Exhibit 10.4

MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is
made this 16th day of January, 2015 (the “Effective Date”), by and between, Red
Lion Hotels Corporation, a Washington corporation (referred to herein sometimes
as “Red Lion” or as “Seller”), and Shelbourne Falcon RLHC Hotel Investors LLC, a
Delaware limited liability company (the “Purchaser”) relating to the Membership
Interests in RL Venture LLC, a Delaware limited liability company (the
“Company”).

RECITALS:

A.Red Lion is the sole member of the Company, holding one-hundred percent (100%)
of the Member Interests in the Company.

B.On the Contribution Date, (1) Red Lion caused its affiliates to contribute to
the Company certain hotels located at the addresses and in the commonly known
locations identified on Schedule 1.01, each of which the Company, in turn,
contributed to one of the Subsidiaries pursuant to that certain Contribution
Agreement dated the Contribution Date (the “Contribution Agreement”); and (2)
the Company has caused its subsidiaries to close the Loan with the Lender and
the Company has executed and delivered the Guaranties.

C.On the Effective Date, Red Lion desires to transfer to the Purchaser, and the
Purchaser desires to acquire from Red Lion forty-five percent (45%) of the
Member Interests in the Company (the “Transferred Member Interest”), on the
terms set forth in this Agreement and in the Related Agreements (as hereinafter
defined). Lender has given its approval for the transfer of the Transferred
Member Interest conditioned, inter alia, on Seller causing additional Persons
who are affiliated with Purchaser and approved by Lender to execute and deliver
to Lender joinders with respect to the Guaranties.

D.Simultaneous with the Closing of the transfer of the Transferred Member
Interests, (1) Red Lion, and the Purchaser will enter into the Amended and
Restated Limited Liability Company Agreement for the Company, (2) Purchaser will
cause the joinders to be executed as described in paragraph C above, and (3) Red
Lion and the Persons executing such joinders shall execute a Reimbursement and
Indemnity Agreement with regard to the Guaranties.

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing premises and the respective
representations, warranties, agreements, covenants and conditions herein
contained, and other good and valuable consideration, Red Lion and the Purchaser
agree as follows:

ARTICLE I DEFINITIONS AND REFERENCES
Section 1.01 Definitions. As used herein, capitalized terms have the same
meaning as set forth below and if used in this Agreement and not specifically
defined herein shall have the meanings given in the Contribution Agreement:

Affiliate: With respect to a specific entity, any natural person or any firm,
corporation, partnership, association, trust or other entity which, directly or
indirectly, controls, or is under common control with, the subject entity, and
with respect to any specific entity or person, any firm, corporation,
partnership, association, trust or other entity which is controlled by the
subject entity or person. For purposes hereof, the term “control” shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any such entity or the power to veto
major policy decision of any such entity, whether through the ownership of
voting securities, by contract, or otherwise.

Agreement: This Agreement including the Exhibits and Schedules thereto.

Amended and Restated Operating Agreement: The Amended and Restated Operating
Agreement of the Company in the form of Exhibit A, which will be entered into at
Closing and amend and restate in its entirety and supersede the Original
Operating Agreement.

Breaching Party: As defined in Section 4.01.

Closing: As defined in Section 6.01.

Closing Date: As defined in Section 6.01.

Company: As defined in the preamble.

Contribution Agreement: As defined in the Recitals.

Contribution Date: The date immediately preceding the Effective Date, on which
all of the actions contemplated by the Contribution Agreement have been
completed.

Contributor: As defined in the Contribution Agreement.

Effective Date:    As defined in the preamble, which shall be the date
immediately following the Contribution Date.

Exhibits: The forms of agreements identified as “Exhibits” herein and listed at
the end of this Agreement, including the executed versions thereof delivered in
connection with Closing.

Franchise Agreements: Those certain agreements to be entered into with
Franchisor for the franchise licensing of each of the Hotels.

Franchisor: Red Lion Hotels Franchising, Inc., a Washington corporation, which
is an Affiliate of Seller.

Franchisor Approval: The approval or consent of the Franchisor for the Seller’s
transfer of the Transferred Member Interests to Purchaser.

Guaranties: That certain Indemnity Guaranty, Environmental Indemnity Agreement
and Completion Guaranty signed by Seller in connection with the Loan.

Legal Requirements: All laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all governments and governmental
authorities having jurisdiction over the Hotels, and the operation thereof.

Lender: The lender, Pacific Western Bank, who has provided the Loan to the
Company’s subsidiaries (namely, (i) RL Venture Holding LLC wholly-owned by the
Company, and (ii) the twelve wholly-owned subsidiaries of RL Venture Holding).

Lender Approval: The Lender’s approval or consent for the transfer by Seller of
the Transferred Member Interests to Purchaser.

Liens:    Any mortgage, deed of trust or other consensual lien, mechanic’s or
any materialman’s lien, judgment lien, lien for delinquent real property taxes
or assessments, other tax and statutory lien (other than the lien for
non-delinquent real estate taxes and assessments or any lien arising out of any
activity of the Company) that secures an obligation of Seller or the
Contributing Entities and affects Seller’s or the Contributing Entities’ title
to any of the Property.

Loan: That certain loan made by Lender on the Contribution Date to subsidiaries
of the Company in the maximum principal amount of $80,000,000.

Losses: As defined in Section 14.01.

Manager: Red Lion Hotels Management, Inc., which is an Affiliate of Seller.

Member Interest: means the limited liability equity interest in the Company.

Obligations: All payments required to be made and all representations,
warranties, covenants, agreements and commitments required to be performed under
the provisions of this Agreement by Seller.

Original Operating Agreement: That certain Limited Liability Company Agreement
dated October 29, 2014 for the Company and entered into by Seller as its sole
member in connection with the formation of the Company.

Purchaser: As defined in the preamble.

Purchaser’s Conditions: As defined in Section 8.02.

Red Lion: Red Lion Hotels Corporation, a Washington corporation.

Related Agreements: This Member Interest Purchase Agreement, the Contribution
Agreement and all ancillary agreements entered into between the Company and
Purchaser related thereto or required thereby.

Schedules: The items and documents identified as “Schedules” herein.

Seller’s Conditions: As defined in Section 8.01.

Seller’s Knowledge and Known to Seller and like phrases: Any written notice
received by any entity Seller or its subsidiaries, the current actual knowledge
of any one or more of the following: Greg Mount (President and Chief Executive
Officer of Red Lion Hotels Corporation), Julie Shiflett (Executive Vice
President and Chief Financial Officer of Red Lion Hotels Corporation), Harry G.
Sladich ((Executive Vice President, Hotel Operations and Sales), and Thomas
McKeirnan (general counsel of Red Lion Hotels Corporation). Seller represents
and warrants that the foregoing-named Persons are those individuals most
appropriate to have the knowledge of the matters to which the representations
and warranties being made by Seller relate.

Taxes: All taxes and other governmental charges of any kind whatsoever that may
at any time be assessed or levied against or with respect to the Property, or
any part thereof or any interest therein, including, without limitation, all
general and special real estate taxes and assessments or taxes assessed
specifically in whole or in part in substitution of general real estate taxes or
assessments; any taxes levied upon or with respect to the revenue, income or
profits of Seller from all or any part of the Property which, if not paid, will
become a lien on all or any part of the Property, or a lien or charge on the
rents, revenues or receipts therefrom; all Excise Taxes; all assessed ad valorem
taxes; all utility and other charges incurred in the operation, maintenance,
use, occupancy and upkeep of the Property and all assessments and other charges
made by any governmental agency for improvements that may be secured by a lien
on the Property.

Section 1.02 References. Except as otherwise specifically indicated, all
references to Section and Subsection numbers refer to Sections and Subsections
of this Agreement. References to Exhibits refer to the Exhibits as defined
above, and references to Schedules refer to the Schedules as defined above. The
words “hereby,” “hereof,” “herein,” “hereto,” “hereunder,” “hereinafter,” and
words of similar import refer to this Agreement as a whole and not to any
particular Section or Subsection hereof. The word “hereafter” shall mean after,
and the term “heretofore” shall mean before, the date of this Agreement.
Captions used herein are for convenience only and shall not be used to construe
the meaning of any part of this Agreement. Time shall refer to the time in
effect in Washington unless otherwise specified.

ARTICLE II

TRANSFER OF MEMBER INTEREST; WARRANTS

Section 2.01 Effective on the Closing Date, Red Lion shall transfer the
Transferred Member Interest to the Purchaser, with the result that immediately
thereafter Red Lion shall own fifty-five percent (55%) of the Member Interests
in the Company and Purchaser shall own forty- five percent (45%) of the Member
Interests in the Company.

Section 2.02 In consideration for structuring the Member as a joint venture
between Red Lion and the Purchaser, at Closing Red Lion will award to Shelbourne
Falcon RLHC Stock Investors LLC, a Delaware limited liability company and an
Affiliate of the Purchaser, warrants for Shelbourne Falcon RLHC Stock Investors
LLC to purchase, at any time within five (5) years after the date of this
Agreement, 442,533 shares of Red Lion Hotels Corporation common voting stock.

ARTICLE III PURCHASE PRICE
Section 3.01 The purchase price for the Transferred Member Interest is Eighteen
Million Four Hundred Fifty-Five Thousand Two Hundred and Fifty-Six Dollars
($18,455,256), which the Purchaser shall pay to Red Lion in immediately
available U.S. funds at Closing.

ARTICLE IV CONFIDENTIALITY; TITLE
Section 4.01    Confidentiality.

(a)Each party shall ensure that all confidential information which such party or
any of its respective officers, directors, employees, attorneys, agents,
investment bankers, or accountants may now possess or may hereafter create or
obtain relating to the financial condition, results of operations, manner of
doing business, customer lists, contract vendees, business, properties, assets,
liabilities, or future prospects of the other party, any affiliate of the other
party, or any customer or supplier of such other party or any such affiliate
shall not be published, disclosed, or made accessible by any of them to any
other person or entity at any time or used by any of them, in each case without
the prior written consent of the other party; provided, however, that the
restrictions of this sentence shall not apply (1) as may otherwise be required
or given by law (for example, this sentence shall not apply to any disclosures
or notices made after the Effective Date in connection with the Company’s
obtaining a new full liquor license or temporary liquor permit); (2) as may be
necessary or appropriate in connection with the enforcement of this Agreement;
(3) to the extent such information shall have otherwise become publicly
available, or (4) as to the Company, to disclosure by or on its behalf to
existing or prospective lenders or investors or to others whose consent may be
required or desirable in connection with obtaining the financing or consents
which are required or desirable to consummate the transactions contemplated
herein; provided that such party has been advised that

such information is confidential. Each party shall advise all persons and
entities who received confidential data from it either to destroy or deliver to
the other party all tangible evidence of such confidential information to which
the restrictions of the foregoing sentence apply at such time as negotiations
with respect to the transactions contemplated herein are terminated. In the
event of any breach or intended breach by either party (the “Breaching Party”)
of the terms of this Section 4.01, the Breaching Party agrees to the entry of an
order restraining such Breaching Party from breaching this paragraph and such
Breaching Party agrees to promptly reimburse the other party for its reasonable
counsel fees and disbursements in connection with such action or proceeding
enforcing this paragraph.

(b)The Purchaser acknowledges that Seller is a publicly traded company and this
Agreement and any Exhibits and Schedules thereto may be disclosed to and filed
with the Securities and Exchange Commission to the extent required by law as
Seller determines in its reasonable discretion.

ARTICLE V REPRESENTATIONS AND WARRANTIES
Section 5.01 Representations and Warranties of Seller. Seller hereby makes to
the Purchaser (for the benefit of the Purchaser) all of the same representations
and warranties that the Contributor has made to the Company in the Contribution
Agreement and all such representations and warranties are incorporated herein by
reference as if they were set forth in their entirety herein. Purchaser shall
have the exclusive right to cause the Company to enforce such representations
and warranties against Seller. In addition to the exclusive right to cause the
Company to enforce such representations and warranties against Seller, Purchaser
shall also have the right to enforce all such representations and warranties
directly against Seller. In addition to the foregoing, Seller hereby made the
following representations and warranties:

(a)Due Organization, etc. The Company is duly formed, validly existing and in
good standing as a limited liability company under the laws of the State of
Delaware. This Agreement has been duly authorized by all requisite action on the
part of Seller. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, except as otherwise
expressly provided herein, do not require the consent or approval of any
governmental authority, nor shall such execution and delivery result in a breach
or Violation of any Legal Requirement, or constitute a default (or an event
which with notice and passage of time or both will constitute a default) under
any contract or agreement to which Seller or an Affiliate is a party or by which
it or the Property is bound. This Agreement 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, except to the extent that enforcement
may be limited by applicable bankruptcy, insolvency, moratorium.

(b)The Transferred Member Interests are not subject to any liens, charges,
restrictive agreements, security interests and other encumbrances of any kind.
There are no outstanding interests, equity interests, subscriptions, purchase
rights, subscription rights, conversion rights, exchange rights, options,
warrants, preemptive rights, rights of first refusal,

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rights of first offer, or other rights or other arrangements or commitments
outstanding with respect to the Transferred Member Interests. The Transferred
Member Interests are not subject to any voting trusts, proxies, or other
agreements or understandings.

(c)Upon the Closing, the Purchaser will obtain good and valid title to the
Transferred Member Interests assigned by such Seller free and clear of any
liens, restrictions, claims, equities, options, charges, rights of first
refusal, or encumbrances or other restrictions, and with no defects of title
whatsoever, except restrictions on transfer and other rights contained in the
Amended and Restated Operating Agreement and except for restrictions imposed by
applicable state and federal securities laws.

(d)
Seller has not: (i) made a general assignment for the benefit of creditors;

(ii) filed any voluntary petition in bankruptcy or suffered the filing of an
involuntary petition by Seller’s creditors; (iii) suffered the appointment of a
receiver to take possession of all or substantially all of such Seller’s assets;
(iv) suffered the attachment, or other judicial seizure of all, or substantially
all, of Seller’s assets; (v) admitted in writing its inability to pay its debts
as they come due; or (vi) made an offer of settlement, extension or compromise
to its creditors generally.

(e)There are no taxes due and unpaid on the Transferred Member Interests and no
transfer taxes shall be due and payable in connection with the transfer of the
Transferred Member Interest to Purchaser.

(f)There are no actions, suits, or proceedings, pending or, to the knowledge of
Seller, threatened against Seller affecting the ownership or the transfer of the
Transferred Member Interests or any of Seller’s rights with respect to the
Transferred Member Interests or which challenges or impairs the Assignor’s
ability to execute, deliver or perform this Agreement, nor is Seller aware of
any facts which to its knowledge might result in any action, suit or
proceedings.

(g)Except for the Lender Approval and the Franchisor Approval, no consent or
approval of any third party under any material agreement, material contract,
material commitment, material understanding, order or judgment and no action of,
filing with or notice to any instrumentality, subdivision, court, administrative
agency, commission, official or other authority of the United States or any
state, municipality, locality or other government or political subdivision
thereof, or any quasi-governmental or private body under any law or order
applicable to Seller is necessary or required for the execution and delivery of
this Agreement by the Seller, the performance by the Seller of Seller’s
obligations hereunder or the consummation of the transactions contemplated
hereby. For purposes of this section “material” means any agreement, contract,
commitment or understanding that is not cancellable on 30 days’ notice or causes
a financial commitment in excess of $25,000 for the term of the agreement,
contract, commitment or understanding.

(h)Except for that certain payment owed to CS Capital Advisors (which payment
Seller is obligated to make), Seller has not incurred any obligation for any
finders,’ brokers’ or agents’ fees or commissions or similar compensation in
connection with the transactions contemplated hereby.

(i)Seller’s affiliate, Red Lions Hotels Management, Inc. has sufficient
authority granted to it by the applicable governmental authorities as of the
Closing Date for each of the operating subsidiaries of the Company (i.e. all
subsidiaries except RL Venture Holding LLC) to sell spirits, beer and wine at
each hotel owned by the wholly-owned subsidiaries of RL Venture Holding LLC.

Except as specifically set forth herein, Seller has not made and does not make
or give any warranties or representations.

Section 5.02 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants the following to Seller:

(a)Authority. The Purchaser has all requisite power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
pursuant to the terms and conditions hereof.

(b)No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with,
breach, result in a default under, or violate any commitment, document or
instrument to which the Purchaser is a party or by which it is bound.

Except as specifically set forth herein, Purchaser has not made and does not
make or give any warranties or representations.

Section 5.03 Restatement and Duration of Representations and Warranties. All
representations and warranties contained in Section 5.01 and Section 5.02 shall
be deemed restated on (and made as of) the Closing Date and shall survive the
period of one (1) year from the Closing Date.

Section 5.04    As-Is Purchase/Disclaimer of Implied Representations or
Warranties.

(a)AS-IS PURCHASE. THE PURCHASER ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT,
EXCEPT AS EXPRESSLY PROVIDED IN Section
5.01 ABOVE OR IN THE EXHIBITS AND WITHOUT AFFECTING ANY OF THE OBLIGATIONS OF
SELLER UNDER THIS AGREEMENT OR THE OBLIGATIONS OF THE SELLER UNDER THE
CONTRIBUTION AGREEMENT: (I) ANY INFORMATION INCLUDING DOCUMENTS AND OTHER
INFORMATION PROVIDED, SUPPLIED OR MADE AVAILABLE BY SELLER IS FURNISHED TO THE
PURCHASER SOLELY AS A COURTESY; (II) THE INFORMATION IS PROVIDED, AND THE
PROPERTY IS PURCHASED, ON AN AS-IS-WHERE-IS BASIS AND SELLER MAKES NO
REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW OR OTHERWISE,
INCLUDING, BUT IN NO WAY LIMITED TO, ANY WARRANTY OF CONDITION, MERCHANTABILITY,
OR FITNESS FOR A PARTICULAR PURPOSE AS TO THE INFORMATION OR THE PROPERTY (AS
DEFINED IN THE CONTRIBUTION AGREEMENT); AND (III) NO REPRESENTATIONS, WHETHER
WRITTEN OR ORAL, HAVE BEEN MADE BY SELLER, OR ITS AGENTS OR EMPLOYEES IN ORDER
TO INDUCE THE COMPANY TO ENTER INTO THIS AGREEMENT.

(b)EXCEPT AS EXPRESSLY PROVIDED IN Section 5.01, AND WITHOUT AFFECTING ANY OF
THE OBLIGATIONS OF SELLER UNDER THIS AGREEMENT OR THE OBLIGATIONS OF THE SELLER
UNDER THE CONTRIBUTION AGREEMENT OR THE OBLIGATIONS OF THE SELLER UNDER THE
AMENDED AND RESTATED OPERATING AGREEMENT, AS PART OF THE PURCHASER’S AGREEMENT
TO ACCEPT THE TRANSFERRED MEMBERSHIP INTEREST IN COMPANY ON AN AS-IS-WHERE-IS
BASIS, AND NOT AS A LIMITATION ON SUCH AGREEMENT, THE PURCHASER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES AND RELEASES ANY AND ALL ACTUAL OR
POTENTIAL RIGHTS THE PURCHASER MIGHT HAVE REGARDING ANY FORM OF WARRANTY,
EXPRESS OR IMPLIED, OF ANY KIND OR TYPE, RELATING TO THE PROPERTY AND THE
INFORMATION.

(c)RELEASE. WITH THE EXCEPTION OF: (I) SELLER’S DEFAULT, SELLER’S BREACH OF ANY
REPRESENTATION OR WARRANTY OF SELLER, OR SELLER’S COVENANTS OR INDEMNIFICATION
OBLIGATION SPECIFICALLY SET FORTH IN THIS AGREEMENT OR IN THE CONTRIBUTION
AGREEMENT OR THE OBLIGATIONS OF THE SELLER UNDER THE AMENDED AND RESTATED
OPERATING AGREEMENT, OR (II) ANY CLAIMS ARISING OUT OF SELLER’S FRAUD, THE
PURCHASER, FOR ITSELF AND ITS AGENTS, AFFILIATES, SUCCESSORS AND ASSIGNS, HEREBY
RELEASES AND FOREVER DISCHARGES SELLER AND THE COMPANY FROM AND AGAINST ANY AND
ALL COST, LIABILITY OR DEMAND ARISING OUT OF OR RELATED TO THE PROPERTY WHICH
THE PURCHASER HAS AT CLOSING OR MAY HAVE IN THE FUTURE.

THE PURCHASER HEREBY SPECIFICALLY ACKNOWLEDGES THAT THE PURCHASER HAS CAREFULLY
REVIEWED THIS SUBSECTION AND DISCUSSED ITS IMPORT WITH LEGAL COUNSEL AND THAT
THE PROVISIONS OF THIS SUBSECTION ARE A MATERIAL PART OF THE AGREEMENT AND OF
THE CONSIDERATION GIVEN TO SELLER UNDER THE AGREEMENT.

ARTICLE VI CLOSING MATTERS
Section 6.01 Closing. The closing of the transaction contemplated hereby (the
“Closing”) shall take place through the escrow established with the Title
Company on the date immediately following the Contribution Date, but in any
event not later than 5:00 PM, Seattle, Washington time on January 16, 2015 the
“Closing Date”) and shall only be complete upon the completion of all actions
related to the Contribution Agreement.

Section 6.02 Revenues and Expenses of the Company – Apportionments. All expenses
related to the operation of the Property and all income from the Property, have
been and shall continue to be those of the Company (subject to the allocations
as between the Existing Company (as defined below) and the Reconstituted Company
(as defined below) as provided in this Agreement and the Amended and Restated
Operating Agreement of the Company). Notwithstanding the foregoing, the parties
hereto acknowledge and agree that, for accounting

and income tax purposes, all items of income and expense of Owner, as well as
all other items of gain, loss, deduction or credit of Owner recognized on or
prior to Closing will be allocated to the Seller in accordance with the terms of
the Original Agreement (the “Existing Company”); and all such items of income,
expense, gain, loss, deduction or credit of Company recognized after the date of
Closing will be allocated to the Company as owned by Seller and Buyer as the
members of the Company in accordance with the terms of the Amended and Restated
Operating Agreement (the “Reconstituted Company”), with the Reconstituted
Company treated as a partnership for federal income tax purposes. The provisions
of this paragraph shall survive the Closing.

ARTICLE VII CLOSING DELIVERIES
Section 7.01    Seller’s Deliveries.    At Closing, Seller shall deliver, or
cause to be delivered to the Purchaser:

(a)Evidence of the existence, organization and authority of the Company;

(b)Evidence of the authority of the persons executing this Agreement on behalf
of the Seller;

(c)Amended and Restated Operating Agreement, executed on behalf of the Seller
and the Company;

(d)Assignment and Assumption of Member Interests assigning to Purchaser the
Member Interests, in form attached hereto as Exhibit “B” (the “Member Interests
Assignment”), executed by Seller; and

(e)Foreign Investment in Real Property Tax Act affidavit(s) in the form attached
hereto as Exhibit “C”, executed by Seller. If Seller fails to provide the
necessary affidavit(s) and/or documentation of exemption on the Closing Date,
Purchaser may proceed with withholding required by applicable law;

(f)Evidence of the Lender Consent and Franchisor Consent and, if applicable, the
consent of Manager;

(g)Seller’s affidavits or similar certifications as may be reasonably and
customarily required by the Title Company to issue to the Company a title
insurance policy in accordance with the Contribution Agreement;

(h)Reimbursement and Indemnity Agreement in form attached hereto as Exhibit “D”
(the “Reimbursement and Indemnity Agreement”) and

(i)such additional deliveries as may be required by this Agreement or any
Exhibit attached hereto.

Section 7.02    The Purchaser’s Deliveries. At Closing, the Purchaser shall
deliver, or cause to be delivered, to Seller (or in the case of Section 7.02(d),
to Lender), the following,

(a)To Evidence of the authority of the persons executing this Agreement on
behalf of Purchaser;

(b)
The Purchase Price;

Purchaser;
(c)

Amended and Restated Operating Agreement, executed on behalf of the

(d)Joinders (in form approved by the Lender) to that certain Indemnity Guaranty,
Environmental Indemnity Agreement and Completion Guaranty signed by Seller in
connection with the Loan;

(e)
Reimbursement and Indemnity Agreement; and

(f)such additional deliveries as may be required by this Agreement or any
Exhibit attached hereto.

Section 7.03 Transactions. All documents or other deliveries required to be made
by the Company or Seller at Closing are being delivered in accordance with the
agreement of the parties as to the order of the transactions being completed on
successive dates. However, it is understood and agreed that the closing on the
sale and transfer of the Transferred Member Interest is to occur on the date
immediately following the completion of all actions contemplated by the
Contribution Agreement.

Section 7.04 Further Assurances. Seller and the Company will, at the Closing, or
at any time or from time to time thereafter, upon request of either party,
execute such additional instruments, documents or certificates as either party
deems reasonably necessary in order to convey, assign and transfer the
Transferred Member Interest to the Purchaser hereunder.

ARTICLE VIII CONDITIONS TO OBLIGATIONS
Section 8.01 Conditions to Seller’s Obligations. The obligation of Seller to
close the transaction and deliver the documents and instruments required
hereunder shall be subject to satisfaction in full of the following conditions
(“Seller’s Conditions”) on or before the Closing Date:

(a)The Purchaser shall have performed on or before the Closing Date the
obligations required to be performed by it on or before the Closing Date.

(b)The Purchaser shall have completed all the deliveries and actions required to
be made by the Company under Section 7.02 and elsewhere in this Agreement.

(c)There shall be no material breach of any of the Purchaser’s representations,
warranties and covenants set forth in this Agreement.

(d)There shall not then be any pending or, to the knowledge of the Purchaser,
threatened litigation against the Seller or the Company which, if determined
adversely, would restrain the consummation of any of the transactions referred
to herein, or declare illegal, invalid or nonbinding any of the covenants or
obligations of the Purchaser herein.

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 the Company. If any of Seller’s Conditions is not satisfied or has not been
so waived by notice to the Company prior to the Closing Date, Seller shall give
written notice to the Company describing the condition or conditions that have
not been satisfied or waived and either Seller or the Company by notice to the
other party shall be entitled to postpone the Closing Date by up to thirty (30)
days in the aggregate for the purpose of attempting to satisfy such condition or
conditions by delivering written notice on or before the then scheduled Closing
Date. Nothing contained in this Agreement shall require the Company 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 conditions to Closing.

Section 8.02 Conditions to the Purchaser’s Obligations. The obligation of the
Purchaser to purchase the Transferred Member Interest and to close the
transactions contemplated hereby is subject to satisfaction in full of each of
the following conditions (“Purchaser’s Conditions”) on or before the Closing
Date:

(a)All of the Seller’s obligations under the Contribution Agreement to be
performed by Seller as a condition precedent to closing thereunder have been
performed and closing under the Contribution Agreement has occurred on the date
immediately preceding the Closing Date;

(b)The representations, warranties and agreements of Seller contained in Section
5.01 shall be true and accurate in all material respects on the Closing Date, as
if made on such date.

(c)Seller shall have performed on or before the Closing Date the obligations
required to be performed by it on or before the Closing Date.

(d)Seller shall have completed all the deliveries and actions required to be
made by Seller under Section 7.01 and elsewhere in this Agreement.

(e)There shall not then be any pending or, to the knowledge of either the
Company or Seller, threatened litigation against Seller which, if determined
adversely, would restrain the consummation of any of the transactions referred
to herein, or declare illegal, invalid or nonbinding any of the covenants or
obligations of the Seller herein.

(f)The Lender Consent and Franchisor Consent have been received by the Seller
and Purchaser.

Purchaser’s Conditions are solely for the benefit of the Purchaser and may be
waived only by the Seller. Any such waiver or waivers shall be in writing and
shall be delivered to Seller. If any of Purchaser’s Conditions is not satisfied
or has not been so waived by the Seller prior to the Closing Date, the Purchaser
shall give written notice to Seller describing the condition which has not been
satisfied or waived and the Purchaser by notice to the other party shall be
entitled to postpone the Closing Date by up to thirty (30) days in the aggregate
for the purpose of attempting to obtain satisfaction of such condition or
conditions by delivering written notice on or before the then scheduled Closing
Date. Nothing contained in this Agreement shall require the Purchaser to
postpone the Closing Date or to bring any suit or other proceedings or, except
as otherwise expressly required by this Agreement, to pay any substantial sum to
satisfy any of the Purchaser’s conditions.

ARTICLE IX ACKNOWLEDGEMENTS
Section 9.01 Hart-Scott-Rodino. Seller and the Company agree that The
Hart-Scott- Rodino Antitrust Improvements Act of 1976, 15 U.S.C. §18(a) et.
seq., as amended does not apply to the sale and transactions contemplated in
this Agreement.

ARTICLE X INDEMNIFICATION
Section 10.01 Seller’s Indemnification. Seller hereby agrees to indemnify, hold
harmless and defend the Purchaser from and against any and all loss, damage,
claim, cost and expense and any other liability whatsoever, including, without
limitation, reasonable accountants’ and attorneys’ fees, charges and costs
(collectively, “Losses”), incurred by the Company by reason of (a) Seller’s
breach of any representations or warranties of Seller contained in this
Agreement (“Seller Rep Breaches”), (b) Seller’s breach of any covenants of
Seller contained in this Agreement which survive the Closing, (c) failure to
perform the obligations of Seller under the Related Agreements, or any other
document delivered by Seller at Closing in accordance with Section 7 of this
Agreement, and (d) any liability or obligation relating to the ownership of the
Transferred Member Interest and attributable to the period prior to the date
hereof.

Section 10.02 Intentionally Omitted.

Section 10.03 The Purchaser’s Indemnification. The Purchaser hereby agrees to
indemnify, hold harmless and defend Seller from and against any and all loss,
damage, claim, cost and expense and any other liability whatsoever, including,
without limitation, reasonable accountants’ and attorneys’ fees, charges and
costs incurred by Seller by reason of (a) the Purchaser’s breach of any
representations or warranties of the Company contained in this Agreement
(“Purchaser Rep Breaches”); (b) the Purchaser’s breach of any covenants of the
Purchaser contained in this Agreement which survive the Closing, the failure to
perform the obligation of Purchaser under the Related Agreements. The
Purchaser’s representations and warranties shall terminate and be of no force
and effect one (1) year after the Closing Date,

except with respect to any Company Rep Breaches indemnity claims delivered to
the Company prior to the termination date; and the foregoing Company indemnities
shall terminate and be of no force and effect two (2) years after the Closing
Date with respect to claims based on the Company’s failure to comply with a
covenant in this Agreement which survives the Closing.

Section 10.04 Third Party Claims. If a claim by a third party is made against
either of the indemnified parties, and if either of the indemnified parties
intends to seek indemnity with respect thereto under this ARTICLE X, such
indemnified party shall promptly notify the Company or Seller, as the case may
be, of such claim. The indemnifying party shall have thirty
(30)days after receipt of the above-mentioned notice to undertake, conduct and
control, through counsel of its own choosing (subject to the consent of the
indemnified party, such consent not to be unreasonably withheld or delayed) and
at its expense, the settlement or defense therefor, and the indemnified party
shall cooperate with it in connection therewith; provided that: (a) the
indemnifying party shall not thereby permit to exist any lien, encumbrance or
other adverse charge upon any asset of any indemnified party; (b) the
indemnifying party shall permit the indemnified party to participate in such
settlement or defense through counsel chosen by the indemnified party, provided
that the fees and expenses of such counsel shall be borne by the indemnified
party; and (c) the indemnifying party shall agree promptly to reimburse the
indemnified party for the full amount of any loss resulting from such claim and
all related expenses incurred by the indemnified party within the limits of this
ARTICLE X. So long as the indemnifying party is reasonably contesting any such
claim in good faith, the indemnified party shall not pay or settle any such
claim. Notwithstanding the foregoing, the indemnified party shall have the right
to pay or settle any such claim, provided that in such event they shall waive
any right to indemnity hereunder by the indemnifying party. If the indemnifying
party does not notify the indemnified party within thirty days after receipt of
the indemnified party’s notice of a claim of indemnity hereunder that it elects
to undertake the defense thereof, the indemnified party shall have the right to
contest, settle or compromise the claim in the exercise of its exclusive
discretion at the expense of the indemnifying party.

ARTICLE XI NOTICES
Section 11.01 Notices. Except as otherwise provided in this Agreement, all
notices, demands, requests, consents, approvals and other communications (herein
collectively called “Notices”) required or permitted to be given hereunder, or
which are to be given with respect to this Agreement, shall be in writing and
shall be personally delivered or sent by overnight express courier, prepaid for
next morning delivery, or by electronic facsimile transmission (“Fax”) addressed
to the party to be so notified as follows:

If intended for Seller, to:    Red Lion Hotels Corporation
W. 201 North River Drive Spokane, WA 99201 Fax: 509-325-7325
Attention: General Counsel

copies to:
Davis Wright Tremaine LLP 1201 Third Avenue, Suite 2200

Seattle, WA 98101-3045
Fax: (509) 325-7324
Attention: Matt LeMaster

If intended for the Purchaser, to:    Shelbourne Falcon RLHC Hotel Investors LLC
c/o Shelbourne Capital, LLC Suite 300
595 East Lancaster Avenue Radnor PA 19087
Fax: (610) 964-7609
Attention: Joseph L. Fox

copies to:
Duane Morris LLP 30 S. 17th Street

Philadelphia, PA 19103-4196
Fax: (215) 689-2481
Attention: David I. Haas

Notice mailed by regular, registered or certified mail shall not be permitted.
Notice personally delivered shall be deemed received when delivered. Notice sent
by overnight express courier for next morning delivery shall be deemed received
by the addressee the next business day after mailing thereof upon proof of
delivery by the overnight express courier. Notice by Fax transmission shall be
deemed received on the day of transmission if transmission is completed before
5:30 pm recipient’s local time on a business day, and otherwise on the business
day following the day of transmission; provided, however, that delivery by Fax
shall be effective only if the Fax transmission is confirmed within one business
day by duplicate notice delivered as otherwise provided herein. Time of
completion of Fax transmission shall be established by a transmission
confirmation log sheet generated by the sending machine. Either party may at any
time change the address for notice to such party by delivering a Notice as
aforesaid. Counsel may give any notices on behalf of its client.

ARTICLE XII ADDITIONAL COVENANTS
Section 12.01 Additional Covenants. In addition, the parties agree as follows:

(a)Expenses. The fees and expenses of Seller’s designated representatives,
accountants and attorneys shall be borne by Seller, and the fees and expenses of
the Purchaser’s designated representatives, accountants and attorneys shall be
borne by the Purchaser. At Closing, the Seller and Buyer shall reconcile as
between them such expenses incurred such that the Seller bears an aggregate 55%
share of such combined expenses and Buyer bears a 45% share of such combined
expenses.

(b)Brokerage. Except as set forth in Section 5.01(h), Seller and the Purchaser
each hereby represent and warrant to the other that neither has dealt with any
broker or finder in connection with the transaction contemplated hereby. Each of
Seller and the Company hereby agrees to indemnify, defend and hold the other
harmless against and from any and all manner of claims, liabilities, loss,
damage, attorneys’ fees and expenses, incurred by either party and arising out
of, or resulting from, any claim by any broker or finder in contravention of its
representation and warranty herein contained.

(c)Construction. This Agreement shall not be construed more strictly against one
party than against the other, merely by virtue of the fact that it may have been
prepared primarily by counsel for one of the parties, it being recognized that
both the Company and Seller have contributed substantially and materially to the
preparation of this Agreement. As used in this Agreement, (i) each term defined
in this Agreement has the meaning assigned to it, (ii) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with U.S. Treasury Regulations, (iii) as the context may require, words in the
singular include the plural and words in the plural include the singular, (iv)
as the context may require, words in the masculine or neuter gender include the
masculine, feminine and neuter genders, (v) except as the context may require,
all references to Schedules or Exhibits refer to Schedules or Exhibits delivered
herewith or attached hereto (each of which is deemed to be a part of this
Agreement), (vi) all references to Sections or Articles refer to Sections or
Articles of this Agreement, (vii) all references to “$” or “dollars” refer to
U.S. dollars legal currency,
(viii) any amount to be paid in “$” or “dollars” shall be paid in U.S. dollars,
(ix) “including” means “including without limitation”, and (x) the terms
“herein”, “hereunder”, “hereby”, “hereto” and terms of similar import refer to
this Agreement in its entirety, and not to any particular Article, Section,
paragraph or subparagraph.

(d)Public Statement. Neither Seller nor the Purchaser shall make any press
release or public statement or announcement concerning this Agreement or the
transactions contemplated herein, without the prior written consent of the
other, which consent shall not be unreasonably withheld or delayed.

(e)Exclusivity. Seller shall deal exclusively with the Purchaser with respect to
the sale of the Transferred Member Interests, Seller shall not enter into an
agreement to sell the Transferred Member Interests to any party other than the
Purchaser and Seller shall not make any offer to sell or accept any offer to
purchase the Transferred Member Interests.

(f)Acquisition Fee. On the date of Closing, Seller and Purchaser shall pay an
acquisition fee in the total amount of $888,360 to Shelbourne Capital, LLC as
follows: (i) Seller shall pay 55% of the acquisition fee; and (ii) Purchaser
shall pay 45% of the acquisition fee..

ARTICLE XIII MISCELLANEOUS
Section 13.01 Successors and Assigns. This Agreement shall be binding upon the
heirs, executors, administrators, and successors and assigns of Seller and the
Purchaser; provided,

however, the Purchaser shall not assign the Purchaser’s rights and obligations
hereunder to any party without the prior written consent of Seller, which
consent may be withheld by Seller in its sole discretion. Any such assignment in
violation of this provision shall be void. If Seller consents to an assignment,
the assignment will not be effective against Seller until the Purchaser delivers
to Seller a fully executed copy of the assignment instrument, which instrument
must be reasonably satisfactory to Seller in both form and substance and
pursuant to which the assignee assumes and agrees to perform for the benefit of
Seller the obligations of the Company under this Agreement, and pursuant to
which the assignee makes the warranties and representations required of the
Purchaser under this Agreement; provided, however, that no such assignment shall
relieve the assignor from primary liability for its obligations under this
Agreement.

Section 13.02 Entire Agreement. This Agreement and the Related Agreements
contain all of the covenants, conditions and agreements between the parties and
shall supersede all prior correspondence, agreements and understandings, both
oral and written.

Section 13.03 Disputes – Arbitration.

(a)For any dispute arising between the Purchaser and Seller under this
Agreement, either party shall have the right to require that the dispute be
resolved through a binding arbitration proceeding (an “Arbitration Proceeding”)
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association with expedited procedures in effect on the date thereof.
The arbitrator shall have authority to award reasonable attorney’s fees for
costs for any party to the arbitration. The arbitration hearing shall be
conducted in Chicago, IL.

(b)The party desiring arbitration shall provide written notice to the other
party (the “Arbitration Notice”) indicating (i) the matter in controversy and
(ii) the name, contact information and professional resume of a Qualified
Arbitrator (“Initial Arbitrator”) to arbitrate such matter in controversy. The
party receiving the Arbitration Notice shall deliver to the other party, within
ten (10) days of the receipt of the Arbitration Notice, written notice (“Second
Arbitrator Notice”) of the name, contact information and professional resume of
a second Qualified Arbitrator (“Second Arbitrator”) to arbitrate the matter in
controversy set forth in the Arbitration Notice. The Initial Arbitrator and the
Second Arbitrator shall, within ten (10) days after delivery of the Second
Arbitrator Notice, agree, upon a Qualified Arbitrator (“Third Arbitrator”) and
shall deliver written notice of the name, contact information and professional
resume of the Third Arbitrator to each party simultaneously.

(c)In the event the Initial Arbitrator and the Second Arbitrator cannot agree on
the Third Arbitrator or if such Arbitrator is unwilling to act as the Third
Arbitrator, then any party may petition the AAA (or any successor body of
similar function agreed upon by the parties) to appoint a Qualified Arbitrator
to act as the Third Arbitrator within five (5) days of such petition.

(d)The Arbitration Proceedings shall commence ten (10) Business Days after the
engagement or appointment of the third Arbitrator pursuant to this Section 24.
Such Arbitration Proceedings shall be conducted in one (1) day until completion,
each party shall have no more than a total of four (4) hours to present its case
and to cross-examine or interrogate persons supplying information or
documentation on behalf of the other party and the arbitrators shall

17

make a determination within ten (10) Business Days after conclusion of the
Arbitration Proceeding.

(e)Each party shall sign all documents and do all other things necessary to
submit any such matter to arbitration and agree to, and hereby do, waive any and
all rights they or either of them may at any time have to revoke their agreement
hereunder to submit to arbitration and to abide by the decision rendered
thereunder.

(f)The costs and expenses of an Arbitration Proceeding and the arbitrators shall
be shared equally by the parties, provided, however, each Member shall pay its
own counsel and other professional fees and expenses with respect to such
Arbitration Proceeding.

(g)The final decision and award in which any two of the arbitrators agree shall
be in writing, shall be binding on the parties and shall be nonappealable, and
counterpart copies thereof shall be delivered to the parties. A judgment or
order based upon such award may be entered in any court of competent
jurisdiction. All actions necessary to implement the decision of the arbitrators
shall be undertaken as soon as possible, but in no event later than five (5)
Business Days after the rendering of such decision.

(h)For purposes of this Section 13.03, a “Qualified Arbitrator” shall mean an
individual (i) having at least ten (10) years of professional experience with
matters like that which is subject matter of the dispute being submitted to
arbitration, and (ii) is neutral and shall have had no prior notice, information
or discussions concerning the dispute and, at such time or for the previous ten
(10) years, shall not have been employed by or associated with or agent of any
party or any Affiliate of either of them.

Section 13.04 Governing Law. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of Delaware.

Section 13.05 Further Assurances. Seller or the Company shall promptly perform,
execute and deliver or cause to be performed, executed and/or delivered at or
after Closing any and all acts, deeds and assurances as either party or the
Escrow Agent may reasonably require in order to carry out the intent and purpose
of this Agreement.

Section 13.06 Amendment. This Agreement cannot be changed, amended, supplemented
or terminated orally.

Section 13.07 Counterparts. This Agreement may be executed in one (1) or more
counterparts, and all the counterparts shall constitute but one and the same
agreement, notwithstanding that all parties hereto are not signatory to the same
or original counterpart. This Agreement may be executed and delivered by
telecopy, pdf or similar electronic transmittal which shall be deemed an
original if sent in accordance with the terms of Section 11.01 regarding
Notices.

Section 13.08 Nonwaiver. Unless otherwise expressly provided herein, no waiver
by Seller or the Company of any provision hereof shall be deemed to have been
made if such waiver is made orally. No delay or omission in the exercise of any
right or remedy accruing to Seller or the Company upon any breach under this
Agreement shall impair such right or remedy or be

construed as a waiver of any such breach theretofore or thereafter occurring.
The waiver by Seller or the Company of any breach of any term, covenant or
condition herein stated shall not be deemed to be a waiver of any other term,
covenant or condition. All rights or remedies afforded to Seller or the Company
hereunder or by law shall be cumulative and not alternative, and the exercise of
one right or remedy shall not bar other rights or remedies allowed herein or by
law.

Section 13.09 Captions. Paragraph titles or captions contained herein are
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement.

Section 13.10 Exhibits. All Exhibits attached hereto shall be incorporated
herein by reference as if set out herein in full.

Section 13.11 Survival. To the extent required for its proper effect and subject
to ARTICLE X, each provision of this Agreement shall survive Closing, regardless
of whether this Agreement specifically provides for its survival, and shall not
be deemed merged into any other documents delivered at Closing.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to
be executed, all as of the day and year first above written.

SELLER:

Red Lion Hotels Corporation,
a Washington corporation

By:    /s/ Thomas L. McKeirnan_
Name: Thomas L. McKeirnan

Title:

Executive Vice President

PURCHASER:

Shelboume Falcon RLHC Hotel Investors LLC,
a Delaware limited liability company

By:    /s/ John L. Fox_
Name: John L. Fox
Title: President

EXHIBITS

Exhibit A Exhibit B Exhibit C Exhibit D

Amended and Restated Operating Agreement Member Interests Assignment
FIRPTA Affidavit
Reimbursement and Indemnity Agreement

EXHIBIT A

AMENDED AND RESTATED OPERATING AGREEMENT

[to be attached]

FINAL

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF

RL VENTURE LLC

THE INTERESTS ACQUIRED PURSUANT TO THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS THEY HAVE BEEN REGISTERED UNDER SAID ACT OR
UNLESS REGISTRATION UNDER SAID ACT IS NOT REQUIRED. THERE ARE SUBSTANTIAL
RESTRICTIONS ON TRANSFER CONTAINED IN THIS AGREEMENT.

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF

RL VENTURE LLC

TABLE OF CONTENTS

Page

1.
DEFINITIONS    1

1.1
Act    2

1.2
Additional Capital    2

1.3
Additional Capital Contribution Notice    2

1.4
Additional Capital Contribution    2

1.5
Adjusted Capital Account Deficit    2

1.6
Affiliates    2

1.7
Agreement    2

1.8
Applicable Law    2

1.9
Approved Budget    2

1.10
Approved Business Plan    2

1.11
Approved by the Board, Approval of the Board, Consent of the Board,

Etc.3
1.12
Arbitration Notice    3

1.13
Arbitration Proceeding    3

1.14
Bankruptcy    3

1.15
Board    3

1.16
Budget    3

1.17
Business Day    3

1.18
Business Plan    3

1.19
Buy/Sell    4

1.20
Buy-Sell Lockout Date    4

1.21
Buy-Sell Lockout Period    4

1.22
Buy/Sell Notice    4

1.23
Buying Member    4

1.24
Capital Account    4

1.25
Capital Contribution    4

1.26
Cash Reserves    4

1.27
Certificate of Formation    4

1.28
Closing    4

1.29
Code    5

1.30
Company    5

1.31
Company Minimum Gain    5

1.32
Company Acceptance Period    5

1.33
Company Removal Event    5

1.34
Competitive Set    5

1.35
Contribution Agreement    5

1.36
Contribution Date    5

1.37
Contribution Default    5

1.38
Contribution Funding    5

1.39
Control or control    5

1.40
CS    5

1.41
CS Loan    5

1.42
Cumulative Income Tax Liability    5

1.43
Delinquent Member    6

1.44
Depreciation    6

1.45
Director    7

1.46
Dissolution Event    7

1.47
Distributable Cash    7

1.48
Distribution    7

1.49
Effective Date    7

1.50
Election Date    7

1.51
Exchange    7

1.52
FF&E    7

1.53
Final Distribution    7

1.54
Fiscal Year    7

1.55
Former Member    8

1.56
Reserved    8

1.57
Reserved    8

1.58
Gross Asset Value    8

1.59
Holdco    9

1.60
including    9

1.61
Indemnitee    9

1.62
Initial Arbitrator    9

1.63
Initial Capital    9

1.64
Initiating Member    9

1.65
Major Decision    9

1.66
Majority In Interest of the Members    9

1.67
Management Company    9

1.68
Management Contract    9

1.69
Managing Member    9

1.70
Material Contract    9

1.71
Member    10

1.72
Member Interest    10

1.73
Member Interest Purchase Agreement    10

1.74
Member Nonrecourse Deductions    10

1.75
Net Operating Income    10

1.76
Net Profits and Net Losses    10

1.77
New Hotel Equity ROFO    11

1.78
New Hotel Equity ROFO Period    11

1.79
Non-Delinquent Member    11

1.80
Nonrecourse Deductions    11

1.81
OFAC List    11

1.82
Offer    12

1.83
Operating Period    12

1.84
Original Operating Agreement    12

1.85
Other Member    12

1.86
Owner    12

1.87
Partially Adjusted Capital Account    12

1.88
Participation Percentage    12

1.89
Percentage Adjustment    12

1.90
Performance Test    12

1.91
Person    12

1.92
Professional Independent Director    12

1.93
Properties; Property    13

1.94
Purchase Price    13

1.95
Qualified Arbitrator    13

1.96
Receiving Member    13

1.97
Receiving Member Notice    13

1.98
Regulations    13

1.99
Removal Date    13

1.100
Removal Notice    13

1.101
Removing Member    13

1.102
Remaining Member    13

1.103
RevPAR    13

1.104
RLH Management    13

1.105
RLH Member    13

1.106
“RLHC Senior Management”    13

1.107
ROFO Initiating Member    14

1.108
ROFO Non-Initiating Member    14

1.109
ROFO Offer    14

1.110
ROFO Offered Interests    14

1.111
ROFO Response Period    14

1.112
ROFO Sale Notice    14

1.113
ROFO Sale Notice    14

1.114
Second Arbitrator    14

1.115
Second Arbitrator Notice    14

1.116
Selling Member    14

1.117
Shelbourne Capital    14

1.118
Shelbourne Member    14

1.119
Special Director    14

1.120
Successor    14

1.121
Target Capital Account    14

1.122
Target Final Balance    15

1.123
Tax Authority    15

1.124
Tax Distribution    15

1.125
Tax Matters Partner    15

1.126
Tax Payment Loan    15

1.127
Testing Period    15

1.128
Third Arbitrator    15

1.129
Total Price    15

1.130
Termination Event    15

1.131
Termination Event Notice    15

1.132
Transfer    15

1.133
Transfer Offer    15

1.134
Transfer Sale Period    15

1.135
Unresolved Deadlock    15

1.136
Unreturned Capital Contributions Account    16

1.137
Withholding Tax Act    16

2.
FORMATION OF LIMITED LIABILITY COMPANY    16

3.
NAME AND PLACE OF BUSINESS    16

3.1
Name    16

3.2
Principal Place of Business    16

4.
PURPOSE    16

5.
TERM OF COMPANY; RECORDINGS; AGENT FOR SERVICE OF

PROCESS16
5.1
Term    16

5.2
Qualification    16

5.3
Agent for Service of Process    16

6.
CAPITAL CONTRIBUTIONS AND LOANS    17

6.1
Initial Capital Contributions    17

6.2
Additional Capital Contributions or Loans    17

6.3
Required Additional Capital Contributions    17

6.4
Failure to Contribute Additional Capital    17

6.5
Interest on Capital Contributions    19

6.6
Return of Capital Contributions    19

6.7
Loans By a Member    19

6.8
Withholding    19

6.9
Intentionally Omitted    20

6.10
Capital Accounts    20

7.
ALLOCATIONS    21

7.1
Allocation of Net Profits and Net Losses    21

7.2
Special / Regulatory Allocation    21

7.3
Curative Allocations    23

7.4
Tax Allocations    23

7.5
Allocation in Event of Transfer    24

7.6
Allocation of Tax Credits    24

7.7
Allocations of Tax Items    24

8.
DISTRIBUTIONS AND FEES    24

8.1
Distribution of Distributable Cash    24

8.2
To Whom Distributions Are Made    25

8.3
Tax Distributions    25

8.4
Withholding Obligations    25

8.5
Fees    26

8.6
Right of Setoff    26

8.7
Right of First Offer on Equity Capital for Additional Hotels    27

8.8
Termination Fees.    28

9.
MANAGEMENT    29

9.1
General Management    29

9.2
Powers of the Board; Major Decisions    30

9.3
Resignation or Removal of the Managing Member    36

9.4
RLH Member Listing    38

9.5
Special Rules for Owners    39

9.6
Deadlocks; Buy/Sell    39

9.7
Conflict of Interest    41

9.8
Member Approval    41

9.9
Execution of Documents    42

9.10
Liability/Indemnification    42

9.11
Compensation of the Directors and the Managing Member    43

9.12
No Withdrawal of Members    43

9.13
Umbrella Insurance To Be Maintained by RLH Member    43

10.
RESTRICTIONS ON TRANSFER; NEW MEMBERS    43

10.1
Limitations on Transfers    43

10.2
Excluded Transfers    44

10.3
Right of First Offer for Member Interests    44

10.4
Title    45

10.5
No Dissolution    45

10.6
New Members    45

11.
PURCHASE OF MEMBER’S INTEREST UPON BANKRUPTCY OF A

MEMBER45
11.1
Rights to Purchase Upon Bankruptcy of a Member    45

11.2
Right to Purchase Former Member’s Member Interest by Company and/or

Other Member45
11.3
Purchase Price    46

11.4
Payment of Purchase Price    46

11.5
Closing of Purchase of Former Member’s Interest    46

12.
DISSOLUTION AND WINDING UP OF THE COMPANY    47

12.1
Dissolution of Company    47

12.2
Winding Up of the Company    47

12.3
Right To Receive Property    47

12.4
Target Final Balance    47

13.
BOOKS AND RECORDS; EXPENSES    48

13.1
Books of Account    48

13.2
Accounting and Reports    48

13.3
Banking    48

13.4
Accountants    48

13.5
Expenses of Company    48

14.
ADJUSTMENT OF BASIS ELECTION    49

15.
WAIVER OF ACTION FOR PARTITION    49

16.
AMENDMENTS    49

17.
EQUITABLE RELIEF    49

18.
NOTICES    49

19.
LEGAL REPRESENTATION    49

20.
ATTORNEYS’ FEES    50

21.
INDEPENDENT ACTIVITIES OF MEMBERS    50

22.
INVESTMENT REPRESENTATIONS OF THE MEMBERS    50

22.1
Risks of Investment    50

22.2
Income Tax Matters    50

22.3
Securities Matters    50

23.
SPECIAL OFAC PROVISIONS; OTHER SPECIAL PROVISIONS.    51

23.1
No Illegal Activity as Source of Funds    51

23.2
Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
Laws      51

23.3
Requirements of Law    52

23.4
Special Investment Company Provisions    52

23.5
Representations Regarding ERISA    52

24.
DISPUTES – ARBITRATION    52

24.1
Arbitration    52

25.
MISCELLANEOUS    53

25.1
Applicable Law    53

25.2
Severability    53

25.3
Further Assurances    53

25.4
Successors and Assigns    54

25.5
Number and Gender    54

25.6
Entire Agreement; Amendments    54

25.7
Waiver    54

25.8
Counterparts    54

25.9
Interpretation    54

25.10
Parties in Interest    54

25.11
No Authority    55

Exhibits:

A - List of Members (names and addresses), Participation Percentages and Capital
Contributions as of the Effective Date
B - Initial Directors
C - List of the Properties

Schedule 9.2.7 Competitive Sets for the Properties

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
RL VENTURE LLC

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT OF RL VENTURE LLC (this “Agreement”) is made and entered into as of
January 16, 2015 (the “Effective Date”), by and between the persons and/or
entities listed on Exhibit A (such persons and/or entities listed on Exhibit A
shall be referred to collectively as the “Members” and individually as a
“Member”).

Background

A.On September 4, 2014, the RLH Member caused to be filed a Certificate of
Formation for RL Venture LLC (the “Company”), a limited liability company formed
under the laws of the State of Delaware, which was subsequently amended to
effect a name change.

B.As sole member of the Company, the RLH Member executed a Limited Liability
Company Agreement dated as of October 17, 2014 (the “Original Operating
Agreement”) for the Company.

C.During the period commencing with the formation of the Company through the
date immediately preceding the Effective Date, the Company has at all times been
disregarded as separate from the RLH Member solely for federal and applicable
state and local income tax purposes.

C.Simultaneously with the execution of this Agreement, the RLH Member sold
forty-five percent (45%) of its Member Interest to the Shelbourne Member
pursuant to that certain Member Interest Purchase Agreement dated as of even
date herewith and as amended (the “Member Interest Purchase Agreement”), in a
transaction the federal income tax
consequences of which are governed by Revenue Ruling 99-5, 1999-1 CB 434,
Situation 1.

D.The Members now desire to enter into this Agreement, inter alia, to reflect
the admission of the Shelbourne Member as a Member and to amend and restate the
Original Operating Agreement in its entirety as provided herein.

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
herein contained and other valuable consideration, the parties agree as follows:

1.DEFINITIONS. When used in this Agreement, the following terms shall have the
meanings set forth below:

1.1    Act. “Act” means the Delaware Limited Liability Company Act, 6 Del. Code
§§ 18-101 et. seq., as such act may from time to time be amended, including any
successor statute.

1.2    Additional Capital. “Additional Capital” means capital of the Company in
excess of the Initial Capital.

1.3    Additional Capital Contribution Notice. “Additional Capital Contribution
Notice” has the meaning set forth in Section 6.3.

1.4    Additional Capital Contribution. “Additional Capital Contribution” means
the amount of Additional Capital contributed to the Company by the Members in
proportion to their respective Participation Percentages in response to a Major
Decision approved by the Board calling for Additional Capital pursuant to
Section 6.3.

1.5    Adjusted Capital Account Deficit. “Adjusted Capital Account Deficit”
means for each Member, the deficit balance, if any, in such Member’s Capital
Account as of the end of the relevant Fiscal Year or other relevant period,
after giving effect to the following adjustments:

(a)    Credit to such Capital Account any amounts that such Member is obligated
to restore or is deemed to be obligated to restore pursuant to the penultimate
sentences in Treasury Regulation §§ 1.704-2(g)(1) and 1.704-2(i)(5); and

(b)    Debit to such Capital Account the items described in Treasury Regulation
§§ 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).

1.6    Affiliates. “Affiliates” of a Member means Persons controlled by,
controlling or under common control with such Member.

1.7    Agreement. “Agreement” means this Amended and Restated Limited Liability
Company Agreement.

1.8    Applicable Law. “Applicable Law” means any law, regulation, ordinance,
code, decree, treaty, ruling or determination of an arbitrator, court or other
governmental or
quasi-governmental authority, or any executive order issued by the President of
the United States, in each case applicable to or binding upon such Person or to
which such Person, any of its property or the conduct of its business is subject
including laws, ordinances and regulations pertaining to the zoning, use,
occupancy or subdivision of real property.

1.9    Approved Budget. “Approved Budget” means (as to the Company, any one or
more of the Owners, or any one or more of the Properties) a Budget (for
operating expenses and/or capital expenses) that has been approved by the Board
as a Major Decision pursuant to Section 9.2.

1.10    Approved Business Plan. “Approved Business Plan” means a Business Plan
approved by the Board as a Major Decision pursuant to Section 9.2.

1.11    Approved by the Board, Approval of the Board, Consent of the Board,
Etc.. “Approved by the Board”, “approval of the Board”, “consent of the Board”
or a similar phrase to that effect means approval or consent of the Board by a
majority of the votes of all of the Directors, except that Major Decisions shall
require the approval or consent of two-thirds (2/3) of all of the Directors.

1.12    Arbitration Notice. “Arbitration Notice” has the meaning given in
Section 24.1.1.

1.13    Arbitration Proceeding. “Arbitration Proceeding” has the meaning given
in Section 24.1.1.

1.14
Bankruptcy. “Bankruptcy” means:

(a)    The commencement of any voluntary proceedings under federal or state
bankruptcy or insolvency laws or filing for reorganization or for the
appointment of a receiver or trustee of all (or a material portion) of the
Person’s property;

(b)    The failure to terminate any involuntary proceeding under federal or
state bankruptcy laws within thirty (30) days after the commencement thereof;

(c)
A general assignment for the benefit of creditors; or

(d)    The issuance of a charging order against the interest of any person
without the removal thereof within thirty (30) days after issuance.

1.15    Board. “Board” means, collectively, the Directors chosen by the Members
in accordance with Section 9.1.1 to oversee the operation of the Company and to
consider and act on those matters that this Agreement specifies shall require
the approval or consent of the Board (including any Major Decisions). The
initial Directors are listed on Exhibit B.

1.16    Budget. “Budget” means a budget (either for a year or such other time
period as is approved by the Board as a Major Decision) for operating expenses
and/or capital expenses for the Company and/or for any one or more Owners or
Properties (including amounts for the Company’s contributions to the capital of
an Owner for the costs, expenses and liabilities of the Owner).

1.17     Business Day. “Business Day” or “business day” means every day other
than Saturdays, Sundays, all days observed by the federal or New York State
government as legal holidays and all days on which commercial banks in New York
State are required by law to be closed. Any reference in this Agreement to a
"day" or a number of "days" (other than references to a "Business Day" or
"Business Days") means a calendar day or calendar days.

1.18    Business Plan. “Business Plan” means a plan (including a Budget) for
operation of the Company, the Owners, the Properties or the improvements for the
Properties.

1.19
Buy/Sell. “Buy/Sell” has the meaning set forth in Section 9.6.1.

1.20     Buy-Sell Lockout Date. “Buy-Sell Lockout Date” means the date that is
the third (3rd) anniversary of the Effective Date.
1.21    Buy-Sell Lockout Period. “Buy-Sell Lockout Period” means the period of
time commencing on the Effective Date of this Agreement and ending on the
Buy-Sell Lockout Date.

Section 9.6.2.
1.22

Buy/Sell Notice. “Buy/Sell Notice” has the meaning set forth in

Section 9.6.5.
1.23

Buying Member. “Buying Member” has the meaning given in

1.24    Capital Account. “Capital Account” means an account established for each
Member and determined in accordance with Section 1.704-1(b) of the Regulations.
The Capital Accounts shall be adjusted in order to reflect allocations of
depreciation, amortization, and gain and loss as computed for book purposes.
Upon the Transfer of the Member Interest of any Member, the Capital Account of
the transferor Member shall carry over to the transferee Member.

1.25    Capital Contribution. “Capital Contribution” means any money or the
Gross Asset Value of any other property which a Member contributes as capital to
the Company in that Member’s capacity as a Member pursuant to this Agreement
(net of any liabilities assumed by the Company in connection with the
contribution or to which the contributed property is subject). Notwithstanding
anything to the contrary contained in this Agreement, including the transactions
described in Section 6.1.1, the Members hereby agree that the Capital
Contributions of the Members as of the Effective Date are as set forth on
Exhibit A, which such Exhibit A shall be amended from time to time to take into
account Additional Capital Contributions by one or more of the Members.

1.26    Cash Reserves. “Cash Reserves” means such amounts as may be reasonably
estimated by the Managing Member (and approved by the Board in an Approved
Budget or otherwise as a Major Decision) for payment of costs, expenses and
liabilities incident to the business of the Company (including amounts for
contributions to the capital of any Owner for the costs, expenses and
liabilities of any Owner) and for which the cash to make such payments will not,
in the reasonable discretion of the Managing Member, be expected to be available
to the Company (or, or as applicable, an Owner) at or about the time such
payments are required to be made, and which therefore, in the reasonable opinion
of the Managing Member, require that cash be set aside periodically to for such
payments.

1.27    Certificate of Formation. “Certificate of Formation” means the
Certificate of Formation filed with the Delaware Secretary of State (“Delaware
Secretary”) for the purpose of forming the Company.

1.28
Closing. “Closing” has the meaning given in Section 11.5.

1.29    Code. “Code” means the Internal Revenue Code of 1986, as amended from
time to time.

1.30    Company. “Company” means RL Venture LLC, a Delaware limited liability
company.

1.31    Company Minimum Gain. “Company Minimum Gain” means “partnership minimum
gain,” as defined in the Regulations promulgated under Section 704(b) of the
Code.

1.32    Company Acceptance Period. “Company Acceptance Period” has the meaning
given in Section 11.2.

1.33    Company Removal Event. “Company Removal Event” has the meaning given in
Section 9.3.

1.34    Competitive Set. “Competitive Set” has the meaning given in Section
9.2.7(c).

1.35    Contribution Agreement. “Contribution Agreement” means that certain
Asset Contribution Agreement between the Company and the RLH Member dated
January 15, 2015.

1.36    Contribution Date. “Contribution Date” means the date immediately
preceding the Effective Date.

1.37    Contribution Default. “Contribution Default” has the meaning set forth
in Section 6.4.1.

1.38    Contribution Funding. “Contribution Funding” means the obligation of the
Company to the RLH Member in the amount of Forty Eight Million Seven Hundred
Eighty- Seven Thousand Three Hundred Fifty-Two Dollars ($48,787,352) which is
being paid on the date of Closing in accordance with the Contribution Agreement.

1.39    Control or control. “Control “or “control”(or other formulation thereof
such as “controlled” or “controlling”) means a direct or indirect ownership
interest of more than fifty percent (50%) in value of another entity, or more
than fifty percent (50%) of the voting interests of a Person, or the ability to
direct the management and policies of such Person, whether by ownership,
contract or otherwise.

1.40
CS. “CS” means CapitalSource, a division of Pacific Western Bank.

1.41
CS Loan. “CS Loan” has the meaning set forth in Section 6.1.1.

1.42    Cumulative Income Tax Liability. Cumulative Income Tax Liability” means,
with respect to a Member as of the end of a particular Fiscal Year or other
relevant period, the sum of the following amounts:

(a)    the product of (i) the total amount of the Company’s “net capital gains”,
dividends that constitute “qualifying dividend income” subject to taxation at
long-term capital gains rates in accordance with Section 1(h)(11) of the Code
and other items of income and gain subject to United States federal taxation as
long-term capital gain that has been allocated to the Member for the current and
all prior Fiscal Years or other relevant periods, multiplied by (ii) the
combined maximum United States federal, state and local marginal income tax rate
applicable to long-term capital gains recognized by an individual residing in
New York, NY (taking into consideration the deductibility of state and local
income taxes for federal income tax purposes), with such rate for such current
and any prior Fiscal Year or other relevant period being multiplied by the
amount referred to in clause (i) for such current and any such prior Fiscal Year
or other relevant period, plus

(b)    the product of (i) the total amount of the Company’s net ordinary income
(including depreciation recapture) and other items of income and gain subject to
United States federal taxation as “ordinary income” or short-term capital gain
that has been allocated to the Member for the current and all prior Fiscal Years
or other relevant periods, multiplied by (ii) the combined maximum United States
federal, state and local marginal income tax rate applicable to ordinary income
or short-term capital gain of an individual residing in New York, NY(taking into
consideration the deductibility of state and local income taxes for federal
income tax purposes), with such rate for such current and any prior Fiscal Year
or other relevant period being multiplied by the amount referred to in clause
(i) for such current and any such prior Fiscal Year or other relevant period.

The computation of the amounts under clause (i) of paragraph (a) of this
definition and the amounts under clause (i) of paragraph (b) of this definition
shall take into account (i.e., shall be net of) any, respectively, prior Company
losses subject to United States federal taxation as capital losses or Company
losses and deductions subject to United States federal taxation as deductions
and ordinary losses allocated to the Member and not previously taken into
account or otherwise reflected in any of the amounts referred to under such
clause (i) of paragraph (a) or such clause (i) of paragraph (b) of this
definition.

1.43    Delinquent Member. “Delinquent Member” has the meaning given in Section
6.4.1 of this Agreement.

1.44    Depreciation. “Depreciation” means, for each Fiscal Year or other
relevant period, an amount equal to the depreciation, amortization, or other
cost recovery deduction allowable with respect to an asset for such year or
other period for federal income tax purposes, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization or other cost recovery deduction
for such year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation, amortization or
other cost recovery deduction for such year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Board.

1.45    Director. “Director” means any person chosen by the Members to serve on
the Board in accordance with Section 9.1.1. The initial Directors are set forth
on Exhibit B to this Agreement.

1.46    Dissolution Event “Dissolution Event” has the meaning set forth in
Section 12.1 hereof.

1.47    Distributable Cash. “Distributable Cash” means for any period the total
cash gross receipts of the Company from all sources (including amounts of cash
distributed directly or indirectly to the Company by any Owner) minus (i)
amounts allotted to any Cash Reserves established by the Managing Member in
accordance with the applicable Approved Budget or as otherwise approved by the
Board as a Major Decision for contemplated needs of the Company (including
amounts that may be required for contributions by the Company of capital to any
Owner for any of the Properties), and (ii) all out-of-pocket cash expenditures
of the Company, including expenditures for legal and accounting costs,
duplicating services, postage and other expenses properly chargeable to the
Company and incurred by the Company, but excluding any expenditures made from
Cash Reserves previously established. Cash expenditures of the Company shall not
include any overhead of the Managing Member or any of its Affiliates or of any
Person in which a Member or an Affiliate of a Member has directly or indirectly
an ownership interest (except to the extent such overhead is included in (a)
fees paid to the Management Company under a Management Contract, (b) fees
described in Section 8.5, or (c) fees paid to any such Person pursuant to a
contract approved by the Board as a Major Decision. Distributable Cash shall
include any amounts that, although previously set aside by the Managing Member
as Cash Reserves, are reasonably determined by the Managing Member with approval
of the Board as no longer required by the Company.

1.48    Distribution. “Distribution” means any cash, or the fair market value of
any other property, distributed (or deemed distributed) by the Company to a
Member (including Distributable Cash and Tax Distributions), excluding (i)
reimbursement of Company expenses, or (ii) payment with respect to an
indemnification obligation of the Company to such Member, or
(iii) or repayment of principal or interest on any Member Loans.

1.49    Effective Date. “Effective Date” has the meaning given in the opening
paragraph of this Agreement.

1.50
Election Date. “Election Date” has the meaning given in Section 9.6.5.

1.51
Exchange. “Exchange” has the meaning given in Section 9.4.

1.52
FF&E. “FF&E” means furniture, fixtures and equipment.

1.53    Final Distribution. “Final Distribution” has the meaning given in
Section 12.2(e).

1.54
Fiscal Year. “Fiscal Year” means the calendar year.

Section 11.1.
1.55

Former Member. “Former Member” has the meaning given in

1.56
Reserved.

1.57
Reserved.

1.58    Gross Asset Value. “Gross Asset Value” means for any asset the asset’s
adjusted basis for federal income tax purposes, except as follows:

(a)    The initial Gross Asset Value of any asset contributed by a Member to the
Company shall be the gross fair market value of such asset on the date of
contribution, as determined by the contributing Member and approved by the Board
as a Major Decision. The Members agree that the Gross Asset Value of the assets
contributed by the RLH Member under the terms of the Contribution Agreement is
Eighty-Nine Million Eight Hundred Thirty-Six Thousand Three Hundred Ninety-Eight
Dollars ($89,836,398).

(b)    The Gross Asset Values of all Company assets shall be adjusted to equal
their respective gross fair market values, as determined by the Board as a Major
Decision, as of the following times: (i) the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more than
a de minimis Capital Contribution if any Member reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company; (ii) the distribution by the Company to
a Member of more than a de minimis amount of Company property as consideration
for an interest in the Company if any Member reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company; and (iii) the liquidation of the
Company within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g).

(c)    The Gross Asset Value of any Company asset distributed to any Member
shall be the gross fair market value of such asset on the date of distribution,
as approved by the Board as a Major Decision.

(d)    The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustment to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704- 1(b)(2)(iv)(m); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this subparagraph to the
extent the Board determines as a Major Decision that an adjustment pursuant to
subparagraph (b) of this Section is necessary or appropriate in connection with
a transaction that would otherwise result in an adjustment pursuant to this
subparagraph.

If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraphs (a), (b) or (d) of this Section, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Net Profits and Net Losses.

1.59    Holdco. “Holdco” means RL Venture Holding LLC, a Delaware limited
liability company wholly-owned by the Company.

1.60
including. “including” means including without limitation.

1.61
Indemnitee. “Indemnitee” has the meaning given in Section 9.10.1.

1.62    Initial Arbitrator. “Initial Arbitrator” has the meaning given in
Section 24.1.1.

1.63    Initial Capital. “Initial Capital” means the aggregate amount of Capital
Contributions stated on Exhibit A which the Members, in the aggregate, have
made, are deemed to have made, or are making on the date hereof to the Company.

Section 9.6.1.
1.64

Initiating Member. “Initiating Member” has the meaning given in

1.65    Major Decision. “Major Decision” means any of the decisions that are
listed in Section 9.1 or otherwise so identified in this Agreement.

1.66    Majority In Interest of the Members. “Majority In Interest of the
Members” means those Members owning more than fifty percent (50%) of the
Participation Percentages of all Members.

1.67    Management Company. “Management Company” means Red Lion Hotels
Management, Inc. or such other entity designated by the Managing Member to serve
as the manager for the Properties and whose designation as the Managing Company
is approved by the Board as a Major Decision.

1.68    Management Contract. “Management Contract” means a Management Agreement
for each Property between the Management Company and the Owner of the Property.

1.69    Managing Member. “Managing Member” means the RLH Member or in the event
that the RLH Member resigns or is removed in accordance with Section 9.3, such
other Member who is designated by the Board as a Major Decision as replacement
for the RLH Member to serve as Managing Member.

1.70    Material Contract. “Material Contract” means any contract or agreement
to which the Company or any Owner is a party which (a) is with any Member or
Affiliate of a Member; or (b) requires payment by the Company or any Owner of
amounts in excess of
$25,000 in the aggregate for such contract over the term of the contract and has
a term in excess of one (1) year unless it is terminable by the Company or
Owner, as applicable, at any time and without penalty upon no more than thirty
(30) days’ notice to the Company or any Owner, as applicable; or (c) requires
payment by the Company or any Owner of amounts in excess of
$25,000 in the aggregate for such contract in any calendar year, unless such
payments have been included in an Approved Budget; or (d) requires payments by
the Company or any Owner in

excess of $100,000 over the life of the contract, regardless of whether the
payments have been included in an Approved Budget.

1.71    Member. “Member” means any person or entity admitted to the Company as a
member in accordance with this Agreement, or a person or entity who has been
admitted as a member pursuant to applicable law. The Members of the Company and
their respective Participation Percentages shall be reflected on Exhibit A
attached hereto, as it may be amended from time to time.

the Company.
1.72

Member Interest. “Member Interest” means the interest of a Member in

1.73    Member Interest Purchase Agreement. “Member Interest Purchase Agreement”
has the same meaning as given in paragraph C of the Background.

1.74    Member Nonrecourse Deductions. “Member Nonrecourse Deductions” has the
same meaning as given to “partner nonrecourse deductions” referred to in Section
7.2.4.

1.75    Net Operating Income. “Net Operating Income” shall mean Gross Operating
Profit (as defined in the Management Contract) less the Base Fee (as defined in
the Management Contract), Taxes (as defined in the Management Contract),
Insurance Costs (as defined in the Management Contract), Reserve Fund
Contributions (as defined in the Management Contract) and costs of rental of
real or personal property.

1.76    Net Profits and Net Losses. “Net Profit” and “Net Loss” means, for each
Fiscal Year of the Company (or other period for which Net Profit or Net Loss
must be computed), the Company’s taxable income or loss determined in accordance
with Code
Section 703(a) (for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Section 703(a)(1) shall be
included in taxable income or loss), with the following adjustments:

(a)    Any income of the Company that is exempt from United States federal
income tax and not otherwise taken into account in computing Net Profits or Net
Losses pursuant to this definition of “Net Profits” and “Net Losses” shall be
added to such taxable income or loss;

(b)
Any expenditures of the Company described in Code

Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulation §§ 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Net Profits or Net Losses pursuant to this definition
of “Net Profits” and “Net Losses” shall be subtracted from such taxable income
or loss;

(c)    In the event the Gross Asset Value of any items of property of the
Company is adjusted pursuant to paragraphs (b) or (c) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the Gross Asset Value of the item of property) or
an item of loss (if the adjustment decreases the

Gross Asset Value of the item of property) from the disposition of such item of
property and shall be taken into account for purposes of computing Net Profits
or Net Losses;

(d)    Gain or loss resulting from any disposition of property with respect to
which gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Gross Asset Value;

(e)    In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year or other relevant
period, computed in accordance with the definition of “Depreciation; and

(f)    To the extent an adjustment to the adjusted tax basis of any Company
asset pursuant to Code Section 734(b) is required, pursuant to Treasury
Regulations § 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as a result of a distribution other than in liquidation of a
Member’s interest in the Company, the amount of such adjustment shall be treated
as an item of gain (if the adjustment decreases such basis) from the disposition
of such asset and shall be taken into account for purposes of computing Net
Profits or Net Losses.

Notwithstanding any other provision of this definition, any items that are
specially allocated pursuant to Section 7.2 or Section 7.3 hereof shall not be
taken into account in computing Net Profits or Net Losses. The amounts of such
specially allocated items shall be determined by applying rules analogous to
those set forth in subparagraphs (a) through (e) above.

1.77    New Hotel Equity ROFO. “New Hotel Equity ROFO” has the meaning given in
Section 8.7.

1.78    New Hotel Equity ROFO Period. “New Hotel Equity ROFO Period” has the
meaning given in Section 8.7.

1.79    Non-Delinquent Member. “Non-Delinquent Member” has the meaning given in
Section 6.4.1 of this Agreement.

1.80    Nonrecourse Deductions. “Nonrecourse Deductions” has the meaning given
in Section 7.2.5.

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

        

1.81    OFAC List. “OFAC List” means the list of specially designated nationals
and blocked persons subject to financial sanctions that is maintained by the
United States Treasury Department, Office of Foreign Assets Control and any
other similar list maintained by the United States Treasury Department, Office
of Foreign Assets Control pursuant to any Applicable Law, including trade
embargo, economic sanctions, or other prohibitions imposed by Executive Order of
the President of the United States. The OFAC List currently is accessible
through the Internet website www.treas.gov/ofac/tl1sdn.pdf.

Agreement.
1.82

Offer. “Offer” has the meaning given in Section 10.3.2 of this

1.83    Operating Period. “Operating Period” has the meaning given in Section
9.2.7(c).

1.84    Original Operating Agreement. “Original Operating Agreement” has the
meaning given in paragraph B of the Background.

Section 11.1.

Other Member. “Other Member” has the meaning given in

1.85    Owner. “Owner” means any direct or indirect subsidiary of the Company
including either a single asset, single purpose, single member limited liability
company wholly- owned by the Company or a limited liability company all of whose
member interests are owned by the Company or by a single member limited
liability company wholly-owned by the Company, and either (i) the owner of a
Property (or proposed to own Property), or (ii) a partner in a partnership or a
member in a limited liability company that owns a Property (or is proposed to
own a Property). (For the avoidance of doubt, Holdco is deemed an “Owner”.)

1.86    Partially Adjusted Capital Account. “Partially Adjusted Capital Account”
means with respect to any Member for any Fiscal Year or other relevant period,
the Capital Account of such Member at the beginning of such Fiscal Year or other
relevant period, increased by all Capital Contributions during such year and all
special allocations of income and gain pursuant to Section 7.2 or Section 7.3
with respect to such Fiscal Year or other relevant period, and decreased by all
Distributions of Distributable Cash during such Fiscal Year or other relevant
period and all special allocations of losses and deductions pursuant to Section
7.2 or Section 7.3, but before giving effect to any allocation of Net Profits or
Net Losses for such Fiscal Year or other relevant period pursuant to Section
7.1.1 and Section 7.1.2.

1.87    Participation Percentage. “Participation Percentage" of a Member means
that percentage set forth opposite such Member's name on Exhibit A and
reflecting the Members’ relative Capital Contributions (subject to Percentage
Adjustments as described in Section 6.4.2).

1.88    Percentage Adjustment. “Percentage Adjustment” has the meaning given in
Section 6.4.2(a)(i).

9.2.7(c).
1.89

Performance Test. “Performance Test” has the meaning given in Section

1.90    Person. “Person” means any individual, corporation, partnership, limited
liability company, joint venture, estate, trust, unincorporated association, or
any other legal entity, and any fiduciary acting in such capacity on behalf of
any of the foregoing.

1.91    Professional Independent Director. “Professional Independent Director”
has the meaning given in Section 9.1.2(a).

1.92    Properties; Property. “Properties” means all of the hotel properties
listed on Exhibit C attached hereto; each of which is a “Property”.

1.93
Purchase Price. “Purchase Price” has the meaning given in Section 9.6.5.

1.94    Qualified Arbitrator . “Qualified Arbitrator” has the meaning set forth
in Section 24.1.7.

Section 9.6.2.
1.95

Receiving Member. “Receiving Member” has the meaning set forth in

1.96    Receiving Member Notice. “Receiving Member Notice” has the meaning set
forth in Section 9.6.3.

1.97    Regulations. “Regulations” means the Income Tax Regulations promulgated
under the Code, including Temporary and Proposed Regulations, as such
Regulations may be amended from time to time, including corresponding provisions
of succeeding Regulations.

1.98
Removal Date. “Removal Date” has the meaning given in Section 9.3.

Section 9.3.
1.99

Removal Notice. “Termination Notice” has the meaning given in

Section 9.3.2
1.100

Removing Member. “Removing Member” has the meaning given in

1.101    Remaining Member. “Remaining Member” has the meaning given in Section
10.3.1.

1.102    RevPAR. “RevPAR” means Gross Rooms Revenue for a particular time period
(net of discounts, sales tax and meals) for a hotel divided by the number of
available guest rooms in the hotel for the same time period. (RevPAR information
shall be provided to the Parties by their obtaining STAR (also known as STR)
reports of the RevPAR for the Properties and the Competitive Set.)

1.103    RLH Management. ‘RLH Management” means Red Lion Hotels Management,
Inc., an Affiliate of the RLH Member.

1.104    RLH Member. “RLH Member” means Red Lion Hotels Corporation, a Delaware
corporation.

1.105     “R LHC Senior M ana gem ent” . “RLHC Senior Management” means any
employees of Red Lion Hotels Corporation who do not work at individual hotel
Properties and who hold one of the following job titles: “vice-president” ,
“senior vice president”, “executive vice president” or “president”.

1.106    ROFO Initiating Member. “ROFO Initiating Member” has the meaning given
in Section 10.3.2.

1.107    ROFO Non-Initiating Member. “ROFO Non-Initiating Member” has the
meaning given in Section 10.3.2.

1.108
ROFO Offer. “ROFO Offer” has the meaning given in Section 10.3.2.

1.109    ROFO Offered Interests. “ROFO Offered Interests” has the meaning given
in Section 10.3.2.

1.110    ROFO Response Period. “ROFO Response Period” has the meaning given in
Section 10.3.3.

Section 10.3.2
1.111

ROFO Sale Notice. “ROFO Sale Notice” has the meaning given in

1.112    ROFO Sale Notice. “ROFO Sale Notice” has the meaning given in Section
10.3.2.

1.113    Second Arbitrator. “Second Arbitrator” has the meaning given in Section
24.1.1.

1.114    Second Arbitrator Notice. “Second Arbitrator Notice” has the meaning
given in Section 24.1.1.

1.115    Selling Member. “Selling Member” has the meaning given in Section 9.6.5
of this Agreement.

1.116    Shelbourne Capital. “Shelbourne Capital” means Shelbourne Capital, LLC,
a Pennsylvania limited liability company.

1.117    Shelbourne Member. “Shelbourne Member” means Shelbourne Falcon RLHC
Hotel Investors, LLC, a Delaware limited liability company.

1.118
Special Director. “Special Director” has the meaning given in Section

9.1.1.

1.119
Successor. “Successor” has the meaning given in Section 11.2.

1.120    Target Capital Account. “Target Capital Account” means, with respect to
any Member for any Fiscal Year or other relevant period, an amount equal to (a)
the hypothetical distribution that such Member would receive if all Company
assets were sold for cash equal to their Gross Asset Value, all Company
liabilities were satisfied to the extent required by their terms (limited, with
respect to each “partner nonrecourse liability” and “partner nonrecourse debt”,
each as defined in Treasury Regulations § 1.704-2(b)(4), to the Gross Asset
Value of the asset(s) securing such liability), and the net cash of the Company
were distributed in full to the Members as required pursuant to Section 12.2(f),
all as of the last day of such Fiscal

Year or other relevant period), minus (b) the Member’s share of “partner minimum
gain” determined pursuant to Treasury Regulations § 1.704-2(g), and minus (c)
the Member’s share of the “partner nonrecourse debt minimum gain” determined in
accordance with Treasury Regulations § 1.704-2(i)(5), all computed immediately
prior to such hypothetical sale.

1.121    Target Final Balance. “Target Final Balance” has the meaning set forth
in Section 12.4.

1.122
Tax Authority. “Tax Authority” has the meaning given in Section 6.8.

1.123    Tax Distribution. “Tax Distribution” means, with respect to each Member
for each taxable year of the Company, an amount distributed to such Member in
accordance with Section 8.3 hereof.

Section 13.2.
1.124

Tax Matters Partner. “Tax Matters Partner” has the meaning given in

1.125    Tax Payment Loan. “Tax Payment Loan” has the meaning set forth in
Section 8.4 hereof.

1.126    Testing Period. “Testing Period” has the meaning given in Section
9.2.7(c).

1.127    Third Arbitrator. “Third Arbitrator” has the meaning given in Section
24.1.1.

1.128
Total Price. “Total Price” has the meaning given in Section 9.6.2.

Section 11.1.
1.129

Termination Event. “Termination Event” has the meaning given in

1.130    Termination Event Notice. “Termination Event Notice” has the meaning
given in Section 11.2.

1.131    Transfer. “Transfer” means any encumbrance, gift, assignment, pledge,
hypothecation, sale or other transfer (whether directly or indirectly) of all or
any portion of a Member Interest.

1.132    Transfer Offer. “Transfer Offer” has the meaning given in Section
10.3.2.

1.133    Transfer Sale Period. “Transfer Sale Period” has the meaning given in
Section 10.3.5.

Section 9.6.1.
1.134

Unresolved Deadlock. “Unresolved Deadlock” has the meaning given in

1.135    Unreturned Capital Contributions Account. “Unreturned Capital
Contributions Account” means, with respect to each Member, a bookkeeping account
which shall at all times be equal to the aggregate amount of Capital
Contributions made to the Company by such Member reduced by Distributions made
to such Member pursuant to Section 8.1.

1.136
Withholding Tax Act. “Withholding Tax Act” has the meaning set forth

in Section 8.4 hereof.

2.FORMATION OF LIMITED LIABILITY COMPANY. The Company was formed by the filing
of the Certificate of Formation of the Company with the Delaware Secretary of
State on September 4, 2014.

3.
NAME AND PLACE OF BUSINESS .

3.1    Name. The name of the Company is RL Venture LLC, or such other name as
determined by the Board.

3.2
Principal Place of Business. The principal office of the Company shall be

W. 201 North River Drive, Spokane, Washington 99201, unless changed by the
Managing Member. The registered agent of the Company in the State of Delaware is
The Corporation Trust Company, Corporate Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801. The Managing Member may from time to time, change
the registered office and principal place of business of the Company and, in
such event, the Managing Member shall notify the Members in writing promptly
after the effective date of such change. The Managing Member may establish
additional offices or places of business of the Company when and as required by
the Company’s business and approved by the Members and the Board as a Major
Decision.

4.PURPOSE. The purpose of the Company is, directly or through one or more
Owners, to acquire, hold, finance and dispose of the Properties and to engage in
any and all general business activities related or incidental thereto permitted
under the Act; provided that the Company shall not conduct any banking,
insurance or trust company business.

5.TERM OF COMPANY; RECORDINGS; AGENT FOR SERVICE OF PROCESS .

5.1    Term. The Company’s existence commenced as of the date of the filing of
the Certificate of Formation and shall continue until terminated as herein
provided or by operation of law.

5.2    Qualification. The Managing Member shall cause the Company to file any
documents with any other appropriate governmental agencies as may be required by
applicable law. The Managing Member shall cause the Company to qualify to do
business in any other jurisdiction as may be required under the laws of such
jurisdiction.

5.3    Agent for Service of Process. The name and address of the initial agent
for service of process of the Company designated on the Certificate of Formation
is The

Corporation Trust Company. The agent for service of process of the Company may
be changed from time to time by the Managing Member, subject to applicable law.

6.
CAPITAL CONTRIBUTIONS AND LOANS .

6.1
Initial Capital Contributions.

6.1.1    In accordance with the Contribution Agreement, the RLH Member
contributed to the Company all of the Properties in exchange for one hundred
percent (100%) of the Member Interests in the Company, subject to satisfaction
of the Contribution Funding. In addition, on the Contribution Date the Company
caused Holdco to borrow from CS a loan in the aggregate principal amount of
$80,000,000 (the “CS Loan”) of which (a) $53,807,023 is being funded by CS to
the Company on the date hereof (and the sum of $48,787,352 was distributed by
Holdco to the Company and used by the Company to satisfy the Contribution
Funding), and (b) the balance is to be funded for improvements to be made to the
Properties. CS required that the Company and the Owners guaranty the obligations
of Holdco for the CS Loan. On the Effective Date, the Shelbourne Member acquired
from the RLH Member a forty-five percent (45%) Member Interest in the Company in
exchange for a payment to the RLH Member of
$18,455,256.

6.1.2    The Members agree that the aggregate amount of the Initial Capital is
set forth on Exhibit A.

6.2    Additional Capital Contributions or Loans. Except as in Section 6.3 and
6.4 of this Agreement or as otherwise agreed upon by the Board as a Major
Decision, no Member shall be permitted or required to make any additional
Capital Contributions or extend any loans to the Company.

6.3    Required Additional Capital Contributions. If the Board determines as a
Major Decision that the Company requires additional capital for any reason
consistent with the purpose of the Company, each Member shall make an additional
Capital Contribution in cash, in an amount equal to the product of (x) the
aggregate Additional Capital Contribution as determined by the Board as a Major
Decision, and (y) the respective Member’s Participation Percentage as of the
Contribution Date, and at such times as set forth in a written notice delivered
by the Company to each Member at least ten (10) Business Days prior to the
effective date of any such Additional Capital Contribution (the “Additional
Capital Contribution Notice”). Each Member shall thereafter be required to make
an Additional Capital Contribution pursuant to the terms and conditions
contained in the Additional Capital Contribution Notice.

6.4
Failure to Contribute Additional Capital.

6.4.1    If a Member fails to contribute timely all or any portion of any
Additional Capital Contribution required to be made by such Member pursuant to
this Agreement and such failure continues for a period of ten (10) Business Days
after the required date of such Additional Capital Contribution (the
“Contribution Date”) stated in the Additional Capital Contribution Notice
received by such Member (such Member being hereinafter referred to as a
“Delinquent Member” and such failure being hereinafter referred to as a
“Contribution

Default”), then the Member who is not a Delinquent Member (the “Non-Delinquent
Member”) shall have the right to advance that portion of the Delinquent Member’s
required Additional Capital Contribution which such Delinquent Member failed to
make, on the following terms: (i) the sums thus advanced shall be deemed to be
demand recourse loans from the Non-Delinquent Member to the Delinquent Member
and an Additional Capital Contribution of such sums to the Company by the
Delinquent Member; (ii) such loans shall bear interest at the rate of interest
equal to the lesser of (x) eighteen percent (18%) per annum, or (y) the highest
lawful rate, from the date that the advance was made until the date that such
advance, together with any costs and expenses incurred by the Company as a
result of the Delinquent Member’s failure to contribute, and together with all
interest accrued thereon, is repaid; (iii) unless otherwise paid, and subject to
Section 6.4.2(b) below, the repayment of these loans shall be withheld from any
Distribution from the Company otherwise to be made to the Delinquent Member
during the term of the Company or after dissolution; and (iv) all repayments of
advances shall first be applied to any costs and expenses incurred by the
Company as a result of the Delinquent Member’s failure to contribute, then to
interest earned and unpaid, and then to principal. Any such election shall be
made within ten (10) Business Days after notice of such option is given by the
Board.

6.4.2    If the Non-Delinquent Member does not make advances (as described in
Section 6.4.1) in an aggregate amount sufficient to cover the entire amount of
the required Additional Capital Contribution of the Delinquent Member, or if the
loans referenced in Section 6.4.1 above are not repaid within six (6) months
following the applicable Contribution Date, the Board shall, as determined by a
majority of the Members, but expressly excluding the vote of any Director
appointed by a Delinquent Member, take one or more of the following actions:

(a)In the case of the Non-Delinquent Member not making advances (as described in
Section 6.4.1) in an aggregate amount sufficient to cover the entire amount of
the required Additional Capital Contribution of the Delinquent Member, offer the
Non- Delinquent Member the ability to make an Additional Capital Contribution,
the sum of which shall equal the Delinquent Member’s required Additional Capital
Contribution which such Delinquent Member failed to make and was not covered by
a loan from Non-Delinquent Member as described in Section 6.4.1 , and adjust
each Member’s Participation Percentage as follows:

(i)the Participation Percentage of the Delinquent Member shall be decreased by
an amount, expressed as a percentage (subject to clause (iii) below, the
“Percentage Adjustment”), equal to one and one-half times the product of (A)
such Delinquent Member’s Participation Percentage (before any such adjustment)
and (B) the quotient of (1) the amount of the Additional Capital Contribution
which the Delinquent Member failed to make, (2) the product of (x) such
Delinquent Member’s Participation Percentage (before any such adjustment), and
(y) the sum of all Capital Contributions made by all Members prior to the date
of the Additional Capital Contribution Notice and the aggregate Additional
Capital Contribution set forth in the Additional Capital Contribution Notice;
and

(ii)the Participation Percentage of the contributing Non- Delinquent Member
shall be increased by an amount, expressed as a percentage, equal to the

Non-Delinquent Member’s share of the Percentage Adjustment determined pursuant
to (i) above; and

(iii)the Participation Percentage of the Members shall be adjusted to the
nearest one-hundredth of one percent.

(b)In the case of a loan referenced in Section 6.4.1 above and not repaid within
six (6) months following the applicable Contribution Date, treat the outstanding
loan advanced by a Non-Delinquent Member under Section 6.4.1 (together with the
unpaid interest accrued thereon) as if it were an Additional Capital
Contribution made by such Non- Delinquent Member pursuant to Section 6.4.2(a) as
of the applicable Contribution Date (rather than as an Additional Capital
Contribution of the Delinquent Member), and make the Percentage Adjustments
described in Section 6.4.1 with respect thereto.

(c)Exercise such other rights and remedies to which the Board may be entitled at
law or in equity or by statute.

6.4.3    No right, power or remedy conferred pursuant to this Section 6.4 shall
be exclusive, and each such right, power or remedy shall be cumulative and in
addition to every other right, power or remedy whether conferred in this Section
6.4 or now or hereafter available at law or in equity or by statute or
otherwise.

6.5    Interest on Capital Contributions. Except as described in Section 6.4.1,
no interest shall be paid by the Company on any Capital Contribution made by any
Member to the Company.

6.6    Return of Capital Contributions. Except as otherwise provided in this
Agreement, no Member shall have the right to withdraw or reduce such Member’s
Capital Contribution or to receive any Distributions, except as a result of
dissolution. No Member shall have the right to demand or receive property other
than cash in return for such Member’s Capital Contributions.

6.7    Loans By a Member. Loans by a Member to the Company shall not be
considered Capital Contributions for purposes of this Agreement, increase such
Member’s Capital Account or entitle such Member to any greater share of the Net
Profits, Net Losses or Distributions of the Company than such Member is
otherwise entitled to under this Agreement. No loan shall be made by a Member to
the Company unless approved by the Board as a Major Decision.

6.8    Withholding. The Company shall comply with all of its withholding
obligations under the Code and under any applicable United States federal,
state, local and, as applicable, foreign tax law. Any amount so withheld by the
Company and paid over to the Internal Revenue Service and/or any other tax or
other governmental authority, agency, entity, instrumentality or other body (any
of the foregoing, a “Tax Authority”) in respect of any payment or Distribution
made by the Company to or on behalf of any Member shall be treated as an amount
actually paid or distributed to such Member or other Person for all purposes of
this Agreement. With respect to any amount required to be remitted by the
Company to any Tax

Authority in respect of any income, gain and/or Net Profits (and/or items
comprising thereof) allocated and/or allocable to any Member, such Member shall,
by no later than ten (10) days following the date of such remittance by the
Company to the Tax Authority, repay to the Company such amount so remitted by
the Company to the applicable Tax Authority (and which repayment by such Member
shall be treated for all purposes of this Agreement as a repayment of a loan by
such Member to the Company and not, for example, as a Capital Contribution or
loan made by such Member to the Company); provided, however, if such Member
fails to repay such amount in full within such ten (10) day period, then
beginning on the day immediately following such ten (10) day period, interest on
the unpaid amount shall accrue at the rate equal to eighteen percent (18%) per
annum (with any such repayment(s), first, to offset and be applied to any
accrued and unpaid interest to the extent thereof and, then, in repayment of the
amount so remitted to the extent thereof); provided, further, the Company may
(and shall) reduce and/or otherwise apply any amount otherwise distributable or
payable to such Member in repayment of the unpaid balance, including the accrued
and unpaid interest thereon (with any such amount so applied to be treated first
as the payment of accrued and unpaid interest to the extent thereof and, then,
in repayment of the amount so remitted to the extent thereof, but with the
amount so applied otherwise being treated for all purposes of this Agreement as
having actually been distributed and/or paid to such Member).

6.9
Intentionally Omitted.

6.10
Capital Accounts.

6.10.1    An individual capital account (a “Capital Account”) shall be
established and maintained on the books of the Company for each Member in
compliance with Treasury Regulations Sections 1.704-1(b)(2)(iv) and 1.704-2.

6.10.2    To each Member’s Capital Account there shall be credited the amount of
cash and the initial Gross Asset Value of any other property contributed by such
Member as Capital Contributions to the Company, such Member’s distributive share
of Net Profits and items of income and gain, and the amount of any Company
liabilities assumed by such Member or which are secured by any property of the
Company distributed to such Member (but only to the extent such liabilities are
to be credited pursuant to the Treasury Regulations).

6.10.3    To each Member’s Capital Account there shall be debited the amount of
cash and the Gross Asset Value of any property of the Company distributed to
such Member pursuant to any provision of this Agreement, such Member’s
distributive share of Net Losses and items of loss and deduction, and the amount
of any liabilities of such Member assumed by the Company or which are secured by
any property contributed by such Member to the Company (but only to the extent
such liabilities are to be debited pursuant to the Treasury Regulations).

6.10.4    Upon a transfer of any Member Interest in the Company or portion
thereof in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred Member Interest or portion thereof.

7.
ALLOCATIONS.

7.1    Allocation of Net Profits and Net Losses. After giving effect to the
special allocations and limitations set forth in Sections 7.2 and 7.3, Net
Profits and Net Losses shall be allocated to the Members as follows:

7.1.1    Net Profits. Net Profits, and each item of Company income, gain, loss
or deduction entering into the computation thereof, for each Fiscal Year or
other relevant period shall be allocated to the Members so as to reduce,
proportionally, the difference between their respective Target Capital Accounts
and Partially Adjusted Capital Accounts for such Fiscal Year or other relevant
period. No portion of the Net Profits for any Fiscal Year or other relevant
period shall be allocated to a Member whose Partially Adjusted Capital Account
is greater than or equal to its Target Capital Account for such Fiscal Year or
other relevant period.

7.1.2    Net Losses. Subject to Section 7.1.3, the Net Losses for any Fiscal
Years and each item of Company income, gain, loss or deduction entering into the
computation thereof, shall be allocated to the Members so as to reduce,
proportionally, the difference between their respective Partially Adjusted
Capital Accounts and Target Capital Accounts for such Fiscal Year or other
relevant period. No portion of the Net Losses for any Fiscal Year or other
relevant period shall be allocated to a Member whose Target Capital Account is
greater than or equal to its Partially Adjusted Capital Account for such Fiscal
Year or other relevant period.

7.1.3    Loss Limitation. Net Losses allocated pursuant to Section 7.1.2 to a
Member shall not exceed the maximum amount of Net Losses that can be allocated
without causing such Member to have an Adjusted Capital Account Deficit at the
end of any Fiscal Year or other relevant period. In the event that some but not
all of the Members would have an Adjusted Capital Account Deficit as a
consequence of an allocation of Net Losses pursuant to Section 7.1.2, the
limitations set forth herein shall be applied on a Member-by-Member basis and
Net Losses not allocable to any Member as a result of such limitation shall be
allocated to the other Members in accordance with the positive balances in such
Members’ Capital Accounts so as to allocate the maximum permissible Net Losses
to each Member under Treasury Regulations
§ 1.704-1 (b)(2)(ii)(d).

7.2    Special / Regulatory Allocation. The following special allocations shall
be made to the Members in the following order and priority:

7.2.1    Member Nonrecourse Debt Minimum Gain Chargeback. Except as otherwise
provided in §1.704-2(i)(4) of the Treasury Regulations, notwithstanding any
other provision of this Section 7, if there is a net decrease in “partner
nonrecourse debt minimum gain” (as defined in Treasury Regulations §
1.704-2(i)(2)) attributable to “partner nonrecourse debt (as defined in Treasury
Regulations § 1.704-2(b)(4)) during any Fiscal Year, each Member who has a share
of the partner nonrecourse debt minimum gain attributable to such partner
nonrecourse debt, determined in accordance with Section 1.704-2(i)(5) of the
Treasury Regulations, shall be specially allocated items of Company income and
gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Member’s share of the net decrease in partner nonrecourse
debt minimum gain attributable to such partner Nonrecourse Debt, determined in
accordance with Treasury Regulation §1.704-2(i)(4). Allocations pursuant to the

previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with §§1.704-2(i)(4) and 1.704-2(j)(2) of the
Treasury Regulations. This Section 7.2.1 is intended to comply with the minimum
gain chargeback requirement in §1.704-2(i)(4) of the Treasury Regulations and
shall be interpreted consistently therewith.

7.2.2
Minimum Gain Chargeback. Except as otherwise provided in

§1.704-2(f) of the Treasury Regulations, notwithstanding any other provision of
this Section 7, if there is a net decrease in “partnership minimum gain” (as
defined in Treasury Regulations § 1.704-2(b)(2)) during any Fiscal Year or other
relevant period, each Member shall be specially allocated items of Company
income and gain for such Fiscal Year or other relevant period (and, if
necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of
the net decrease in partnership minimum gain, determined in accordance with
Treasury Regulations
§1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with §§1.704-2(f)(6) and 1.704(j)(2) of the Treasury Regulations. This Section
7.2.2 is intended to comply with the minimum gain chargeback requirement in
§1.704-2(f) of the Treasury Regulations and shall be interpreted consistently
therewith.

7.2.3    Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations, or distributions described in Treasury Regulations
§1.704- 1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6)
which causes or increases an Adjusted Capital Account Deficit of such Member,
items of Company income and gain shall be specially allocated to such Members in
an amount and manner sufficient to eliminate any such Adjusted Capital Account
Deficit as quickly as possible. This Section 7.2.3 is intended to qualify as a
“qualified income offset” within the meaning of Treasury Regulations
§1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

7.2.4     Member Nonrecourse Deductions. Any “partner nonrecourse deductions”
(as defined in Treasury Regulations § 1.704-2(i)(1)) for any Fiscal Year shall
be specially allocated to the Member who bears the economic risk of loss with
respect to the “partner nonrecourse debt” (as defined in Treasury Regulations §
1.704-2(b)(4)) to which such partner nonrecourse deductions are attributable in
accordance with Treasury Regulations §1.704- 2(i)(1).

7.2.5    Nonrecourse Deductions. “Nonrecourse deductions” (as defined in
Treasury Regulations § 1.704-2(b)(1)) shall be allocated among the Members in
proportion to their respective Participation Percentages.

7.2.6    Section 754 Adjustments.    To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Treasury Regulations
§1.704-1(b)(2)(iv)(m)(2) or Treasury Regulations §1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis)

and such gain or loss shall be specially allocated to the Members, respectively,
in proportion to their respective Participation Percentages in the event
Treasury Regulations §1.704- 1(b)(2)(iv)(m)(2) applies, or to the Member to whom
such distribution was made in the event Treasury Regulations
§1.704-1(b)(2)(iv)(m)(4) applies.

7.3    Curative Allocations. The allocations set forth in Section 7.1.3 and
Section 7.2 (the “Regulatory Allocations”) are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Members that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss, or deduction pursuant to this
Section 7.3. Therefore, notwithstanding any other provision of this Section 7
(other than the Regulatory Allocations), the Managing Member shall make such
offsetting special allocations of Company income, gain, loss, or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Member’s Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of the Agreement and all Company items were
allocated pursuant to Sections 7.1.1 and 7.1.2. In exercising its discretion
under this Section 7.3, the Managing Members shall take into account future
Regulatory Allocations that, although not yet made, are likely to offset other
Regulatory Allocations previously made.

7.4
Tax Allocations.

7.4.1    General. For each Fiscal Year, items of taxable income, deduction,
gain, loss or credit shall be allocated for income tax purposes to and among the
Members in the same manner as their corresponding book items are allocated to
the Members pursuant to Sections 7.1, 7.2 and 7.3 hereof for such Fiscal Year,
as modified by subsections 7.4.2 through
7.4.4 below.

7.4.2    Section 704(c) Allocations. In accordance with Code
Section 704(c) and the Treasury Regulations promulgated thereunder, Company
income, gain, loss, and deduction with respect to any asset contributed to the
capital of the Company shall, solely for tax purposes, be allocated to and among
the Members so as to take account of any variation between the Company’s
adjusted tax basis in such asset for United States federal income tax purposes
and the Gross Asset Value of the asset using any method (or methods) permitted
under Code Section 704(c) and the Treasury Regulations thereunder as determined
by the Managing Member and approved by the Board as a Major Decision.
Notwithstanding anything to the contrary in this Section 7.4.2, the Company
shall use the either (a) the traditional method with curative allocations under
Treasury Regulations § 1.704-3(c), or (b) the remedial allocation method under
Treasury Regulations § 1.704-3(d) as shall be selected by the Shelbourne Member
prior to the Company’s preparation of its first Federal income tax return to be
filed after the Effective Date with respect to any property deemed contributed
to the Company by the RLH Member on the Effective Date under Revenue Ruling
99-5, 1999-1 CB 434, Situation 1, with respect to which the “ceiling rule,” as
defined in Treasury Regulations § 1.704- 3(b)(1), applies.

7.4.3    Reverse Section 704(c) Allocations. In the event the Gross Asset Value
of any Company asset is adjusted pursuant to clauses (b) or (d) of the
definition of "Gross Asset Value," subsequent allocations of Company income,
gain, loss and deduction with respect to such asset shall take account of any
variation between the Gross Asset Value of such asset immediately before such
adjustment and its Gross Asset Value immediately after such adjustment using any
method (or methods) permitted under Code Section 704(c) and the Treasury
Regulations thereunder as determined by the Managing Member and approved by the
Board as a Major Decision.

7.4.4    Recapture Income. Depreciation and amortization recapture, if any,
resulting from any sales or dispositions of tangible or intangible depreciable
or amortizable property of the Company shall be allocated to and among the
Members in the same proportions that the depreciation or amortization being
recaptured was allocated to and among the Members to the maximum extent
permissible under the Treasury Regulations.

7.4.5    Other. Any elections or other decisions relating to allocations under
this Section 7.4 will be made by the Managing Member with the approval of the
Members (which approval not to be unreasonably withheld, conditioned or
delayed). Allocations under this Section 7.4 are solely for purposes of United
States federal, state and local taxes and will not affect, or in any way be
taken into account in computing, any Member’s Capital Account or share of Net
Profits or Net Losses or other items or Distributions under any provision of
this Agreement.

7.5    Allocation in Event of Transfer. If any Member Interest is transferred,
or the Participation Percentages are increased or decreased by reason of the
admission of a new Member or otherwise during any Fiscal Year or other relevant
period, Net Profits, Net Losses and items thereof for such Fiscal Year or other
relevant period shall be assigned to the day in the particular period of such
Fiscal Year or other relevant period to which such item is attributable (i.e.,
the day on or during which it is accrued or otherwise incurred) and the amount
of each such item so assigned to any such day shall be allocated as if the
Company closed its books as of the date of such transfer or increase or
decrease.

7.6    Allocation of Tax Credits. Except as may otherwise be required by law,
any tax credits to which the Company may be entitled shall be allocated among
the Members in accordance with their respective Participation Percentages.

7.7    Allocations of Tax Items. For federal income tax purposes, every item of
income, gain, loss and deduction shall be allocated among the Members in
accordance with the foregoing allocations.

8.
DISTRIBUTIONS AND FEES.

8.1    Distribution of Distributable Cash. Distributable Cash shall be
distributed to the Members as follows:

(a)    First, to the Members with positive Unreturned Capital Contribution
Account balances, pro rata in accordance with such balances, until the
Unreturned Capital Contribution Account balance of each Member is reduced to
zero; and

(b)    Thereafter, to the Members in accordance with their respective
Participation Percentages.

Distributions shall be made as determined by the Board, but no less frequently
than monthly.

8.2    To Whom Distributions Are Made. Unless named in this Agreement or unless
admitted as a Member as provided in this Agreement, no person or entity shall be
considered a Member in the Company. Any Distribution by the Company to the
person shown on the Company records as a Member, or to such Member’s legal
representatives, or to a named assignee of the right to receive Distributions,
shall acquit the Company and the Members of all liability to any other person
who may be interested in such Distribution by reason of an assignment by a
Member or for any other reason.

8.3    Tax Distributions. Prior to the Distribution of Distributable Cash to the
Members pursuant to Section 8.1, for any Fiscal Year, to the extent that the
Managing Member determines in good faith that cash is available, the Company
shall make distributions (“Tax Distributions”) to the Members at such times and
in such amounts as are necessary to enable the Members to satisfy their
respective quarterly estimated income tax obligations attributable to their
respective Cumulative Income Tax Liabilities. If the Managing Member determines
that the Company lacks sufficient cash to make such Tax Distributions on the
dates described above, available cash shall be distributed to the Members as Tax
Distributions in proportion to the excess of the Cumulative Income Tax Liability
of each Member for the relevant Fiscal Year over the cumulative amount of Tax
Distributions previously made to such Member with respect to such Fiscal Year.
Any Tax Distribution to a Member will be deemed to be an advance Distribution of
amounts otherwise distributable to such Member pursuant Section 8.1 and will
reduce the amounts that would subsequently otherwise be distributable to such
Member pursuant to Section 8.1 in the order they would otherwise have been
distributable.

8.4    Withholding Obligations. Unless treated as a Tax Payment Loan, any amount
paid by the Company for or with respect to any Member on account of any
withholding tax or other tax payable with respect to the income, profits or
distributions of the Company pursuant to the Code, the Regulations, or any state
or local statute, regulation or ordinance requiring such payment (a “Withholding
Tax Act”) shall be treated as a Distribution to such Member for all purposes of
this Agreement, consistent with the character or source of the income, profits
or cash which gave rise to the payment or withholding obligation. To the extent
that the amount required to be remitted by the Company under the Withholding Tax
Act exceeds the amount then otherwise distributable to such Member (including as
a Tax Distribution), the excess shall constitute a loan from the Company to such
Member (a “Tax Payment Loan”), which shall be payable upon demand and shall bear
interest, from the date that the Company makes the payment to the relevant
taxing authority, at a lesser of (i) a variable rate per annum at all times
equal to two hundred (200) basis points in excess of the Prime Rate or (ii) the
maximum legal interest rate under applicable law. As long as any Tax Payment
Loan or the interest thereon

remains unpaid, the Company shall make future Distributions due to such Member
under this Agreement by applying the amount of any such Distribution first to
the payment of any unpaid interest on all Tax Payment Loans to such Member and
then to the repayment of the principal of all Tax Payment Loans of such Member.
The Managing Member shall have the authority to take all actions necessary to
enable the Company to comply with the provisions of any Withholding Tax Act
applicable to the Company and to carry out the provisions of this Section 8.4.
Nothing in this Section 8.4 shall create any obligation on any Member to advance
funds to the Company or to borrow funds from third parties in order to make any
payments on account of any liability of the Company under a Withholding Tax Act
except for withholding tax liabilities attributable to such Member

8.5    Fees. The Members agree that, in addition to any Distributions to be made
pursuant to this Agreement, the Members shall be entitled to receive the
following fees paid by the Company:

8.5.1    The Company shall pay to the Shelbourne Member an investors relations
fee each month equal to 0.50% of the total aggregate revenue of the Properties
during the prior month;

8.5.2    The Company shall pay to CPA Development, LLC (a designee of the
Shelbourne Member) a construction management fee in the aggregate amount of
$200,000 plus approved expense reimbursements (the payments of such fee and
reimbursements to be in accordance with an agreement to be executed by the
Company and CPA Development, LLC. The agreement and the payment of such fee
shall be subject to the approval of Board including the approval of the Director
appointed by Shelbourne Capital);

8.5.3    On the date hereof, the Company shall pay to Shelbourne Capital a
financing fee (as is also described in the Member Interest Purchase Agreement)
in the amount of Two Hundred Thousand and 00/100 Dollars ($200,000.00);

8.5.4    The Member Interest Purchase Agreement that on the date hereof
Shelbourne Capital shall be paid an acquisition fee in the amount of Eight
Hundred Eighty-Eight Thousand Three Hundred Sixty and 00/100 Dollars
($888,360.00) fifty-five percent (55%) of which is paid by the RLH Member and
forty-five percent (45%) of which is paid by the Shelbourne Member; and

8.5.5    The Company shall cause Holdco to cause each of the Owners to pay to
the Management Company the fees and other amounts provided for in the Management
Contracts between such Owner and the Management Company, and, after entering
into a franchise agreement, to pay the franchisor the fees and other amounts
provided for in the franchise agreement between such Owner and a franchisor.

8.6    Right of Setoff. In the event the Shelbourne Member determines that the
Company has a claim against the RLH Member arising from a breach of any
representations, warranties or indemnifications obligations of the RLH Member
under that certain Contribution Agreement entered into as of the business day
immediately preceding the date of this Agreement and pursuant to which the
Company acquired the Properties, the Directors appointed by the

Shelbourne Member alone shall be entitled to vote as Directors to assert a claim
against the RLH Member. If a claim is asserted on behalf of the Company against
the RLH Member under the Contribution Agreement or by the Shelbourne Member
under the Member Interest Purchase Agreement, it shall specify the nature and
amount of such claim and, if there is an agreement reached between the RLH
Member and Shelbourne Member or a determination is made judicially or by binding
arbitration of an amount that is due to the Shelbourne Member on account of the
Shelbourne Member’s claim, and such amount has not been paid in full to the
Shelbourne Member within thirty (30) days following such agreement or
determination, the Managing Member shall set off against amounts distributable
to the RLH Member pursuant to Section 8 of this Agreement up to the unpaid
amount of the Shelbourne Member’s claim and will cause the Company, as agent for
the RLH Member, to pay any amounts so set off to the Shelbourne Member to cover
the unpaid amount of such claim. Such payment shall be deemed to have been paid
to the RLH Member and, in all other respects, shall be deemed as having been
distributed to the RLH Member pursuant to Section 8 of this Agreement. If there
is such an agreement or determination but, before the earlier of the amount due
to the Shelbourne Member pursuant to such agreement or determination being fully
paid to the Shelbourne Member or the expiration of the thirty (30) days
following such agreement or determination there are any distributions otherwise
to be made to the RLH Member, the amounts otherwise distributable to the RLH
Member shall be held in escrow by the Managing Member pending confirmation of
payment in full by the RLH Member to the Shelbourne Member of the amount that
was agreed upon or determined to be payable by the RLH Member to the Shelbourne
Member. Nothing contained in this Agreement shall limit the right of the
Shelbourne Member to assert a claim against the RLH Member under the Member
Interest Purchase Agreement under which the Shelbourne Member acquired its
Member Interest in the Company.

Any dispute about the validity of or amount due as a result of such a claim
under the Contribution Agreement shall be resolved through arbitration in
accordance with Section 24 but any election to be made by the Company to assert
a claim under the Contribution Agreement shall be made by the Company at the
direction solely of the Shelbourne Member.

8.7    Right of First Offer on Equity Capital for Additional Hotels. In the
event that at any time during which the Shelbourne Member remains a Member of
the Company (the “New Hotel Equity ROFO Period”), Company, the RLH Member, or
any of its Affiliates, shall elect to pursue the acquisition of any one or more
additional hotel properties and intends to seek equity capital from another
Person for the acquisition and/or rehabilitation/renovation of such one or more
additional hotel properties, the Company or RLH Member (as applicable) shall
first offer, or cause its Affiliate to first offer, to Shelbourne Capital the
opportunity for Shelbourne Capital or its designee to provide such equity
capital for such hotel property acquisition and/or rehabilitation/renovation to
the extent that such equity capital is not provided by the Company (for
acquisitions by the Company) or by the RLH Member or its Affiliates (for
acquisitions by any of them) ; and, for each such additional hotel property, the
RLH Member or its Affiliate shall have the right to participate pro-rata
alongside Shelbourne Capital or its designee in providing such equity capital
with the percentage share of the RLH Member or its Affiliate being up to the
same percentage as the Participation Percentage of the RLH Member in the Company
or in such other percentage as may be agreed upon by the RLH Member and
Shelbourne Capital. The foregoing right of first offer is hereinafter referred
to as the “New Hotel Equity ROFO”.

The New Hotel Equity ROFO shall not apply in the case of an independent third
party bringing to the Company, the RLH Member or its Affiliate an opportunity to
acquire one or more hotel properties together with such third party’s offer to
provide the equity capital required for the acquisition (and, as applicable,
rehabilitation/renovation), provided the third party’s equity is accepted on the
terms offered. Until the expiration of the New Hotel Equity ROFO Period, the RLH
Member shall give to Shelbourne Capital notice describing in reasonable detail
the additional hotel property and the projected equity capital being sought by
the Company, RLH Member or its Affiliate and, no later than five (5) days after
giving such notice, the RLH Member shall provide or make available to Shelbourne
Capital, or cause to be provided or made available, all relevant documentation
and other information (including, without limitation, due diligence information,
a projected “pro forma” and financial returns, and a projected business plan)
that the Company, RLH Member or its Affiliate has regarding the additional hotel
property and the projected equity capital required. Shelbourne Capital shall
have a period of at least thirty
(30) days from receipt of such documentation and other information during which
to conduct a due diligence investigation of the proposed additional hotel
property and proposed equity capital requirement and notify the RLH Member if
Shelbourne Capital wishes to invest the proposed equity capital. Shelbourne
Capital’s failure to give to the RLH Member a notice before the expiration of
such thirty (30) day period shall be deemed Shelbourne Capital’s declining to
invest the proposed equity capital and the Company, RLH Member or its Affiliate
shall be free to seek the required equity capital elsewhere. Before the Company,
RLH Member or its Affiliate shall either offer to another Person or accept from
another Person all or any portion of the required equity capital on terms that
are more advantageous to that Person than the terms last offered to or proposed
by Shelbourne Capital, the RLH Member or its Affiliate shall first offer the
same terms to Shelbourne Capital and the RLH Member or its Affiliate and
Shelbourne Capital shall follow the same process as is set forth above in this
Section 8.7 If Shelbourne Capital shall timely give the RLH Member notice of
Shelbourne Capital’s election to invest the proposed equity capital, then the
RLH Member shall proceed, or cause its Affiliate to proceed with good faith
negotiations with Shelbourne Capital and, within forty-five (45) days after
Shelbourne Capital’s notice of its election to invest the proposed equity
capital, complete and execute definitive agreements with Shelbourne Capital or
its designee for the contribution of the required by Shelbourne Capital or its
designee and participation of Shelbourne Capital or its designee in the
ownership of the entity acquiring the additional hotel property.

8.8    Termination Fees. If, as a result of a transfer of a Property, the
Management Agreement for that Property will be terminated, the RLH Member will
cause its Affiliate, Red Lion Hotels Franchising, Inc., to offer to enter into a
franchise agreement under its then-standard terms and conditions consistent with
Schedule 16.4(a) of the Management Contract. In the event that prior to or
contemporaneously with the transfer, the transferee and the Affiliate do not
enter into a franchise agreement with a term of at least three years, the
Company will pay to the Affiliate a franchise termination fee in accordance with
the provisions of Section 16.4(b) of the Management Contract for that hotel. The
Termination Fee shall be paid on the date of the transfer of the Property. No
other termination fee shall be payable for the termination of the Management
Agreement in connection with a transfer of a Property. In the event that the
Shelbourne Member acquires the Member Interests held by the RLH Member through
the Buy/Sell process described in Section 9.6, the Company shall have the right
to terminate the Management Agreement for the Properties and to enter into
franchise agreements on the same

terms as a transferee of a Property and if it fails to do so, will pay the
termination fee for each Property that does not enter into a franchise agreement
with the Affiliates (and no other termination fee shall be payable for the
termination of the Management Agreement in connection with the Shelbourne Entity
acquiring the Member Interests held by the RLH Member through the Buy/Sell
process described in Section 9.6.)

9.
MANAGEMENT.

9.1
General Management.

9.1.1    Except as otherwise expressly provided in this Agreement, the day-
to-day business and affairs of the Company shall be conducted by the Managing
Member, but all decisions affecting the business and affairs of the Company that
are identified by this Agreement as Major Decisions shall be made, by the Board.
Unless otherwise provided in this Agreement,
(i)approval of the Board means the approval of a majority of all Directors; and
(ii) any Major Decision shall require approval of at least two-thirds (2/3) of
all Directors. The Board shall consist of seven (7) directors: three (3) chosen
by the RLH Member; three (3) chosen by the Shelbourne Member, or their
respective permitted successors and assigns; and one (1) chosen by the RLH
Member from a list of five (5) independent Persons proposed by the Shelbourne
Member. The initial Directors shall be those individuals set forth on Exhibit B
to this Agreement. Subject to the last sentence of this Section 9.1.1, any
Director may be removed with or without cause by the Member entitled to select
such Director. Any Director may resign at any time upon written notice to the
Company and the Members. Any vacancy in the Board shall be filled by the Member
entitled to select the Director whose resignation or removal led to the vacancy.
The Director who was chosen by the RLH Member from a list of Persons proposed by
the Shelbourne Member may be removed by consent of the RLH Member and the
Shelbourne Member, and the successor to such Director shall be selected by RLH
from a list of persons proposed by the Shelbourne Member at that time (and such
list may include any one or more Persons previously proposed by the Shelbourne
Member on any list previously submitted to the RLH Member pursuant to this
Section).

9.1.2    At all times, the Company shall have designated an additional Person
(“Special Director”) who shall be deemed a member of the Board for the limited
purpose of considering matters under Section 9.2.4(xxvi) and shall have no other
powers and responsibilities and shall have the qualifications set forth in
Section 9.1.2(a). If and when consent of the Special Director is sought for a
matter which, pursuant to this Agreement, the approval or consent of the Special
Director is required by the terms of the Agreement, the Special Director shall
be entitled to be compensated by the Company on an hourly basis at the Special
Director’s standard hourly rate (which, if the Special Director is an attorney,
shall be his customary hourly rate for providing legal services) for the time
actually spent by the Special Director specifically for such matter. Except
exclusively for matters for which the approval or consent of the Special
Director is specifically required under Section 9.2.4(xxvi), the Special
Director shall not be entitled to attend meetings of the Board or receive any
materials or information regarding the Company, its assets, liabilities,
activities or operations (or of any of its direct or indirect subsidiaries). The
initial Special Director shall be Joshua Sarner. The Board shall have the right,
as a Major Decision, to replace, from time to time and at any time, the

individual serving as Special Director provided the individual selected by the
Board meets the criteria set forth in Section 9.1.2(a).

(a)The Special Director shall be an individual who is not and has not been for
at least five (5) years:

(i)a manager or director (other than in its capacity as an independent manager
or director of any Member and/or the Company or an affiliate), officer,
employee, trustee, trade creditor, customer, supplier, member attorney, counsel
or shareholder (or spouse, parent, sibling or child of the foregoing) of (i) a
Member or the Company, (ii) a principal of a Member or the Company, (iii) any
equitable or beneficial owner, partner, principal or affiliate of a Member or
the Company or of a principal of any such Person, or (iv) any affiliate of any
equitable or beneficial owner, partner, or principal of a Member or the Company
or of a principal of any such Person; or

(ii)a creditor, customer, supplier or Person who derives any of its purchases or
revenues from its activities with (i) a Member or the Company, (ii) a principal
of a Member or the Company, (iii) any equitable or beneficial owner, partner,
principal or affiliate of a Member or the Company or of a principal of any such
Person, or (iv) any affiliate of any equitable or beneficial owner, partner, or
principal of a Member or the Company or of a principal of any such Person.

A natural person who satisfies the foregoing definition other than subparagraph
9.1.2(a)(ii) shall not be disqualified from serving as Special Director of the
Company if such individual who provides professional independent manager or
director services (a “Professional Independent Director”) and other corporate
services in the ordinary course of his business. A natural person who otherwise
satisfies the foregoing definition other than subparagraph 9.1.2(a)(ii) by
reason of being the independent manager or director of a “special purpose
entity” affiliated with the Company shall not be disqualified from serving as
Special Director of the Company if such individual is either (i) a Professional
Independent Director or (ii) the fees that such individual earns from serving as
Independent Director of affiliates of the Member or the Company in any given
year constitute in the aggregate less than five percent (5%) of such
individual’s annual income for that year.

9.2    Powers of the Board; Major Decisions.

9.2.1    The Board shall have the right, power and authority to approve any and
all actions consistent with the purpose of the Company that is permitted under
this Agreement and under applicable law. Furthermore, the Board shall have the
power to direct the Managing Member to undertake any action which, pursuant to
the provisions of this Agreement would require approval of the Board if
initiated by the Managing Member or any other Member, provided that if the
action is a Major Decision, it shall require the consent of two-thirds (2/3) of
all Directors; and, if so directed by the Board, the Managing Member shall
follow such direction. Except as provided in this Agreement, no Member shall
have any right, power or authority to act (as agent or otherwise) for, or to
bind, the Company in any manner (other than as expressly provided herein).

9.2.2    Subject to the authority, direction and supervision of the Board and
the remaining provisions of this Agreement, the day-to-day administration of the
Company’s business (including the role of the Company as a member of any Owner
and the Company’s performance of the obligations of the Company under any
contract to which the Company is a party) shall be conducted by the Managing
Member. The Managing Member shall devote such time to the Company as shall be
necessary in its sole and absolute discretion to conduct the Company’s business
and to carry out its duties and responsibilities under this Agreement for the
furtherance of the Company’s business. Except as otherwise directed or approved
by the Board, the Managing Member shall cause compliance by the Company with the
terms and conditions of any contract to which the Company is a party and enforce
compliance by the other party to such contract with the Company.

9.2.3    The Managing Member shall use commercially reasonable efforts in good
faith to comply with, and to administer the Company in conformance with any
Business Plan and Approved Budget and the decisions and directives of the Board.
Actions that result in expenses for any Property in a calendar quarter that do
not increase the aggregate expenses for that Property in that calendar quarter
by more than five percent (5%) above the aggregate expenses budgeted in the
Approved Budget for that Property for that quarter shall be deemed to be in
compliance with an Approved Budget. The Managing Member shall not take any
action which constitutes a Major Decision without Approval of the Board.

9.2.4    Neither the Managing Member nor the Board shall have authority to do
any of the following (each of which is deemed a Major Decision) without first
obtaining the written approval of affirmative vote at a meeting of the Board of
at least two-thirds (2/3) of all Directors (which approval may be effected at a
meeting, or by written consents (which can be effected through electronic or
facsimile transmission)):

(i)    Cause the Company or any Owner to enter into any purchase, lease or other
acquisition of (a) any hotels; or (b) any real property; (c) any stock or other
equity interests of or in another person or entity; or (d) any personal property
(other than ordinary course operating supplies) for any one Property with a
value in excess of $10,000 in the aggregate in any calendar year unless the
expenditure is approved in an Approved Budget.

(ii)    Cause the Company or any Owner to enter into any sale, lease, exchange
or other transfer or disposition of (a) any of the Properties or (b) any real
property;
(c) any transfer of the ownership interests in any Owner, or substantially all
of the assets of any Owner, as part of a single transaction or plan or in
integrated multiple transactions.

(iii)    Amend this Agreement or the certificate of formation of the Company or
approve the amendment of any of the operative organizational documents of any
Owner.

(iv)    Change, or approve a change in, the purpose or nature of the business of
the Company or any Owner.

(v)
Change the Company or any Owner to any other legal form.

(vi)    Cause the Company or any Owner to engage any Management Company (other
than Red Lion Hotels Management, Inc.), or to terminate the Management Contract
for any of the Properties; or to amend or terminate any Management Contract for
any of the Properties.

(vii)    Cause the Company or any Owner to (a) enter into any Material Contract
for which the contract expenditure has not been included in an Approved Budget
or Business Plan, or (b) amend any Material Contract to increase the expenditure
required by the Company in excess of the amounts approved in an Approved Budget
or Business Plan, or (c) enter into any partnership or joint venture agreement.

(viii)    Cause the Company or any Owner to enter into any agreement that is not
related to the operations or ownership of the assets of the Company or the
Owners.

(ix)    Admit a new Member to the Company or to any Owner, or cause the Company
or any Owner to issue (or grant any option for) any additional Member Interest
(or any obligation or instrument convertible into an additional Member Interest)
to any Person, or to redeem any Member Interest.

(x)    Cause any merger or reorganization of the Company or any Owner with
another limited liability company, corporation, general partnership, limited
partnership, or other entity.

(xi)    Change the Managing Member of the Company or the managing member,
manager, or general partner of any Company.

(xii)    Liquidate, dissolve, wind-up or terminate the business of the Company
or any Owner (except for termination of the business of a subsidiary after a
sale of all of the assets of such subsidiary).

(xiii)    Call for capital or any loans to be funded to the Company or any Owner
if not specifically stated in the Business Plan.

(xiv)    Approve or amend any Business Plan or Approved Budget (operating and
capital) of the Company or any Owner.

(xv)
Make expenditures for capital improvements, provided that:

(a) such approval shall not be required for capital improvements that are
included in an Approved Budget or Business Plan; (b) Managing Member may cause
the Company or Owner make capital expenditures that are reasonably required to
address emergency situations posing a risk of imminent harm to persons or
property; and (c) Managing Member may authorize the Company or Owner to make
capital expenditures not included in an Approved Budget or Business Plan for
which the expenditure is less than $10,000 for any one Property in any one
calendar year.

(xvi)    Take any act or cause the Company or any Owner to do anything that
which would cause a Member to incur personal liability for the obligations of
the Company or any Owner, as applicable, without the prior written consent of
such Member (which the Member shall have the right to withhold in the Member’s
sole discretion).

(xvii)    Do anything which would make it impossible to carry on the ordinary
business of the Company or any Owner.

(xviii)    Confess (or enter into any agreement to confess) a judgment against
the Company or cause any Owner to confess (or enter into any agreement to
confess) a judgment against the Company or any Owner.

(xix)    Cause the Company or any Owner to borrow any money or to become
obligated as a guarantor or surety for any Person or with respect to any
obligation or assign or grant a security interest in any of the assets of the
Company or any Owner.

(xx)    Cause the Company or any Owner to give a mortgage, security interest or
other encumbrance or pledge of all or any portion of any of the interests of the
Company or Holdco in any Owner or in all or any portion of any of the Properties
or on any other assets of the Company or Owner (other than ordinary course of
business financing for any Owner for furniture, fixtures and equipment (FF&E)
approved as part of an Approved Budget).

any Owner.
(xxi)

Cause any prepayment of indebtedness of the Company or

(xxii)    Establish any Cash Reserves not specifically provided for in the
Business Plan or Approved Budget.

(xxiii)    Cause any Distribution of Distributable Cash except as approved in an
Approved Budget or provided for in a distribution policy adopted by the Board as
a Major Decision.

(xxiv)    Cause the Company or any Owner to enter into any transaction,
including the rendering of services, between a Member or any Affiliate of a
Member and the Company, other than those identified in this Agreement.

(xxv)    Cause the Company or any Owner to commence or settle (or otherwise
dispose of) any litigation, provided that such approval shall not be required to
commence or settle any litigation: (a) for which insurance proceeds will cover
the entire claim less a deductible that is part of an insurance program that has
been Approved by the Board as a Major Decision; or (b) for which the cost to the
Company is less than $50,000 in the aggregate for any single Property in any one
calendar year.

(xxvi)    Cause the filing, or consent to the filing of, on behalf of the
Company or any Owner, of a petition or other similar action in bankruptcy or
similar proceeding for Company or any Owner (including: filing an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against it in any proceeding of this nature or

otherwise seeking any relief under any laws relating to the relief from debts or
the protection of debtors generally; seeking, consenting to or acquiescing in
the appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official for the Company or any Owner; making an
assignment of its assets for the benefit of its creditors or an assignment of
the assets of another entity for the benefit of such entity’s creditors; or
taking any action in furtherance of the foregoing). Any action described in this
subsection (xxvi) shall require the prior written consent of the Special
Director.

elections.
(xxvii)

Cause the Company or any Owner to make any tax

9.2.5    The Managing Member shall give to all members of the Board prior notice
of any meeting at which the Board will be asked to vote on any matter or action
which constitutes a Major Decision.

9.2.6    The Board shall hold meetings either in person or by video- conference
or teleconference at least once per calendar quarter and, in addition, a meeting
of the Board shall be held within five (5) business days of the request of any
two of the Directors by notice to the Managing Member. Managing Member shall
provide meeting minutes and meeting materials to the Directors.

9.2.7    The Members and the Board hereby approve the retention of RLH
Management as the Management Company pursuant to a Management Contract with each
Owner owning one of the Properties, and the payment of fees and other amounts as
described in the Management Contracts. The Company shall exercise its voting and
other control to cause Holdco to cause the other Owners as applicable, to retain
RLH Management as its Management Company.

(a)The prior approval of the Board as a Major Decision shall be required for any
instance in which an Owner takes action (i) to provide approval, consent,
agreement, or exercise of any termination right in connection with a Management
Contract, or
(ii)to provide approval, consent, agreement for, or enter into, or to terminate
any franchise agreement.

(b)Notwithstanding any other provision of this Agreement, as long as the
Management Company is either an Affiliate of the RLH Member or the RLH Member or
any Affiliate of the RLH Member has directly or indirectly an ownership interest
in the Management Company all decisions relating to (i) the exercise of any
consent, approval, option or election of an Owner under a Management Contract,
or (ii) making any claim (or exercising any remedies) against the Management
Company or commencement (or settlement) of any action to enforce or decision to
terminate a Management Contract as a result of a default in the obligations of
the Management Company under the Management Contract, shall be made and
exercised by the Board with approval of a majority of the Directors appointed by
the Shelbourne Member and the Independent Director, without a vote by the
Directors appointed by the RLH Member. Subject to the preceding sentence, RLH
Management shall not be terminated as the Management Company without the
approval of the Board as a Major Decision. For the avoidance of doubt,

this provision shall not apply to limit the right of the Directors appointed by
the RLH Member to participate in the approval of a budget as a Major Decision.

(c)Notwithstanding any other provision of this Agreement or in any Management
Agreement, if the Properties have not met the following performance-based test,
the Company shall have the right (through its wholly-owned subsidiary, Holdco
and through Holdco’s ownership of the Owners) to cause the Owners to terminate
the Management Contracts with the Management Company (without payment of any
termination fee) upon decision by the Board with approval of a majority of the
Directors appointed by the Shelbourne Member and the Independent Director, and
without a vote by the Directors appointed by the RLH Member:

(i)Performance Test. If for any two consecutive six-month periods (each
six-month period is an “Operating Period”) beginning with the first day of the
second Full Operating Year (as defined in the Management Contract) (each two
consecutive six- month period is a "Testing Period"), each of the following
occurs in both of such Operating Periods: (a) the aggregate Gross Operating
Profit (as defined in the Management Contract) achieved by the Properties for
each Operating Period is less than 90% of the aggregate Gross Operating Profit
set forth in the Approved Business Plan for such Operating Period, and (b) the
average RevPAR for all of the Properties for each such Operating Period is less
than 90% of the average RevPAR for hotels in the Competitive Set for the same
Operating Period (collectively, the "Performance Test"). If no Approved Business
Plan has been approved by the Parties for any Operating Year (as defined in the
Management Contract), the applicable Approved Business Plan for purposes of
computing the Performance Test shall be that from the preceding Operating Year.
As promptly as reasonably possible after the end of each Testing Period, the
Managing Member shall obtain the relevant RevPAR reports (i.e., STAR Reports
from STR Global) and provide to the Members such RevPAR reports and the Gross
Operating Profit information needed to confirm whether the Performance Test has
been achieved for such Testing Period. If the Performance Test is not achieved
for any Testing Period, then the Company (subject to the provisions regarding
decisions of the Board as set forth in Section 9.2.7(b)) may exercise its right
to cause the termination of the Management Contracts for all of the Properties
by delivering a notice of termination to Management Company given within sixty
(60) days after receipt by the Company of the certified financial statements for
the Properties for the second such Operating Period, specifying a termination
date not less than sixty (60) days nor more than one hundred- twenty (120) days
after the delivery of such notice. Notwithstanding the foregoing, the Company's
right to cause termination of Management Contracts under this Section 9.2.7(c)
shall not be exercisable if the applicable level of aggregate Gross Operating
Profit or the applicable relative RevPAR results is not achieved as a result of:
(i) Force Majeure (as defined in the Management Contract) affecting the
Properties, (ii) a failure of Owners to fund a Funds Request that Section 5.5.2
of the Management Contract requires Owners to fund, or (iii) the performance of
approved Building Capital Improvements (as defined in the Management Contract)
or ROI Capital Improvements (as defined in the Management Contract) adversely
affecting a material portion of the income generating areas of the Properties or
any other area material to the operation of the Properties ).

(ii)Cure Right. Notwithstanding anything to the contrary in this Section
9.2.7(c), if Company causes a notice of termination to be given pursuant to
Section

9.2.7(c)(i), the Management Company shall have the right, but not the
obligation, to pay to the Company, within sixty (60) days after receipt by
Management Company of such termination notice, an amount equal to the difference
between: (a) 90% of the aggregate Gross Operating Profit set forth in the
Operating Plan for the Test Period giving rise to Company's right to cause the
termination, and (b) the actual aggregate Gross Operating Profit for such
Operating Period. If Management Company timely makes such payment, Company's
notice of termination shall be deemed withdrawn for the Testing Period on which
such notice of termination was based.

(iii)Competitive Set. Schedule 9.2.7(c) lists a set of competitive hotels for
each of the properties (the "Competitive Set") for the purposes of the
Performance Test. If a material change to any hotel in the then existing
Competitive Set occurs, including the cessation of operation of a hotel, or a
material change in the standards of operation of a hotel, then either the
Company (by decision of by decision of a majority of the Directors appointed by
the Shelbourne Member and the Independent Director) or the Management Company
may request the replacement of such hotel in the Competitive Set, provided the
replacement hotel has been in operation for at least three full years. The
Initial Competitive Set as agreed upon as of the Effective Date by the Company
(by decision of by decision of a majority of the Directors appointed by the
Shelbourne Member and the Independent Director) and the Management Company shall
constitute the Competitive Set as of the Effective Date. The Competitive Set
shall be reviewed by the Company and the Management Company as part of the
process for the Company’s approval of the Approved Business Plan and only
amended with the approval of the Company (by decision of by decision of a
majority of the Directors appointed by the Shelbourne Member and the Independent
Director) and the Management Company.

(d)Notwithstanding any other provision of this Agreement, as long as the
franchisor with whom an Owner is to enter, or has entered into, a franchise
agreement is either an Affiliate of the RLH Member or the RLH Member or any
Affiliate of the RLH Member has directly or indirectly an ownership interested
in the franchisor all decisions relating to (i) entering into a franchise
agreement with such franchisor, (ii) the exercise of any consent, approval,
option or election of an Owner under a franchise agreement with such franchisor,
or
(iii)making any claim (or exercising any remedies) against such franchisor or
commencement (or settlement) of any action to enforce or decision to terminate a
franchise agreement with such franchisor as a result of a default in the
obligations of such franchisor under the franchise agreement with such
franchisor, shall be made and exercised by the Board with approval of a majority
of the Directors appointed by the Shelbourne Member and the Independent
Director, without a vote by the Directors appointed by the RLH Member. If the
Company and the Management Company are unable to agree on an amendment to the
Competitive Set, it will be determined by the alternative dispute procedure set
forth in Article 17 of the Management Contract

9.3
Resignation or Removal of the Managing Member.

9.3.1    The Managing Member may resign at any time upon written notice to the
Company and the Members. If the Managing Member is a Member, resignation of the
Managing Member shall have no effect on such Member’s rights or interest as a
Member.

9.3.2    The Member which is not the Managing Member (the “Removing Member”)
shall have the right to remove the Managing Member by written notice to the
Managing Member (a “Removal Notice”) and become the Managing Member upon the
occurrence of any one or more of the following (each a “Company Removal Event”):

(i)    the Managing Member has committed fraud, willful misconduct, or the
misappropriation of funds. The actions of employees of the Managing Member who
commit fraud, willful misconduct or the misappropriation of funds shall not be
imputed to the Managing Member for purposes of this section unless: (1) the
actions are taken by a person who is a member of the board of directors of the
Managing Member or one of the RLHC Senior Management; (2) the acts or omissions
that constitute fraud, willful misconduct, or the misappropriation of funds
resulted from the gross negligence, willful misconduct or fraudulent acts of one
or more members of the board of directors of the Managing Member or one or more
of the RLHC Senior Management in supervising such employee; or (3) the Managing
Member, promptly after learning of the act or omission that constitutes fraud,
willful misconduct, or the misappropriation of funds and the identity of the
employee responsible for such act or omission, fails to terminate the employee
responsible for such act or omission;

(ii)    the Managing Member has committed gross negligence or the material
breach of this Agreement which breach, if curable, has not been cured within
thirty (30) days after notice of such breach to the Managing Member, so as to
have no material adverse effect on the Company or the Shelbourne Member provided
that if the breach can be cured by the payment of money in a determinable
amount, the Managing Member shall be required to pay that amount to effect the
cure;

(iii)    while the Management Company is an Affiliate of the Managing Member, or
any other Affiliate of the Managing Member is engaged by the Company or an Owner
to perform services for the Company or any Owner, in the event that any
executive of the Management Company or such other Affiliate who holds a position
as a director or a more senior level executive commits fraud, willful
misconduct, or the misappropriation of funds, gross negligence, or the material
breach of the Management Contract (or such other agreement) and which breach, if
curable has not, within thirty (30) days after notice of such breach to the
Managing Member, been cured so as to have no material adverse effect on the
Company or the Shelbourne Member provided that if the breach can be cured by the
payment of money in a determinable amount, the Managing Member shall be required
to pay that amount to effect the cure. The Managing Member shall have the same
responsibility for other employees of the Management Company or such other
Affiliates and it shall be a Company Removal Event if any of these actions are
determined to have been committed by such other employees and the Management
Company does not promptly take steps to terminate the employment of those
persons;

(iv)    the taking by the Managing Member of a Major Decision, without first
obtaining Board approval, unless: the action is ratified by the Board by the
same vote as was required for the action as a Major Decision within thirty (30)
days after notice to the Managing Member; or is cured by the Managing Member so
as to have no material adverse effect on the Company or the Shelbourne Member
provided that if the breach can be cured by the

payment of money in a determinable amount, the Managing Member shall be required
to pay that amount to effect the cure;

(v)
the Bankruptcy of the Managing Member; or

(vi)    the Bankruptcy of the Management Company (while the Management Company
is an Affiliate of the Managing Member).

9.3.3    The Removing Member may exercise such rights of removal and termination
by giving Notice thereof (a “Removal Notice”) to the Managing Member and any
other Member. Any removal of the Managing Member pursuant to this Section 9.3
shall be effective as of the date the Removal Notice is given or such later date
as the Removing Member shall have specified in the Removal Notice (“Removal
Date”). Upon such removal of the Managing Member, the Removing Member shall
become the replacement Managing Member.

9.3.4    In the event that the Managing Member provides a written notice of its
objection to the removal within ten (10) days following receipt of the Removal
Notice, the dispute shall be resolved by arbitration in accordance with Section
24.

9.3.5    If the RLH Member is removed as Managing Member because a person who is
a member of the board of directors or one of the RLHC Senior Management
committed fraud, willful misconduct or misappropriation of funds or because of
the Bankruptcy of the Managing Member, then, notwithstanding any other provision
of this Agreement, the RLH Member and all Directors who have been chosen by the
RLH Member shall no longer have any voting, consent or approval rights with
regard to actions of the Company (including, without limitation, any action of
the replacement Managing Member) and the vote of an independent Director shall
not be required for any vote of the Board on a decision for which this Agreement
otherwise requires a Board vote.

9.4    RLH Member Listing. The Members recognize that the RLH Member is an
affiliate of one or more entities that is subject to reporting, notice and other
procedural requirements imposed by the New York Stock Exchange or other
exchanges on which its securities are listed or reported (in each case, the
“Exchange”), and that actions taken by the RLH Member must comply with such
requirements. In recognition of this fact, the Board shall, as part of its
approval of any action by the Company, take all reasonable steps (to the extent
that they do not adversely affect the rights of the Shelbourne Member or impose
additional obligations on the Shelbourne Member) to accommodate the RLH Member’s
compliance with such reporting, notice and other procedural requirements of the
Exchange, which may require, among other things, providing adequate time (i) for
public notice of actions or events and (ii) for the process of obtaining
internal approvals by the RLH Member and its Affiliates. Moreover, the Board
members selected by the RLH Member shall be authorized to condition their
approval or the timing of any action requiring Board approval to accommodate the
RLH Member’s compliance with reporting, notice and other procedural requirements
of the Exchange.

9.5
Special Rules for Owners.

9.5.1    It is the intention of the Members that the legal and economic
agreement between the Members embodied in this Agreement shall govern and
control, whether a Company asset is owned directly by the Company or is owned
through an ownership interest in an Owner. The Business Plan for the Company
shall include the Business Plan of each Owner.

9.5.2
In addition, the following shall apply to each Owner:

(a)if the partnership agreement, limited liability company agreement or similar
agreement for an Owner requires the Company, as a partner or member in such
Owner, to approve any matter which, had it been undertaken by the Company, would
have required approval of the Member, then such matter shall be deemed approved
by the Company if, and only if, such matter is approved in accordance with the
provisions of this Agreement (including those regarding any matter that would be
a Major Decision) as if such matter was being untaken by the Company; and

(b)the Owners will obtain third party equity or debt, including first mortgage
financing on Properties and any such equity or debt will pertain to the Owners
of the Properties and not the Company.

9.6
Deadlocks; Buy/Sell.

9.6.1    If, after the expiration of the Buy-Sell Lockout Period, either (a)
there is an Unresolved Deadlock, or (b) the RLH Member or the Shelbourne Member
shall elect to trigger a buy/sell as between the Members, then either Member may
initiate (“Initiating Member”) the buy-sell procedures of this Section 9.6
(“Buy/Sell”). (An “Unresolved Deadlock” shall mean the Board is deadlocked and
unable to reach agreement on any matter that requires agreement of the Directors
as a Major Decision or consent or approval of the Board, the matter shall have
been submitted by the Members to an individual mediator mutually agreeable to
the Members, for purposes of attempting to resolve the deadlock, and (despite
reasonable good faith efforts of the Members to mediate the dispute such
mediation does not resolve the deadlock within thirty (30) days after submission
to the mediator) the dispute is not resolved.).

9.6.2    The Initiating Member shall commence the Buy/Sell by giving written
notice (a “Buy/Sell Notice”) to the other Member (in such capacity, the Member
receiving the Buy/Sell Notice shall be referred to as the “Receiving Member”)
specifying the cash price, conditions and terms on which the Initiating Member
would be willing to purchase an undivided one hundred percent (100%) interest in
the Company (“Total Price”).

9.6.3    Within 60 days after the receipt of the Buy/Sell Notice, the Receiving
Member shall then be obligated to notify the Initiating Member (“Receiving
Member Notice”) of its irrevocable acceptance of the Initiating Member’s offer
by electing either:

(a)
to sell to the Initiating Member all of its Member Interests; or

(b)
to buy the Initiating Member’s aggregate Member Interests,

at a cash price (in the case of either of the foregoing (a) or (b)) equal to the
aggregate net cash proceeds which such Receiving Member (in the case of the
foregoing (a)) or Initiating Member (in the case of the foregoing (b)) would
receive under the liquidating distribution provisions set forth in Section 12 if
all of the assets of the Company were sold for cash to a third party, all
allocations of items of income, gain, loss or deduction were made pursuant to
this Agreement, and the Company received cash sales proceeds equal to the Total
Price less normal and customary closing costs.

9.6.4    If the Receiving Member is unable to agree as to whether to buy or
sell, or upon the failure of the Receiving Member to return the Receiving Member
Notice within 60 days of its receipt of the Buy/Sell Notice, the Receiving
Member shall be deemed to have made an election to sell to the Initiating Member
all of its Member Interests. Such election shall be deemed to occur on the 61st
day following the Receiving Member’s receipt of the Buy/Sell Notice.

9.6.5    Once an election has been made or deemed to have been made with respect
to a Buy/Sell Notice (the date of such election, the “Election Date”), the
Member who has elected to purchase the other Member’s Member Interests (“Buying
Member”) shall deposit, within ten (10) Business Days of such election or deemed
election with a nationally recognized title insurance company, designated in the
Buy/Sell Notice, unless otherwise designated by the Member selling its Member
Interests (“Selling Member”) five percent (5%) of the amount described in
Section 9.6.3 (“Purchase Price”) as a nonrefundable deposit. The Selling Member
shall execute such commercially reasonable documentation as is requested by
Buying Member to transfer the Selling Member’s Member Interest. The Buying
Member shall have 90 days from the Election Date to consummate the purchase and
sale. At the closing, the amount of the Purchase Price (less the amount of any
deposit) shall be paid in cash by the Buying Member. The Company and the Member
who is not the Buying Member in a Buy/Sell transaction under this Section shall
each use their commercially reasonable efforts to facilitate the consummation of
the closing contemplated hereunder.

9.6.6    Failure by the Selling Member to take those actions necessary to
consummate the closing of the purchase and sale contemplated by this Section 9.6
shall constitute a default under this Agreement by the Selling Member, in which
case the Buying Member, as the non-defaulting Member, shall be considered to
have been granted a power of attorney to act on behalf of the defaulting Member
and the Company to take such actions as are reasonably necessary to consummate
such purchase and sale (in addition to any other remedies the Buying Member may
have under this Agreement for default by the Selling Member).

9.6.7    Failure by the Buying Member to tender the full amount of the Purchase
Price in cash by the period prescribed above or otherwise to take such actions
as are necessary timely to consummate such purchase shall constitute default by
the Buying Member and shall (i) entitle the Selling Member to be paid and retain
the non-refundable deposit, and (ii) give the Selling Member the right, but not
the obligation, to become the Buying Member in the contemplated transaction;
provided, however, the new Buying Member shall (A) have sixty (60) days from the
originally scheduled closing to consummate its purchase and (B) be entitled to
make such purchase at ninety-five percent (95%) of the price provided in Section
9.6.3(a) or (b),

as applicable. If the new Buying Member shall fail to consummate its purchase
within such sixty
(60) days, then the Buy/Sell process shall be deemed terminated as between
Buying Member and Selling Member without prejudice to the right of either Member
to invoke a new Buy/Sell.

9.6.8    Notwithstanding anything to the contrary set forth in this Section 9.6,
the Buy/Sell provisions of this Section 9.6 may be amended at any time by
Managing Member if and to the extent that such amendment is required to comply
with the
listing requirements of the New York Stock Exchange and approved by the Board,
provided, that the Managing Member shall not revise any of the provisions of
this Section 9.6 if the effect of doing so would be to materially and adversely
impact the economic rights of a Member or materially amend the terms of this
Agreement.

9.6.9    In any purchase by the Shelbourne Member pursuant to this Section 9.6,
the RLH Member shall (a) cause to be assigned (to the extent they are
assignable) to the Shelbourne Member or its Affiliate any permits and licenses
that may be held for any of the Properties in the name of the Management Company
or its Affiliate, any Affiliate of the Company, or any Affiliate of the RLH
Member, and (b) cause such entities to cooperate with the Shelbourne Member and
its Affiliate in the transition of permitting and licensure for the Properties.

9.7
Conflict of Interest.

9.7.1    The Managing Member may employ on behalf of the Company such Persons as
it deems advisable for the operation and management of the business of the
Company on terms and for such compensation as it may determine but only with the
prior approval of the Board as a Major Decision (and, in the case of, of a
Person who is an Affiliate of a Member or in whom either a Member or an
Affiliate of a Member has directly or indirectly an ownership interested in the
Person, then the decision of the Board shall be a Major Decision but also
require approval of a majority of the Directors who were appointed by the Member
which does not (and whose Affiliate) does not have an ownership interested in
the Person. Any such Person may also be employed or retained by either Member in
connection with other business ventures of the Managing Member or its employees
or Affiliates.

9.7.2    The fact that the Managing Member, or an employee or Affiliate of the
Managing Member, is directly or indirectly interested in or connected with any
person, firm or corporation employed by the Company or from whom the Company,
with prior Board approval, may borrow money or buy merchandise, services or
other property, shall not prohibit the Managing Member from employing or from
dealing with such person, firm or corporation on behalf of the Company with
prior Board approval, but in such case the Board approval shall be that as
applies to a Major Decision.

9.8    Member Approval. No annual or regular meetings of the Members are
required to be held. If such meetings are held, such meetings shall be noticed,
held and conducted pursuant to the Act. In any instance in which the approval of
the Members is required under this Agreement, such approval may be obtained in
any manner permitted by the Act. Unless otherwise provided in this Agreement,
approval of the Members means the approval of a Majority In Interest of the
Members. To the extent permitted by the Act, any action required or

permitted to be taken at a meeting of the Members or the Board, as the case may
be, may be taken without a meeting by written action signed by the number of
Members or Directors who would be required to take the same action at a meeting
of the Members or Board at which all Members or Directors were present. The
written action is effective when signed by the required number of Members or
Directors, unless a different effective time is provided in the written action.

9.9     Execution of Documents. In order to document actions authorized or
permitted by this Agreement, each check, contract, deed, lease, promissory note,
deed of trust, escrow instruction, bond, release or any other documents of any
nature whatsoever, in any way pertaining to the Company or on behalf of the
Company, shall be signed by the person or persons designated from time to time
by the Managing Member.

9.10
Liability/Indemnification.

9.10.1    Neither any Member nor any Director shall be liable, responsible or
accountable in damages or otherwise to the Company or to the other Members or
Directors for any acts performed within the scope of the authority conferred on
such Member or Director by this Agreement, except for such Member’s or
Director’s gross negligence, willful misconduct or breach of fiduciary duty. The
Company shall indemnify and hold harmless the Members and Directors
(individually, each an “Indemnitee”) from and against any and all losses,
claims, demands, costs, damages, liabilities, expenses of any nature (including
reasonable attorneys’ fees and disbursements), judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, brought
against, or threatened against, such Indemnitee by reason of the fact such
Indemnitee was a Member or Director of the Company. Such indemnification shall
be provided regardless of whether the Indemnitee continues to be a Member or
Director at the time any such liability or expense is paid or incurred.

9.10.2    Expenses incurred by an Indemnitee in defending any claim, demand,
action, suit or proceeding subject to this Section 9.10, shall from time to
time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Company of an undertaking
by or on behalf of the Indemnitee to repay such amount if it shall be determined
that such person is not entitled to be indemnified under this Section 9.10.

9.10.3    The indemnification provided by this Section 9.10 shall be in addition
to any other rights to which the Indemnitee may be entitled under any agreement,
vote of the Members, as a matter of law or equity or otherwise and shall inure
to the benefit of the heirs, successors, assigns and administrators of the
Indemnitee.

9.10.4    The Company shall purchase and maintain insurance, at the Company’s
expense, on behalf of the Members, Directors, the Managing Member and such other
persons as the Managing Member shall reasonably determine against any liability
that may be asserted against, or any expense that may be incurred by, such
persons in connection with the activities of the Company and/or the acts or
omissions of such persons regardless of whether the

Company would have the power to indemnify such persons against such liability
under the provisions of this Agreement.

9.10.5    Any indemnification under this Section 9.10 shall be satisfied solely
out of the assets of the Company. No Member shall be subject to personal
liability or required to provide any funds, or to cause any funds to be
provided, to Company to satisfy any indemnification obligation of the Company
under this Section 9.10.

9.11    Compensation of the Directors and the Managing Member. Except for the
reimbursement of expenses provided in Section 13.5 and any services provided by
the Managing Member pursuant to a written agreement entered into between the
Company and the Managing Member, the Directors and the Managing Member shall
receive no compensation for services rendered to the Company.

9.12    No Withdrawal of Members. No Member shall have the right to withdraw
from the Company.

9.13    Umbrella Insurance To Be Maintained by RLH Member. The Company will
maintain primary and excess liability insurance coverage with limits of not less
than $75 million, covering the Company, Holdco and the Owners, and if permitted
by the insurance carriers, the RLH Member shall arrange for the Company, Holdco
and the Owners to be additional insureds on coverage maintained by the RLH
Member with limits of not less than $75 million, in which event the Company will
pay a reasonably allocated share of the premiums for such coverages.

10.
RESTRICTIONS ON TRANSFER; NEW MEMBERS.

10.1    Limitations on Transfers. Except as set forth in Sections 10.2 and 10.3
below, no Member shall for any reason, whether voluntarily, involuntarily or by
operation of law, Transfer all or any of such Member’s Member Interest, without
the prior written consent of the Members. (For purposes of this Section 10, a
Transfer subject to this Section 10 shall include the Transfer of all or
substantially all of the ownership interests in or the control over a Member,
and in such case, the provisions of this Section 10 shall treat such Transfer as
if it is a transfer of all of the Member Interests of the Member the ownership
interests in or control of which are the subject of the Transfer.)
Notwithstanding the foregoing or any other provisions contained in this
Agreement, under no circumstances shall any Member Transfer, or enter into any
agreement or arrangement contemplating a Transfer, of any portion of such
Member’s Member Interest if the proposed Transfer would violate the terms of (a)
any loan agreement to which the Company or Owner is party, (b) any loan secured
by any Property, or (c) any guaranty of any obligations of the Company or Owner
given to a third party lender providing a loan secured by any of the Properties.
Any Transfer not expressly permitted in this Agreement shall be null and void. A
transferee of a Member Interest shall have the right to become a substitute
Member only if (i) consent of the Members is given (if required), (ii) such
person executes an instrument satisfactory to the Members accepting and adopting
the terms and provisions of this Agreement, and (iii) such person pays any
reasonable expenses in connection with his or her admission as a substitute
Member. The admission of a substitute Member shall not release the

Member who assigned the Member Interest from any liability that such Member may
have to the Company.

10.2    Excluded Transfers. The provisions of Sections 10.1, 10.3 and 10.4 shall
not apply to: (a) any Transfer by a Member of any of its Member Interests to an
Affiliate of such Member; (b) in the case of the RLH Member, any purchase of any
of the stock of the RLH Member; or (c) in the case of the Shelbourne Member, (i)
any Transfer of any direct or indirect ownership interests in the Shelbourne
Member by one or more of the direct or indirect owners of the Shelbourne Member
to any one or more other direct or indirect owners of the Shelbourne Member,
(ii) any Transfer of any direct or indirect ownership interests in the
Shelbourne Member or in any owner of the Shelbourne Member that is not described
in the foregoing (i) or
(ii) and does not constitute a Transfer of control of the Shelbourne Member.
Notwithstanding any other provision of this Section 10, while the CS Loan is
outstanding no Transfer of Member Interests shall occur unless either (x) it is
a Permitted Transfer (as that term is defined in the Loan Agreement for the CS
Loan) or (y) it has the prior written consent of the Agent (as that term is
defined in the Loan Agreement for the CS Loan).

10.3
Right of First Offer for Member Interests.

10.3.1    No Member shall solicit, offer or accept any proposal to Transfer all
or any portion of such Member’s Member Interest without first offering the same
to the other Member in accordance with this Section 10.3.

10.3.2    If at any time and from time to time (1) a Member desires to offer all
or any part of the Member’s Member Interest for Transfer to any third party not
Affiliated with such Member or (2) a Member receives from a third-party
purchaser not Affiliated with such Member a bona fide written offer for the
purchase of all or any part of the Member’s Member Interest on terms which such
Member desires to accept (the terms of such offer, in the case of either (1) or
(2), including the share of the Member’s Member Interest to be the subject of
the proposed Transfer, the applicable sales price, method of payment of the
sales price, anticipated closing date measured from the date of any
to-be-executed contract, and any other
material specified terms of the offer being herein called, in the aggregate, the
“Transfer Offer”), then the Member desiring so to make or accept the Transfer
Offer (the “ROFO Initiating Member”) shall provide written notice of the terms
of such Transfer Offer (the “ROFO Sale Notice”) to the other Member (the “ROFO
Non-Initiating Member”) (The share of the ROFO Initiating Member’s Member
Interest offered in the Transfer Offer is the “ROFO Offered Interests”. The
Transfer Offer offered to the ROFO Non-Initiating Member is the “ROFO Offer”.)

10.3.3    The ROFO Non-Initiating Member shall have thirty (30) days from the
date of the ROFO Sale Notice (the “ROFO Response Period”) to provide written
notice to the ROFO Initiating Member of the ROFO Non-Initiating Member’s
election to accept the
ROFO Offer.

10.3.4    If the ROFO Non-Initiating Member elects to accept the ROFO Offer,
then the Members shall consummate the Transfer on the terms of the ROFO Offer.

10.3.5    If the ROFO Non-Initiating Member does not elect to accept the ROFO
Offer, then for a period of up to six (6) months following the expiration of the
Response Period (the “Transfer Sale Period”) the ROFO Initiating Member shall
have the right to consummate and close with a third-party purchaser not
Affiliated with such Member the Transfer of the ROFO Offered Interests at a
price that is at least ninety-five percent (95%) of the price set forth in the
ROFO Offer and otherwise on terms that are no more advantageous to the
third-party purchaser than in the ROFO Offer. If the ROFO Initiating Member is
unable within such Transfer Sale Period to consummate and close with a
third-party the purchaser the sale of the Member Interests at a price that is at
least ninety-five percent (95%) of the price set forth in the ROFO Offer and
otherwise on terms that are no more advantageous to the third-party purchaser
than in the ROFO Offer, then the ROFO Initiating Member must again submit a new
offer to the Non-Initiating Member under the terms of this Section 10.3 before
the ROFO Initiating Member may solicit, offer or accept any proposal to Transfer
any of the Member Interests of the ROFO Initiating Member to any third party not
Affiliated with such Member.

10.4    Title. Upon any Transfer of Member Interests in the Company made in
accordance with the terms of this Agreement, the transferee shall take, own,
hold and Transfer such Member Interests in the Company pursuant and subject to
each and all of the provisions, conditions and covenants of this Agreement, as
fully as if such transferee were designated as a Member herein. As a condition
precedent to any Transfer of Member Interests in the Company, the transferee
shall agree in writing to be bound by all provisions of this Agreement.

10.5    No Dissolution. If a Member Transfers all or any part of its interests
in the Company without complying with the provisions of this Agreement, such
action shall not cause or constitute a dissolution of the Company.

10.6    New Members. No new Member may be admitted into the Company without the
consent of the Members. No new Member shall be issued any Member Interest in
return for services.

11. PURCHASE OF MEMBER’S INTEREST UPON BANKRUPTCY O F A MEMBER.

11.1    Rights to Purchase Upon Bankruptcy of a Member. Upon the Bankruptcy of a
Member (a “Termination Event”), the Company and/or the Member other than the
bankrupt Member (the “Other Member”) shall have the right to purchase, and the
bankrupt Member’s estate or legal representative (collectively, the “Former
Member”) shall sell, all or any portion of the Former Member’s Member Interest
in the Company, as set forth in the following sections:

11.2     Right to Purchase Forme r Member’s M ember Int e rest b y Compan y
and/or Other Member. Within thirty (30) days after the fair market value of the
Former Member’s Member Interest has been determined in accordance with Section
11.3 (the “Company Acceptance Period”), the Company (as determined by the Other
Member) or the Other Member shall notify the Former Member in writing (the
“Termination Event Notice”) of the Company’s or the Remaining Member’s desire to
purchase all or a portion of the Former Member’s Member Interest, in which case,
the Company or the Other Member, as applicable, shall purchase and the

Former Member shall sell, the Former Member’s Member Interest, in accordance
with this Article 11. The failure of Company or the Other Member to submit a
Termination Event Notice within the Company Acceptance Period shall constitute
an election on the part of the Company and the Other Member not to purchase any
of the Former Member’s Member Interest. A Termination Event Notice shall specify
the amount of the Former Member’s Member Interest that the Company or the Other
Member, as applicable, desires to purchase. If the Company and the Other Member
do not collectively elect to purchase all of the Former Member’s Member
Interest, the Former Member’s heirs or successors in interest (collectively,
“Successor”), as the case may be, shall retain any portion of the Former
Member’s Member Interest not so purchased by the Company and/or the Other
Member. Such Successor shall not have the power or authority to conduct Company
business.

11.3    Purchase Price. The purchase price for all of the Former Member’s Member
Interest shall be the fair market value of the Former Member’s Member Interest
as determined by an independent third party appraiser with at least ten (10)
years’ experience valuing company ownership interests and who is acceptable to
the Board in their reasonable discretion within thirty (30) days following
delivery of notice by the Company or the Other Member requesting determination
of such fair market value. If an appraiser is not agreed upon by the Board, then
the selection of an appraiser meeting the foregoing criteria shall be promptly
submitted to the American Arbitration Association for a determination in
accordance with its rules. The parties shall use their best efforts to obtain an
expedient determination of fair market value. The fees of the appraiser and any
arbitrator(s) and the costs to be paid to the American Arbitration Association
shall be paid fifty percent (50%) by the Other Member or the Company, as
applicable, and fifty percent (50%) by the Former Member.

11.4    Payment of Purchase Price. The Company and/or the Other Member, as the
case may be, shall pay to the Former Member at the Closing (as hereafter
defined) one-fifth (1/5) of the purchase price for the Former Member’s Member
Interest being acquired, with the balance of the purchase price to be paid to
the Former Member in four (4) equal annual principal installments, plus accrued
interest, each year on the anniversary date of the Closing. The unpaid principal
balance shall accrue interest at the current applicable federal rate as provided
in the Code for the month in which the initial payment is made, but the Company
and/or the Other Member, as the case may be, shall have the right to prepay the
balance of the promissory note(s) referenced below in full or in part at any
time without penalty. The obligation of the Other Member and/or the Company, as
applicable, to pay its respective portion of the balance due shall be evidenced
by a separate promissory note executed by the Other Member and/or the Company,
as applicable. Each such promissory note shall be in an original principal
amount equal to the portion owed by the Other Member or the Company, as
applicable. The promissory note executed by the Other Member shall be secured by
a pledge of that portion of the Former Member’s Member Interest purchased by the
Other Member.

11.5     C losi ng of Purchas e of Former Membe r’s Inte rest . The closing for
the sale of a Former Member’s Member Interest pursuant to this Article 11 (the
“Closing”) shall be held at 10:00 a.m. at the principal office of Company no
later than sixty (60) days after the determination of the purchase price, except
that if the date of the Closing falls on a Saturday, Sunday or Colorado legal
holiday, then the Closing shall be held on the next succeeding business

day. At the Closing, the Former Member shall deliver to the Company and/or the
Other Member, as appropriate, an instrument of Transfer, containing warranties
of title and no encumbrances, conveying the Former Member’s Member Interest
purchased by the Company and/or the Other Member. The Former Member, the Company
and/or the Other Member, as applicable, shall do all things and execute and
deliver all papers as may be reasonably necessary fully to consummate such sale
and purchase in accordance with the terms and provisions of this Agreement.

12.
DISSOLUTION AND WINDING UP OF THE COMPANY.

12.1    Dissolution of Company. The Company shall be dissolved upon the
happening of any of the following events (each a “Dissolution Event”):

(a)
The written consent of all of the Members;

(b)
Entry of a judicial decree of dissolution pursuant to the Act; or

(c)
The sale of substantially all of the Company’s assets.

12.2    Winding Up of the Company. Upon dissolution of the Company, the Members
shall wind up the affairs and liquidate the assets of the Company in accordance
with the provisions of this Section and the Act. Net Profits, Net Losses,
Nonrecourse Deductions, Member Nonrecourse Deductions and all other Company
items shall be allocated until the liquidation is completed in the same ratio as
such items were allocated prior thereto. The proceeds from liquidation of the
Company when and as received by the Company shall be utilized, paid and
distributed in the following order:

(a)    First, to pay expenses of liquidation;

the Members;
(b)

Next, to pay the debts of the Company to third parties other than

Members;
(c)

Next, to pay the debts of the Company owing to creditors who are

(d)    Next, to the establishment of any Cash Reserves (such Cash Reserves to be
paid and distributed in accord with this Section 12.2 if and when no longer
required);

(e)    Finally, in accordance with the Distribution provisions set forth in
Section 8.1 (for each Member, such Member’s “Final Distribution”).

12.3    Right To Receive Property. The Members shall have no right to demand or
receive property other than cash as Distributions.

12.4    Target Final Balance. Notwithstanding anything herein to the contrary,
the Company’s income, gain, losses, deductions and credits for the Fiscal Year
or other period in which the Company dissolves and liquidates shall be allocated
to and among the Members in a manner such that the Capital Account balance of
each Member, immediately after giving effect

to such allocations, shall, as nearly as possible, equal such Member’s Final
Distribution (as determined immediately prior to the time Distributions are made
to any Member in respect of the Final Distribution). For purposes of this
Section 12.4, the allocation provisions contained in this Agreement are intended
to produce a final Capital Account balance for each Member (such Member’s
“Target Final Balance”) that is equal to such Member’s Final Distribution and
that to the extent that the allocation provisions of this Agreement would not
produce the Target Final Balance for any Member, then this Agreement shall be
automatically amended, and allocations of items of Company income (including
gross income), gain, deductions and/or losses shall be made to and among the
Members for the Fiscal Year or other relevant period in which the Final
Distribution will be made (and, if and to the extent necessary, for any prior
Fiscal Year or other period if the United States federal income tax return of
the Company for such prior Fiscal Year or other period has not yet been filed or
is still open and can be amended) as necessary to cause the respective positive
Capital Account balance of each Member to be equal to such Member’s Target Final
Balance. This Section 12.4 shall apply without regard to any allocation or re-
allocation that may be required and/or imposed by the Internal Revenue Service
or any other tax authority in any audit, proceeding or otherwise.

13.
BOOKS AND RECORDS; EXPENSES.

13.1    Books of Account. The Company shall, at the Company’s sole cost and
expense, keep adequate books of account of the Company wherein shall be recorded
and reflected all of the Capital Contributions and all of the income, expenses
and transactions of the Company and a list of the names, addresses and number of
Member Interests in the Company held by the Members in alphabetical order. The
books and records shall be maintained in accordance with generally accepted
accounting principles consistently applied, and each Member shall have complete
access to the books and records of the Company upon providing reasonable notice
to the Managing Member.

13.2    Accounting and Reports. The Managing Member shall serve as the “Tax
Matters Partner” and shall, at the Company’s sole cost and expense, cause
federal and state returns for the Company to be prepared and filed with the
appropriate authorities, and shall furnish to the Members, within one hundred
twenty (120) days after the close of each Fiscal Year, such financial
information with respect to each Fiscal Year as shall be reportable for federal
and state income tax purposes. The Tax Matters Partner shall provide reasonable
opportunity for the Board to review federal and state tax returns prior to
filing.

13.3    Banking. All funds of the Company shall be deposited in a separate bank
account or accounts as shall be determined by the Managing Member and approved
by the Board. All withdrawals therefrom shall be made upon checks signed by the
person or persons designated by the Managing Member with approval of the Board.

13.4    Accountants. The Managing Member shall select the accountants for the
Company with approval of the Board.

13.5    Expenses of Company. All direct out-of-pocket expenses actually and
reasonably incurred by the Managing Member in conducting the Company’s business
and either in an Approved Budget or otherwise approved by the Board shall be
billed to and paid by the

Company or if paid by the Managing Member or a Member, the Managing Member or
such Members may be reimbursed for such direct expenses without interest.

14.ADJUSTMENT OF BASIS ELECTION. In the event of a Transfer of any Member
Interest in the Company (other than the transfer of the 45% Member Interest in
the Company by the RLH Member to the Shelbourne Member described in Section
6.1), or in the event of a Distribution of the property of the Company to any
Member, the Managing Member shall, at the request of the transferee Member, file
an election, in accordance with Section 754 of the Code and applicable Treasury
Regulations, to cause the basis of the Company’s property to be adjusted for
federal income tax purposes, as provided in Sections 734, 743 and 754 of the
Code.

15.WAIVER OF ACTION FOR PARTITION. Each of the Members hereby irrevocably
waives, during the term of the Company, any right such Member may have to
maintain any action for partition with respect to any property of the Company.

16.AMENDMENTS. Amendments to this Agreement may be made only if approved by a
vote of a Majority In Interest of the Members.

17.EQUITABLE RELIEF. The rights granted to the parties hereunder are of a
special and unique kind and character, and if there is a breach by any party of
any material provision of this Agreement, the other parties would not have an
adequate remedy at law. Therefore, the rights of the parties under this
Agreement may be enforced by equitable relief as is provided under the laws of
the State of Delaware.

18.NOTICES. Any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing and shall be
validly delivered to another party only if served either by overnight courier
service or if deposited in the United States first class mail, certified return
receipt requested, postage prepaid at the address set forth on Exhibit A next to
each Member’s name. If such notice is sent by overnight courier service, service
shall be conclusively deemed made at the time of written confirmation of
receipt, if on or before 5:00 p.m. local time on a legal business day at the
place of receipt, and if not, then on the next legal business day thereafter. If
such notice, demand or other communication is given by mail, service shall be
conclusively deemed made on the date shown on the return receipt as the date
delivery was accepted or refused. The address for delivery of notices, demands
or other communications for each Member is set forth on Exhibit A next to each
Member’s name. Any party hereto may change its address for the purpose of
receiving notices, demands and other communications as herein provided by a
written notice given in the manner aforesaid to the other party or parties
hereto.

19.LEGAL REPRESENTATION. EACH MEMBER REPRESENTS AND WARRANTS THAT SUCH MEMBER
HAS BEEN ADVISED THAT SUCH MEMBER MAY BE REPRESENTED BY COUNSEL OF SUCH MEMBER’S
OWN CHOOSING IN THE PREPARATION AND ANALYSIS OF THIS AGREEMENT AND EACH MEMBER
HAS CONSENTED TO THE JOINT REPRESENTATION BY COUNSEL FOR ALL MEMBERS IN THE
PREPARATION OF THIS AGREEMENT. EACH MEMBER HAS READ THIS

AGREEMENT WITH CARE AND BELIEVES THAT SUCH MEMBER IS FULLY AWARE OF AND
UNDERSTANDS THE CONTENTS THEREOF AND THEIR LEGAL EFFECT.

20. ATTORNEYS’ FE ES . Should any party hereto institute any action or
proceeding at law or in equity to enforce any provision hereof, including an
action for declaratory relief or for damages by reason of an alleged breach of
any provision of this Agreement, or otherwise in connection with this Agreement,
or any provision hereof, the prevailing party shall be entitled to recover from
the losing party or parties reasonable attorneys’ fees and costs for services
rendered to the prevailing party in such action or proceeding.

21.INDEPENDENT ACTIVITIES OF MEMBERS. Each Member may engage in or possess an
interest in other business ventures of every nature and description,
independently or with others, including, but not limited to, the ownership,
financing, leasing, operation, management, syndication, brokerage and
development of real property or any other investment asset or venture, and
neither the Company nor the other Members shall have, and each of them hereby
expressly waives, relinquishes and renounces any right by virtue of this
Agreement in and to such independent ventures or to the income or profits
derived therefrom.

22.INVESTMENT REPRESENTATIONS OF THE MEMBERS. Each Member, by executing this
Agreement, hereby acknowledges, covenants, represents and warrants to the
Company and the other Members, and each of them, as follows:

22.1    Risks of Investment. Such Member realizes that such Member’s investment
in the Company involves an element of substantial uncertainty as to the
potential for profitability of the business of the Company.

22.2    Income Tax Matters. The Company has not requested a tax ruling on behalf
of the Company to the effect that the Company will be taxed as a partnership for
federal income tax purposes, nor does the Company intend to request such a
ruling. It is the intention of the Members that the Company be treated for
federal income tax purposes as a partnership.

22.3    Securities Matters. Such Member understands that the interests in the
Company have not been registered with the Securities and Exchange Commission or
qualified with any state securities agency, in reliance upon exemptions
therefrom which are predicated, in part, upon the information previously
provided by each of the Members and the following representations:

(a)    Such Member understands that in addition to the restrictions imposed by
applicable federal and state securities laws, the right to Transfer a Member
Interest is restricted by the terms of this Agreement. No Transfer will be
permitted if, in the opinion of counsel for the Company, such Transfer will
violate applicable federal or state securities laws. The burden and expense will
be borne by the Member desiring to Transfer its Member Interests to satisfy the
Company that all of the conditions of Transfer have been satisfied. In addition,
even if the Member meets all of these requirements, there is no present market
for Member Interests and none is anticipated to develop;

(b)    Such Member represents that such Member is acquiring such Member’s Member
Interests in the Company for investment purposes and for such Member’s own
account, with no present intention of dividing the same with others, or
reselling or otherwise distributing such Member Interests, and such Member will
not sell or otherwise dispose of such Member Interests in violation of the
Securities Act of 1933, as amended, or any applicable state securities laws or
regulations promulgated thereunder;

(c)    Such Member represents that such Member is capable of bearing the
economic risk of such Member’s investment in the Company (meaning such Member
can afford either a complete loss of the investment or hold it indefinitely
without materially adversely affecting such Member’s standard of living, causing
financial difficulties, or impairing such Member’s ability to meet current needs
and possible personal contingencies);

(d)    Such Member represents that such Member either has a preexisting personal
or business relationship with the other Members, or by reason of such Member’s
business or financial experience or the business or financial experience of such
Member’s professional advisors who are unaffiliated with and not compensated by
any other Member, or any Affiliate or any selling agent of any other Member, has
the capacity to protect such Member’s Member Interests in the Company;

(e)    That prior to the execution hereof, such Member had knowledge that the
persons listed upon Exhibit A would become members of the Company upon their
execution hereof, and such desires and consents to the association of each of
them as Members of this Company;

(f)    Such Member recognizes that the Company will be newly organized and
therefore has no financial or operating history. For this reason and others,
purchase of Member Interests as an investment involves special risks; and

(g)    Such Member is a bona-fide resident of the state in which the principal
address of such Member is located, as set forth on Exhibit A hereto.

23.
SPECIAL OFAC PROVISIONS; OTHER SPECIAL PROVISIONS.

23.1    No Illegal Activity as Source of Funds. Each Member hereby represents,
warrants and covenants to each of the other Members that no portion of the
Member’s Capital Contributions has been or will be derived (directly or
indirectly) from proceeds of any illegal activity.

23.2    Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money
Laundering Laws. The Members hereby represent and warrant to each other that: to
the actual knowledge of the respective Members, each Person owning an interest
(directly or indirectly) in a Member: (A) is not currently identified on the
OFAC List, and (B) is not a Person with whom a citizen of the United States is
prohibited to engage in transactions by any trade embargo, economic sanction, or
other prohibition of United States law, regulation, or Executive Order of the
President of the United States. The Managing Member shall implement and apply,
on behalf of the Company, procedures to ensure the foregoing representations and
warranties remain true

and correct at all times. In addition, the Managing Member shall implement and
apply procedures to ensure that none of the tenants at any of the Project is a
Person (x) currently identified on the OFAC List or (y) with whom a citizen of
the United States is prohibited to engage in transactions by any trade embargo,
economic sanction, or other prohibition of United States law, regulation, or
Executive Order of the President of the United States.

23.3    Requirements of Law. The Managing Member , at all times, shall use good
faith efforts to cause the Company to comply with all Applicable Law relating to
money laundering, anti-terrorism, trade embargoes and economic sanctions, now or
hereafter in effect.

23.4    Special Investment Company Provisions. Each Member hereby represents,
warrants and covenants to each of the other Members that such Member is not an
“investment company,” or a company “controlled” by an “investment company,” as
such terms are defined in the Investment Company Act of 1940, as amended.

23.5    Representations Regarding ERISA. The assets of each Member are not and
will not become treated as “plan assets”, whether by operation of law or under
regulations promulgated under the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.

24.
DISPUTES – ARBITRATION.

24.1    Arbitration. Any dispute arising between the Member or between the
Company and a Member shall be resolved through a binding arbitration proceeding
(an “Arbitration Proceeding”) conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association with expedited
procedures in effect on the date thereof. The arbitrator shall have authority to
award reasonable attorney’s fees for costs for any party to the arbitration. The
arbitration hearing shall be conducted in Chicago, IL.

24.1.1    The Member desiring arbitration shall provide written notice to the
other Member (the “Arbitration Notice”) indicating (i) the matter in controversy
and (ii) the name, contact information and professional resume of a Qualified
Arbitrator (“Initial Arbitrator”) to arbitrate such matter in controversy. The
Member receiving the Arbitration Notice shall deliver to the other Member,
within ten (10) days of the receipt of the Arbitration Notice, written notice
(“Second Arbitrator Notice”) of the name, contact information and professional
resume of a second Qualified Arbitrator (“Second Arbitrator”) to arbitrate the
matter in controversy set forth in the Arbitration Notice. The Initial
Arbitrator and the Second Arbitrator shall, within ten (10) days after delivery
of the Second Arbitrator Notice, agree, upon a Qualified Arbitrator (“Third
Arbitrator”) and shall deliver written notice of the name, contact information
and professional resume of the Third Arbitrator to each Member simultaneously.

24.1.2    In the event the Initial Arbitrator and the Second Arbitrator cannot
agree on the Third Arbitrator or if such Arbitrator is unwilling to act as the
Third Arbitrator, then any Member may petition the AAA (or any successor body of
similar function agreed upon by the Members) to appoint a Qualified Arbitrator
to act as the Third Arbitrator within five (5) days of such petition.

24.1.3    The Arbitration Proceedings shall commence ten (10) Business Days
after the engagement or appointment of the third Arbitrator pursuant to this
Section 24. Such Arbitration Proceedings shall be conducted in one (1) day until
completion, each party shall have no more than a total of four (4) hours to
present its case and to cross-examine or interrogate persons supplying
information or documentation on behalf of the other party and the arbitrators
shall make a determination within ten (10) Business Days after conclusion of the
Arbitration Proceeding.

24.1.4    Each Member shall sign all documents and do all other things necessary
to submit any such matter to arbitration and agree to, and hereby do, waive any
and all rights they or either of them may at any time have to revoke their
agreement hereunder to submit to arbitration and to abide by the decision
rendered thereunder.

24.1.5    The costs and expenses of an Arbitration Proceeding and the
arbitrators shall be shared equally by the Members, provided, however, each
Member shall pay its own counsel and other professional fees and expenses with
respect to such Arbitration Proceeding.

24.1.6    The final decision and award in which any two of the arbitrators agree
shall be in writing, shall be binding on the Members and shall be nonappealable,
and counterpart copies thereof shall be delivered to the Members. A judgment or
order based upon such award may be entered in any court of competent
jurisdiction. All actions necessary to implement the decision of the arbitrators
shall be undertaken as soon as possible, but in no event later than five (5)
Business Days after the rendering of such decision.

24.1.7    For purposes of this Section 24, a “Qualified Arbitrator” shall mean
an individual (i) having at least ten (10) years of professional experience with
matters like that which is subject matter of the dispute being submitted to
arbitration, and (ii) is neutral and shall have had no prior notice, information
or discussions concerning the dispute and, at such time or for the previous ten
(10) years, shall not have been employed by or associated with or agent of any
Member or any Affiliate of either of them.

25.
MISCELLANEOUS.

25.1    Applicable Law. This Agreement shall, in all respects, be governed by
the laws of the State of Delaware applicable to agreements executed and to be
wholly performed within the State of Delaware.

25.2    Severability. Nothing contained herein shall be construed so as to
require the commission of any act contrary to law, and wherever there is any
conflict between any provisions contained herein and any present or future
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail; but the provision of this
Agreement which is affected shall be curtailed and limited only to the extent
necessary to bring it within the requirements of the law.

25.3    Further Assurances. Each of the parties hereto shall execute and deliver
any and all additional papers, documents and other assurances, and shall do any
and all acts and

things reasonably necessary in connection with the performance of their
obligations hereunder to carry out the intent of the parties hereto.

25.4    Successors and Assigns. All of the terms and provisions contained herein
shall inure to the benefit of and shall be binding upon the parties hereto and
their respective heirs, legal representatives, permitted successors and assigns.

25.5    Number and Gender. In this Agreement, the masculine, feminine or neuter
gender, and the singular or plural number, shall each be deemed to include the
others whenever the context so requires.

25.6    Entire Agreement; Amendments. This Agreement constitutes the entire
understanding and agreement of the parties with respect to its subject matter
and any and all prior agreements, understandings or representations with respect
to its subject matter are hereby terminated and canceled in their entirety and
are of no further force or effect. Except as otherwise expressly permitted
pursuant to this Agreement, no alteration, modification or amendment of this
Agreement shall be made unless in writing and signed (in counterpart or
otherwise) by the Members. Furthermore, until the CS Loan has been repaid, the
Members shall not amend this Agreement or the Certificate of Formation without
the prior written consent of Agent (as defined in the Loan Agreement for the CL
Loan) in its Permitted Discretion (as defined in the Loan Agreement for the CL
Loan).

25.7    Waiver. A waiver of any provision of this Agreement shall be valid only
if it is in writing and signed by the party making the waiver. No waiver by any
party hereto of any breach of this Agreement or any provision hereof shall be
deemed to be a waiver of any preceding or succeeding breach of the same or any
other provision hereof.

25.8    Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

25.9    Interpretation. The captions appearing at the commencement of the
sections hereof are descriptive only and for convenience in reference. No
provision of this Agreement is to be interpreted for or against any party
because that party or that party’s legal representative drafted such provision.
Pronouns, wherever used herein, and of whatever gender, shall include natural
persons and corporations and associations of every kind and character, and the
singular shall include the plural wherever and as often as may be appropriate.
Whenever the terms “hereof”, “hereby”, “herein”, or words of similar import are
used in this Agreement they shall be construed as referring to this Agreement in
its entirety rather than to a particular Section or provision, unless the
context specifically indicates to the contrary. Whenever the words “include” and
“including” are used herein, they shall be construed to mean “including, without
limitation”. Any reference to a particular “Article” or a “Section” shall be
construed as referring to the indicated Article or Section of this Agreement
unless the context indicates to the contrary.

25.10    Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on

any persons other than the parties and their respective successors and assigns,
nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third persons to any party to this Agreement, nor
shall any provision give any third person any right of subrogation or action
over or against any party to this Agreement.

25.11    No Authority. No Member shall have the duty to inquire into the
authority of another Member to act. All of the Members shall be presumed to have
the authority to execute this Agreement and to carry out any acts contemplated
hereby.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
hereinabove mentioned.

Members
Red Lion Hotels Corporation, a Delaware corporation

By:_________________
Name:
Its:

Shelbourne Falcon RLHC Hotel Investors LLC, a Delaware limited liability company

By:_________________
Name:
Its:

!
Signature page Amended and Restated LLC Agreement -RL Venture LLC
LIMITED LIABILITY COMPANY AGREEMENT OF RL VENTURE LLC

Exhibit A

MEMBERS AND INITIAL CAPITAL CONTRIBUTIONS

NAME
PARTICIPATION PERCENTAGE
INITIAL CAPITAL CONTRIBUTIONS
Red Lion Hotel Corporation Address:
W. 201 North River Drive Spokane, WA 99201 Attn: Gregory T. Mount
Thomas L. McKeirnan
55%
$22,556,424
Shelbourne Falcon RLHC Hotel Investors, LLC Address:
Suite 300
595 East Lancaster Avenue Radnor PA 19087
Attn: Joseph L. Fox
45%
$18,455,256

Total Initial Capital    $41,011,679

Exhibit “B”

DIRECTORS

Appointed by RLH Member:

Gregory T. Mount Jim Bell
Thomas McKeirnan Appointed by Shelbourne Member:
Joseph L. Fox Todd Seneker Alex Washburn

Director chosen by RLH Member from five (5) independent individuals whose names
have been provided by the Shelbourne Member:

Marianne Menapace

Exhibit C

LIST OF THE PROPERTIES

Red Lion Hotel at the Park, 303 West River Drive, Spokane WA Red Lion Salt Lake,
161 West 600 South, Salt Lake City UT Red Lion Boise, 1800 Fairview Avenue,
Boise ID
Red Lion Bend, 1415-1465 NE Third Street, Bend OR
Red Lion Coos Bay, 1313 North Bayshore Drive, Coos Bay OR Red Lion Eureka, 1929
Fourth Street, Eureka CA
Red Lion Redding, 1830 Hilltop Drive, Redding CA
Red Lion Post Falls, 414 East First Avenue, Post Falls ID Red Lion Olympia, 2300
Evergreen Park Drive, Olympia WA Red Lion Pasco, 2525 North 20th Avenue, Pasco
WA
Red Lion Port Angeles, 221 North Lincoln Street, Port Angeles WA Red Lion
Richland, 802 George Washington Way, Richland WA

SCHEDULE 9.2.7

Hotel at the Park

COMPETITIVE SETS FOR THE PROPERTIES

2015 Competitive Set for Shelbourne JV hotels

Doubletree Spokane City Center
Mirabeau Park Hotel & Convention Center
Holiday Inn Express Spokane Downtown
Red Lion River Inn Spokane
Courtyard Spokane Downtown @ The Convention Center

Salt Lake
Salt Lake Inn
Radisson Salt Lake City Downtown
Royal Garden Inn
Shilo Inn Suites Hotel Salt Lake City
Crystal Inn Salt Lake City Downtown

Boise
Boise Hotel & Conference Center
Rodeway Inn
Boise Riverside Hotel
Shilo Inn Boise Riverside
Shilo Inn Boise Airport

Bend
La Quinta Inns & Suites Bend
Shilo Inn Suites Hotel Bend
Holiday Inn Express & Suites Bend
Fairfield Inn & Suites Bend Downtown
Comfort Inn & Suites Bend
Extended Stay America Seattle Redmond

Coos Bay
Best Western Plus Holiday Motel
Motel 6 Coos Bay

Quality Inn & Suites @ Coos Bay

Eureka
Best Western Plus Bayshore Inn
Best Western Plus Humboldt Bay Inn
Econolodge Eureka
Motel 6 Eureka
Travelodge Eureka
Quality Inn Eureka
Super 8 Eureka
Days Inn Eureka
Rodeway Inn Eureka
Comfort Inn Eureka
Clarion Hotel Humboldt Bay

Redding
Holiday Inn Redding
Best Western Plus Hilltop Inn
LaQuinta Inn & Suites Redding
Quality Inn Redding
Oxford Suites Redding
Comfort Inn Redding
Hampton Inn & Suites Redding

Post Falls
Best Western Plus Coeur D Alene Inn
Mirabeau Park Hotel & Convention Center
Shilo Inn Suites Coeur D Alene
Comfort Inn Post Falls
FairBridge Inn Express Post Falls
Holiday Inn Express Spokane Valley
Comfort Inn & Suites Spokane Valley
Best Western Plus Peppertree Liberty Lake Inn

Olympia

Comfort Inn Lacey Olympia
Quality Inn & Suites Lacey
La Quinta Inns & Suites Lacey
DoubleTree Olympia
Extended Stay America Olympia Tumwater
Comfort Inn Conference Center Tumwater Olympia

Pasco
Red Lion Hotel Pasco
Shilo Inn Suites Hotel Richland
Sleep Inn Pasco
Holiday Inn Express & Suites Pasco Tricities
Best Western Plus Pasco Inn & Suites

Port Angeles
Quality Inn Uptown Port Angeles
Days Inn Port Angeles
Quality Inn & Suites @ Olympic National Park Sequim
Holiday Inn Express & Suites Sequim

Richland
Days Inn Richland
Shilo Inn Suites Hotel Richland
Hampton Inn Richland Tri Cities
Holiday Inn Express & Suites Richland
Holiday Inn Express & Suites Pasco Tricities
Courtyard Richland Columbia Point

EXHIBIT B

MEMBER INTERESTS ASSIGNMENT

ASSIGNMENT AND ASSUMPTION OF MEMBER INTERESTS

This ASSIGNMENT AND ASSUMPTION OF PARTNERSHIP INTERESTS (this
“Assignment”) dated effective as of January , 2015 by and between RED LION
HOTELS CORPORATION, a Washington corporation (“Assignor”) and SHELBOURNE FALCON
RLHC HOTEL INVESTORS LLC, a Delaware limited liability company (“Assignee”).

BACKGROUND

A.Reference is made to that certain Limited Liability Company Agreement of RL
Venture LLC dated and effective as of October 29, 2014 (the “LLC Agreement”).

B.Assignor is the sole member of RL Venture LLC, a Delaware limited liability
company (the “Company”), and holds one hundred percent (100%) of the ownership
interest (“Member Interest”) in the Company.

C.Assignor and Assignee are parties to that certain Membership Interest Purchase
Agreement of even date herewith (the “MIPA”) pursuant to which (and subject to
its terms and conditions) (1) Assignor has agreed to sell and assign to Assignee
and Assignee has agreed to purchase and assume a forty-five percent (45%) Member
Interest (the “Transferred Member Interest”) so that after and giving effect to
the assignment and transfer of the Transferred Member Interest, (a) Assignor
shall remain a member of the Company owning a fifty-five percent (55%) Member
Interest, and (b) Assignee shall be a member of the Company owning a forty-five
percent (45%) Member Interest; and (2) Assignor and Assignee have agreed to
enter into an Amended and Restated Limited Liability Agreement attached as an
exhibit to the MIPA.

NOW, THEREFORE, consistent with the provisions of the MIPA in consideration of
the consideration paid by Assignee pursuant to the MIPA, the parties, intending
to be legally bound, agree as follows:

1.Effective as of the date hereof, Assignor hereby assigns, transfers and sets
over unto Assignee all of Transferred Member Interest.

2.Assignee hereby accepts such assignment and, from and after the date hereof
and subject to the provisions of the MIPA, assumes all right, title and interest
in and to, and all obligations and liabilities with respect to, the Transferred
Member Interest.

3.This Assignment shall be binding upon and inure to the benefit of Assignor,
Assignees and their respective heirs, executors, administrators, beneficiaries,
legal representatives, successors and assigns.

4.This Assignment may be executed by the parties hereto in separate
counterparts, each of which so executed and delivered shall be an original, but
all such counterparts shall together constitute one and the same instrument.

23

IN WITNESS WHEREOF, and intending to be legally bound, Assignor and Assignee
have executed this Assignment effective as of the date and year first above
written.

RED LION HOTELS CORPORATION

By:

___________________________________

Name:    
Title:    

SHELBOURNE FALCON RLHC HOTEL INVESTORS LLC

By: Name: Title:

___________________________________

EXHIBIT C

FIRPTA AFFIDAVIT AND CERTIFICATION OF NON-FOREIGN STATUS

This Certification of Non-Foreign Status (this “Certification”) is being
delivered in connection with the Membership Interest Purchase Agreement on even
date herewith, as amended (the “MIPA”), by and between Red Lion Hotels
Corporation, a Washington corporation (“RL”) and Shelbourne Falcon RLHC Hotel
Investors LLC, a Delaware limited liability company (“Transferee”).

Section 1445 of the Internal Revenue Code provides that a transferee of a U.S.
real property interest must withhold tax if the transferor is a foreign person.
For U.S. tax purposes (including Section 1445), the owner of a disregarded
entity (which has legal title to a U.S. real property interest under local law)
will be the transferor of the property and not the disregarded entity. RL
Venture LLC, a Delaware limited liability company, (“Contributor”) is a direct
or indirect, wholly-owned subsidiary of RL (“Transferor”). To inform Transferee
that withholding of tax is not required upon the disposition of a U.S. real
property interest by Contributor, 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 Internal Revenue Code and
Income Tax Regulations);

2.Transferor is not a disregarded entity as defined in Treasury Regulations
Section 1.1445-2(b)(2)(iii);

3.Contributor is a disregarded entity (as defined in Treasury Regulations
Section 1.1445-2(b)(2)(iii)) whose sole owner for U.S. federal tax purposes is
Transferor;

4.
Transferor’s U.S. employer identification number is 91-1032187; and

5.
Transferor’s office address is 201 W North River Drive, Suite 100, Spokane, WA
99201. Transferor understands that this Certification may be disclosed to the
Internal Revenue

Service by Transferee and that any false statement contained herein could be
punished by fine, imprisonment or both.

Under penalties of perjury, I declare that I have examined this Certification
and, to the best of my knowledge and belief, it is true, correct and complete,
and I further declare I have authority to sign this document on behalf of
Transferor.

Dated and effective as of    , 2015.

[Remainder of Page Left Intentionally Blank; Signature Page Follows]

IN WITNESS WHEREOF, Transferor has executed this Certification of Non-Foreign
Status as of the date listed above.

RED LION HOTEL CORPORATION

By:      Printed Name:
Title:

EXHIBIT D REIMBURSEMENT AND INDEMNITY AGREEMENT
[to be attached]

FINAL

REIMBURSEMENT AND INDEMNITY AGREEMENT

This REIMBURSEMENT AND INDEMNITY AGREEMENT (this “Agreement”) is
made and entered into as of January 16 , 2015 (“Effective Date”), by and among
RED LION HOTELS CORPORATION, a Washington corporation (“RLHC”), SHELBOURNE
CAPITAL, LLC, a Delaware limited liability company (“Shelbourne”), PAYDAY
PARTNERS, LLC, a Delaware limited liability company (“Payday”), FALCON
INVESTORS, LLC, a New York limited liability company (“Falcon”), STEVEN FISHMAN,
an individual (“Fishman”) (RLHC, Shelbourne, Payday, Falcon and Fishman are
collectively, the “Guarantors” and each is a “Guarantor (Shelbourne, Payday,
Falcon and Fishman are collectively referred to as the “Shelbourne Guarantors”.)

WHEREAS, prior to the Effective Date, RLHC formed RL Venture LLC, a Delaware
limited liability company (“Venture”) and, through the Venture’s wholly-owned
subsidiary, RL Venture Holding LLC, a Delaware limited liability company
(“Holding”), the Venture controls the ownership of each of twelve (12)
single-member limited liability companies (the “Owners” and each, an “Owner” and
listed on Exhibit “A” attached hereto) whose sole member is Holding and which,
respectively, own each of twelve (12) hotels listed on Exhibit “A” (the
“Hotels”), and the manager for each of the Hotels is Red Lion Hotel Management
Corporation, an affiliate of RLHC; and

WHEREAS, on the date preceding the Effective Date, Pacific Western Bank
(“Lender”) has provided to the Owners and Holding, as co-borrowers, a loan in
the maximum principal amount of Eighty Million Dollars ($80,000,000) for which
RLHC has provided its guaranty of certain non-recourse carve-out liabilities
(the “Indemnity Guaranty”) and a guaranty of completion of a Property
Improvement Plan for the Hotels (the “Completion Guaranty”, and a an
environmental indemnity agreement with regard to certain environmental matters
(the “Environmental Indemnity”, and together with the Indemnity Guaranty and
Completion Guaranty, the “Guaranties”); and

WHEREAS, on the Effective Date, RLHC is selling and assigning to Shelbourne
Falcon RLHC Hotel Investors LLC (the “Shelbourne Member”) (which is an affiliate
of Shelbourne, Payday, Falcon and Fishman), and the Shelbourne Member is
purchasing and assuming a 45% member interest in the Venture, and in connection
with the assignment of such member interest,
(a) RLHC and affiliates of the Shelbourne Guarantors are executing an Amended
and Restated Limited Liability Company Agreement (the “Venture Agreement”), and
(b) Shelbourne, Payday, Falcon, and Fishman are executing joinders to become
co-guarantors with RLHC under the Guaranties; and

WHEREAS, the Guarantors have potential joint and several liability under the
Guaranties, including, without limitation, certain instances in which the loan
or loans to which one or both of the Guaranties relate could become recourse to
all Guarantors (all of the obligations and liabilities of the Guarantors
described in the Indemnity Guaranties are, collectively, the “Guaranty
Obligations”); and

WHEREAS, the Guarantors hereto wish to allocate their respective
responsibilities for the Guaranty Obligations and to provide for reimbursement,
inter se, among the Guarantors for expenditures that the Guarantors may be
required to make for the Guaranty Obligations.

NOW, THEREFORE, the parties hereto hereby agree as follows:

1.
Representations, Warranties and Covenants. Each of the Guarantors shall be
responsible for any cost, expense or liability for any Guaranty Obligations
arising from the assertion of a claim by the Lender under any of the Guaranties
(a “Claim Expense”) based upon that Guarantor’s breach of any of the
representations, warranties or covenants which that Guarantor makes under any of
the Guaranties, and shall defend, indemnify and hold the other Guarantors
harmless from and against and for any cost, expense or liability arising from
such breach.

2.
Indemnity Guaranty. In the event that any of the Guarantors (including in the
case of RLHC its affiliate Red Lion Hotels Management, Inc.): (1) takes any
action or omits to take any action that is one of the Guaranteed Obligations
defined in Section 2.02(a)(i) through (ix) or in Section 2.02(b)(i) through (v)
of the Indemnity Agreement; or (2) commits gross negligence, willful misconduct
or breach of fiduciary duty with respect to the Venture, Holding or the Owners;
or (3) any of the Guarantors (including in the case of RLHC its affiliate Red
Lion Hotels Management, Inc.) takes action that was a factor that resulted in
the substantive consolidation of the assets of a Borrower (as defined in the
Indemnity Guaranty) in a bankruptcy with any person other than a Borrower or
Venture, with the result that one or more of the Guarantors incurs a Claim
Expense, the Guarantor who committed that act or omission shall be responsible
for that Claim Expense and shall defend, indemnify and hold the other Guarantors
harmless from and against and for any cost, expense or liability arising from
such Claim Expense.

3.
Reimbursement Obligations.

a.
In the event that any of the Guarantors incurs any Claim Expense other than in
connection with the matters allocated under Sections 1 or 2, the responsibility
for payment for such Claim Expense shall be allocated between the Guarantors in
the following percentages (the “Allocated

Percentages”):

RLHC:

55%
Shelbourne Guarantors, collectively:
45%

b.
Except as provided in Section 1 above, in the event that RLHC incurs a cost,
expense or liability in excess of its Allocated Percentage of a Claim Expense,
the Shelbourne Guarantors shall collectively provide sufficient reimbursement to
RLHC such that the Claim Expense is paid by the Guarantors in accordance with
their respective Allocated Percentages. Except as provided in Section 1 above,
in the event that any of Shelbourne, Payday, Falcon and Fishman incur,
collectively, a cost,

expense or liability such that the aggregate liability of Shelbourne, Payday,
Falcon and Fishman exceeds their Allocated Percentage of a Claim Expense, RLHC
shall provide sufficient reimbursement to Shelbourne, Payday, Falcon and Fishman
such that the Claim Expense is paid by the Guarantors in accordance with their
respective Allocated Percentage.

4.
Reporting. Each of the Guarantors will provide to the other Guarantors on a
quarterly basis, a certification in writing that there has been no material
deterioration in the certifying Guarantor’s Liquidity and Tangible Net Worth, as
those terms are defined in the Indemnity Guaranty.

5.
Transfers. This Agreement shall inure to the benefit and shall be binding upon
the successors and assigns of each party, provided, however, that the sale,
assignment or other transfer (each, a “Transfer”) of all or any portion of any
direct or indirect interest in Venture by a Member (as defined in the Venture
Operating Agreement) shall not result in a release of any party of its liability
under this Agreement without the prior written consent of the other parties to
this Agreement.

6.
Remedies. In the event that any of the Guarantors fails to reimburse the other
Guarantors as required hereunder within five (5) business days following written
demand therefor, the party who is entitled to but does not receive payment (the
“Aggrieved Party”) may exercise any right or remedy available to it at law or in
equity, including the right to sue for specific performance hereof, and the
Aggrieved Party shall additionally be entitled to interest on the unpaid amount
accrued at a rate equal to the lower of 10% per annum and the highest rate
permitted by applicable law (the “Interest Rate”), and to recover from the other
party (the “Owing Party”) the Aggrieved Party's out-of-pocket costs incurred in
connection with the enforcement of this Agreement, including reasonable
attorneys' fees and expenses incurred before and at trial, at all levels, and
whether or not suit is instituted.

7.
Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to conflicts of laws
principles.

8.
Entire Agreement. This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof, incorporates all prior
negotiations and understandings with respect to such subject matter and may be
amended only by an instrument in writing executed by all of the parties.

9.
Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be an original but all of which together shall constitute but one
and the same agreement.

10.
Waiver of Jury. EACH PARTIES HERETO, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY

IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING
TO THIS AGREEMENT.

11.
Third Parties Not Benefited. Nothing in this Agreement shall confer any rights
or remedies under or by reason of this Agreement on any person or entity other
than the parties and their respective successors and assigns, nor shall anything
in this Agreement relieve or discharge the obligation or liability of any third
person to any party to this Agreement, nor shall any provision of this Agreement
give any third person any right of subrogation or action over or against any
party to this Agreement.

[The remainder of this page has been intentionally left blank]

 

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

        

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

RED LION HOTELS CORPORATION

By: ________
Name:
Title:

SHELBOURNE CAPITAL, LLC

By:_______________________    
Name: Joseph L. Fox
Title:

PAYDAY PARTNERS, LLC

By:    _ Name:
Title:

FALCON INVESTORS, LLC
By: Senior Care Development LLC, Its Manager By:
_

[SIGNATURE PAGE TO RLHC/SHELBOURNE GUARANTORS REIMBURSEMENT AGMT

EXHIBIT A

LIST OF OWNERS AND HOTELS

RL Spokane, LLC
Red Lion Hotel at the Park, 303 West River Drive, Spokane WA
RL Salt Lake, LLC
Red Lion Salt Lake, 161 West 600 South, Salt Lake City UT
RL Boise, LLC
Red Lion Boise, 1800 Fairview Avenue, Boise ID
RL Bend, LLC
Red Lion Bend, 1415-1465 NE Third Street, Bend OR
RL Coos Bay, LLC
Red Lion Coos Bay, 1313 North Bayshore Drive, Coos Bay OR
RL Eureka, LLC
Red Lion Eureka, 1929 Fourth Street, Eureka CA
RL Redding, LLC
Red Lion Redding, 1830 Hilltop Drive, Redding CA
RL Post Falls, LLC
Red Lion Post Falls, 414 East First Avenue, Post Falls ID
RL Olympia, LLC
Red Lion Olympia, 2300 Evergreen Park Drive, Olympia WA
RL Pasco, LLC
Red Lion Pasco, 2525 North 20th Avenue, Pasco WA
RL Port Angeles, LLC
Red Lion Port Angeles, 221 North Lincoln Street, Port Angeles WA
RL Richland, LLC
Red Lion Richland, 802 George Washington Way, Richland WA