa, and the masculine shall include the feminine and the neuter.

(ii) All references herein to particular articles, sections, subsections,
clauses or exhibits are references to articles, sections, subsections, clauses
or exhibits of this Agreement.

(iii) References to “including” shall mean “including without limitation”.

(iv) The table of contents and headings contained herein are solely for
convenience of reference and shall not constitute a part of this Agreement nor
shall they affect its meaning, construction or effect.

(v) Each party hereto and its counsel have reviewed and revised (or requested
revisions of) this Agreement and have participated in the preparation of this
Agreement, and therefore any usual rules of construction requiring that
ambiguities are to be resolved against a particular party shall not be
applicable in the construction and interpretation of this Agreement or any
exhibits hereto.

(y) No Recording. Neither this Agreement nor any memorandum hereof, or any other
instrument intended to give notice hereof (or which actually gives notice
hereof) shall be recorded.

 

-42-

--------------------------------------------------------------------------------

(z) No Recourse.

(i) Notwithstanding anything contained herein to the contrary or any rights of
Purchaser at law or in equity, in the event of any default or breach by Seller
under this Agreement, Purchaser’s remedies shall in all events be restricted to
enforcement of its rights against the property and assets of Seller, and no
recourse shall be had to any of the partners, members or shareholders of Seller
personally or to any property and assets of any of the members, partners or
shareholders of Seller.

(ii) Notwithstanding anything contained herein to the contrary or any rights of
Seller at law or in equity, in the event of any default or breach by Purchaser
under this Agreement, Seller’s remedies shall in all events be restricted to
enforcement of its rights against the Deposit and, to the extent this Agreement
does not expressly limit Seller’s remedies to enforcement of its rights solely
against the Deposit, the assets of Purchaser, and no recourse shall be had to
any of the partners, members or shareholders of Purchaser personally or to any
property and assets of any of the members, partners or shareholders of
Purchaser.

(aa) No Effect Until Mutual Execution. The submission of this Agreement by
Seller, its agent or representative for examination or execution by Purchaser
does not constitute an option or offer to sell the Property upon the terms and
conditions contained herein or a reservation of the Property in favor of
Purchaser, it being intended hereby that this Agreement shall only become
effective upon the execution hereof by Seller and Purchaser and delivery of a
fully executed agreement to Purchaser and Escrow Holder

(bb) Survival. The provisions of this Section 17 shall survive the Closing. All
of the representations and warranties and covenants of the parties contained in
this Agreement shall not survive the Closing and shall merge into the closing
documents, unless otherwise expressly provided in this Agreement. Upon the
Closing, any breach or default of any such representations or warranties or
covenants that do not expressly survive the Closing, whether known or unknown,
shall be deemed waived by proceeding to the Closing.

[The next page is the signature page.]

 

-43-

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Seller and Purchaser have executed this Agreement as of the
date first above written.

 

SELLER:

NEW RANCHO, L.L.C.,

a Delaware limited liability company

By:

 

 

/s/ Laurence Geller

 

 

Name:

 

Laurence Geller

Title:

 

President and CEO

PURCHASER:

KSL RLP HOLDINGS, LLC,

a Delaware limited liability company

By:

 

 

/s/ Steven Siegel

 

Name:

 

Steven Siegel

Title:

 

Vice President

 

-44-

--------------------------------------------------------------------------------

Acceptance by Escrow Holder

Escrow Holder acknowledges receipt of the foregoing Agreement and accepts the
instructions contained therein.

Dated: 5/8, 2006

 

 

  COMPANY By:  

/s/ Kelly Simoneau

 

Name:

  Kelly Simoneau

Title:

  Vice President

 

-45-

--------------------------------------------------------------------------------

EXHIBIT A

LEGAL DESCRIPTION

PARCEL 1:

Lot(s) 18 through 33, inclusive of Tract No. 7251-1, in the City of Rancho
Mirage, as shown by Map on file in Book 87, Page(s) 29 through 38, inclusive of
Maps, in the Office of the County Recorder of Riverside County, California.

Assessor’s Parcel Nos.: 618-120-012; 618-160-014, 015, 021; 618-180-002, 003,
006; 618-190-005, 011, 012, 014, 015, 017, 018, 020, 021; 618-200-001, 005, 006;
618-230-001, 003, 013, 015

PARCEL 1-A:

All rights to easements, private roadways, and common areas on Tract No. 7251-1,
in the City of Rancho Mirage, as shown by Map on file in Book 87, Page(s) 29
through 38, inclusive of Maps, in the Office of the County Recorder of Riverside
County, California, and on Tract 7251, in the City of Rancho Mirage, as shown by
Map on file in Book 91, Page(s) 86 through 89, inclusive of Maps, in the Office
of the County Recorder of Riverside County, California, specifically described
in the Declaration of Covenants, Conditions and Restrictions recorded
December 30, 1976, as Instrument No. 202382; modifications recorded August 11,
1977, Instrument No. 155480; August 11, 1977, Instrument No. 155482; May 27,
1983, Instrument No. 105189; June 8, 1988, Instrument No. 155978; August 5,
1996, Instrument No. 294142 and Amended and Restated Declaration of Covenants,
Conditions and Restrictions recorded June 4, 2003, Instrument No. 2003-404034,
all of Official Records of Riverside County, California.

PARCEL 2:

Lot(s) 5 of Tract No. 7263, in the City of Palm Desert, as shown by Map on file
in Book 90, Page(s) 52 and 53 of Maps, in the Office of the County Recorder of
Riverside County, California.

Assessor’s Parcel No. 618-240-014

PARCEL 2A:

All rights to easements, private roadways, and common areas on Tract No. 7263,
in the City of Rancho Mirage, as shown by Map on file in Book 90, Page(s) 52 and
53 of Maps, in the Office of the County Recorder of Riverside County,
California, specifically described in the Declaration of Covenants, Conditions
and Restrictions recorded December 10, 1976, as Instrument No. 202382;
modifications recorded August 11, 1977, Instrument No. 155480; August 11, 1977,
Instrument No. 155482; May 27, 1983, Instrument No. 105189; June 8, 1988,
Instrument No. 155978; August 5, 1996, Instrument No. 294142 and Amended and
Restated Declaration of Covenants, Conditions and Restrictions recorded June 4,
2003, Instrument No. 2003-404034, all of Official Records of Riverside County,
California.

EXHIBIT A

--------------------------------------------------------------------------------

PARCEL 3:

Lot(s) 1 through 55, inclusive and Lot(s) A through F, inclusive of Tract
No. 8829, in the City of Rancho Mirage, as shown by Map on file in Book 92,
Page(s) 88 through 93, inclusive of Maps, in the Office of the County Recorder
of Riverside County, California.

Assessor’s Parcel Nos.: 618-120-009, 010; 618-170-002, 003, 004, 005, 006, 007

PARCEL 3A:

All rights to easements, private roadways, and common areas on Tract No. 7251-1,
in the City of Rancho Mirage, as shown by Map on file in Book 87, Page(s) 29
through 38, inclusive of Maps, in the Office of the County Recorder of Riverside
County, California and on Tract No. 7251, in the City of Rancho Mirage, as shown
by Map on file in Book 91, Page(s) 86 through 89, inclusive of Maps, in the
Office of the County Recorder of Riverside County, California, specifically
described in the Declaration of Covenants, Conditions and Restrictions recorded
December 30 1976 as Instrument No. 202382; modifications recorded August 11,
1977, Instrument No. 155480; August 11, 1977, Instrument No. 155482; May 27,
1983, Instrument No. 105189; June 8, 1988, Instrument No. 155978; August 5,
1996, Instrument No. 294142 and Amended and Restated Declaration of Covenants,
Conditions and Restrictions recorded June 4, 2003, Instrument No. 2003-404034,
all of Official Records of Riverside County, California.

PARCEL 4:

Lot(s) 11 of Tract No. 7251, in the City of Rancho Mirage, as shown by Map on
file in Book 91, Page(s) 86 through 89, inclusive of Maps, in the Office of the
County Recorder of Riverside County, California.

Assessor’s Parcel No. 618-190-002

PARCEL 4A:

All rights to easements, private roadways, and common areas on Tract No. 7251,
in the City of Rancho Mirage, as shown by Map on file in Book 91, Page(s) 86
through 89, inclusive of Maps, in the Office of the County Recorder of Riverside
County, California, specifically described in the Declaration of Covenants,
Conditions and Restrictions recorded December 30, 1976 as Instrument No. 202382;
modifications recorded August 11, 1977, Instrument No. 155480; August 11, 1977,
Instrument No. 155482; May 27, 1983, Instrument No. 105189; June 8, 1988,
Instrument No. 155978; August 5, 1996, Instrument No. 294142 and Amended and
Restated Declaration of Covenants, Conditions and Restrictions recorded June 4,
2003, Instrument No. 2003-404034, all of Official Records of Riverside County,
California.

EXHIBIT A

--------------------------------------------------------------------------------

EXHIBIT B

ASSIGNMENT AND ASSUMPTION OF CONTRACTS

THIS ASSIGNMENT AND ASSUMPTION OF CONTRACTS (“Assignment”) is made as of the
     day of                     , 2006, by NEW RANCHO, L.L.C., a Delaware
limited liability company (“Assignor”)1, whose address is Strategic Hotels &
Resorts, Inc., 77 West Wacker Drive, Suite 4600, Chicago, Illinois 60606, to KSL
RLP HOLDINGS, LLC, a Delaware limited liability company (“Assignee”), whose
address is 50-905 Avenido Bermudas, La Quinta, California 92253.

RECITALS

A. Assignor as “Seller” and Assignee as “Purchaser” have entered into that
certain Agreement of Purchase and Sale (the “Purchase Agreement”) dated as of
May     , 2006, pursuant to the terms of which Assignor shall sell to Assignee
and Assignee shall purchase from Assignor certain property, including the hotel
(the “Hotel”) currently known as Marriott’s Las Palmas Resort & Spa located at
41000 Bob Hope Drive, Rancho Mirage, California, as more particularly described
in the Purchase Agreement.

B. Pursuant to the terms of the Purchase Agreement, Assignor desires to assign
to Assignee, and Assignee desires to accept such assignment from Assignor and
Assignor’s affiliates, all the right, title and interest of Assignor in and to
those contracts (the “Contracts”) identified on Schedule 1, attached hereto and
incorporated by reference herein.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Assignor and Assignee hereby agree as follows:

1. Assignment and Assumption. Effective as of the date hereof (the “Effective
Date”), Assignor hereby grants, assigns, transfers and conveys to Assignee,
without any representations or warranties and without recourse (except as
otherwise provided in the Purchase Agreement), and Assignee hereby accepts from
Assignor such grant, assignment, transfer and conveyance, all right, title and
interest of Assignor, if any, in and to the Contracts. Assignee hereby assumes
and agrees to perform and to be bound by all of the terms, covenants, conditions
and obligations of Assignor under the Contracts which first arise on or after
the Effective Date (the “Post Effective Date Obligations”); provided, however,
that with respect to the Capital Improvements Contracts (as defined in the
Purchase Agreement), any and cost overruns shall be the sole responsibility of
Assignee regardless of whether such cost overruns first arise before or after
the Effective Date.

--------------------------------------------------------------------------------

1 With respect to Contracts executed by affiliates of Seller, Seller will cause
such affiliates to execute as Assignor an Assignment and Assumption of Contracts
that is substantially similar in form and scope to this Exhibit.

EXHIBIT B

--------------------------------------------------------------------------------

2. Assignee Indemnity. Assignee hereby agrees to protect, defend, indemnify and
save and hold harmless Assignor from and against the Post Effective Date
Obligations and any and all liability, loss, costs, damage or expense (including
attorneys’ fees, charges and expenses) which Assignor may incur in connection
with the Post Effective Date Obligations, and from any and all claims and
demands whatsoever which may be asserted against Assignor by reason of any
alleged obligation or undertaking on Assignee’s part or failure of Assignee to
perform or discharge any of the terms, covenants or agreements contained in any
of the Contracts, which claims or demands first arise from events occurring on
or after the Effective Date.

3. Assignor Indemnity. Assignor hereby agrees to protect, defend, indemnify and
save and hold harmless Assignee from and against any and all liability, loss,
cost, damage or expense (including attorneys’ fees, charges and expenses) which
Assignee may incur under the Contracts and from and against any and all claims
and demands whatsoever which may be asserted against Assignee, by reason of any
alleged obligation or undertaking on Assignor’s part or failure of Assignor to
perform or discharge any of the terms, covenants or agreements contained in any
of the Contracts which claims or demands arose from events occurring prior to
the Effective Date.

4. Further Assurances. Each party agrees to execute such other and further
instruments and documents as may be necessary or proper in order to consummate
the transaction contemplated by this Assignment.

5. Successors and Assigns. This Assignment shall be binding upon and inure to
the benefit of the respective successors and assigns of Assignor and Assignee.

6. Attorneys’ Fees and Costs. If either party to this Assignment brings any
action or suit against the other party to this Assignment by reason of any
breach of any covenant, condition, agreement or provision on the part of the
other party set forth in this Assignment, the prevailing party shall be entitled
to recover from the other party all costs and expenses of the action or suit,
including reasonable attorneys’ fees, charges and expenses, in addition to any
other relief to which it may be entitled.

7. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the State of California.

8. Conflict with Purchase Agreement. This Assignment is intended to implement
the terms and conditions of the Purchase Agreement. If any of the provisions
hereof are in direct conflict with the provisions of the Purchase Agreement, the
Purchase Agreement shall control.

9. Counterparts. This Assignment may be executed in several counterparts and all
such executed counterparts shall constitute one Assignment, binding on all of
the parties hereto, notwithstanding that all of the parties hereto are not
signatories to the original or to the same counterpart.

EXHIBIT B

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered this
Assignment as of the day and year first above written.

 

ASSIGNOR:

NEW RANCHO, L.L.C.,

a Delaware limited liability company

By:  

EXHIBIT – DO NOT SIGN

Name:  

 

Title:  

 

ASSIGNEE:

KSL RLP HOLDINGS, LLC,

a Delaware limited liability company

By:  

EXHIBIT – DO NOT SIGN

Name:  

 

Title:  

 

 

EXHIBIT B

--------------------------------------------------------------------------------

Schedule 1 to Assignment of Contracts

Schedule of Contracts

[to be attached]

 

EXHIBIT B

--------------------------------------------------------------------------------

EXHIBIT C

TITLE COMMITMENT

[Attached]

 

EXHIBIT C

--------------------------------------------------------------------------------

EXHIBIT D

DEED

 

RECORDING REQUESTED BY

AND WHEN RECORDED MAIL TO:

  

 

  

 

  

 

   Attn:  

 

   SEND TAX STATEMENTS TO:   

 

  

 

  

 

   Attn:  

 

        (Space Above for Recorder’s Use Only)

GRANT DEED

Documentary                                         
                                Transfer
                                        Tax
                                             Shown

by Separate Affidavit Not of Record

FOR VALUABLE CONSIDERATION, the receipt of which is hereby acknowledged, NEW
RANCHO, L.L.C., a Delaware limited liability company (“Grantor”), hereby GRANTS
to KSL RLP HOLDINGS, LLC, a Delaware limited liability company (“Grantee”), all
that certain real property located in the County of Riverside, State of
California, and more particularly described on Exhibit A attached hereto and by
this reference made a part hereof (the “Property”).

TOGETHER WITH, all and singular, the tenements, hereditaments, easements,
rights-of-way and appurtenances belonging or in anywise appertaining to same,
including all buildings and other improvements thereon and all the estate,
right, title, interest and claim, either at law or in equity, of Grantor in the
Property.

 

EXHIBIT D

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Grantor has executed this Deed as of the      day of
                    , 2006.

 

NEW RANCHO, L.L.C., a Delaware limited liability company By:  

 

Name:  

 

Title:  

 

 

EXHIBIT D

--------------------------------------------------------------------------------

Exhibit A to Grant Deed

Legal Description

[to be attached]

EXHIBIT D

--------------------------------------------------------------------------------

STATE OF CALIFORNIA   

)        

COUNTY OF                        

)        

On                          , 2006, before me,
                                        , Notary Public, personally appeared
                                             , personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name(es)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the persons(s) acted, executed the instrument.

WITNESS my hand and official seal.

My commission expires:                                                      

 

 

Signature of Notary

AFFIX SEAL

EXHIBIT D

--------------------------------------------------------------------------------

EXHIBIT E

BILL OF SALE

KNOW ALL MEN BY THESE PRESENTS, that NEW RANCHO, L.L.C., a Delaware limited
liability company, whose address is c/o Strategic Hotels & Resorts, Inc.,
77 West Wacker Drive, Suite 4600, Chicago, Illinois 60606 (“Seller”), for and in
consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration, lawful money of the United States, paid by KSL RLP HOLDINGS, LLC,
a Delaware limited liability company, whose address is 50-905 Avenido Bermudas,
La Quinta, California 92253 (“Purchaser”), the receipt whereof is hereby
acknowledged, has absolutely and unconditionally granted, bargained, sold,
transferred, assigned, conveyed and delivered, and by these presents does
absolutely and unconditionally grant, bargain, sell, transfer, assign and convey
and deliver unto Purchaser, without any representations or warranties and
without recourse (except as otherwise provided in the Purchase Agreement, as
defined below), all Personal Property and Inventories except for any and all
Excluded Assets, as those terms are defined in that certain Purchase and Sale
Agreement dated May     , 2006 (“Purchase Agreement”), between Seller and
Purchaser with respect to the Property as defined therein.

TO HAVE AND TO HOLD the same unto Purchaser and its successors and assigns
forever.

IN WITNESS WHEREOF, Seller has hereunto set its hand and seal by and through its
duly authorized undersigned officer, this      day of                     ,
2006.

 

NEW RANCHO, L.L.C.,

a Delaware limited liability company

By:  

 

Name:

 

 

Title:

 

 

EXHIBIT E

--------------------------------------------------------------------------------

EXHIBIT F

ASSIGNMENT OF INTANGIBLE PROPERTY

THIS ASSIGNMENT AND ASSUMPTION OF INTANGIBLE PROPERTY (“Assignment”) is made as
of the      day of                                 , 2006 by New Rancho, L.L.C.,
a Delaware limited liability company (“Assignor”), whose address is Strategic
Hotels & Resorts, Inc., 77 West Wacker Drive, Suite 4600, Chicago, Illinois
60606, to KSL RLP Holdings, LLC, a Delaware limited liability company
(“Assignee”), whose address is 50-905 Avenido Bermudas, La Quinta, CA 92253.

RECITALS

A. Assignor as “Seller” and Assignee as “Purchaser” have entered into that
certain Agreement of Purchase and Sale (the “Purchase Agreement”) dated as of
May                     , pursuant to the terms of which Assignor shall sell to
Assignee and Assignee shall purchase from Assignor certain property, including
the hotel (the “Hotel”) currently known as “Marriott’s Rancho Las Palmas
Resort & Spa” located at 41000 Bob Hope Drive, Rancho Mirage, California, as
more particularly described in the Purchase Agreement.

B. Pursuant to the terms of the Purchase Agreement, Assignor desires to assign
to Assignee, and Assignee desires to accept such assignment from Assignor, all
Intangible Property as defined in the Purchase Agreement.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Assignor and Assignee hereby agree as follows:

1. Assignment and Assumption. Effective as of the date of this Assignment
(the ”Effective Date”), Assignor hereby grants, assigns, transfers and conveys
to Assignee, without any representations or warranties and without recourse
(except as otherwise expressly stated in the Purchase Agreement), and Assignee
hereby accepts from Assignor such grant, assignment, transfer and conveyance,
all right, title and interest of Assignor, if any, in and to the Intangible
Property, excluding all Excluded Assets and Marriott Trademarks (as defined in
the Purchase Agreement). Assignee hereby assumes and agrees to perform and to be
bound by all of the terms, covenants, conditions and obligations of Assignor
under the Intangible Property which first arise on or after the Effective Date
(“Post Effective Date Obligations”).

2. Assignee Indemnity. Assignee hereby agrees to protect, defend, indemnify and
save and hold harmless Assignor from and against the Post Effective Date
Obligations, and from any and all claims and demands whatsoever which may be
asserted against Assignor by reason of any alleged obligation or undertaking on
Assignee’s part or failure of Assignee to perform or discharge any of the terms,
covenants or agreements contained in any of the Intangible Property, which
claims or demands arise from events first occurring on or after the Effective
Date.

EXHIBIT F

--------------------------------------------------------------------------------

3. Assignor Indemnity. Assignor hereby agrees to protect, defend, indemnify and
save and hold harmless Assignee from and against any and all liability, loss,
cost, damage or expense (including attorneys’ fees, charges and expenses) which
Assignee may incur under the Intangible Property and from and against any and
all claims and demands whatsoever which may be asserted against Assignee, by
reason of any alleged obligation or undertaking on Assignor’s part or failure of
Assignor to perform or discharge any of the terms, covenants or agreements
contained in any of the Intangible Property which claims or demands arose from
events occurring prior to the Effective Date.

4. Further Assurances. Each party agrees to execute such other and further
instruments and documents as may be necessary or proper in order to consummate
the transaction contemplated by this Assignment.

5. Successors and Assigns. This Assignment shall be binding upon and inure to
the benefit of the respective successors and assigns of Assignor and Assignee.

6. Attorneys’ Fees and Costs. If either party to this Assignment brings any
action or suit against the other party to this Assignment by reason of any
breach of any covenant, condition, agreement or provision on the part of the
other party set forth in this Assignment, the prevailing party shall be entitled
to recover from the other party all costs and expenses of the action or suit,
including reasonable attorneys’ fees, charges and expenses, in addition to any
other relief to which it may be entitled.

7. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the State of California.

8. Conflict with Purchase Agreement. This Assignment is intended to implement
the terms and conditions of the Purchase Agreement. If any of the provisions
hereof are in direct conflict with the provisions of the Purchase Agreement, the
Purchase Agreement shall control.

9. Counterparts. This Assignment may be executed in several counterparts and all
such executed counterparts shall constitute one Assignment, binding on all of
the parties hereto, notwithstanding that all of the parties hereto are not
signatories to the original or to the same counterpart.

EXHIBIT F

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Assignor and Assignee have executed and delivered this
Assignment as of the day and year first above written.

 

ASSIGNOR:

NEW RANCHO, L.L.C.,

a Delaware limited liability company

By:  

 

Name:  

 

Title:  

 

ASSIGNEE:

 

KSL RLP HOLDINGS, LLC,

a Delaware limited liability company

By:  

 

Name:  

 

Title:  

 

EXHIBIT F

--------------------------------------------------------------------------------

EXHIBIT G

NON-FOREIGN PERSON AFFIDAVIT

Under Section 1445 of the Internal Revenue Code of 1986, as amended
(the ”U.S. Code”), a transferee of a United States real property interest must
withhold tax if the transferor is a foreign person. To inform KSL RLP Holdings,
LLC, a Delaware limited liability company (the ”Transferee”), that withholding
of tax will not be required upon the transfer to Transferee by New Rancho,
L.L.C., a Delaware limited liability company (the “Transferor”), of that certain
real property located in the State of California and currently known as
“Marriott’s Rancho Las Palmas Resort & Spa” located at 41000 Bob Hope Drive,
Rancho Mirage, California (the “Property”), the undersigned hereby certifies the
following on behalf of Transferor:

1. Transferor is not a foreign corporation, foreign partnership, foreign trust,
or foreign estate, as those terms are defined in the U.S. Code and the Income
Tax Regulations promulgated thereunder; and

2. Transferor’s U.S. employer identification number is                     .

3. Transferor’s principal place of business address is Strategic Hotels &
Resorts, Inc., 77 West Wacker Drive, Suite 4600, Chicago, Illinois 60606.

Transferor understands that this Certification may be disclosed to the Internal
Revenue Service and that any false statement contained herein could be punished
by fine, imprisonment, or both.

Transferor understands that Transferee is relying on this Certificate in
determining whether withholding is or will be required in connection with the
transfer of the Property by Transferor to Transferee, and that Transferee may
face liabilities if any statement contained in this certificate is false.

Transferor hereby indemnifies Transferee, and agrees to hold Transferee
harmless, from any liability or cost which such Transferee may incur as a result
of: (i) the Transferor’s failure to pay any U.S. Federal Income tax which
Transferor is required to pay under applicable federal law or (ii) any false or
misleading statement contained herein. Under penalties of perjury, I declare
that I have examined this Certification and to the best of my knowledge declare
that I have authority to sign this document on behalf of Transferor.

EXHIBIT G

--------------------------------------------------------------------------------

Dated:                              , 2006

 

“TRANSFEROR”:

NEW RANCHO, L.L.C.,

a Delaware limited liability company

By:

 

EXHIBIT – DO NOT SIGN

Name:

 

 

Title:

 

 

EXHIBIT G

--------------------------------------------------------------------------------

EXHIBIT H

SCOPE OF WORK

Golf Course Irrigation Lake

The installation shall include:

 

  1. Demolition of the existing lake and liner

 

  2. Excavating and shaping the lake

 

  3. 30 mil PVC waterproofing membrane

 

  4. Placement of 12” of soil cover on the PVC membrane

 

  5. 8”x8” keyway at the shoreline

 

  6. 24” high concrete shoreline with 4’ wide concrete apron

 

  7. Staining the concrete shoreline

 

  8. Hauling the excavated soil to the adjacent rough

 

  9. Shaping the area where the excavated soil is placed

Items not included are as follows:

 

  1. Draining the lake

 

  2. All irrigation work

 

  3. Any changes to the well, intake pipe or irrigation station

 

  4. All aeration

 

  5. Construction water to the work area

 

  6. Engineering and permits

Ballroom Renovation (Carpet and Paint)

 

  1. Prime and paint crown molding and chair railing. Prime and paint walls two
colors. Install six-inch baseboard. Labor only for baseboard. Prime and paint
all door pop-outs.

 

  2. Protect flooring. Mask ceiling at crown molding

 

  3. All paint to be high-grade low-sheen

 

  4. Demo and scrape up 2 layers of existing glue down carpet and padding and
prepare floors for new materials. Dumpsters provided by Resort.

 

  5. Carpet installation – labor only – wall-to-wall direct glue down throughout
Salons 1 through 8 to include seam sealing and pattern matching as required

 

  6. Supply and install  1/4” neoprene double glue down padding throughout
Salons 1 through 8

 

  7. Install 936 lf. of custom border – glue down with seam sealer

 

  8. Purchase carpet from Design Originals as follows:

 

  a. Carpet 1 – Field Carpet for 1st floor ballroom rug insets

 

  i. Pattern: 2S3F1D

 

  ii. Pattern repeat: 18”W x 18”L

 

  iii. Net quantity: 817 yards (612’9” x 12’)

 

  b. Carpet 2 – Border Carpet for 1st floor ballroom rug insets

 

  i. Pattern: 1QKB1D

 

  ii. Pattern repeat: Border: 13.75”W x 3”L, Bleedout – Solid

 

  iii. Net quantity: 159 yards (119’3” x 12’)

EXHIBIT H

--------------------------------------------------------------------------------

  iv. 952’LF of Border

 

  v. 8 splits and no corners

 

  c. Carpet 3 – Pattern Bleedout for 1st Floor Ballroom Rug Insets

 

  i. Pattern: 2S2F1D

 

  ii. Pattern repeat: 18”W x 18”L

 

  iii. Net quantity: 639 yards (479’3” x 12’)

Repair of Roofs on 11 Buildings

 

     October 20,
2005
Original   

James
02/06/06
APPROVED

Scope of
Work

     Petronella
Roofing (#1)   

Phase #A - Highest Priority Buildings

     

600

     22,050    22,050

800

     25,200    25,200

1000

     31,500    31,500

1200

     22,050    22,050

1400

     31,500    31,500

1600

     31,500    31,500

2400

     31,500    31,500

2600

     31,500    31,500

2800

     25,200    25,200

3000

     25,200    25,200

3200

     31,500    31,500         Sub-total Construction Costs:       308,700

Phase #A: ADD Alternates:

     

Aluminum Coping @Exposed Wood Beams: Entries

   $ 22,000    14,235.29

Aluminum Coping @Exposed Wood Beams: Guest Balconies

     Included    Included

Aluminum Drip @ Eaves

     Included    Included

Plywood Replacement – Allowance

   $ 16,000    10,352.94

Fascia/Rake Board Replacement – Allowance

   $ 13,000    8,411.76

Ridge/Hip Board Replacement – Allowance

     Included    Included

Tile Replacement – Allowance

     Included    Included

Wood Structure Replacement (estimate)

     0    0      76,200   

Permits (consultant estimate @ 2% including ADD Alternates)

     1,524    6,174        

Subtotal Reimbursable Allowances:

      39,174

Roof Contingencies

      15,435

Subtotal

      363,309

Building Trellis Replacement

      39,971

Consultant Project Management (@ 10%)

      40,328        

TOTAL PROJECT COSTS NOT TO EXCEED Phase A:

      443,608

EXHIBIT H

--------------------------------------------------------------------------------

1. Tile & Underlayment Removal

 

  A. Remove roof tiles from section to section with one section of roof tiles
removed from the building to allow room to off load tiles on section being
roofed to section that has had tiles removed and stored off roof.

 

  B. Remove all ridge and hip boards and save for reuse.

 

  C. Remove existing underlayment as necessary to expose plywood deck. Dispose
of underlayment daily and do not allow accumulation on roof.

 

  D. Remove and dispose of all existing flashing.

 

2. Roof Deck Preparation

 

  A. Re-nail plywood diaphragm as necessary to insure flush nailing of plywood
deck. Seat all nails that have “backed out” of plywood deck by pounding down
nails as necessary.

 

  B. Report to owner representative any damaged fascia, shiplap or plywood
decking prior to installation of any underlayment material. All wood replacement
that may be necessary will be first authorized by the owners representative and
a change of work order will be generated and executed by the Contractor and
Rancho Las Palmas representative.

 

3. Underlayment System

 

  A. Contractor is to provide and install a Dual Layer G-40 high underlayment
SBS System over entire roof and a water shield protective membrane at all eaves
and valleys.

 

  B. After anti-pond metal has been installed apply a 12” strip of GAF
Stormguard HT over anti-ponding metal and 6” up roof slope.

 

  C. Install GAF Stormguard HT in a 36” wide strip down all valleys. After
24-gauge saddles are installed at skylight and chimneys apply an 18” wide strip
of GAF Stormguard HT over back of saddle and up roof slope.

 

  D. Provide and install over entire roof surface (2) two-layers of G-40 high
performance SBS Underlayment as manufactured by Fontana. Apply in a shingle type
fashion over entire roof surface. Fasten with 1” Cap nail at 18” centers. Reset
all hip and ridge boards and apply one 18” layer of SBS Felt Underlayment over
ridge-boards in a neat and tight fashion.

 

  E. At all low slope area of roof (Roof areas under 4/12 apply (1) one- layer
of # 28 Modified Sheet as manufactured by Certainteed. Torch apply in a shingle
type fashion using at 4” end lap and 6” side lap.

 

  F. Verify that deck surfaces are clean and dry prior to installation of
underlayment.

 

4. Sheet Metal Flashings

 

  A. Chimney / Skylights saddles to be new 24-gauge fully soldered with built in
crickets and 3” corner returns.

 

  B. Sidewall pan flashing to be 24-gauge and fastening shall be with 2” metal
clips installed between 8”-24”.

 

  C. Valley flashing to 24-gauge and fastening shall be with 2” metal clips
installed between 8”-24”. Valley flashing to be 24” wide.

EXHIBIT H

--------------------------------------------------------------------------------

  D. Anti-pond metal to be brown baked enamel with a 2” face and minimum 4”
flange up roof slope. All anti-pond metal to have pre-painted factory finish.

 

  E. All primary flashings to be 26-gauge standard flashing.

 

  F. All secondary flashings to be new 26-gauge type flashings with flexible
skirt.

 

  G. E.P.D.M. storm collars to be utilized at all pipe penetrations.

 

  G. Soft Lead flexible sheet flashings to be utilized at valley to Ridge areas,
Ridge terminations to rake interface, Ridge end to gable interface and valley
evacuation areas.

 

  I. Custom 24-gauge splash diverters to be utilized at all evacuation areas of
sidewall flashings. Extend sidewall pan flashings from chimney and skylight
areas to eave underneath tile. Sidewall flashing extension metal to be of equal
width of sidewall flashing with  1/2” turn up on each side to contain water.

 

5. Quality Assurance

 

  A. Use adequate number of skilled workmen who are trained in the necessary
crafts and who are completely familiar with specified requirements and the
methods needed for proper performance of the work of this section.

 

6. Chalk Lines

 

  A. Chalk horizontal and vertical lines on membrane to assure proper spacing
for appearance and water tightness.

 

  B. Do not exceed manufacturer’s exposure recommendations.

 

7. Installing Roofing Tile

 

  A. Install tiles in strict accordance with Roof tile institute and US tiles
most current, written and published specifications, January 2002 edition. Tiles
not to exceed 14” to weather exposure. All tiles to be fastened with 10d
corrosion resistant fastener for tiles in the field. Fastener shall have a
nominal 5/16” head and of sufficient length to penetrate  3/4” into or through
substrate.

 

  B. The first (2) two courses will be fastened with hurricane clip fasteners as
manufactured by Newport Fasteners Co. Hurricane clips to be installed along the
water channel (Or side) of the tile, as close to the nose end as possible. Screw
the hurricane clip to the roof deck using the nail hole closest to the
horizontal leg of the hurricane clip.

 

  C. Valleys are to be applied using an open valley. Tiles will be cut back a
minimum of 2” from valley rib. All valley tiles cut pieces to be secured with
tile wire ties or RT600 premium grade adhesive.

 

  D. Tiles at ridge and hip ends to be built up with a minimum of (2) two
booster tiles with cement mortar in between each tile. Install 2x3 nailer at
sidewall flashing areas. All tiles at sidewall flashing areas to be fastened
with tile wire tie system and RT600 premium grade adhesive. Tiles to be set back
at chimneys and skylights one half course at down slope sections.

 

8. Eave Areas

 

  A. Install anti-ponding metal and Stormguard HT as specified.

 

  B. Install underlayment system and roof tiles in accordance with manufactures
specifications. Hurricane clip first (2) two-courses of tile.

EXHIBIT H

--------------------------------------------------------------------------------

  C. Install nominal 2”x2” on top of fascia prior to installing anti-ponding
metal. (only if necessary )

 

9. Rake Areas

 

  A. Install underlayment with a 2” turn down over edge.

 

  B. Install 2x4 nailer flat on deck.

 

  C. Install 2x2 nailer over 2x4 nailer.

 

  D. All rakes are to receive a right rake or left rake tile. All rake tiles to
be fastened with (2) two non-corrosive nails. Apply a continuous bead of RT600
premium grade adhesive at head lap of all ridge tiles at rake.

 

  E. Apply 1” dab of RT-600 tile adhesive at overlap of rake tiles.

 

10. Hip And Ridge Areas

 

  A. Install all hip tiles and miter cut for tight fit at hip.

 

  B. Install all cut tiles using nail, wire tie, or RT600 premium grade
adhesive.

 

  C. Install (1) one-layer of diamond screed lath over hip / ridge boards prior
to cement weather block.

 

  D. All tiles will be immersed in water for (2) two minutes before coming in
contact with cement mortar. All mortar to comply with Chapter 24 type “O”
mortar. All hip and ridge areas will receive a full cement weather block in a
continuous fashion. All hip / ridge ends to receive a full bull-nose of mortar
applied in a neat clean fashion. All hip / ridge tiles to be secured with one
corrosion resistant fasteners into the wood nailers. At all head laps in hip /
ridge tiles a bead of RT600 premium grade adhesive to be utilized at all tiles.

 

11. Mansard Ridge Areas

 

  A. Install 2x6 nailer in front on end and 2x4 nailer at back on end. Envelope
nailers with underlayment to a tight fit.

 

  B. Install diamond screed lath over ridge nailers.

 

  C. Install full cement weather block at ridge. Fully immerse all tile coming
in contract with mortar for two-minutes prior to contact with mortar.

 

  D. Install rake tile at back and ridge tile on top. Apply RT600 premium grade
adhesive at all head laps at ridge.

 

12. Roof To Wall Intersection

 

  A. Apply 26- gauge roof to wall flashing at all roof to wall interface.

 

13. Pipe Details

 

  A. Primary flashing to be installed directly to the roof deck with a minimum
six-inch skirt.

 

  B. Underlayment is laid in shingle fashion, with A.S.T.M. plastic modified
cement used to secure underlayment around collar of primary flashing. After tile
is notched to accept pipe, secondary flashing is to be installed on top of tile
with a minimum nine-inch flexible skirt. Continue installation of adjacent and
overlapping tiles.

EXHIBIT H

--------------------------------------------------------------------------------

14. Painting Of Flashings

 

  A. All flashings and valleys are to be primed with approved primer by Dunn
Edwards or equal.

 

  B. All flashings and valleys to be painted with (2) two coats of high quality
exterior paint to match tile color.

 

15. Clean Up / Punch List

 

  A. All tile roofs to be washed down after completion.

 

  B. A punch list will be generated for building and signed off by Contractors
Quality Control Supervisor and Rancho Las Palmas Representatives. Punch list
will include building number and date.

EXHIBIT H

--------------------------------------------------------------------------------

EXHIBIT I

OWNER’S DECLARATION

The undersigned hereby declares as follows:

 

1. New Rancho, L.L.C., a Delaware limited liability company (“Owner”), has not
conveyed, assigned or otherwise transferred any of its right, title or interest
in the premises located at 41000 Bob Hope Drive, Rancho Mirage, California, and
further described in Preliminary Report/Commitment (“Commitment”) issued by
Fidelity National Title Insurance Company (“Fidelity”) on April 18, 2006, under
File No. 9870220, except pursuant to the documents set forth on Schedule B,
Section 2, of such Commitment (“the Land”), attached hereto as Exhibit “A” and
by this reference incorporated herein.

 

2. During the period of six months immediately preceding the date of this
declaration, certain work of improvement has been done and materials furnished
in connection with three works of improvement upon the Land described as
follows: (a) the repair of the roofs on eleven (11) buildings on the premises in
the approximate total sum of Four Hundred Thirty-Two Thousand Dollars
($432,000); (b) the replacement of certain ballroom carpeting on the premises in
the approximate sum of One Hundred Ten Thousand Dollars ($110,000), and (c) the
establishment of a golf course irrigation lake on the premises in the
approximate sum of One Hundred Twenty-Nine Thousand Dollars ($129,000), but no
work whatever remains to be done and no materials remain to be furnished to
complete such works of improvement, nor are there any unpaid bills incurred for
labor and materials used in making such improvements or repairs upon the Land,
or for the services of architects, surveyors or engineers, except as follows:
                                                 [described remaining work,
unpaid bills, etc.]                                    . Owner hereby agrees to
indemnify and hold harmless Fidelity National Title Insurance Company against
any and all claims arising from the portion of such works of improvement
performed prior to the date on which the premises are transferred to
                            , except to the extent of any costs, damages or
liabilities caused, directly or indirectly, by the gross negligence or willful
misconduct of Fidelity.

 

3. Owner is not a debtor in bankruptcy (and if a partnership, the general
partner thereof is not a debtor in bankruptcy); and, to Owner’s knowledge, has
not received notice of any pending court action affecting the title to the Land.

 

4. Except as shown in the above-referenced Preliminary Report/Commitment, Owner
has not entered into any unpaid or unsatisfied security deeds, mortgages or
deeds of trust that constitute a lien against the Land or that affect the Land
but have not been recorded in the public records.

 

5. The Land is currently in use as a hotel, resort and spa, and various
amenities related thereto. To Owner’s knowledge, there are no persons or parties
in possession of the Property who have a right of first refusal or option to
purchase the Land. To Owner’s knowledge, the rights of parties in possession of
the land are as tenants only and are as set forth in Exhibit “B” (the “Rent
Roll”), attached hereto and by this reference incorporated herein.

EXHIBIT I

--------------------------------------------------------------------------------

This declaration is made with the intention that Fidelity and its policy issuing
agents will rely upon it in issuing their title insurance policies and
endorsements. Owner agrees to indemnify Fidelity against loss or damage
(including attorneys’ fees, expenses, and costs) incurred by Fidelity as a
result of any untrue statement made herein; provided, however, that such
indemnity shall not apply to any costs, damages or liabilities caused, directly
or indirectly, by the gross negligence or willful misconduct of Fidelity. This
Owner’s Declaration will terminate twelve (12) months from the date set forth
below.

The undersigned declares under penalty of perjury that the foregoing is true and
correct and that this declaration was executed on
                                    [date]                              at
                             [city and state]                            .

 

NEW RANCHO, L.L.C.,

a Delaware limited liability company

By:  

 

Name:

 

 

Title:

 

 

EXHIBIT I

--------------------------------------------------------------------------------

Exhibit “A” to Owner’s Declaration

Commitment

[to be attached]

 

EXHIBIT I

--------------------------------------------------------------------------------

Exhibit “B”

Rent Roll

[to be attached]

 

EXHIBIT I

--------------------------------------------------------------------------------

EXHIBIT J

ESTOPPEL CERTIFICATE

May     , 2006

 

KSL RLP HOLDINGS, LLC c/o KSL Capital Partners, LLC 50-905 Avenido Bermudas La
Quinta, California 92253. Attention: Steven S. Siegel FIDELITY NATIONAL TITLE
COMPANY 3550 Vine Street, Suite 100 Riverside, CA 92507 Attention: Patti Porter

Re:     Marriott Rancho Las Palmas Resort & Spa

City of Rancho Mirage, CA

Ladies and Gentlemen:

The certifications set forth herein below are being given in connection with the
proposed acquisition of that certain property, currently known as “Marriott’s
Rancho Las Palmas Resort & Spa”, more particularly described on Exhibit A
attached hereto and made a part hereof (“Property”), pursuant to that certain
Purchase and Sale Agreement, dated May     , 2006, by and between New Rancho,
L.L.C., a Delaware limited liability company, as seller, and KSL RLP Holdings,
LLC, a Delaware limited liability company, as purchaser (the “Purchase and Sale
Agreement”).

With reference to that certain document entitled, “Declaration of Covenants,
Conditions and Restrictions Rancho Las Palmas Condominiums”, dated January 20,
1976, recorded December 30, 1976, as Instrument No. 202382, in the Official
Records of Riverside County, California (“Official Records”), as modified by
(a) that certain Supplementary Declaration of Covenants, Conditions and
Restrictions Rancho Las Palmas Condominium Phase XV, dated July 26, 1977, and
recorded August 11, 1977, as Instrument No. 155480, (b) that certain
Supplementary Declaration of Covenants, Conditions and Restrictions Rancho Las
Palmas Condominiums Phase XVI, dated July 26, 1977, and recorded August 11,
1977, as Instrument No. 155482, (c) that certain First Amendment To Declaration
of Covenants, Conditions and Restrictions of Rancho Las Palmas Condominiums
County of Riverside, State of California, dated May 23, 1983, and recorded
May 27, 1983, as Instrument No. 105189, (d) that certain Second Amendment To The
Declaration of Covenants, Conditions and Restrictions of Rancho Las Palmas
Association, Inc., dated April 30, 1996, and recorded August 5, 1996, as

 

EXHIBIT J

--------------------------------------------------------------------------------

Instrument No. 294142, all in the Official Records (the documents referenced
under (a) through (d) are collectively referred to as the “Original
Declaration”), and (e) that certain First Restated Declaration of Covenants,
Conditions and Restrictions of Rancho Las Palmas Association, Inc., dated
May 16, 2003, and recorded June 4, 2003, as Instrument No. 2003-404034, in the
Official Records, which document amended and restated the Original Declaration
in its entirety (hereinafter, the “Declaration”), the undersigned hereby
certifies to Purchaser and Fidelity National Title Insurance Company (the “Title
Company”), as follows:

1. The Declaration is in full force and effect and has not been modified,
amended or supplemented in any other manner whatsoever, except as is described
on Exhibit B attached hereto. If additional matters (other than the Settlement
Agreement now listed under Item 1 on Exhibit B), are disclosed on Exhibit B, the
undersigned has attached true, complete and accurate copies of documents
referenced thereon hereto.

2. The Declaration constitutes the entire agreement among the parties thereto
with respect to the Property.

3. The undersigned has not received nor has the undersigned given any notice of
any default under the Declaration.

4. All obligations of Seller to be performed or complied with by Seller through
the date hereof have been fully performed and complied with, and there exists no
default or condition, state of facts or event that, with the passing of time or
the giving of notice, or both, would constitute a default by Seller in the
performance of its obligations under the Declaration.

5. There is no money owned to us by the Seller under the Declaration, and no
right of offset now exists with respect to any monetary obligations that we have
thereunder.

6. The undersigned understands and acknowledges that this certificate is
delivered to, and shall be relied on by, the Purchaser, in connection with its
acquisition of the Property, and the Title Company, in connection with the
issuance of title insurance in connection with the subject transaction.

7. The undersigned agrees to execute, upon request, those documents necessary to
release all right, title and interest of the undersigned in the exclusive
retail, resale and management brokerage rights granted to William Bone under
that certain Covenant and Agreement (Resale Office Land), dated August 14, 1981,
and recorded September 25, 1981 as Instrument No. 180263, of the Official
Record.

 

Very truly yours,

RANCHO LAS PALMAS ASSOCIATION, INC.,

a California nonprofit mutual benefit corporation

By:  

 

Name:  

 

Title:  

 

 

EXHIBIT J

--------------------------------------------------------------------------------

SCHEDULE 1(a)(vi)

CONTRACTS

[Attached]

SCHEDULE 1(a)(vi)

--------------------------------------------------------------------------------

SCHEDULE 1(b)

EXCLUDED ASSETS

 

EXTERIOR

  v   Marriott branded exterior signage   v  

Marriott branded directional signage

  v  

DOT signs

  v  

local billboards

  v  

airport signs

  v  

airport phone banks

  v  

hotel van

  v  

parking garage signage

   

FRONT DESK / LOBBY

  v  

any uniforms with Marriott branded logo

  v  

interior graphics

  v  

name tags

  v  

manuals

  v  

registration cards

  v  

folio paper

  v  

pens/note pads

  v  

rebate slips

  v  

key packs

  v  

fax cover pages

  v  

Marriott directories

  v  

Restaurant menus

  v  

voice/mail & wake-up call

  v  

Marriott logos on TV listings (OCV/Lodge net)

   

GUEST ROOMS

  v  

name tags

  v  

guest information guide

  v  

soap/shampoo

  v  

pens/note pads

  v  

evacuation signage

  v  

coasters

  v  

valet bags/dry cleaning slips

  v  

matches

  v  

any Marriott branded stickers (TV remote, balcony latch, etc.)

  v  

telephone face/plate

  v  

provide Marriott representative with copy of the last 90 days of the Lost and
Found Log

   

MISCELLANOUS

  v  

meeting room signage

  v  

telephone banks

  v  

restaurant menus

  v  

napkins

  v  

re-program Micros/remove name

  v   return any Complimentary Night Vouchers (CFRST ONLY)to Marriott Customer
Service in Salt Lake City (David Thompson 801-468-4043)

SCHEDULE 1(b)

--------------------------------------------------------------------------------

1) The following applications (if installed) would remain, but the Marriott
data would be removed:

Micros Point Of Sale (Marriott customized programming and interfaces to be
removed)

Espresso MoneyMinder

GuestWare Guest Response (vendor needs to assist hotel with re-installing the
application)

 

2) The following applications and data would be removed:

Marriott PMS

NGS Sales & Catering

GCS Property Card

GCS ScanStation Software

Marriott Learning Journey Multimedia Training System

SFA (Sales Force Automation)

Marrpay Profiles application

Kronos TKC software

InfoWIZ Optical Storage

ChecTec Receipe Software

Employee Appraiser

MS Exchange and Domain Controller Software

File & Print Server

Marriott PC Imaging Server

Marriott Connect VPN

Marriott Secure Dial

 

3) Access to the following centralized systems would be removed:

Access to MARSHA Reservations System

Access to Marriott’s Outlook E-Mail System

Access to PeopleSoft Financials System

Access to Labor Management System (LMS)

Access to GCS Folio Viewer

Access to GCS Charge Back Manager

Access to Marrpay Payroll System.

Access to HRMS PeopleSoft System

Access to Marriott Career Management System

Access to the Mercury Accounting Website.

Access to the Unicru eHiring System

Access to ADAMS Engineering centralized data.

Access to any other centralized Marriott systems.

 

4) The following applications and data would remain (if installed):

Mintek WinTrack PM

Meeting Matrix

 

5) The following equipment belongs to Marriott would be removed:

Marriott MCN Network Communications Equipment

SCHEDULE 1(b)

--------------------------------------------------------------------------------

SCHEDULE 11(a)(viii)

PENDING PROPERTY TAX APPEALS

Seller is in the process of appealing property tax assessments from 2004 and
2005.

SCHEDULE 11(a)(viii)

--------------------------------------------------------------------------------

SCHEDULE 11(a)(ix)

INSURANCE

 

EMSIG SCHEDULE OF AUTOMOBILES

YEAR

  

MAKE

   VIN   

GARAGED

  

ANNUAL PREMIUM

PER VEHICLE

1992

   SAAB    0024    Cedarhurst, NY    $ 2,672

1992

   FORD    7865    New York, NY    $ 4,609

2001

   TOYOTA    2884    New York, NY    $ 3,598

2003

   JAGUAR    6594    Locust Valley, NY    $ 3,335

2003

   VOLVO    6179    Cedarhurst, NY    $ 3,449

2003

   JAGUAR    0564    Manhasset, NY    $ 3,964

2003

   HONDA    3509    Fort Lee, NJ    $ 3,059

2004

   BMW    1495    Dix Hills, NY    $ 3,741

SCHEDULE 11(a)(ix)

--------------------------------------------------------------------------------

RANCHO LAS PALMAS PROPERTY      

Limit of Liability

      $ 350,000,000

Earthquake Sublimit

      $ 15,000,000

Deductible:

     

$50,000 except 5% of TIV for Earthquake

     

Participating Insurers

     

Lexington Ins. Co.

     

Great Lakes RE

     

Lloyds

     

Steadfast Ins. Co.

     

Federal Ins. Co.

      6/29/05 to 6/29/06      

DIFFERENCE IN CONDITIONS

     

(California Earthquake)

     

Limit of Liability

      $ 10,000,000    excess of    $ 15,000,000

Participating Insurers

     

Empire Indemnity Ins. Co.

     

Essex Ins. Co.

     

6/29/05 to 6/29/06

     

DIFFERENCE IN CONDITIONS

     

(California Earthquake)

     

Limit of Liability

      $ 45,000,000    excess of    $ 25,000,000

Participating Insurers

     

Ins. Co. of the West

     

Great American Ins. Co.

     

Greenwich Ins. Co.

     

Traders & Pacific Ins. Co.

     

SCHEDULE 11(a)(ix)

--------------------------------------------------------------------------------

12/13/05 to 12/13/06    GENERAL LIABILITY   

Limit of Liability

   $ 1,000,000

Zurich American Ins. Co.

  

6/29/05 to 6/29/06

  

AUTOMOBILE

  

Limit of Liability

   $ 1,000,000

Physical Damage Deductible $1,000

  

Zurich American Ins. Co.

  

6/29/05 to 6/29/06

  

UMBRELLA LIABILITY

  

Limit of Liability

   $ 250,000,000

Participating Insurers

  

Illinois National Ins. Co.

  

St. Paul Travelers Ins. Co.

  

Swiss RE

  

Gerling Ins. Co.

  

Lexington Ins. Co.

  

Zurich American Ins. Co.

  

Ohio Casualty Ins. Co.

  

6/29/05 to 6/29/06

  

SCHEDULE 11(a)(ix)

--------------------------------------------------------------------------------

CRIME   

Limit of Liability

   $ 5,000,000

$25,000 Deductible

  

National Union Ins. Co.

  

6/29/05 to 6/29/06

  

TERRORISM

  

Limit of Liability

   $ 100,000,000

$100,000 Deductible

  

Lexington Ins. Co.

  

6/29/05 to 6/29/06

  

ENVIRONMENTAL LIABILITY

  

Limit of Liability

   $ 10,000,000

$50,000 Deductible

  

Indian Harbor Ins. Co.

  

6/29/05 to 6/29/06

  

SCHEDULE 11(a)(ix)

--------------------------------------------------------------------------------

SCHEDULE 11(a)(x)

CONDEMNATION PROCEEDINGS

None.

SCHEDULE 11(a)(x)

--------------------------------------------------------------------------------

SCHEDULE 11(a)(xi)

ACTIONS OR PROCEEDINGS

None.

SCHEDULE 11(a)(xi)

--------------------------------------------------------------------------------

 

116