Exhibit 10.1

PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS

between

The parties designated on Schedule A

as Seller

and

INNKEEPERS USA LIMITED PARTNERSHIP, a Virginia limited partnership

as Purchaser

July 21, 2006

 

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Hilton Ontario Airport

Hilton Suites Anaheim

Residence Inn by Marriott - Garden Grove

Residence Inn by Marriott – Mission Valley

 

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PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS

This PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (“Agreement”) is dated
this 21st day of July, 2006 (“Effective Date”), and is made by and between each
of the parties named on Schedule A hereto (each, individually, “Seller” and,
collectively, “Sellers”), and INNKEEPERS USA LIMITED PARTNERSHIP, a Virginia
limited partnership (“Purchaser”).

RECITALS

A. Sellers are the owners of all of the Properties, with the specific owner of
each Property as set forth on Schedule A.

B. Purchaser desires to purchase all of the Properties and to acquire all of
Sellers’ respective right, title and interest in and to the Properties, on the
terms and conditions set forth in this Agreement.

C. Sellers desire to sell to Purchaser all of the Properties and to convey to
Purchaser all of their respective right, title and interest in the Properties,
on the terms and conditions set forth in this Agreement.

D. All capitalized terms used in this Agreement and not otherwise defined shall
have the meanings ascribed to such terms in Article I.

AGREEMENT

NOW, THEREFORE, for valuable consideration, including the promises, covenants,
representations and warranties hereinafter set forth, the receipt and adequacy
of which are hereby acknowledged, the parties, intending to be legally and
equitably bound, agree as follows.

I.

DEFINITIONS

As used in this Agreement, the following terms have the meanings ascribed to
them in this Article I:

“Alcoholic Beverages.” With respect to each Property, all unopened wine, beer
and other alcoholic beverages located at the Real Property and held for
consumption and/or sale in the operation of the Hotel.

“Assignment of Contracts.” As set forth in Section 5.2(d) hereof.

“Assignment of Intangibles.” As set forth in Section 5.2(c) hereof.

“Bill of Sale.” As set forth in Section 5.2(b) hereof.

 

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“Bookings.” With respect to each Property, all contracts or reservations for the
use or occupancy of guest rooms, meeting rooms and/or banquet facilities of the
Hotel for periods on and after the Closing Date which are made in Seller’s
ordinary course of business for the Hotel.

“Casualty.” As set forth in Section 12.13.1 hereof.

“Casualty Notice.” As set forth in Section 12.13.1 hereof.

“Casualty Renovation Cost.” As set forth in Section 12.13.1 hereof.

“Close of Escrow.” As set forth in Section 5.1 hereof.

“Closing Date.” As set forth in Section 5.1 hereof.

“Contracts.” With respect to each Property, all leases of furniture and
equipment, all space leases, and all contracts and agreements used and/or
executed in connection with the ownership and/or operation of the Hotel and/or
the Property, as described on Schedule “C” attached hereto, together with (a)
all contracts, agreements and other obligations terminable on not more than
thirty (30) days prior notice without fee or penalty, (b) all Bookings, gift
certificates, and similar promotional arrangements entered into by Seller, and
(c) all contracts and agreements entered into by Seller in the ordinary course
of business after the date hereof, but only to the extent expressly permitted,
and disclosed to Purchaser as required, by the terms of this Agreement, but
excluding, in each case, the Franchise Agreement, provided Purchaser shall have
the right to by notice delivered during the Due Diligence Period to require that
Seller terminate or give notice of termination with respect to any or all
Contracts that can be terminated without penalty, or with penalty if Purchaser
agrees to assume the penalty.

“Cooperating Party.” As set forth in Section 12.5 hereof.

“Cut-Qff Time.” As set forth in Section 5.5.4 hereof.

“Due Diligence Materials.” As set forth in Section 4.3 hereof.

“Due Diligence Period.” As set forth in Section 4.3 hereof.

“Earnest Money Deposit.” As set forth in Section 2.2.1 hereof.

“Environmental Damages.” As set forth in Section 4.4.5(j) hereof.

“Environmental Requirements.” As set forth in Section 4.4.5(k) hereof.

“Escrow.” As set forth in Section 3.1 hereof.

“Escrow Holder.” Chicago Title Insurance Company

“Exchangor.” As set forth in Section 12.15 hereof.

 

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“Excluded Assets.” With respect to each Property, the Proprietary Computer
Systems, the Excluded Documents, cash, cash equivalents, checks and other funds,
including, without limitation, till money, house banks, Seller’s Accounts
Receivable, notes, securities and other evidence of indebtedness held at the
Hotel as of the Cut-Off Time, and balances on deposit to the credit of Seller
with banking institutions, all of which shall be retained by Seller.

“Excluded Documents.” With respect to each Property, all (a) Proprietary
Information, (b) internal memoranda, correspondence, analyses, documents or
reports prepared by or for Seller or any affiliate of Seller in connection with
the sale of the Property or otherwise, including, without limitation, tax
returns or financial statements of Seller (exclusive of operating statements of
the Hotel which shall be available for review by Purchaser) for or in connection
with its ownership or operation of the Property (but excluding any historical
sales/customer data used in the ordinary course of business which shall be
provided to Purchaser), (c) communications between Seller or any affiliate and
its attorneys or other agents or representatives, (d) employee personnel files
of Seller and the manager of the Hotel, (e) appraisals, assessments or other
valuations of the Property in the possession of Sellers, (f) original bills,
invoices, receipts and checks relating to expenses incurred prior to the Cut-Off
Time (provided that Purchaser shall be entitled to copies of such items), and
(g) any confidential or proprietary information of any Seller in Seller’s
possession, in each case however embodied.

“Existing Indebtedness.” The debt relating to the HS Anaheim Property, as set
forth in Schedule “B”.

“Food Inventory.” With respect to each Property, all unopened food, food stuffs,
menu stock and non-alcoholic beverages located at the Real Property and held for
consumption and/or sale in the operation of the Hotel.

“Franchise Agreement.” With respect to each Property, the franchise agreement to
be entered into by Purchaser with Franchisor at or prior to Closing or, if an
existing franchise agreement is being assumed by Purchaser pursuant to the
election of Franchisor, then the assumed franchise agreement from and after
Closing.

“Franchisor.” With respect to each Property, the franchisor having entered into
an existing franchise agreement or which will enter into a new Franchise
Agreement.

“Good Funds.” A deposit of cashier’s check, certified funds, or confirmed wire
transfer of funds.

“Hazardous Materials.” As set forth in Section 4.4.5(l) hereof.

“Hotel.” With respect to each Property, the hospitality business (including
restaurant and lounge services and businesses) operated and conducted by Seller
on the Real Property.

“HS Anaheim PIP.” That certain Property Improvement Plan, dated August 17, 2004
issued by the Franchisor for the HS Anaheim Property with respect to that
Property.

 

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“HS Anaheim PIP Escrow Agreement.” With respect to the Hilton Suites Anaheim
Property, an escrow agreement in the form of Exhibit L pursuant to which Seller
of the Hilton Suites Anaheim Property will deposit funds for the completion of
work necessary to comply with the HS Anaheim PIP.

“HS Anaheim Property.” The Property branded as a Hilton Suites Hotel located in
Anaheim, California and owned by RLJ Anaheim Suites Hotel, L.P. and RLJ Anaheim
Suites Hotel Lessee, L.P.

“Improvements.” With respect to each Property, the buildings, structures, and
other permanent improvements located on the Land, including, without limitation,
electrical distribution systems, HVAC systems, walkways, driveways, parking
lots, recreational facilities, plumbing, swimming pool, lighting, and mechanical
equipment and fixtures installed thereon, and all rights, benefits and
privileges appurtenant thereto.

“Intangible Property.” With respect to each Property, all (a) fictitious
business names and logos used by Seller in the operation of the Hotel and which
are identified exclusively with the Hotel, but excluding the franchise
proprietary names, (b) local telephone and facsimile exchange numbers identified
exclusively with the Hotel, (c) - transferable certificates (including the
Certificate of Occupancy for the Real Property), licenses (including liquor
licenses, to the extent transferable), permits and warranties now in effect with
respect to the Property (specifically excluding, however the franchise name for
the Hotel) at no cost to Seller, (d) internet sites and names associated with
each hotel (URLs), (e) plans, specifications and surveys and (f) all other
intangible property located at the Real Property and used by Seller exclusively
in connection with the ownership and operation of the Hotel, but excluding the
Excluded Assets.

“Intermediary.” As set forth in Section 12.15 hereof.

“Inventory.” With respect to each Property, all unopened operating inventories,
materials and supplies used in connection with the operation of the Hotel and
located thereat, including linens, bath towels, paper goods and guest supplies,
and all gift shop inventory owned by Seller, but excluding the Alcoholic
Beverages.

“Land.” With respect to each Property, the land, as more particularly described
on Exhibit “B” attached hereto and upon which the Improvements are located,
including all easements, rights-of-way, strips, zones, licenses, transferable
hereditaments, privileges, tenements and appurtenants belonging to the Land
including any development rights, water rights and mineral rights, and any right
or interest in any open or proposed highways, streets, roads, avenues, alleys,
easements, strips, gores and rights-of-way in, across, in front of, contiguous
to, abutting or adjoining the Land, and other rights and benefits running with
the Land and/or the owner of the Land.

“Lender Approvals.” As set forth in Section 2.5 hereof.

“Liabilities.” As set forth in Section 12.15 hereof.

 

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“Liquor Licenses.” With respect to each Property, the liquor licenses relating
to the operation of the restaurant and lounge businesses at the Real Property,
as described in Section 2.4 hereof.

“Non-Foreign Affidavit.” As set forth in Section 5.2(g) hereof.

“Notice.” As set forth in Article XI hereof.

“Ontario PIP.” That certain Property Improvement Plan, dated August 17, 2005 as
revised on June 8, 2006 issued by the Franchisor for the Ontario Hotel with
respect to that Hotel, which is currently being further updated by Franchisor.

“Ontario PIP Escrow Agreement.” With respect to the Ontario Property, an escrow
agreement in the form of Exhibit L pursuant to which Seller of the Ontario
Property will deposit funds for the completion of work necessary to comply with
the Ontario PIP.

“Ontario Property.” The Property located in Ontario, California and owned by RLJ
Ontario Hotel, L.P. and RLJ Ontario Hotel Lessee, L.P.

“Opening of Escrow.” As set forth in Section 3.1 hereof.

“Permits.” As set forth in Section 4.4.5(a) hereof.

“Permitted Exceptions.” As set forth in Section 4.2 hereof.

“Personal Property.” With respect to each Property, all (a) keys and
combinations to all doors, cabinets, enclosures and other locks on or about the
Real Property, (b) furniture, equipment, appliances, televisions, telephone
systems, artwork, machinery, tools, trade fixtures, linens, towels, utensils,
china, glassware, and theme park tickets and other personal property owned by
Seller, located on the Real Property, including those used in the operation of
any restaurants and other ancillary hotel operations, and which are used
exclusively in connection with the operation of the Hotel and/or the Real
Property, (c) copies of files maintained or generated by Seller and/or Seller’s
Hotel manager in the course of, and related to, the operation of the Hotel
(excluding the Excluded Documents and other materials proprietary to Seller)
which are located on the Real Property, (d) the Restaurant Equipment, (e) the
Food Inventory, (f) any vehicles owned by Seller and used in the operation of
the Hotel, and (g) all other personal property located at the Real Property with
respect to which Seller is the owner thereof and which is used by Seller
exclusively in connection with the ownership and operation of the Hotel and/or
the Real Property; but excluding, however, (i) the Alcoholic Beverages, (ii) the
Excluded Assets, (iii) the personal property owned by any tenant or guest on the
Real Property, (iv) the Liquor Licenses, (v) all refunds and claims for refunds
for real property and personal property taxes in connection with the Property
for any period prior to the Close of Escrow, and (vi) all tax and utilities and
other deposits.

“Physical Condition.” A structural or environmental defect or defects identified
by an independent and qualified structural or environmental consultant
(“Consultant”) in a property condition assessment report or an environmental
site assessment report issued by such Consultant (either, an “Inspection
Report”).

 

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“Property.” With respect to each Seller, the Improvements, the Hotel, the
Personal Property, the Inventory, and the Intangible Property owned by such
Seller.

“Proprietary Computer Systems.” With respect to each Property, the computer
software, hardware, programs, processes and procedures set forth for such
Property on Schedule “C” attached hereto.

“Proprietary Information.” As set forth in Section 12.18 hereof.

“Purchase Price.” As set forth in Section 2.2 hereof.

“Real Property.” With respect to each Property, the Land and the Improvements.

“Regulations.” As set forth in Section 4.4.5(a) hereof.

“Reports. As set forth in Section 4.4.5(e) hereof.

“Restaurant Equipment.” With respect to each Property, all equipment, furniture,
fixtures, utensils, glassware, silverware and china used in connection with the
operation of all restaurants and lounges on the Real Property.

“Seller’s Accounts Receivable.” With respect to each Property, all accounts
receivable and other sums owing Seller in connection with the operation of the
Hotel existing on and prior to the Close of Escrow.

“Survey.” As set forth in Section 4.2 hereof.

“Title Commitment.” As set forth in Section 4.1 hereof.

“Title Insurer.” Chicago Title Insurance Company

  700 South Flower Street,

  Los Angeles, CA 90017

“Title Policy.” As set forth in Section 4.2 hereof.

“WARN Act.” As set forth in Section 6.3 hereof.

II.

SALE AND PURCHASE OF PROPERTY

2.1 Purchase of Property. As of the Close of Escrow, and subject to the terms
and conditions of this Agreement, each Seller shall sell, assign, convey,
transfer and deliver to Purchaser, and Purchaser shall purchase and acquire from
each Seller, such Seller’s fee title in

 

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the Improvements, good and marketable title in the Land and the Personal
Property and the Inventory, and all of such Seller’s right, title and interest
in and to the Contracts, and the Intangible Property, free and clear of all
monetary liens and encumbrances (other than the Contracts and the Permitted
Exceptions), at the purchase price provided in Section 2.2 hereof.

2.2 Purchase Price and Terms of Payment. The aggregate purchase price for the
Properties (“Purchase Price”) shall be Two Hundred Fifteen Million Dollars
($215,000,000), allocated as indicated on Schedule A-l, reduced by an amount
equal to the purchase price for the Liquor Licenses, and shall consist of and be
payable as follows:

2.2.1 Earnest Money Deposit. Within three (3) business days following the
Effective Date, Purchaser shall deliver to Escrow Holder, in Good Funds, the sum
of One Million Dollars ($1,000,000) (together with all interest accrued thereon,
the “Earnest Money Deposit”). The Earnest Money Deposit shall be fully
refundable to Purchaser if Purchaser elects to terminate this Agreement for any
reason on or before the 14th day following the Effective Date (“General Review
Period”). If Purchaser has not elected to terminate this Agreement and cancel
the Escrow prior to the end of the General Review Period, then Purchaser shall
increase the Earnest Money Deposit to Five Million Dollars ($5,000,000) (without
regard to any interest earnings, provided that any interest earned thereon shall
become part of the Earnest Money Deposit) by delivery to Escrow Holder of the
additional sum of Four Million Dollars ($4,000,000) in Good Funds. The Earnest
Money Deposit shall thereafter be refundable on or prior to the end of the Due
Diligence Period (as defined in Section 4.3.1 of this Agreement) only as and to
the extent provided in Section 4.4 of this Agreement. Upon expiration of the Due
Diligence Period, the Earnest Money Deposit shall thereafter be non-refundable
to Purchaser, except (a) in the event of a material default by Seller of its
obligations under this Agreement that is not cured within any applicable cure
period provided in this Agreement, (b) upon the failure of a condition precedent
to Purchaser’s obligations as set forth in this Agreement, or (c) as otherwise
specifically provided in this Agreement. The Earnest Money Deposit shall be
applied to the Purchaser Price on the Closing Date.

2.2.2 Existing Indebtedness. With respect to the HS Anaheim Property, Purchaser
shall assume, at its sole cost and expense, the Existing Indebtedness, if any,
and the principal balance thereof outstanding as of the Cut-Off Time shall be
credited to the Purchase Price. In connection therewith, it shall be a condition
of such assumption that Seller and any guarantors be released from all liability
and recourse under the Existing Indebtedness for all periods after the Closing
Date, and Purchaser agrees to perform and satisfy all obligations required of
Purchaser by the holder of the Existing Indebtedness for such assumption and
release of Seller and guarantors thereunder, provided (i) that Purchaser shall
only be required to use commercially reasonably efforts to obtain the lender’s
approval of such assumption and shall not be required to assume the Existing
Indebtedness on terms materially different than the currently existing terms
thereof and (ii) that Seller shall cooperate as reasonably required to obtain
Lender’s approval and release.

2.2.3 Balance of Purchase Price. Not later than 11:00 a.m. California time on
the business day immediately preceding the Closing Date, Purchaser shall deposit
with Escrow Holder, in Good Funds, the balance of the Purchase Price, reduced or
increased by such amounts

 

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required to take into account by such prorations, credits, costs or other
adjustments which are required by this Agreement and which can be computed and
determined as of the time for the required deposit hereunder.

2.3 Assumption of the Contracts. As additional consideration, Purchaser shall,
on and as of the Close of Escrow, at its sole cost and expense, assume and agree
to pay all sums and perform, fulfill and comply with all other covenants and
obligations which are to be paid, performed and complied with by Sellers under
the Contracts, that Purchaser is, pursuant to the provisions of this Agreement,
required to assume, which first arise or accrue on and after the Closing Date.

2.4 Liquor Licenses and Alcoholic Beverages. The Liquor Licenses and the
Alcoholic Beverages located at the Hotels shall be conveyed to Purchaser (or its
designee) as permitted pursuant to California law. The purchase price (the
“Liquor License Purchase Price”) for the Liquor Licenses shall be the amount of
$25,000.00 for each Hotel.

2.4.1 Purchaser shall, in accordance with California law, use good faith efforts
to cause, on or before the Closing Date (a) the transfer of the Liquor Licenses
to Purchaser (or to another entity designated by Purchaser) and/or (b) a
temporary liquor license to issue for the Hotel (effective as of the Closing
Date). Seller and Purchaser shall fully cooperate with each other in connection
with said transfer of the Liquor Licenses, including, without limitation,
submitting all necessary applications with the State of California Department of
Alcoholic Beverage Control and the opening, at Purchaser’s expense, of a
separate escrow for each Hotel (each an “LLT Escrow”) to effectuate such
transfer. Purchaser shall have sole responsibility for (a) ascertaining all
applicable laws, regulations, and procedures which govern the transfer of liquor
permits and inventories (the “Liquor Laws”), (b) determining and notifying
Seller which, if any, of the Liquor Licenses or inventory of alcoholic beverages
in each Hotel as of the Closing which are used in the operation of such Hotel
(the “Liquor Assets”) Seller may transfer to Purchaser pursuant to such Liquor
Laws, and (c) complying with, processing all applications under, and satisfying
all requirements of all Liquor Laws in connection with the transfer to Purchaser
of the Liquor Assets.

2.4.2 Seller will cooperate in all reasonable respects (which shall include,
without limitation, supplying information known to Seller and execution of such
documents as may be legally required) with Purchaser in connection with
Purchaser’s application for transfer of the Liquor License to Purchaser or
issuance of new liquor licenses. If Purchaser is unable to obtain the transfer
of the Liquor License or issuance of new liquor licenses (temporary or
permanent) prior to the Closing, provided that Purchaser has taken all
commercially reasonable measures to obtain cause such transfer or obtain such
new license, then, on the Closing Date, Seller shall cause the current licensee
of the applicable Hotel (“License Holder”) enter into a lease, concession or
management agreement with Purchaser, to the extent legally permissible, whereby
License Holder shall, for a period not to exceed ninety (90) days, operate the
liquor concessions at the Hotel under Seller’s or License Holder’s existing
liquor license at no cost or expense to Purchaser pending the transfer or
issuance of the Liquor License to Purchaser. Purchaser shall indemnify, defend
and hold the License Holder harmless from and against any and all claims,
liabilities, costs and expenses (including, without limitation, reasonable
attorneys’

 

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fees and costs) arising in connection with such operation, except to the extent
of any negligence or willful misconduct of License Holder or any of its agents
or employees in such respect, and provide insurance coverage naming License
Holder as an additional named insured.

2.4.3 Upon the opening of each LLT Escrow, Purchaser shall deposit the Liquor
License Purchase Price, together with amounts being paid for the alcoholic
beverage inventory, with the LLT Escrow, which shall serve as a credit to the
Purchase Price and shall be paid to Seller upon the closing of the LLT Escrow.
Seller and Purchaser acknowledge and agree that the close of the LLT Escrows or
the issuance of a temporary liquor license for the Hotel pending the completion
of the transfer of the Liquor Licenses and the closing of the LLT Escrows are
NOT a condition to Closing. Purchaser and Seller agree that if this Agreement is
terminated prior to Closing (for whatever reason), or if Purchaser is unable to
cause the Liquor Licenses to be transferred within six (6) months after the
Closing Date, Purchaser and Seller shall take all necessary actions to cancel
the LLT Escrows and any pending transfer of the Liquor Licenses and shall cause
the monies held in the LLT Escrows to be returned to Purchaser less escrow costs
incurred, if any. The transfer of the Liquor Licenses in the LLT Escrows shall
be made by bills of sale.

2.5 Assumption of Existing Indebtedness. On or before five (5) business days
after the date of this Agreement, Sellers will deliver a written request to the
holder of the Existing Indebtedness for its approval of the sale of the Property
to Purchaser, the assumption of the Existing Indebtedness by Purchaser, the
change in the management of the Hotel, and the termination of the Franchise
Agreement contemplated hereby (collectively, the “Lender Approvals”).
Concurrently with such assumption request, and as soon as practical after a
request of the holder of the Existing Indebtedness, Sellers and Purchaser, as
applicable, will each promptly deliver to the holder of the Existing
Indebtedness, any documents concerning such party, the Hotel or the foregoing
described transactions as it may reasonably request to evaluate whether it will
give the Lender Approvals. At or prior to the Closing Date, Purchaser shall
execute and deliver, or cause to be executed and delivered, any loan assumption
documents in form and content reasonably required by the holder of the Existing
Indebtedness and only if and to the extent materially consistent with the terms
of the Existing Indebtedness, opinions of Purchaser’s counsel, and such other
materials and documents as may be required by the holder of the Existing
Indebtedness as conditions to the Lender Approvals or to affect the assumption
of the Existing Indebtedness. Sellers and Purchaser will otherwise take any
reasonable steps and shall cooperate to obtain the Lender Approvals (but at no
cost to Sellers) on or before the Closing Date. Purchaser shall pay all costs
associated with the assumption due to the holder of the Existing Indebtedness.

III.

ESCROW

3.1 Opening of Escrow. Purchaser and Sellers shall promptly open an escrow
(“Escrow”) with Escrow Holder by depositing with Escrow Holder the Earnest Money
Deposit and three (3) copies of this Agreement duly executed (in counterparts or
otherwise) by Sellers and Purchaser. The time when Escrow Holder so receives the
Earnest Money Deposit and the

 

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copies of this Agreement, fully executed by the parties and executes and
delivers copies thereof to Sellers and Purchaser, shall be deemed the “Opening
of Escrow.” Purchaser and Sellers shall execute and deliver to Escrow Holder, in
a timely fashion, such instruments and funds as are reasonably necessary to
close the Escrow and consummate the sale and purchase of the Property (or the
exchange thereof, if applicable) in accordance with the terms and provisions of
this Agreement.

3.2 Escrow Holder’s General Provisions. In the event of any conflict between the
provisions of the typed portion of this Agreement and Escrow Holder’s General
Provisions (if any), the provisions of the typed portion of this Agreement shall
be controlling and the General Provisions will be deemed amended accordingly.

3.3 Additional Escrow Holder Requirements. If there are any requirements imposed
by Escrow Holder relating to the duties or obligations of Escrow Holder, or if
Escrow Holder requires any other additional instructions, the parties agree to
make such deletions, substitutions and additions to this Agreement which do not
cause more than a ministerial or de minimis change to this Agreement or its
intent. Any such changes requested by Escrow Holder shall be subject to written
approval of the parties, which approval shall not be unreasonably withheld or
conditioned.

3.4 Deposit of Funds. Except as otherwise provided in this Agreement, all funds
deposited into the Escrow by Purchaser shall be immediately deposited by Escrow
Holder into Treasury Bills or other short-term United States Government
obligations, in repurchase contracts for the same, or in a federally insured
money market account, subject to the control of Escrow Holder in a bank or
savings and loan association, or such other institution approved by Purchaser;
provided, however, that such funds must be readily available as necessary to
comply with the terms of this Agreement and Escrow Holder’s escrow instructions
(including the return of the Earnest Money Deposit, or any portion thereof then
on deposit with Escrow Holder, to Purchaser in accordance with this Agreement),
and for the Escrow to close within the time specified in Section 5.1 of this
Agreement. Except as may be otherwise specifically provided herein, interest on
amounts placed by Escrow Holder in any such investments or interest bearing
accounts shall accrue to the benefit of Purchaser, and Purchaser shall promptly
provide to Escrow Holder Purchaser’s Tax Identification Number.

3.5 Release of Funds by Escrow Holder. Escrow Holder’s obligation, if any, under
this Agreement to release the Earnest Money Deposit, and any other funds, prior
to the Close of Escrow is subject to such funds having cleared through the bank,
savings and loan, or other financial institution on which such funds are drawn.
Escrow Holder shall make such payments only in strict accordance with the
provisions of this Agreement, and Purchaser and Sellers agree to save and hold
Escrow Holder harmless in disbursing and releasing the funds as specified in
this Agreement. Purchaser and Sellers represent to Escrow Holder that the
release instructions set forth in this Agreement are made of their own free
will, under no duress, and with full understanding of the consequences thereof,
not relying on any information furnished or statements made by Escrow Holder.

 

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IV.

CONDITION OF TITLE

4.1 Title Commitment. Within five (5) days after the Opening of Escrow, Escrow
Holder, at Purchaser’s sole cost and expense, shall cause to be furnished to
Purchaser, with a copy to Sellers, a current commitment for a C.L.T.A. Owner’s
Policy of Title Insurance (standard coverage) for each Property issued by Title
Insurer (“Title Commitment”) reflecting the status of title to the Real
Property, and all exceptions, including easements, licenses, restrictions,
rights-of-way, leases, covenants, reservations and other conditions, if any,
affecting the Real Property, which would appear in a C.L.T.A. Owner’s Policy of
Title Insurance (standard coverage) if used, and committing to issue the
C.L.T.A. Owner’s Policy of Title Insurance (standard coverage) to Purchaser for
the Real Property and the Improvements in the full amount of the Purchase Price.
Accompanying the Title Commitment, Escrow Holder shall cause to be furnished to
Purchaser, to the extent available, legible copies of the documents affecting
the Real Property referred to in the Title Commitment.

4.2 Title to the Real Property. Effective as of the Closing Date, but
conditioned upon the Close of Escrow, Title Insurer shall issue to Purchaser for
each Property Title Insurer’s C.L.T.A. Owner’s Policy of Title Insurance
(standard coverage) (“Title Policy”), with the liability under the Title
Policies to be in an aggregate amount equal of the Purchase Price, insuring the
fee title in Real Property as vested in Purchaser subject only to the following
matters affecting title (“Permitted Exceptions”).

(a) AH general and special property taxes and assessments not yet delinquent,
and all improvement and assessment bonds;

(b) Supplemental taxes assessed as a result of the sale of the Real Property and
the Improvements by Seller to Purchaser pursuant to the provisions of California
Revenue and Taxation Code Chapter 3.5 (commencing with Section 75);

(c) Subject to the provisions of Section 4.4 hereof, all liens, covenants,
conditions, restrictions, easements, rights of way, and all other exceptions to
title as referenced in the Title Commitment, except monetary liens and
encumbrances (except the Existing Indebtedness, but subject to the provisions of
this Section 4.2, and except as caused by Purchaser) which Seller shall remove
at or prior to the Close of Escrow;

(d) All exceptions to title disclosed by the Survey (and any updates thereto) of
the Real Property for the Title Policy (including, without limitation,
easements, encroachments and zoning) and not objected to by Purchaser as
provided in this Agreement;

(e) The Existing Indebtedness;

 

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(f) All security interests recorded in connection with the Contracts, provided
all indebtedness accruing under such security interest up to the Closing Date
shall be paid in full by Seller;

(g) Rights of parties in possession not shown by the public records, easements
or claims of easements not shown by the public records, but only with respect to
those which Purchaser has actual knowledge thereof;

(h) Governmental laws, codes, ordinances and restrictions now or hereafter in
effect so far as these affect the Real Property or any part thereof, including,
without limitation, zoning ordinances (and amendments and additions relating
thereto) and the Americans with Disabilities Act of 1990, as amended;

(i) Any exceptions created by Purchaser or its agents, employees and/or
contractors, including without limitation, any exceptions arising by reason of
the entry on the Real Property by Purchaser or by its agents, employees and/or
contractors; and

(j) All preprinted exceptions and exclusions contained in the Title Policy.

At Purchaser’s election, each Title Policy shall be an A.L.T.A. Owner’s Policy
of Title Insurance (extended coverage); provided, however, that Purchaser’s
ability to obtain an A.L.T.A. Owner’s Policy of Title Insurance (extended
coverage) for each Property shall not be a condition precedent to Purchaser’s
obligations hereunder and shall not extend the Closing Date or delay the Close
of Escrow. In addition, Purchaser shall have the right to obtain from Title
Insurer such endorsements to the Title Policies and/or such additional liability
protection as Purchaser may elect to obtain; provided, however, that Purchaser’s
ability to obtain such title endorsements and/or such additional liability
protection shall not be a condition precedent to Purchaser’s obligations
hereunder and shall not extend or delay the Close of Escrow. Purchaser shall be
solely responsible for negotiating with Title Insurer with respect to such
A.L.T.A. Owner’s Policy of Title Insurance (extended coverage) and/or with
respect to such title endorsements and/or such additional liability protection
as may be requested by Purchaser, if any. With respect to each Property, Seller
will deliver to Purchaser a copy of any survey of the Real Property in its
possession, without warranty, and Purchaser shall be solely responsible for, and
shall assume the risk of, obtaining a survey (or updating Seller’s survey) of
the Real Property (“Survey”) acceptable to Title Insurer for purposes of issuing
the Title.Policy.

4.3 Inspection and Due Diligence Review.

4.3.1 Purchaser shall have the right, in its sole discretion, until 3:00 p.m.
California time on the 30th day following the Effective Date, to satisfy itself,
in its sole and absolute discretion, as to the condition and extent of the
Property (“Due Diligence Period”). Subject to the prior termination of this
Agreement, during the term of this Agreement, Sellers shall cooperate and
provide Purchaser with reasonable and continuing access to the Real Property or
any due diligence materials required hereunder upon one (1) business day prior
Notice to Sellers for the purpose of Purchaser’s inspection and due diligence
review. In connection with such review, Seller shall deliver to Purchaser or
make available to Purchaser at

 

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the respective Hotel during normal business hours during the Due Diligence
Period, all records, including non-proprietary financial reports, the
instruments evidencing the Contracts pertaining to the Hotels and any other
documents which are in or under Sellers’ or Sellers’ property manager’s control
and relate to the operation of the Hotels or any other matter affecting the
Property (“Due Diligence Materials”), except that Sellers shall have no
obligation to deliver or make available to Purchaser, and Purchaser shall have
no right to review, the Excluded Assets and the Excluded Documents. Neither
Purchaser nor any of its employees, agents or representatives shall contact or
otherwise discuss this transaction and/or the operation of the Hotels with any
on-site employees of the Hotels; provided, however, that Purchaser may meet with
any Hotel’s General Manager (or other designee) upon not less than one
(1) business day’s Notice to Sellers but only in the presence of Sellers’
representative (unless waived).

4.3.2 Purchaser acknowledges that prior to the date of this Agreement, Sellers
have delivered to Purchaser, or Sellers have provided Purchaser with access to,
certain Due Diligence Materials. Purchaser shall have until the expiration of
the Due Diligence Period to review and approve the Due Diligence Materials.

4.3.3 During the Due Diligence Period, Purchaser shall also have the opportunity
to conduct a Phase I environmental audit/study of all Real Property, provided
such Phase I environmental audit/study is not invasive or intrusive. Any
environmental audit/study, other than the Phase I, proposed to be undertaken by
Purchaser shall be subject to Sellers’ written approval, which shall not be
unreasonably withheld, prior to the commencement thereof. As a condition to any
such consent, Purchaser shall, or shall cause the entity conducting the Phase I
environmental audit/study to, obtain and maintain such public liability
insurance in an amount of Two Million Dollars ($2,000,000) for each Property,
naming as an additional insured the Seller owning such Real Property. At any
time after the end of the General Review Period, but prior to 3:00 p.m.
California time on the last day of the Due Diligence Period, Purchaser shall
have the right in its sole discretion to terminate this Agreement only if it is
not satisfied with the result of any environmental audit/study or of any
structural study of any Hotel, provided that Purchaser shall provide Seller with
a copy of any such audit/study and shall specify in writing the reason for its
dissatisfaction.

4.3.4 Purchaser, at all times, will conduct such due diligence in compliance
with all applicable laws, and in a manner so as to not cause damage, loss, cost
or expense to Sellers, any Property or the tenants or guests of any Property,
and without unreasonably interfering with or disturbing any employee, tenant or
guest at the Hotels. Other than required by applicable law, subpoena or other
court order, Purchaser shall not reveal to any governmental agency or any other
third party (other than Purchaser’s employees, agents, attorneys, lenders and
advisors) not approved by Sellers the results of or any other information
acquired pursuant to its inspections. Purchaser will promptly restore any damage
to the Property caused by Purchaser’s inspection to its condition immediately
preceding such inspections and examinations and will keep the Property free and
clear of any mechanic’s liens or materialmen’s liens in connection with such
inspections and examinations.

4.3.5 The cost of the inspections and tests undertaken pursuant to this
Section 4.3 shall be borne solely by Purchaser. Purchaser shall indemnify,
protect, defend and

 

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hold Sellers, Sellers’ lenders, and their affiliates, owners, agents and
employees harmless from and against any obligation, liability, claim (including
any claim for damage to property or injury to or death of any persons), lien or
encumbrance, loss, damage, cost or expense, including reasonable attorneys’
fees, whether or not legal proceedings are instituted, arising from the acts or
omissions of Purchaser or its agents, employees or contractors occurring in
connection with, or as a result of, such inspections, tests or examinations of
any Property.

4.3.6 Purchaser covenants and agrees that, until the Close of Escrow, all such
information and materials disclosed and/or delivered to it by Sellers, or
Sellers’ agents, employees and representatives, are confidential and proprietary
information, and that Purchaser shall hold the same in strict confidence, and
shall not disclose the same to anyone other than its employees, potential
lenders, and advisors on a “need-to-know” basis subject to the confidentiality
restrictions set forth herein. Purchaser also agrees that, in the event the
transactions contemplated in this Agreement are not consummated as provided
herein, Purchaser shall return all such information and documentation, and all
copies thereof, to Sellers promptly upon Sellers’ request.

4.3.7 Except as expressly provided in this Agreement, Sellers make no
representations or warranties as to the truth, accuracy or completeness of any
materials, data or other information, if any, supplied to Purchaser in
connection with Purchaser’s inspection of the Property (e.g., that such
materials are complete, accurate or the final version thereof, or that all such
materials are in Sellers’ possession). It is the parties’ express understanding
and agreement that any such materials are to be provided only for Purchaser’s
convenience in making its own examination and determination prior to the
expiration of the Due Diligence Period as to whether it wishes to purchase the
Properties, and, in doing so, Purchaser shall rely exclusively on its own
independent investigation and evaluation of every aspect of each Property and
not on any materials supplied by Sellers. Purchaser expressly disclaims any
intent to rely on any such materials provided to it by Sellers in connection
with its inspection and agrees that it shall rely solely on its own
independently developed or verified information.

4.3.8 The obligations of Purchaser under this Section 4.3 (including its
indemnification obligations) shall survive the Close of Escrow or the
termination of this Agreement.

4.4 Notice of Non-Satisfaction.

4.4.1 Within ten (10) business days of receipt of the Title Commitment,
Purchaser shall notify Sellers, by Notice, of any objections to exceptions
appearing in the Title Commitment. Within five (5) business days following
Purchaser’s Notice, Sellers shall notify Purchaser, by Notice, (i) that Sellers
will, prior to the Closing Date, eliminate the exceptions to which Purchaser
objects, or (ii) that Sellers decline to eliminate specified exceptions. If
Sellers elect not to take such actions as may be required by the Title Insurer
to remove all exceptions to title to which Purchaser has objected, Purchaser may
within three (3) days terminate this Agreement in its sole discretion and
receive a return of the Earnest Money Deposit. If Sellers agree to take the
actions necessary to eliminate all exceptions to which Purchaser has objected,
then such exceptions shall not be Permitted Exceptions, Sellers shall cause such
exceptions to be

 

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removed prior to or at Close of Escrow, and Seller’s failure to do so shall be a
default under this Agreement. If Purchaser fails to provide Notice of
cancellation within the Due Diligence Period as provided for herein, Purchaser
shall be deemed to have approved the state of the Properties and the condition
of title, and shall be deemed to have waived its rights to terminate this
Agreement by reason of such title objections and cancel the Escrow by reason of
such title objections under this Section 4.4.

4.4.2 In addition, during the General Review Period, Purchaser may in its sole
and absolute discretion, for any reason or for no reason, terminate this
Agreement and cancel the Escrow, in which case the Earnest Money Deposit shall
be promptly refunded to Purchaser, and Purchaser shall return to Sellers all
copies (however embodied) of the information and materials delivered to it by
Sellers or Sellers’ agents, and neither Sellers nor Purchaser shall have any
further obligations under this Agreement (except as otherwise provided in this
Agreement).

4.4.3 If Purchaser determines during the Due Diligence Period that the
Properties have one or more Physical Conditions, Purchaser shall provide written
notice to Sellers (each such notification being a “Physical Conditions
Notice”)and, together with the Physical Conditions Notice, deliver to Sellers,
prior to the expiration of the Due Diligence Period, a copy of the Inspection
Report describing the nature of such Physical Conditions. The Physical
Conditions Notice shall describe (i) the Physical Condition (together with the
appropriate reference to the Inspection Report), (ii) the Property affected by
the Physical Conditions, (iii) the estimated cost required to correct each such
Physical Condition (as reasonably determined by Purchaser’s Consultant) and
(iv) if applicable, the estimated diminution in market value of the Property
resulting from the Physical Condition (as reasonably determined by Purchaser).
If Purchaser fails to provide Sellers with a Physical Conditions Notice,
together with the appropriate Inspection Report, during the Due Diligence
Period, Purchaser shall be deemed to have approved such Property in its “as is,
where is” condition as of the expiration of the Due Diligence Period, in each
case subject to ordinary wear and tear and the representations, warranties,
terms and conditions of this Agreement.

4.4.4 Upon receipt of a Physical Conditions Notice, together with the
appropriate Inspection Report from Purchaser, Sellers shall have the option, to
be exercised by written notice to Purchaser (“Physical Conditions Response”)
given within four (4) business days following receipt by Sellers of the Physical
Conditions Notice, together with the Inspection Report: (i) to agree to cure the
Physical Conditions prior to Closing (“Physical Conditions Cure”), (ii) to give
Purchaser a credit (“Physical Conditions Credit”) against the Purchase Price at
Closing in the amount required to cure the Physical Conditions; as reasonably
determined by Seller and set forth in the Physical Conditions Response (but
subject to Purchaser’s reasonable review and reasonable approval only if the
amount proposed by Seller is less than 95% of the amount proposed by Purchaser’s
Consultant), or (iii) refuse to cure any of the Physical Conditions (with the
absence of a response to be deemed an election to refuse to cure any of the
Physical Conditions).

4.4.5 The provisions of Section 4.4.4 notwithstanding, if, after Sellers have
either not responded to a Physical Condition Notice or have given a Physical
Conditions Response in which Sellers agree to either (i) make the Physical
Conditions Cure, or (ii) give

 

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Purchaser a Physical Conditions Credit in an amount equal to the cost to cure
the Physical Conditions, as reasonably determined by Seller (but subject to
Purchaser’s reasonable review and reasonable approval of any such amount only if
the amount proposed by Seller is less than 95% of the amount proposed by
Purchaser’s Consultant) and set forth in the Physical Conditions Response,
additional Physical Conditions remain uncured with respect to any Property,
Purchaser shall have the option either to (x) terminate this Agreement but only
if the remaining Physical Conditions involve a cost to bring any Property into
compliance with law and into a condition that is safe and suitable for the
operation of a Hotel use (“Remediation Cost”) of (1) $1,000,000 or more with
respect to a single Property or (2) $2,500,000 or more in the aggregate with
respect to all Properties (the “Threshold Remediation Costs”) or (y) consummate
the transactions contemplated hereby, notwithstanding such Physical Conditions,
without any abatement or reduction in the Purchase Price, except to the extent
of any Physical Conditions Credit or Physical Conditions Cure otherwise agreed
to by Seller as provided above. Purchaser shall make such election by written
notice to Sellers before the expiration of the Due Diligence Period. A failure
by Purchaser to give notice of its election in accordance with clause (x) of
this Section shall be deemed an election by Purchaser to proceed to Closing.
Notwithstanding any provision herein to the contrary, if Purchaser has elected
to terminate this Agreement pursuant to the provisions of this Section 4.4.5,
Seller shall have the right by notice given to Purchaser by not later than two
(2) business days following such election by Purchaser, to agree to give
Purchaser a credit at Closing in the amount by which any Remediation Cost
exceeds the Threshold Remediation Costs, whereupon Purchaser’s termination
notice shall be deemed revoked, Purchaser shall proceed to Closing and at
Closing Seller shall provide Purchaser with a credit against the Purchase Price
in the amount of such excess Remediation Costs, including any Physical
Conditions Credit previously agreed to by Seller.

4.5 PIP Escrows. Certain Property Improvement Plan (“PIP”) work required
pursuant to the respective existing Franchise Agreements for the Ontario
Property (the “Ontario PIP Work”) and the HS Anaheim Property (the “HS Anaheim
PIP Work”) has not yet been completed. To the extent that any of such Ontario
PIP Work or HS Anaheim PIP Work has not been completed by the Closing Date, in
lieu of Seller completing such Ontario PIP Work, Seller shall elect, at Seller’s
option, either to (a) provide Purchaser with a credit against the Purchase Price
for the amount of such uncompleted Ontario PIP Work and/or HS Anaheim PIP Work
or (b) (i) assign all of the contracts for the performance of the Ontario PIP
Work to Purchaser, and (ii) fund the Ontario PIP Work and/or HS Anaheim PIP Work
by depositing 105% of the amount remaining to be funded to complete such Ontario
PIP Work and/or HS Anaheim PIP Work (as reasonably determined by Seller, based
upon existing construction contracts, purchase orders and other reasonable
evidence of the cost of completing such PIP Work, in an escrow (either the
“Ontario PIP Escrow” or the “HS Anaheim PIP Escrow”) created pursuant to the
Ontario PIP Escrow Agreement or the HS Anaheim PIP Escrow Agreement,
respectively, and Purchaser shall be entitled to draw upon the respective PIP
Escrow to complete the respective PIP Work; provided, however, that, after
completion of such respective PIP Work, any funds in the respective PIP Escrow
which have not been expended shall be promptly returned to Seller, Seller
covenants that any and all of the Anaheim PIP Work and/or Ontario PIP Work
completed by Seller shall be completed in accordance with all specifications and
requirements of the applicable PIP and otherwise in a good and workmanlike
manner. This covenant shall survive the Closing.

 

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4.6 Condition of the Property. SUBJECT TO THE EXPRESS PROVISIONS OF THIS
AGREEMENT AND EXCEPTING ALL REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY
SET FORTH IN THIS AGREEMENT OR ANY DOCUMENT DELIVERED AT CLOSING:

(a) BY ENTERING INTO THIS AGREEMENT, PURCHASER HAS AGREED TO, AND WILL, PERFORM
(AND PURCHASER REPRESENTS AND WARRANTS TO SELLERS THAT PURCHASER IS CAPABLE OF
PERFORMING) A SOPHISTICATED, EXPERT, THOROUGH AND INDEPENDENT INVESTIGATION,
ANALYSIS AND EVALUATION OF THE LAND AND THE PROPERTY. PRIOR TO THE EXPIRATION OF
THE DUE DILIGENCE PERIOD, PURCHASER WILL HAVE DETERMINED, SUBJECT TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT, THAT THE LAND AND THE PROPERTY ARE ACCEPTABLE
TO PURCHASER. PRIOR TO THE EXPIRATION OF THE DUE DILIGENCE PERIOD, PURCHASER
WILL HAVE CONDUCTED ITS OWN THOROUGH AND INDEPENDENT INSPECTION, INVESTIGATION,
ANALYSIS AND EVALUATION OF ALL INSTRUMENTS, RECORDS AND DOCUMENTS WHICH
PURCHASER MAY DETERMINE TO BE APPROPRIATE OR ADVISABLE TO REVIEW IN CONNECTION
WITH PURCHASER’S ACQUISITION OF THE PROPERTY AND THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT, AND PURCHASER WILL EITHER HAVE DETERMINED, SUBJECT TO THE
TERMS AND CONDITIONS OF THIS AGREEMENT, THAT THE INFORMATION AND DATA CONTAINED
THEREIN OR EVIDENCED THEREBY ARE SATISFACTORY TO PURCHASER, OR TERMINATED THIS
AGREEMENT PRIOR TO THE EXPIRATION OF THE DUE DILIGENCE PERIOD.

(b) PURCHASER ACKNOWLEDGES THAT SELLERS ARE NOT THE DEVELOPERS OR THE ORIGINAL
OWNERS OF THE REAL PROPERTY OR THE HOTELS. PURCHASER FURTHER ACKNOWLEDGES THAT,
PRIOR TO THE EXPIRATION OF THE DUE DILIGENCE PERIOD, PURCHASER WILL HAVE
THOROUGHLY INSPECTED AND EXAMINED, AND, FAILING A TERMINATION OF THIS AGREEMENT
PURSUANT TO SECTION 4.4, UNCONDITIONALLY AND IRREVOCABLY APPROVED, ALL ELEMENTS
COMPRISING THE LAND AND THE PROPERTY, AND ALL FACTORS RELATED TO THEIR USE AND
OPERATION. PURCHASER HEREBY RELEASES AND FOREVER DISCHARGES SELLERS FROM ANY AND
ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES OR OBLIGATIONS ARISING OUT OF OR IN ANY
WAY RELATED TO ALL OF THE ITEMS LISTED IN THIS SECTION, WHICH RELEASE AND
DISCHARGE FROM LIABILITY SHALL SURVIVE THE CLOSE OF ESCROW.

(c) PURCHASER ACKNOWLEDGES AND AGREES THAT PURCHASER’S FAILURE TO TERMINATE THIS
AGREEMENT AND CANCEL THE ESCROW PRIOR TO THE EXPIRATION OF THE DUE DILIGENCE
PERIOD

 

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SHALL BE CONCLUSIVELY DEEMED PURCHASER’S AFFIRMATION THAT IT HAS COMPLETED ITS
INVESTIGATIONS AND DUE DILIGENCE REVIEW OF THE LAND AND THE PROPERTY AND HAS
APPROVED THE CONDITION AND STATE THEREOF.

(d) PURCHASER FURTHER ACKNOWLEDGES THAT PURCHASER HAS SUBSTANTIAL EXPERIENCE
WITH REAL PROPERTY, HOTELS AND HOTEL OPERATIONS, AND THAT PURCHASER WILL ACQUIRE
THE PROPERTY IN “AS IS, WHERE IS, WITH ALL FAULTS” CONDITION, AND SOLELY IN
RELIANCE ON PURCHASER’S OWN INSPECTION AND EXAMINATION AND SELLERS’
REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN. PURCHASER WAIVES ANY OBLIGATION
ON THE PART OF SELLERS, OR ANY OTHER PERSON, TO DISCLOSE ANY DEFECTS OR OTHER
DEFICIENCIES OR LIABILITIES IN OR WITH RESPECT TO THE PROPERTY.

(e) IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT SELLERS MAKE NO REPRESENTATIONS,
WARRANTIES OR GUARANTIES OF ANY KIND, NATURE OR SORT, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PHYSICAL CONDITION, PAST, PRESENT OR FUTURE OPERATION AND/OR
PERFORMANCE, OR VALUE, OF ANY PROPERTY. SELLERS CONVEY THE PROPERTY TO PURCHASER
“AS IS AND WHERE IS, WITH ALL FAULTS,” AND PURCHASER ACKNOWLEDGES THAT SELLERS
MAKE NO REPRESENTATIONS, GUARANTIES OR WARRANTIES WHATSOEVER, EXPRESS OR
IMPLIED, AS TO THE QUALITY, CHARACTER, EXTENT, PERFORMANCE, CONDITION OR
SUITABILITY OF THE PROPERTY FOR ANY PURPOSE. PURCHASER ACKNOWLEDGES THAT
PURCHASER SHALL BE SOLELY RESPONSIBLE AND LIABLE FOR ASCERTAINING THE
TRANSFERABILITY OF ALL LICENSES, PERMITS AND OTHER GOVERNMENTAL CONSENTS FOR THE
OWNERSHIP, USE AND OPERATION OF THE PROPERTY, AND SHALL BE SOLELY RESPONSIBLE
FOR OBTAINING THE TRANSFERS THEREOF, PROVIDED SELLER SHALL USE COMMERCIALLY
REASONABLE EFFORTS (BUT AT NO COST TO SELLER) TO COOPERATE WITH AND ASSIST
PURCHASER IN OBTAINING THE TRANSFER OF OR NEW LICENSES, PERMITS AND CONSENTS AS
NECESSARY.

(f) PURCHASER’S INSPECTION, INVESTIGATION AND SURVEY OF THE LAND AND THE
PROPERTY, DURING THE DUE DILIGENCE PERIOD, SHALL BE IN LIEU OF ANY NOTICE OR
DISCLOSURE REQUIRED BY SECTION 25359.7 OF THE CALIFORNIA HEALTH AND SAFETY CODE,
OR BY ANY OTHER PROVISION OF THE CALIFORNIA CIVIL CODE, OR PURSUANT TO ANY OTHER
APPLICABLE LAW, INCLUDING, WITHOUT LIMITATION, LAWS REQUIRING DISCLOSURE BY
SELLER OF FLOOD, FIRE, MOLD, SEISMIC HAZARDS, LEAD PAINT, MELLO ROOS, LANDSLIDE
AND LIQUEFACTION, OTHER GEOLOGICAL HAZARDS, RAILROAD AND OTHER UTILITY ACCESS,

 

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SOIL CONDITIONS AND OTHER CONDITIONS WHICH MAY AFFECT THE USE OF THE REAL
PROPERTY, AND PURCHASER HEREBY WAIVES ANY REQUIREMENT FOR A NOTICE PURSUANT TO
THOSE PROVISIONS AND HEREBY ACKNOWLEDGES AND AGREES THAT IT IS FAMILIAR WITH
SUCH DISCLOSURE REQUIREMENTS AND WILL CONDUCT ITS OWN DUE DILIGENCE WITH RESPECT
TO ALL MATTERS COVERED THEREBY, AND HEREBY RELEASES SELLERS FROM LIABILITY IN
CONNECTION WITH ANY SUCH MATTERS THAT ARE NOT THE SUBJECT OF ANY OF SELLERS’
REPRESENTATIONS AND WARRANTIES. PURCHASER SHALL BE DEEMED TO HAVE APPROVED ALL
CONDITIONS PERTAINING TO THE PROPERTY UNLESS IT CANCELS THE ESCROW IN ACCORDANCE
HEREWITH ON OR BEFORE THE END OF THE DUE DILIGENCE PERIOD.

(g) PURCHASER ALSO ACKNOWLEDGES AND AGREES THAT, ALTHOUGH SELLERS HAVE PROVIDED
TO PURCHASER CERTAIN REPORTS, STUDIES AND SURVEYS FOR OR REGARDING THE REAL
PROPERTY (“REPORTS”), SELLERS HAVE NOT VERIFIED THE ACCURACY THEREOF AND MAKES
NO REPRESENTATIONS OR WARRANTIES REGARDING THE MATTERS SET FORTH THEREIN, IT
BEING THE RESPONSIBILITY OF PURCHASER TO VERIFY THE ACCURACY OF SUCH REPORTS.
PURCHASER HEREBY RELEASES AND FOREVER DISCHARGES SELLERS FROM ANY AND ALL
CLAIMS, LOSSES, DAMAGES, LIABILITIES OR OBLIGATIONS ARISING OUT OF OR IN ANY WAY
RELATED TO ALL OF THE ITEMS LISTED IN THIS PARAGRAPH, WHICH RELEASE AND
DISCHARGE FROM LIABILITY SHALL SURVIVE THE CLOSE OF ESCROW.

(h) FURTHERMORE, PURCHASER ACKNOWLEDGES THAT SELLERS HAVE NOT AND DO NOT MAKE
ANY REPRESENTATIONS OR WARRANTIES IN CONNECTION WITH THE PRESENCE OR INTEGRATION
OF HAZARDOUS MATERIALS UPON OR WITHIN THE REAL PROPERTY. IN THAT REGARD,
PURCHASER WILL, PRIOR TO THE EXPIRATION OF THE DUE DILIGENCE PERIOD, CONDUCT ITS
OWN INVESTIGATION AND OBTAIN ITS OWN ENVIRONMENTAL ASSESSMENT REPORT TO
DETERMINE IF THE REAL PROPERTY CONTAINS ANY HAZARDOUS MATERIALS OR TOXIC WASTE,
MATERIALS, DISCHARGE, DUMPING OR CONTAMINATION, WHETHER SOIL, GROUNDWATER OR
OTHERWISE, WHICH VIOLATES ANY FEDERAL, STATE, LOCAL OR OTHER GOVERNMENTAL LAW,
REGULATION OR ORDER OR REQUIRES REPORTING TO ANY GOVERNMENTAL AUTHORITY.

(i) PURCHASER, FOR ITSELF AND ITS OWNERS, SUCCESSORS AND ASSIGNS, HEREBY
RELEASES AND FOREVER DISCHARGES SELLERS, AND THEIR PAST, PRESENT AND FUTURE
MEMBERS, AFFILIATES, EMPLOYEES, AGENTS, ATTORNEYS, ASSIGNS, AND
SUCCESSORS-IN-INTEREST FROM ALL PAST, PRESENT AND FUTURE CLAIMS, DEMANDS,
OBLIGATIONS, LOSSES AND CAUSES OF ACTION OF ANY NATURE WHATSOEVER, WHETHER NOW

 

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KNOWN OR UNKNOWN, DIRECT OR INDIRECT, FORESEEN OR UNFORESEEN, SUSPECTED OR
UNSUSPECTED, WHICH ARE BASED UPON OR ARISE OUT OF OR IN CONNECTION WITH THE
CONDITION OF THE LAND OR THE PROPERTY, THE MATTERS ADDRESSED IN SUBSECTIONS (a),
(b), (c), (d) AND (e) OF THIS SECTION 4.4.56, AND WITH RESPECT TO THE PRESENCE
OF ANY HAZARDOUS MATERIALS, ANY ENVIRONMENTAL DAMAGES OR ENVIRONMENTAL
REQUIREMENTS, INCLUDING, WITHOUT LIMITATIONS, THE PHYSICAL, STRUCTURAL,
GEOLOGICAL, MECHANICAL AND ENVIRONMENTAL (SURFACE AND SUBSURFACE) CONDITION OF
THE REAL PROPERTY (INCLUDING THE IMPROVEMENTS THEREON) OR ANY LAW OR REGULATION
RELATING TO HAZARDOUS MATERIALS. WITHOUT LIMITING THE FOREGOING, THIS RELEASE
SPECIFICALLY APPLIES TO ALL LOSSES AND CLAIMS ARISING UNDER THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, THE
SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT OF 1986, (42 U.S.C. SECTIONS 9601
ET SEQ.), THE RESOURCES CONSERVATION AND RECOVERY ACT OF 1976, (42 U.S.C.
SECTIONS 6901 ET SEQ.), THE CLEAN WATER ACT, (33 U.S.C. SECTIONS 466 ET SEQ.),
THE SAFE DRINKING WATER ACT, (14 U.S.C. SECTION 1401-1450), THE HAZARDOUS
MATERIALS TRANSPORTATION ACT, (49 U.S.C. SECTIONS 1801 ET SEQ.), THE TOXIC
SUBSTANCE CONTROL ACT, (15 U.S.C. SECTIONS 2601-2629), THE CALIFORNIA HAZARDOUS
WASTE CONTROL LAW, (CALIFORNIA HEALTH AND SAFETY CODE SECTIONS 25100-25600), THE
PORTER-COLOGNE WATER QUALITY CONTROL ACT (CALIFORNIA HEALTH AND SAFETY CODE
SECTIONS 13000 ET SEQ.), AND ANY OTHER FEDERAL, STATE OR LOCAL LAW OF SIMILAR
EFFECT, AS WELL AS ANY AND ALL COMMON LAW CLAIMS. IN ACCORDANCE WITH THE
FOREGOING, PURCHASER WAIVES ALL RIGHTS UNDER CALIFORNIA CIVIL CODE SECTION 1542
(AND ALL SIMILAR STATUTES IN ALL OTHER STATES) WHICH STATES IN FULL AS FOLLOWS:

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

BY INITIALING THIS AGREEMENT CLAUSE, PURCHASER ACKNOWLEDGES THAT THIS SECTION
HAS BEEN READ AND FULLY UNDERSTOOD, AND THAT PURCHASER HAS HAD THE CHANCE TO ASK
QUESTIONS OF ITS COUNSEL ABOUT ITS MEANING AND SIGNIFICANCE.

 

LOGO [g41615img005.jpg]

PURCHASER’S INITIALS

 

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(j) “Environmental Damages” means all claims, judgments, damages, losses,
penalties, fines, liabilities (including strict liability), encumbrances, liens,
costs, and expenses of investigation and defense of any claim, whether or not
such claim is ultimately defeated, and of any good faith settlement of judgment,
of whatever kind or nature, contingent or otherwise matured or unmatured,
foreseeable or unforeseeable, including without limitation reasonable attorneys’
fees and disbursements and consultants’ fees, any of which are incurred at any
time as a result of the existence of Hazardous Materials upon, about, beneath
the Real Property or migrating or threatening to migrate to or from the Real
Property, or the existence of a violation of Environmental Requirements
pertaining to the Real Property, regardless of whether the existence of such
Hazardous Materials or the violation of Environmental Requirements arose prior
to the present ownership or operation of the Real Property.

(k) “Environmental Requirements” means all applicable present and future
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises, and similar items, of
all governmental agencies, departments, commissions, boards, bureaus, or
instrumentalities of the United States, states and political subdivisions
thereof and all applicable judicial, administrative, and regulatory decrees,
judgments, and orders relating to the protection of human health or the
environment.

(1) “Hazardous Materials” means mold, mildew, and any substance (i) the presence
of which requires investigation or remediation under any federal, state or local
statute, regulation, ordinance or policy; or (ii) which is defined as a
“hazardous waste” or “hazardous substance” under any federal, state or local
statute, regulation or ordinance, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and the Resource Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.) and amendments thereto and regulations promulgated thereunder; or
(iii) which is toxic, explosive, corrosive, infectious or otherwise hazardous or
is regulated by any federal, state or local governmental authority; or
(iv) without limitation which contains polychlorinated biphenyls (PCBs),
asbestos or urea formaldehyde.

The provisions of this Section 4.6 shall survive the Close of Escrow.

V.

CLOSING

5.1 Closing Date. The “Closing Date” for purposes of this Agreement shall be the
date which is the first business day thirty (30) days after the expiration of
the Due Diligence Period, or such earlier or later date as may be agreed upon,
in writing, by Sellers and Purchaser, and shall be the date on which the Close
of Escrow occurs, provided, however, that at the written request of Purchaser
made not later than five (5) business prior to the original Closing Date, the
Closing Date may be extended by up to fifteen (15) calendar days, (i) if
Purchaser determines that such extension is reasonably necessary in order to
finalize Purchaser’s assumption of the

 

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Existing Indebtedness, or (ii) if Purchaser determines that such extension is
reasonably necessary in order to finalize Purchaser’s financing for the purchase
of the Property, provided that in the case of an extension pursuant to
subsection (ii), Purchaser shall be required to increase the Earnest Money
Deposit by $2,000,000 in order to obtain such extension. The “Close of Escrow”
for purposes of this Agreement is defined as the time when the Grant Deeds are
recorded in the Official Records, by Escrow Holder. In the event the Escrow and
this Agreement are canceled and terminated, upon Escrow Holder’s request,
Sellers shall pay to Escrow Holder all title and escrow cancellation charges;
provided, however, that as an agreement between the parties not to concern
Escrow Holder, it is agreed that if termination of the Escrow is caused by the
default of one party then such party shall be responsible for all escrow and
title cancellation charges, and if the termination occurs where neither party is
in default or where both parties are in default, then each party shall be
responsible for one-half (1/2) of all title and Escrow cancellation charges.

5.2 Action Prior to the Close of Escrow by Seller. Sellers agree that, provided
Purchaser has complied with its obligations under Section 5.3 hereof, on or
before 11:00 a.m. California time on the business day immediately preceding the
Closing Date, Sellers will deposit with Escrow Holder such funds and other items
and instruments (executed and acknowledged, if appropriate) as may be necessary
in order for Escrow Holder to comply with this Agreement, including, without
limitation, the following:

(a) For each Property, a grant deed in the form and content attached hereto as
Exhibit “F”, prepared and executed by Seller and acknowledged before a Notary
Public in the manner provided under the laws of the State of California,
reflecting the sale and transfer to Purchaser of the Real Property and the
Improvements, (“Grant Deed”).

(b) For each Property, two (2) duplicate originals of a Bill of Sale, in the
form and content attached hereto as Exhibit “G”, prepared and executed by
Seller, assigning, conveying and transferring to Purchaser the Personal Property
and the Inventory (“Bill of Sale”);

(c) For each Property, two (2) duplicate originals of an Assignment of
Intangible Property, in the form and content attached hereto as Exhibit “H”,
prepared and executed by Seller, assigning and conveying to Purchaser, at no
cost or expense to Sellers, and without representation or warranty, all of
Seller’s right, title and interest in the Intangible Property (“Assignment of
Intangibles”);

(d) For each Property, two (2) duplicate originals of an Assignment and
Assumption of Contracts (which shall include an assignment of any leases if
applicable), in the form and content attached hereto as Exhibit “I”, prepared
and executed by Seller, assigning and conveying to Purchaser, at no cost or
expense to Sellers, and without representation or warranty, all of Seller’s
right, title and interest under the Contracts and any applicable leases
(“Assignment of Contracts”);

(e) For each Property, a Non-Foreign Affidavit signed by Seller in the form to
be prepared by Escrow Holder (“Non-Foreign Affidavit”);

 

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(f) For the Ontario Property, three (3) originals of the Ontario PIP Escrow
Agreement, if applicable;

(g) For the HS Anaheim Property, three (3) originals of the Anaheim PIP Escrow
Agreement, if applicable;

(h) A certificate of Seller recertifying all of Seller’s representations and
warranties as true and correct as of Close of Escrow, subject to such
modifications, if any, to the extent permitted under this Agreement;

(i) A closing settlement statement mutually approved by Purchaser and Seller
(the “Settlement Statement”);

(j) The documentation and instruments required of Sellers pursuant to
Section 2.5 hereof to effect the assumption of the Existing Indebtedness by
Purchaser;

(k) Such other funds, instruments or documents as may be reasonably necessary to
effect or carry out the covenants and obligations to be performed by Sellers
pursuant to this Agreement;

(l) Seller’s 1099-S;

(m) Such other instruments or documents as may be reasonably required by the
Title Insurer as necessary to issue the Title Policy, but only to the extent
required pursuant to the provisions of Section 4,4;

(n) Notices to tenants and contract parties notifying such parties of the
transfer of ownership (“Third Party Notices”);

(o) An updated employee census;

(p) Title to all vehicles, duly endorsed over to Purchaser; and

(q) Evidence of termination of the existing management agreement.

5.3 Action Prior to the Close of Escrow by Purchaser. Purchaser agrees that
Purchaser will deposit with Escrow Holder at such time as required to effect
Close of Escrow on the Closing Date, all additional funds (in Good Funds) and/or
documents (executed and acknowledged, if appropriate) which are necessary to
comply with the terms of this Agreement, including without limitation:

(a) The funds referred to in Section 2.2.3 hereof;

(b) For each Property, two (2) fully executed duplicate originals of the
Assignment of Contracts executed by Purchaser;

 

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(c) For each Property, two (2) fully executed duplicate originals of the
Assignment of Intangibles executed by Purchaser;

(d) For the Ontario Property, three (3) originals of the Ontario PIP Escrow
Agreement, if applicable;

(e) For the HS Anaheim Property, three (3) originals of the Anaheim PIP Escrow
Agreement, if applicable;

(f) The Settlement Statement;

(g) The Third Party Notices;

(h) The documents and instruments required of Purchaser pursuant to Section 2.5
hereof to effect the assumption of the Existing Indebtedness by Purchaser; and

(i) Such other funds, instruments or documents as may be reasonably necessary to
effect or carry out the covenants and obligations to be performed by Purchaser
pursuant to this Agreement.

5.4 Recording of Grant Deeds. Escrow Holder will cause the Grant Deeds to be
dated and recorded in the Official Records, and all other conveyance documents
deposited with Escrow Holder dated as of the Closing Date, when (but in no event
after the Closing Date) Title Insurer is irrevocably committed to issue the
Title Policies to be issued to Purchaser as contemplated in this Agreement, and
holds for the account of Sellers and Purchaser the items and funds (if any) to
be delivered to Sellers and Purchaser through the Escrow, after payment of
costs, expenses, disbursements and prorations chargeable to Sellers or Purchaser
pursuant to the provisions of this Agreement. The amount of any documentary
transfer taxes will not be posted on the Grant Deeds, but will be properly
reported by a separate tax affidavit filed by Escrow Holder with each Grant
Deed.

5.5 Prorations.

5.5.1 Taxes. With respect to each Property, all non-delinquent real estate and
personal property general and special taxes and assessments for the Property and
the Land for the current assessment year shall be prorated as of the Closing
Date. It is understood that any supplemental property tax bill issued as a
result of the sale of any Property pursuant to the provisions of this Agreement,
shall be borne by Purchaser. Notwithstanding anything to the contrary in this
Agreement, Sellers shall retain all right, title and interest in and to any and
all property tax (both real property and personal property) refunds and claims
for refunds with respect to the Properties for any period prior to the Closing
Date. Both Seller and Purchaser shall have the right to pursue claims for any
such refunds, with respect to their respective periods of ownership. With
respect to each Property, Purchaser and Sellers shall be equally responsible
for, and shall pay equally, all sales, use and other transfer taxes imposed in
connection with the sale and transfer of the Personal Property, the Inventory
and the Intangible Property.

 

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5.5.2 Advance Reservations. At the Close of Escrow, each Seller shall provide
Purchaser with a schedule of post-closing confirmed Bookings for such Seller’s
Hotel. Purchaser shall honor all such confirmed and Bookings, provided that such
Bookings were booked by Sellers in a manner consistent with normal business
practices.

5.5.3 Utility Service. With respect to each Property, Sellers shall request each
utility company providing utility service to the Real Property to cause all
utility billings to be closed and billed as of the Closing Date in order that
utility charges may be separately billed for the period prior to the Closing
Date and the period on and after the Closing Date. In the event any such utility
charges are not separately billed, the same shall be prorated. In connection
with any such proration, it shall be presumed that utility charges were
uniformly incurred during the billing period in which the Close of Escrow
occurs.

5.5.4 Revenue From Operations. With respect to each Property, all revenues from
Hotel operations, including, without limitation, guest room rentals, revenue
from the minibars (if any), banquet rooms rentals, vending machines, coin
telephones, and other income-producing equipment arising through 12:01 a.m.
California time on the Close of Escrow (“Cut-Off Time”) shall belong to Seller.
All revenues from Hotel operations, including, without limitation, guest room
rentals, revenue from the minibars (if any), banquet rooms rentals, vending
machines, coin telephones, and other income producing equipment arising after
the Cut-Off Time shall belong to Purchaser. Revenue from guest room rentals for
the evening before the date of the Close of Escrow through to the day of the
Close of Escrow shall be allocated one-half (1/2) to Seller and one-half
(1/2) to Purchaser. All prepaid rentals, room rental deposits, and all other
deposits for advance reservations and Bookings for the period after the Cut-Off
Time, shall be credited to Purchaser.

5.5.5 Accounts Payable and Operating Expenses. With respect to each Property,
all obligations and liabilities (for services and materials ordered, or
otherwise in the ordinary course of business) and accounts payable for the Hotel
and the Real Property owing as of the Closing Date for merchandise, equipment,
tour agents’ and travel agents’ commissions, advertisements, supplies and other
materials and services paid, incurred or ordered shall be prorated between
Sellers and Purchaser as of the Closing Date. Sellers shall receive a credit for
all prepaid expenses.

5.5.6 Miscellaneous Permits and Taxes. With respect to each Property, all water
and sewer charges, taxes (other than ad valorem property taxes), including
license taxes or fees for licenses (other than the Liquor Licenses) which are
assignable or transferable without added cost and have a value which will
survive Close of Escrow, including, but not limited to, any unpaid taxes payable
in arrears, shall be prorated as of the Closing Date. Sellers will be credited
for that portion of taxes and fees paid by Sellers allocable to the period after
the Closing Date.

5.5.7 Contracts/Leases. With respect to each Property, all payments and
receipts, as applicable, under the Contracts and any leases shall be prorated
between Purchaser and Seller as of the Closing Date. Sellers shall receive a
credit for all prepayments and deposits sunder any Contracts and Purchaser shall
receive a credit for any security deposits under any leases.

 

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5.5.8 Existing Indebtedness. All accrued but unpaid interest, and all payments
under the Existing Indebtedness shall be prorated between Seller and Purchaser
as of the Closing Date. All deposits, and all sums under impound and held in
reserves, in each case held by the holder of the Existing Indebtedness, shall be
credited to Seller through the Escrow as of the Close of Escrow.

5.5.9 Other Income. With respect to each Property, all other income derived by
Seller from the Property accruing or relating to the period up to and including
the Cut-Off-Time shall be paid to Seller. All other income derived by Seller
from the Property accruing or relating to the period on and after the
Cut-Off-Time shall be paid to Purchaser.

5.5.10 Other Expenses. With respect to each Property, all other expenses and
obligations not otherwise specified in this Section 5.5 incurred in the
ownership of the Property and operation of the Hotel shall be prorated between
Seller and Purchaser as of the Closing Date.

5.5.11 Ticket and Gift Shop Inventory. With respect to each Property, Seller
shall receive a credit for all theme park and other then currently valid ticket
and admission passes, as well as all gift shop inventory, held by Seller for
sale at the Hotel, in an amount equal to Seller’s actual cost thereof.

5.5.12 House Banks. With respect to each Property, on the Close of Escrow, in
addition to the Purchase Price, Seller shall receive a credit through the Escrow
for an amount equal to all till money, cash-on-hand, and all sums in house banks
for the Hotel, in which case all right, title and interest to the till money,
cash-on-hand and house banks shall be assigned and conveyed by Seller to
Purchaser. In the event Seller and Purchaser are unable to agree upon the amount
of the till money, cash-on-hand and house banks, the provisions of this
Section 5.5.12 shall be inapplicable, and title to the till money, cash-on-hand
and house banks shall remain with Seller. The failure of Purchaser and Seller to
agree on the amounts of the till money, cash-on- hand and house banks shall not
be deemed a condition precedent to the obligations of Seller and Purchaser under
this Agreement.

5.5.13 Delayed Adjustments. If, at any time following the Closing Date, the
amount of an item listed in this Section 5.5 shall prove to be incorrect, the
party in whose favor the error was made shall pay to the other party within
fifteen (15) days after request the sum necessary to correct such error upon
receipt of proof of such error, provided that such proof is delivered to the
party from whom payment is requested on or before one hundred fifty (150) days
after the Close of Escrow. The acceptance of the closing statement by either
party shall not prevent later readjustment pursuant to this Section 5.5.13.
After the Close of Escrow, each party shall have reasonable access to the books
and records of the other party with respect to all matters set forth in this
Section 5.5 for the purposes of determining the accuracy of all adjustments and
the performance of the obligations of the parties under this Section 5.5.

 

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5.5.14 Proration Allocation. For proration purposes, the date of the Close of
Escrow shall be charged to Purchaser.

5.5.15 Survival. The provisions of this Section 5.5 shall survive the Close of
Escrow.

5.6 Guest Property. With respect to each Property, property of guests of the
Hotel in Seller’s care, possession or control (excluding that in guest rooms) on
the Closing Date shall be handled in the following manner:

5.6.1 Safe Deposit Boxes. On the day prior to the Closing Date, Seller shall
send written notice to guests in the Hotel who have safe deposit boxes advising
them of the sale of the Hotel to Purchaser and the procedures to be followed
pursuant to this Section 5.6.1. On the Closing Date, Seller shall deliver to
Purchaser all keys to the safe deposit boxes in the Hotel, all receipts and
agreements relating to such safe deposit boxes, and a complete list of the name
and room number of each depositor. Each box in use by a Hotel guest shall then
be sealed by representatives of Seller and Purchaser. At Purchaser’s option,
guests may be requested to remove and verify the contents of the sealed boxes
prior to the Close of Escrow. All such removals and verifications shall be under
the supervision of a representative to be agreed upon between Purchaser and
Seller. Purchaser shall be responsible for all boxes once the seal is broken,
and for the contents of all boxes which are verified. Seller shall be
responsible for any claims pertaining to any property allegedly deposited in a
safe deposit prior to the Closing Date, the seal of which was not broken. Each
of Seller and Purchaser shall indemnify and hold the other harmless from and
against all claims and losses arising from such indemnifying party’s obligations
under this Section 5.6.1.

5.6.2 Baggage Inventory. All guest baggage and other guest property checked and
left in the possession, care and control of Seller shall be listed in an
inventory to be prepared in duplicate and signed by Seller’s and Purchaser’s
representatives on the Closing Date. Purchaser shall be responsible from and
after the Closing Date for all baggage (and the contents thereof) and other
guest property listed in inventory. Purchaser agrees to indemnify and save and
hold Seller harmless from and against any claim arising out of or with respect
to the baggage listed in the inventory, and Seller agrees to indemnify and save
and hold Purchaser harmless from and against any claim arising prior to the
Closing Date out of or with respect to any guest baggage or other guest property
not listed in the inventory.

5.7 Closing Costs. Seller shall pay for the cost of the premium for the C.L.T.A
coverage under the Title Policy, and Purchaser shall pay the cost of that
portion of the premium for the Title Policy which is applicable to the A.L.T.A.
extended coverage Title Policy for the Real Property and the Improvements, and
shall also pay all additional costs for acquiring any additional endorsements to
the Title Policy not otherwise included with a C.L.T.A. Owner’s Policy of Title
Insurance (standard coverage) and for the Survey (or the updating thereof).
Purchaser and Seller shall each pay one-half (1/2) of the documentary transfer
taxes and the recording fee for the Grant Deed. Each of Seller and Purchaser
shall pay one-half (1/2) of all escrow fees for that portion of the Escrow
pertaining to the sale of the Property.

 

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5.8 California Real Estate Withholding. Sellers and Purchaser appoint Escrow
Holder as the withholding agent for purposes of compliance with California
Revenue and Taxation Code Section 18662. Prior to the Close of Escrow, Sellers
will provide Escrow Holder with all information and documentation reasonably
required to determine the amount, if any, to be withheld from the proceeds of
the sale transaction contemplated herein for payment to the California Franchise
Tax Board pursuant to said Revenue and Taxation Code Section, including
California Form 593-W or California Form 593-C, whichever is applicable to
Sellers as of Close of Escrow.

5.9 Distribution of Funds and Documents Following Close of Escrow. Following
Close of Escrow, Escrow Holder shall distribute the documents as follows:

5.9.1 To Sellers. With respect to each Property:

(a) The cash portion of the Purchase Price as set forth in Section 2.2, less
costs, offsets and prorations in accordance with the provisions of this
Agreement;

(b) A copy of the recorded Grant Deed;

(c) One (1) fully executed duplicate original of the Bill of Sale;

(d) One (1) fully executed duplicate original of the Assignment of Intangibles;

(e) One (1) fully executed duplicate original of the Assignment of Contracts;

(f) One (1) fully executed duplicate original of the Ontario PIP Escrow
Agreement and the HS Anaheim PIP Escrow Agreement, as applicable;

(g) One (1) fully executed duplicate of the Settlement Statement;

(h) One (1) fully executed duplicate of the Third Party Notices;

(i) A copy of the Title Policy issued to Purchaser;

(j) One (1) duplicate original or conformed copy as appropriate, of any other
document to be received by Sellers through Escrow pursuant to the provisions of
this Agreement; and

(k) One (1) copy of any other document delivered to Escrow Holder by Purchaser
or Sellers pursuant to the terms of this Agreement.

5.9.2 To Purchaser.

(a) Any excess funds deposited by Purchaser which remain after disbursement to
Sellers;

 

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(b) One (1) conformed copy of the Grant Deed, the original to be mailed to
Purchaser following the recordation thereof;

(c) One (1) fully executed duplicate original of the Bill of Sale;

(d) One (1) fully executed duplicate original of the Assignment of Intangibles;

(e) One (1) fully executed duplicate original of the Assignment of Contracts;

(f) One (1) fully executed duplicate original of the Ontario PIP Escrow
Agreement and the HS Anaheim PIP Agreement, as applicable;

(g) One (1) fully executed duplicate of the Settlement Statement;

(h) One (1) fully executed duplicate of the Third Party Notices;

(i) One (1) duplicate original or conformed copy as appropriate, of any other
document to be received by Purchaser through Escrow pursuant to the provisions
of this Agreement;

(j) One (1) copy of any other document delivered to Escrow Holder by Purchaser
or Sellers pursuant to the terms of this Agreement; and

(k) The original of the Title Policy.

5.10 Possession. Purchaser shall be entitled to sole possession of each Property
on the Close of Escrow, subject to the possessory rights of any guests of the
Hotel.

VI.

ADDITIONAL COVENANTS AND INDEMNITIES

6.1 Purchaser’s Covenants.

6.1.1 Indemnification. Purchaser covenants to defend, indemnify and hold
harmless Sellers, and their respective affiliates, owners, employees, agents and
representatives, from and against any and all claims, penalties, liabilities,
fines, losses, causes of action, fees, injuries, damages, liens, proceedings,
judgments, actions, rights, demands, costs and expenses (including, without
limitation, reasonable attorneys’ fees and court and litigation costs, but
excluding consequential damages and loss of profits) (a) arising from the acts
and omissions of Purchaser and its agents, employees and contractors occurring
in connection with or as a result of, any inspections, tests or examinations of
or to the Property and the Land, (b) arising from the use, management,
operation, rental, maintenance and ownership of the Property and the Land, based
upon acts, conduct or omissions (other than by Sellers) occurring, on or after
the Closing Date, including, without limitation, with respect to and under the
Contracts, (c) caused by or arising out of any material misrepresentation by
Purchaser in connection with this Agreement, and (d) and arising from any breach
of this Agreement by Purchaser or any instrument or agreement delivered or
required to be delivered pursuant to the provisions of this Agreement, including
under the WARN Act. This indemnity shall survive the Close of Escrow.

 

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6.1.2 Seller’s Accounts Receivable. On the Closing Date, each Seller shall
deliver to Purchaser an update of Seller’s Accounts Receivable list. Thereafter,
Purchaser, upon receipt, shall promptly remit to such Seller all sums received
by Purchaser in payment of any of Seller’s Accounts Receivables. All sums
received by Purchaser from a customer, guest or patron following Closing shall
be credited, unless otherwise designated by the payor, first, to the sums owing
to Purchaser, and then, to the extent any sums remain, to Seller for any
Seller’s outstanding Accounts Receivable . For a period of one (1) year after
the Close of Escrow, Sellers shall have the right, from time to time, to inspect
and audit the books and records of the Hotels that pertain to income and
collections, at Sellers’ sole cost (unless it is determined from such audit or
inspection that Purchaser has withheld any Seller’s Accounts Receivable, then
Purchaser shall pay the costs of such audit and inspection), and Purchaser shall
provide full and complete access thereto to Sellers upon not less than three
(3) business days prior Notice, to verify receipt and payment of Sellers’
Accounts Receivable. All information so obtained by Sellers or their agents
shall be confidential information which shall be disclosed solely on a
need-to-know basis. Nothing in the foregoing shall obligate Purchaser to pursue
the collection of any outstanding Seller Account Receivables and Purchaser shall
have no obligation to Seller to do so.

6.2 Seller Covenants. Each Seller (but solely for itself and its own Property,
and not for any other Seller or any other Property) covenants to Purchaser as
follows:

6.2.1 Indemnification. Seller covenants to defend, indemnify and hold harmless
Purchaser and its affiliates, owners, employees, agents and representatives from
and against any and all claims, penalties, liabilities, fines, losses, causes of
action, fees, injuries, damages, liens, proceedings, judgments, actions, rights,
demands, costs and expenses (including, without limitation, reasonable
attorneys’ fees and court and litigation costs, but excluding consequential
damages and loss of profits) (a) arising from the use, management, rental,
maintenance, ownership and operations of the Property during the period of
Seller’s ownership thereof (except as to, and specifically excluding, the
matters set forth in Section 6.1.1 hereof, Environmental Damages, Environmental
Requirements, and the matters addressed in Section 4.4.5 hereof), (b) arising
under the Contracts and the Franchise Agreement during the period of Seller’s
ownership, (c) caused by or arising out of any material misrepresentation by
Sellers in connection with this Agreement, and (d) arising from any breach of
this Agreement by Seller or any instrument or agreement required to be delivered
or to be delivered pursuant to the provisions of this Agreement. This indemnity
shall survive the Close of Escrow.

6.2.2 Assumption of Franchise Agreement. At Closing, Purchaser shall either
(i) assume the Franchise Agreements or (ii) enter into new franchise agreements
with the same Franchisors, with the original Franchise Agreements being
terminated and Seller being fully released from any liability under the existing
Franchise Agreements. Seller shall terminate, at Seller’s sole cost and expense,
all management agreements affecting each Hotel.

 

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6.2.3 Termination of Management Agreement. At or prior to the Closing Date,
Seller shall terminate, at Seller’s sole cost and expense, the Management
Agreement affecting each Hotel.

6.2.4 Operation of the Hotel. Subject to the terms of this Agreement, Seller,
during the term of this Agreement, shall carry on the business and operations of
the Hotel in substantially the same manner as heretofore carried on by it.
Seller shall pay and perform all of its material obligations and otherwise
comply with all of the material terms and conditions of the covenants and other
agreements of record reflected in the Permitted Exceptions, the Contracts, the
Franchise Agreement, the Existing Indebtedness (and all documents evidencing,
securing or relating to the Existing Indebtedness (including, but not limited
to, causing any guarantors and indemnitors to perform their obligations
thereunder)). Prior to the Closing Date, Seller shall maintain (or replace with
policies of like amounts) all existing insurance policies insuring the Property
and the operation of the Hotel. Seller shall not remove any of the Personal
Property from the Real Property, unless such removal is in the ordinary course
of Seller’s business and Seller replaces the same with like items that are of
equal or better quality and condition. Seller shall maintain the Inventory, the
Food Inventory and the Alcoholic Beverages consistent with Seller’s past
practices, and will replenish the same consistent with its past practices.
Following the Effective Date of this Agreement, Seller may, extend, amend,
modify or terminate any of the existing Contracts, including any leases of
furniture, fixtures or equipment for the Hotel, and may enter into new Contracts
as Seller deems appropriate to operate, service and maintain the Property
consistent with normal business practices, and may enter into new Contracts;
provided, however, (i) that Seller shall not enter into or extend any Contracts
unless terminable on not more than 30 days notice without penalty or fee and
Seller provides Purchaser with a copy of such new Contract or extension of an
existing Contract, and (ii) that so long as Purchaser is not in default of any
of its obligations under this Agreement, (a) from the date of this Agreement to
the Closing Date, Seller shall provide to Purchaser copies of new Contracts, or
any extensions of existing Contracts which Seller has entered into, or intends
to enter into, (b) from and after the expiration of the Due Diligence Period,
Seller shall not, without the written consent of Purchaser which may be withheld
in Purchaser’s sole discretion, enter into (A) any leases of furniture, fixtures
or equipment for the Hotel; or (B) any Contract, which is not made in the
ordinary course of business and is not terminable on not more than 30 days
notice without penalty or fee (provided that, notwithstanding any provision
herein to the contrary, the respective Sellers shall have the continuing right
to enter into Contracts for completion of the Ontario PIP Work and the HS
Anaheim PIP Work, respectively); (c) other than with respect to the sale of Food
Inventory or liquor in the ordinary course of business at the Property, no part
of the Property, or any interest therein, will be sold or otherwise transferred
or encumbered without Purchaser’s prior written consent; (d) without the prior
written approval of Purchaser (which approval shall not be unreasonably withheld
or delayed), Seller shall not make any material alterations to the Property
except to the extent consistent with Ontario PIP and the HS Anaheim PIP,
respectively; and (e) Seller shall pay all of its debts, liabilities and
obligations as and when the same become due. Prior to the earlier of the
termination of this Agreement or the Close of Escrow, and except as contemplated
under Section 2,5 hereof, without Purchaser’s approval (which may be withheld in
its sole and absolute discretion), Seller (A) shall not amend the Existing
Indebtedness or any documents evidencing, securing or otherwise relating to the
Existing Indebtedness, and (B) shall not prepay any part of the Existing
Indebtedness.

 

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6.2.5 Cooperation. Seller shall cooperate with Purchaser in all reasonable
respects, including by executing and delivering necessary or desirable
applications and other documents, to facilitate the issuance and/or transfer of
the Permits and other authorizations in connection with the operation of the
Hotel, including the Liquor Licenses. Purchaser shall promptly reimburse Seller
for all reasonable out-of-pocket expenses incurred by Seller in connection with
such cooperation. Except for the Liquor Licenses which are subject to the
provisions of Section 2.4 above, to the extent any license is not transferable,
but is necessary for any aspect of the operation of the Hotel, Seller shall
cooperate with Purchaser by entering into such arrangements as may be usual and
customary in similar transactions, provided that any such arrangements are in
compliance with all applicable laws, rules and regulations, that Purchaser
promptly reimburses Seller for all reasonable out-of-pocket expenses incurred by
Seller in connection therewith, and that Purchaser indemnifies and holds Seller
harmless from and against any liabilities arising in connection therewith.

6.3 Employee Matters.

6.3.1 On the Closing Date, Seller shall pay all employee salaries, wages, fringe
benefits and other compensation, including any applicable federal, state and
local taxes, for any employees of the Hotel which have accrued up to the Cut-Off
Time. Seller shall terminate all of the Hotel employees effective at 11:00 a.m.
California time on the Closing Date. Subject to the provisions of Section 6.3(b)
hereof, Seller shall indemnify, defend and hold harmless Purchaser against any
and all labor or employment claims, liabilities or obligations (including,
without limitation, attorneys’ fees and costs) which arise or accrue before, or
arise out of events occurring before, the Closing Date, which indemnity shall
survive the Close of Escrow.

6.3.2 As of the Close of Escrow, but effective at 8:00 a.m. California time on
the Closing Date, Purchaser shall hire (or cause its hotel management company to
hire) not less than eighty percent (80%) of the employees of each Hotel.
Purchaser shall indemnify, defend and hold harmless Seller, and its affiliates,
owners and employees, against any and all labor or employment claims,
liabilities and obligations (including, without limitation, attorneys’ fees and
costs) which arise or accrue from or after, or arise out of events occurring
from or after the Close of Escrow, including, without limitation, all claims
arising from the termination by Purchaser of any Hotel employee or personnel
performing services at or for the Hotel, and Purchaser’s decision to continue or
discontinue any employment policy or practice of Seller in existence or effect
at the Hotel prior to the Close of Escrow, which indemnity shall survive the
Close of Escrow. The foregoing indemnity shall survive the Close of Escrow.

6.3.3 Purchaser acknowledges that Seller is not giving any notice under, or
otherwise complying with, the Worker Adjustment and Retraining Notification Act
and/or any applicable state law counterpart (together with all rules and
regulations promulgated thereunder, the “WARN Act”). Purchaser agrees to hire a
sufficient number of the Hotel employees, and on such terms and conditions, as
to avoid any violation of the WARN Act in the absence of such notice, and agrees
to indemnify and defend Seller, and to hold Seller harmless, from and against

 

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any and all loss, damage, liability, claim, cost or expense (including, without
limitation, reasonable attorneys fees) incurred by any of such parties as a
result of the failure to give such notice or otherwise comply with the WARN Act.

6.4 Exclusive Dealings. Purchaser and Seller agree that, in consideration of the
payment of the Earnest Money Deposit, and Purchaser’s projected efforts and
undertakings, and in preparing the necessary legal documentation to complete the
purchase transaction, neither Seller, nor any of its affiliates, agents,
representatives, officers, directors, partners or shareholders, will engage in
any negotiations, or accept any offers, regarding the sale, exchange, or other
conveyance of the Property until the later of the Closing Date, or the date
Purchaser and Seller mutually agree to extend the Closing Date, or such sooner
date as Purchaser terminates this Agreement and cancels the Escrow.

6.5 No Obligations of Escrow Holder. Escrow Holder shall not be concerned with
the provisions of this Article VI.

VII.

REPRESENTATIONS AND WARRANTIES

7.1 Purchaser’s Representations and Warranties. Purchaser represents and
warrants to Seller that as of the date hereof and the Close of Escrow:

7.1.1 Organization and Standing. Purchaser is a Virginia limited partnership,
duly organized, validly existing, and in good standing under the laws of the
State of Virginia, and has the full power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby to be carried
out by it.

7.1.2 Due Authorization. The performance of this Agreement and the transactions
contemplated hereunder by Purchaser have been duly authorized by all necessary
action on the part of Purchaser, and this Agreement is binding on and
enforceable against Purchaser in accordance with its terms. Purchaser shall, on
or prior to the Closing Date, furnish Seller with certified resolutions
evidencing that Purchaser has been duly authorized to enter into and perform
this Agreement and the transactions contemplated hereunder. No further consent
of any shareholder, creditor, board of directors, governmental authority or
other party to such execution, delivery and performance hereunder is required.
The person(s) signing this Agreement, and any document pursuant hereto on behalf
of Purchaser, has full power and authority to bind Purchaser.

7.1.3 Lack of Conflict. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will violate any
restriction, court order, judgment, law, regulation, charter, bylaw, instrument
or agreement to which Purchaser is subject.

7.1.4 Solvency/Bankruptcy. Purchaser has not (i) made any general assignment for
the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or
suffered the filing of an involuntary petition in bankruptcy by Purchaser’s
creditors, (iii) suffered the appointment of a

 

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receiver to take possession of all, or substantially all, of Purchaser’s assets,
(iv) suffered the attachment or other judicial seizure of all, or substantially
all, of Purchaser’s assets, (v) admitted in writing its inability to pay its
debts as they come due, or (vi) made any offer of settlement, extension or
compromise to its creditors generally, and has not considered doing or
undertaking, and has no current plans to do or undertake, any of the foregoing.
Furthermore, Purchaser has not taken, and does not contemplate taking, against
it any such actions.

7.2 Sellers’ Representations and Warranties. Each Seller represents and warrants
(but solely for itself and its own Property, and not for any other Seller or any
other Property) to Purchaser that as of the date hereof and Close of Escrow:

7.2.1 Organization and Standing. Seller is a limited partnership, as reflected
on “Schedule “A” to this Agreement, duly organized under the laws of the State
of Delaware is validly existing, and in good standing under the laws of the
State of California, and has the full power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby to be carried
out by it.

7.2.2 Due Authorization. The performance of this Agreement and the transactions
contemplated hereunder by Seller have been duly authorized by all necessary
action on the part of Seller, and this Agreement is binding on and enforceable
against Seller in accordance with its terms. Seller shall, on or prior to the
Closing Date, furnish Purchaser with certified resolutions evidencing that
Seller has been duly authorized to enter into and perform this Agreement and the
transactions contemplated hereunder. No further consent of any member, manager,
creditor, governmental authority or other party to such execution, delivery and
performance hereunder is required. The person(s) signing this Agreement, and any
document pursuant hereto on behalf of Seller, has full power and authority to
bind Seller.

7.2.3 Lack of Conflict. Neither the execution of this Agreement nor the
consummation of the transactions contemplated herein will violate any
restriction, court order, judgment, law, regulation, charter, bylaw, instrument,
or agreement to which Seller or the Property (or any portion thereof) are
subject.

7.2,4 Non-Foreign Seller. Seller is not a foreign seller as defined in the
“Foreign Investment in Real Property Tax Act.”

7.2.5 Solvency/Bankruptcy. Seller has not (i) made any general assignment for
the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or
suffered the filing of an involuntary petition in bankruptcy by Seller’s
creditors, (iii) suffered the appointment of a receiver to take possession of
all, or substantially all of 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 composition to its creditors
generally, and has not considered doing or undertaking, and has no current plans
to do or undertake any of the foregoing. Furthermore, Seller has not and does
not contemplate taking or having taken against it, any such actions.

 

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7.2.6 Existing Indebtedness. Neither Seller nor any guarantor or indemnitor with
respect to any Existing Indebtedness has received any written notice that it is
in default with respect thereto. All payments currently due on any Existing
Indebtedness have been paid.

7.2.7 Litigation. As of the date hereof, except as set forth on Exhibit “F”
hereto, Seller has not been served with any pending actions, suits,
arbitrations, governmental investigations or other proceedings, and to its best
knowledge, none of the foregoing are pending or threatened against Seller or
affecting the Property before any court or governmental authority.

7.2.8 Condemnation. As of the date hereof, Seller has not been served with
notice of any pending or threatened condemnation actions or special assessments
of any nature with respect to the Property or any part thereof, and has no
knowledge of any of the foregoing being contemplated.

7.2.9 Contracts. All Contracts to which Seller is currently a party (except for
Bookings, gift certificates and similar promotional arrangements), and all
amendments thereto, are listed on Schedule “C” attached hereto. Seller has or
will make available to Purchaser true copies of all such Contracts. All such
Contracts are in full force and effect, and to the best of Seller’s knowledge,
there are no material defaults or events that with notice or the passage of time
or both, would constitute a material default by Seller under any such Contracts,
nor by any other party thereto.

7.2.10 Licenses and Permits. All Permits have been obtained and are in full
force and effect. Seller has made or will make available to Purchaser true
copies of each such Permit. Seller has not received a written notice from any
applicable governmental authority (A) of any violation, default, intended or
threatened non-renewal, suspension or revocation of any of the Permits, the loss
of which would have a material adverse effect on the present use and occupancy
of the Real Property or (B) that it lacks any permits or licenses necessary for
the present use and occupancy of the Real Property.

7.2.11 Real Property Tax Assessments. Seller has received no written notice from
any tax assessor of any proposed increase in real estate taxes with respect to
the Hotel, other than normal fiscal year increases,

7.2.12 Employee Agreements. There are no agreements to which Seller is a party
relating to any labor or collective bargaining agreement affecting the Hotel.
Seller has not received any written notice from any labor union or group of
employees that such union or group represents or believes or claims it
represents or intends to represent any of the employees of Seller nor has it
received any notice of any claim of unfair labor practices. Seller has and shall
maintain through the Closing Date a level of employment at the Hotel that is
sufficient for the normal business operations of the Hotel at standards required
by the Franchise Agreement.

7.2.13 Insurance. Seller has and shall maintain through the Closing Date
insurance policies equivalent in all material respects to those currently
maintained by Seller, which policies are consistent with the requirements of the
lender under the existing financing and under the Franchise Agreement. Seller
has not received any notice of cancellation or threatened cancellation of any
insurance policy applicable to any Property.

 

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7.2.14 Ownership of Personal Property. Except as may otherwise be provided in
any Contracts, Seller is the sole owner of all Personal Property and, at
Closing, none of the Personal Property shall be encumbered by any lien or claim
of any other person or entity, except for the Existing Indebtedness.

7.2.15 Food and Beverage Inventory. Except as may otherwise be provided in any
Contracts, all Food and Beverage Inventory is free and clear of any lien or
claim, except for the Existing Indebtedness.

7.2.16 Violations. Seller has received no written notice of any violation of any
laws, including environmental laws with respect to any Property that has not
been cured as required by law.

7.2.17 No Offers. Seller has not granted any right to purchase, option or other
right with respect to any Property.

Wherever the phrase “to Seller’s knowledge” or any similar phrase stating or
implying a limitation on the basis of knowledge appears in this Agreement,
unless specifically otherwise qualified, such phrase shall mean only the present
actual knowledge of Thomas J. Baltimore, Jr. and of Howard Isaacson, Senior Vice
President, Asset Management, without any duty of inquiry, any imputation of the
knowledge of another to him, or independent investigation of the relevant matter
by any of such individual(s), and without any personal liability. Wherever the
phrase “in Seller’s possession”, “in the possession of Seller” or similar phrase
appears in this Agreement, such phrase shall be deemed to mean only to the
extent the material or other item referred to by such phrase is located at the
Hotel or in Seller’s offices in Bethesda, Maryland. Notwithstanding any
provision of this Agreement to the contrary, should any of the foregoing
representations and warranties of Seller become false or inaccurate prior to the
Close of Escrow, and provided Seller discloses the same to Purchaser, in
writing, prior to the Close of Escrow, and provided any such representation or
warranty was not knowingly false when made or made to be false or inaccurate
through acts or omissions of Seller prior to Closing, then Purchaser’s sole
recourse shall be to either (i) terminate this Agreement and cancel the Escrow,
in which case the Earnest Money Deposit shall be returned to Purchaser and
neither Seller nor Purchaser will have any further liability or obligation under
this Agreement (except for those obligations which survive in accordance with
their terms), or (ii) proceed with the closing, without reservation, in which
case Purchaser shall be deemed to have waived all claims against Sellers with
respect to such false or inaccurate representation and warranty. If any such
representation or warranty was knowingly false when made or made to be false or
inaccurate through intentional acts or omissions of Seller prior to Closing,
then Purchaser shall be entitled to all damages (and subject to all limitations)
available to Purchaser as provided in this Agreement for a default of Seller
hereunder.

 

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VIII.

CONDITIONS PRECEDENT TO CLOSE OF ESCROW

8.1 Conditions to Seller’s Obligations. The obligation of Sellers to close the
Escrow shall be subject to the satisfaction or Notice of its waiver (delivered
to Purchaser and Escrow Holder), in whole or in part, by Sellers of each of the
following conditions precedent:

(a) Except by reason of a default by Sellers, Escrow Holder is in a position to
and will deliver to Sellers the instruments and funds accruing to Sellers
pursuant to the provisions of this Agreement;

(b) There is no existing uncured material breach of any of the covenants,
representations, warranties or obligations of Purchaser set forth in this
Agreement that has not been waived by Seller;

(c) Purchaser shall have assumed the Existing Indebtedness and Seller and
Seller’s guarantor shall have been released therefrom; and

(d) With respect to each Property, Seller has been released from all obligations
under the Franchise Agreement by the franchisor thereunder, provided, Seller
covenants to take all steps reasonably required by the franchisor for such
release and, to the extent this condition fails due to Seller’s failure to
execute and deliver franchisors’ customary termination agreements (which may
include, but not be limited to, a general release of the applicable franchisor
by the applicable Seller) and perform customary obligations thereunder (which
may include, but not be limited, paying any fees accrued under the franchise
agreements through the date of closing), Seller shall be deemed to be in default
under this Agreement, unless Seller otherwise waives this condition.

The foregoing conditions contained in this Section 8.1 are intended solely for
the benefit of Sellers. Sellers shall at all times have the right to waive any
condition precedent, provided that such waiver is in writing and delivered to
Purchaser and Escrow Holder.

8.2 Conditions to Purchaser’s Obligations. The obligations of Purchaser to close
the Escrow shall be subject to the satisfaction or Notice of its waiver
(delivered to Sellers and Escrow Holder), in whole or in part, by Purchaser of
each of the following condition precedent:

(a) Except by reason of a default by Purchaser, Escrow Holder is in a position
to and will deliver to Purchaser the instruments and funds, if any, accruing to
Purchaser pursuant to the provisions of this Agreement;

(b) If Purchaser is entering into new franchise agreements, the Franchise
Agreements have been terminated, effective as of the Closing Date, at no cost or
expense to Purchaser;

 

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(c) There is no existing uncured material breach of any of the covenants,
representations, warranties or obligations of Sellers set forth in this
Agreement that has not been waived by Purchaser; and.

(d) The assumption of the Existing Indebtedness has been approved by the lender.

The foregoing conditions contained in this Section 8.2 are intended solely for
the benefit of Purchaser. Purchaser shall at all times have the right to waive
any condition precedent, provided that such waiver is in writing and delivered
to Seller and Purchaser.

8.3 Failure of Conditions to Close of Escrow. Escrow Holder shall be responsible
for confirming, on or before the Close of Escrow, that the conditions to the
Close of Escrow set forth in Sections 8.1 and 8.2 hereof, and as set forth
elsewhere in this Agreement, have been satisfied. Purchaser and Sellers hereby
agree to deliver their Notices to Escrow Holder, on or before the Close of
Escrow; of the satisfaction or waiver of all other conditions to the Close of
Escrow hereunder, and, in the event that both Purchaser and Sellers specifically
notify and instruct Escrow Holder, in writing, to proceed to the Close of Escrow
hereunder, all such other conditions to the Close of Escrow hereunder that are
not otherwise satisfied shall be deemed to have been waived by both Purchaser
and Sellers Escrow Holder shall not proceed to the Close of Escrow hereunder
unless both Purchaser and Sellers specifically notify and instruct Escrow Holder
to do so.

IX.

LIQUIDATED DAMAGES

9.1 Default by Purchaser. IN THE EVENT THE CLOSING AND THE CONSUMMATION OF THE
TRANSACTION HEREIN CONTEMPLATED DOES NOT OCCUR AS HEREIN PROVIDED BY REASON OF
ANY MATERIAL DEFAULT OF PURCHASER, PURCHASER AND SELLERS AGREE THAT IT WOULD BE
IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLER MAY
SUFFER. THEREFORE, PURCHASER AND SELLERS DO HEREBY AGREE THAT A REASONABLE
ESTIMATE OF THE TOTAL DAMAGES THAT SELLERS WOULD SUFFER IN THE EVENT THAT
PURCHASER DEFAULTS AND FAILS TO COMPLETE THE PURCHASE OF THE PROPERTY IS AND
SHALL BE, AS SELLERS’ SOLE AND EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY),
AN AMOUNT EQUAL TO THE EARNEST MONEY DEPOSIT, (OR THE PORTION THEREOF REQUIRED
TO BE DEPOSITED INTO THE ESCROW BY PURCHASER BY THE TERMS OF THIS AGREEMENT).
SAID AMOUNT SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR THE DEFAULT OF
PURCHASER UNDER THIS AGREEMENT. ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES IN
CONNECTION WITH ANY DEFAULT BY PURCHASER UNDER THIS AGREEMENT ARE EXPRESSLY
WAIVED BY SELLERS (PROVIDED THIS LIMITATION SHALL NOT APPLY TO ANY INDEMNITY OF
PURCHASER THAT EXPRESSLY SURVIVES THIS AGREEMENT). THE PAYMENT OF SUCH AMOUNT AS
LIQUIDATED DAMAGES IS

 

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NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL
CODE SECTIONS 3275 OR 3389, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO
SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTION 1671, 1676 AND 1677. EACH
SELLER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3369. UPON
DEFAULT BY PURCHASER, THIS AGREEMENT SHALL BE TERMINATED AND NEITHER PARTY SHALL
HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER, EXCEPT ANY
INDEMNIFICATION OBLIGATIONS, THE RIGHTS OF SELLER RESERVED HEREIN, AND FOR THE
RIGHT OF SELLERS TO COLLECT SUCH LIQUIDATED DAMAGES FROM PURCHASER AND ESCROW
HOLDER. IN THE EVENT PURCHASER WRONGFULLY FAILS TO AUTHORIZE ESCROW HOLDER TO
RELEASE THE EARNEST MONEY DEPOSIT WITHIN FIVE (5) BUSINESS DAYS OF THE DEMAND OF
SELLERS WHEN PURCHASER HAS DEFAULTED AND SELLERS ARE ENTITLED TO LIQUIDATED
DAMAGES HEREUNDER, THE PROVISIONS OF THIS ARTICLE IX SHALL BE VOIDABLE AT THE
ELECTION OF SELLERS.

 

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SELLERS’ INITIALS      PURCHASER’S INITIALS

9.2 Default by Sellers. IN THE EVENT THE CLOSING AND THE CONSUMMATION OF THE
TRANSACTION HEREIN CONTEMPLATED DOES NOT OCCUR AS HEREIN PROVIDED BY REASON OF
ANY DEFAULT OF SELLERS, PURCHASER AND SELLERS AGREE THAT IT WOULD BE IMPRACTICAL
AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH PURCHASER MAY SUFFER.
THEREFORE, PURCHASER AND SELLERS DO HEREBY AGREE THAT, IN THE EVENT OF SUCH
DEFAULT, IN ADDITION TO ATTORNEYS’ FEES AND COSTS PURSUANT TO SECTION 12.2
HEREOF, PURCHASER MAY, AS ITS SOLE RECOURSE AND REMEDY (AT LAW OR IN EQUITY),
EITHER: (a) PURSUE AN ACTION AGAINST SELLER FOR SPECIFIC PERFORMANCE; OR
(b) RECEIVE (i) THE RETURN OF THE EARNEST MONEY DEPOSIT, AND (ii) REIMBURSEMENT
OF OUT-OF-POCKET EXPENSES ACCORDING TO PROOF NOT TO EXCEED AN AGGREGATE OF FOUR
HUNDRED THOUSAND DOLLARS ($400,000). ALL OTHER CLAIMS TO DAMAGES OR OTHER
REMEDIES IN CONNECTION WITH SELLERS’ FAILURE TO CLOSE AND CONSUMMATE THE
TRANSACTIONS CONTEMPLATED HEREIN (OTHER THAN AS SPECIFIED IN (a) AND (b) HEREOF)
ARE EXPRESSLY WAIVED BY PURCHASER. THE REFUND OF THE EARNEST MONEY DEPOSIT AS
LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING
OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3389, BUT IS INTENDED TO CONSTITUTE
LIQUIDATED DAMAGES TO PURCHASER PURSUANT TO CALIFORNIA CIVIL CODE SECTION 1671.
PURCHASER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389.
UPON DEFAULT BY SELLERS, IF THIS AGREEMENT IS TERMINATED BY PURCHASER, NEITHER
PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER,
EXCEPT ANY INDEMNIFICATION OBLIGATIONS, THE RIGHTS OF PURCHASER RESERVED HEREIN,
AND FOR THE RIGHT OF PURCHASER TO COLLECT SUCH LIQUIDATED DAMAGES FROM SELLERS.

 

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SELLERS’ INITIALS      PURCHASER’S INITIALS

X.

BROKERS

Sellers shall be solely responsible for the payment of any commission, finder’s
fee or other sum initiated by Hodges Ward Elliott (“Broker”) with respect to the
transaction under this Agreement and shall indemnify, defend and hold Purchaser
harmless therefrom. Sellers and Purchaser each agree to indemnify, protect,
defend and hold the other harmless from and against any claims, actions, suits
or demands for payment of any commission, finder’s fee or other sum initiated by
any other broker, commission agent or other person which such party or its
representatives has engaged or retained or with which it has had discussions
concerning, in connection with the transaction contemplated by this Agreement or
the sale of the Property by Sellers.

XI.

NOTICES

Except as otherwise expressly provided in this Agreement, all notices, requests,
demands and other communications hereunder (“Notice”) shall be in writing and
shall be deemed delivered by (i) hand delivery upon receipt, (ii) registered
mail or certified mail, return receipt requested, postage prepaid, upon delivery
to the address indicated in the Notice, (iii) by confirmed telecopy or facsimile
transmission when sent, and (iv) overnight courier (next business day delivery)
on the next business day at 12:00 noon, whichever shall occur first, as follows:

 

To Sellers:    c/o RLJ URBAN LODGING FUND, L.P.    Attention: Thomas J.
Baltimore, Jr.    3 Bethesda Metro Center, Suite 1000    Bethesda, Maryland
20814    Telecopier: (301) 280-7777 With a copy to:    Gerard Leval, Esq.   
Arent Fox, PLLC    1050 Connecticut Avenue, N.W.    Washington D.C. 20036-5339
   Telecopier: (202) 857-6395

 

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To Purchasers:    INNKEEPERS USA LIMITED PARTNERSHIP    340 Royal Poinciana Way
   Suite 306    Palm Beach, FL 33480    Attention: Mark A. Murphy, Esq.   
Telecopier: (561)857-6395 With a copy to:    ALLEN MATKINS LECK GAMBLE MALLORY &
NATSIS LP    1901 Avenue of the Stars    Suite 1800    Los Angeles, California
90067    Attention: Peter J. Roth, Esq.    Telecopier: (310) 788-2410

Any correctly addressed Notice that is refused, unclaimed or undelivered because
of an act or omission of the party to be notified shall be considered to be
effective as of the first day that the Notice was refused, unclaimed or
considered undeliverable by the postal authorities, messenger or overnight
delivery service. The parties hereto shall have the right from time to time, and
at any time, to change their respective addresses and each shall have the right
to specify as its address any other address within the United States of America,
by giving to the other party at least thirty (30) days prior Notice thereof, in
the manner prescribed herein; provided, however, that to be effective, any such
change of address must be actually received (as evidenced by a return receipt).
Telephone numbers and email addresses, if listed, are listed for convenience
purposes only and not for the purposes of giving Notice pursuant to this
Agreement.

XII.

MISCELLANEOUS

12.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California. If any legal action is
necessary to enforce the terms and conditions of this Agreement, the parties
hereby agree that the Superior Court of California, County of San Diego,
California, shall be the sole jurisdiction and venue for the bringing of the
action.

12.2 Professional Fees and Costs. If a lawsuit, arbitration or other proceedings
are instituted by any party to enforce any of the terms or conditions of this
Agreement against any other party hereto, the prevailing party in such
litigation, arbitration or proceedings shall be entitled, as an additional item
of damages, to such reasonable attorneys’ and other professional fees and costs
(including, but not limited to, witness fees), court costs, arbitrators’ fees,
arbitration administrative fees, travel expenses, and other out-of pocket
expenses or costs of such other proceedings, as may be fixed by any court of
competent jurisdiction, arbitrator or other judicial or quasi-judicial body
having jurisdiction thereof, whether or not such litigation or proceedings
proceed to a final judgment or award. For the purposes of this section, any
party receiving an arbitration award or a judgment for damages or other amounts
shall be deemed to be

 

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the prevailing party, regardless of amount of the damage awarded or whether the
award or judgment was based on all or some of such party’s claims or causes of
action, and any party against whom a lawsuit, arbitration or other proceeding is
instituted and later voluntarily dismissed by the instituting party shall be
deemed to be the prevailing party.

12.3 Exhibits and Schedules a Part of This Agreement. The Exhibits and Schedules
attached hereto are incorporated in this Agreement by reference and are hereby
made a part hereof.

12.4 Executed Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Agreement shall become effective upon the due execution
and delivery of this Agreement to the parties hereto.

12.5 Assignment. Purchaser may not assign, convey and otherwise transfer all or
any part of its interest or rights herein without the prior written consent of
Sellers, which consent may be withheld in Sellers’ sole discretion.
Notwithstanding the foregoing, however, Purchaser may, not later than five
(5) business days prior to the Closing Date, assign and transfer all of its
rights and obligations under this Agreement to one (1) or more wholly owned
subsidiary(ies) thereof, or to a one hundred percent (100%) owned affiliate(s)
thereof, or to any entity controlled (directly or indirectly, through voting or
equity ownership) by Purchaser or any affiliate thereof; provided, however, that
Purchaser shall not be released of its obligations under this Agreement as a
result of any such assignment. Any assignment as permitted in the preceding
sentence shall be conditioned upon Purchaser delivering to Sellers and Escrow
Holder, not later than five (5) days prior to the Closing Date Notice thereof,
together with a copy of such assignee’s organizational and formation documents
and instruments, a Certificate of Good Standing for such assignee, and copies of
the resolutions of Purchaser and such assignee authorizing such assignment. As a
further condition to any such permitted assignment, Purchaser shall cause its
assignee to execute an assignment and assumption agreement of Purchaser’s
obligations under this Agreement (in form and content reasonably and mutually
acceptable), and such other documents and instruments as Escrow Holder may
reasonably request.

12.6 IRS - Form 1099-S. For purposes of complying with Section 6045 of the
Internal Revenue Code of 1986, as amended, Escrow Holder shall be deemed the
“person responsible for closing the transaction” and shall be responsible for
obtaining the information necessary to file with the Internal Revenue Service
Form 1099-S, “Statement for Recipients of Proceeds from Real Estate, Broker and
Barter Exchange Transactions.”

12.7 Successors and Assigns. Subject to the provisions of Section 12.5 hereof,
this Agreement shall be binding upon and inure to the benefit of the parties’
respective successors and permitted assigns.

12.8 Time is of the Essence. Time is of the essence of this Agreement.

 

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12.9 Entire Agreement. This Agreement, and Exhibits and Schedules and other
documents and instruments attached to or referenced herein, contain all
representations and the entire understanding and agreement between the parties
hereto with respect to the purchase and sale of the Property, and all prior and
contemporaneous understandings, letters of intent, agreements and
representations, whether oral or written, are entirely superseded. In executing
this Agreement, Sellers and Purchaser each expressly disclaim any reliance on
any oral or written representations, warranties, comments, statements or
assurances made by Sellers, Purchaser, and any of their respective affiliates,
and their respective agents, employees, representatives, attorneys or brokers,
as an inducement or otherwise, to Purchaser’s and Sellers’ respective execution
hereof. No amendment of this Agreement shall be binding unless in writing and
executed by the parties hereto.

12.10 Further Assurances. Whenever and so often as requested by a party, the
other party will promptly execute and deliver or cause to be executed and
delivered all such other and further instruments, documents or assurances, and
promptly do or cause to be done all such other and further things as may be
necessary and reasonably required in order to further and more fully vest in
such requesting party all rights, interests, powers, benefits, privileges and
advantages conferred or intended to be conferred upon it by this Agreement, or
to effectuate the termination of this Agreement and cancellation of the Escrow
(if otherwise permitted hereunder). The terms of this section shall survive the
Close of Escrow and/or termination of this Agreement.

12.11 Waiver. Failure or delay by either party to insist on the strict
performance of any covenant, term, provision or condition hereunder, or to
exercise any option herein contained, or to pursue any claim or right arising
herefrom, shall not constitute or be construed as a waiver of such covenant,
term, provision, condition, option, claim or right. Any waiver by either party
shall be effective only if in a writing delivered to the other party hereto and
setting forth, with specificity, the covenant, term, provision or condition so
waived. Any such waiver shall not constitute or be construed as a continuing
waiver of any subsequent default.

12.12 Headings. The headings of this Agreement are for purposes of convenience
only and shall not limit or define the meaning of the provisions of this
Agreement.

12.13 Risk of Loss. With respect to each Property, the risk of loss shall be as
follows:

12.13.1 Risk of Loss. Until the Closing Date, Seller shall bear the risk of loss
should there be damage to any of the Improvements by fire or other casualty
(collectively “Casualty”). If, prior to the Closing Date, any of the
Improvements shall be damaged by any Casualty, Seller shall promptly deliver to
Purchaser a Notice (“Casualty Notice”‘) of such event. Upon Purchaser’s receipt
of a Casualty Notice, Seller and Purchaser shall meet promptly to estimate the
cost to repair and restore the Improvements to good condition and to replace the
damaged Personal Property (“Casualty Renovation Cost”). If the parties are
unable to agree on the cost of restoration, the matter will be submitted to an
engineer designated by Seller and an engineer designated by Purchaser, each
licensed to practice in the state in which the Land is located, and the
engineers shall resolve the dispute. Each party hereto shall bear the costs and
expenses of its own engineer.

 

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12.13.2 Material Loss. If the Casualty Renovation Cost exceeds in the aggregate
(i) Two Million Dollars ($2,000,000.00) in the event the Casualty is insured
against, or (ii) One Million Dollars ($1,000,000.00) in the event the Casualty
is not insured against, either party hereto may, at its option, elect to
terminate this Agreement by Notice to the other party within five (5) days after
the date that the Casualty Renovation Cost is determined, in which case the
Earnest Money Deposit shall be delivered to Purchaser, and neither party shall
have any further rights or obligations hereunder, except for any continuing
confidentially and indemnity obligations as provided in this Agreement. If both
parties hereto fail to timely make its election to terminate this Agreement,
then the Close of Escrow shall take place as provided herein without reduction
of the Purchase Price, and Seller shall assign the insurance proceeds to
Purchaser in the event the Casualty is insured against and shall pay to
Purchaser the amount of any deductible, under applicable insurance policies, or
have the Purchase Price reduced by the Casualty Renovation Cost in the event the
Casualty is not insured against.

12.13.3 Nonmaterial Loss. If the Casualty Renovation Cost is in the aggregate
(i) Two Million Dollars ($2,000,000.00) or less in the event the Casualty is
insured against, or (ii) One Million Dollars ($1,000,000.00) or less in the
event the Casualty is not insured against, then, in any such event, neither
party hereto shall have any right to terminate this Agreement, but the Closing
shall take place as provided herein without reduction of the Purchase Price, and
Seller shall assign the insurance proceeds to Purchaser and shall pay to
Purchaser the amount of any deductible in the event the Casualty is insured
against or have the Purchase Price reduced by the Casualty Renovation Cost in
the event the Casualty is not insured against.

12.13.4 Eminent Domain. If, prior to the Close of Escrow, (i) all or
substantially all (or so much thereof so as to substantially and materially
interfere with the operation of the Hotel) of the Real Property, (ii) any
portion of the parking areas on the Real Property which results in there being
insufficient parking for the operation of the Hotel as established by applicable
governmental codes and regulations, or (iii) any access-way to the Real Property
or to any part of any building with guest rooms is taken by condemnation or
eminent domain, at the election of Purchaser this Agreement shall, upon the
giving of Notice of such event or of the condemning authorities’ intention so to
take the Real Property, terminate, and Purchaser shall receive a full and prompt
refund of all sums deposited by them with Escrow Holder and/or Seller. If, prior
to the Close of Escrow, less than all or substantially all of the Real Property
shall be taken by condemnation or eminent domain, then, if any of the foregoing,
in Purchaser’s reasonable opinion, materially impairs the value of the Real
Property or any significant interest therein, then Purchaser shall have the
option to (A) accept title to the Real Property subject to such taking, in which
event at the Close of Escrow all of the proceeds of any award or payment made or
to be made by reason of such taking shall be assigned by Seller to Purchaser,
and any money theretofore received by Seller in connection with such taking
shall be paid over to Purchaser, whereupon Purchaser shall pay the Purchase
Price without abatement by reason of such taking, or (B) receive a full and
prompt refund of all sums deposited by Purchaser with Escrow Holder and/or
Seller. Seller shall not settle, agree to, or accept any award or payment in
connection with a taking of less than all of the Real Property without obtaining
Purchaser’s prior written consent in each case, which consent shall not be
unreasonably withheld or delayed.

 

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12.14 Construction of Agreement. The parties hereto have negotiated this
Agreement at length, and have had the opportunity to consult with, and be
represented by, their own competent counsel. This Agreement is, therefore,
deemed to have been jointly prepared. In determining the meaning of, or
resolving any ambiguity with respect to, any word, phrase or provision of this
Agreement, no uncertainty or ambiguity shall be construed or resolved against
any party under any rule of construction, including the party primarily
responsible for the drafting and preparation of this Agreement. The words
“herein,” “hereof,” “hereunder” and words of similar reference shall mean this
Agreement. The words “this Agreement” include the exhibits, schedules addenda
and any future written modifications, unless otherwise indicated by the context.
All words in this Agreement shall be deemed to include any number or gender as
the context or sense of the Agreement requires. The words “will,” “shall” and
“must” in this Agreement indicate a mandatory obligation. The use of the words
“include,” “includes” and “including” followed by one or more examples is
intended to be illustrative and is not a limitation on the scope of the
description or term for which the examples are provided. All dollar amounts set
forth in this Agreement are stated in United States Dollars, unless otherwise
specified. The words “day” and “days” refer to calendar days unless otherwise
stated. The words “business day” refer to a day other than a Saturday, Sunday or
legal holiday on which banking institutions are closed. The words “month” and
“months” refer to calendar months unless otherwise stated. The words “year” and
“years” refer to calendar years unless otherwise stated.

12.15 Tax Deferred Exchange. The following provisions shall apply with respect
to each Property:

12.15.1 Seller and Purchaser (“Cooperating Party”) each agree to fully cooperate
with the other (and any owner of such other party) (“Exchangor”) (including
cooperation with any Intermediary (as defined herein) selected by Exchangor) to
structure the acquisition of the Property and/or the Real Property as an
exchange of property held for productive use in a trade or business or for
investment within the meaning of Section 1031 of the Internal Revenue Code of
1986 (as amended), and upon request, Cooperating Party agrees to execute
additional escrow instructions, documents, agreements or instruments to effect
the exchange; provided, however, that Cooperating Party shall incur no
additional costs or expenses in this transaction, or be required to incur any
additional liability, acquire, accept or hold title to any property (other than
the Property), as a result of or in connection with any such exchange, unless
because of Cooperating Party’s default hereunder or under any agreement executed
by reason of this Section 12.15.

12.15.2 Exchangor agrees to indemnify, defend or hold Cooperating Party harmless
from and against any and all additional costs, expenses, claims, demands,
liabilities, losses, obligations, damages, recoveries, and deficiencies (such
categories being collectively referred to herein as “Liabilities”) in excess of
those Liabilities that Cooperating Party would otherwise have if the transaction
contemplated in this Agreement closes as a sale transaction, and that
Cooperating Party may incur or suffer, as a result of or in connection with (i)
the structuring of the transaction contemplated in this Agreement as an exchange
under Internal Revenue Code Section 1031 and/or (ii) the execution of any
documents in connection with the exchange.

 

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Exchangor’s foregoing indemnity shall not indemnify Cooperating Party for any
Liabilities arising as a result of or in connection with any default by
Cooperating Party under this Agreement or any default by Cooperating Party under
any of the documents or agreements entered into by Cooperating Party in
connection with the exchange or for any negligence or willful misconduct on the
part of Cooperating Party. Implementation of the exchange(s) contemplated in
this Section 12.15 shall not be a condition to the Close of Escrow.

12.15.3 Exchangor, at its election, may substitute for any one or more of them,
one or more persons or entities (“Intermediary”) as a party(ies) to the Escrow
and this Agreement, in which event the Intermediary shall assume and perform the
obligations of Exchangor under this Agreement (but without the release of
liability of Exchangor for such performance), and Cooperating Party agrees to
accept the performance by Intermediary and shall tender its performance to
Intermediary.

12.16 No Public Disclosure. Neither party shall make any public disclosure of
the terms of this transaction without the prior written consent of the other
party prior to the Close of Escrow, except to the extent required by law.
Further Purchaser shall be entitled, with Seller’s consent, which shall not be
unreasonably withheld, to issue a press release announcing the fact that
Purchaser has enterer into this Agreement, but not the terms thereof, except
that such press release may disclose the identities of the properties and the
aggregate purchase price.

12.17 Covenants, Representations and Warranties. Except as otherwise set forth
in this Agreement, all of the covenants, representations and agreements of
Sellers and Purchaser set forth in this Agreement shall survive the Close of
Escrow, except that all representations and warranties shall survive only for a
period of nine (9) months after the Close of Escrow. By proceeding with the
closing of the sale transaction, Sellers and Purchaser shall be deemed to have
waived, and so covenant to waive, any claims of defaults or breaches by the
other party existing on or as of the Close of Escrow whether under this
Agreement or any other document or instrument executed by the other party in
connection with this transaction, of which the waiving party has actual
knowledge of prior to the Close of Escrow for which the other party shall have
no liability.

12.18 Confidentiality. Subject to Section 12.16 above, other than as required or
permitted by the terms of this Agreement, no party hereto shall release or cause
or permit to be released any press notices or releases or publicity (oral or
written) or advertising promotion relating to, or otherwise announce or disclose
or cause or permit to be announced or disclosed, in any manner whatsoever, the
terms and conditions of the purchase and sale transaction for the Properties,
and nor shall Purchaser or its agents or representatives disclose, in any manner
whatsoever, (a) the information provided to Purchaser by any Seller or its
representatives, or (b) any analyses, compilations, studies or other documents
or records prepared by or on behalf of Purchaser, in connection with Purchaser’s
due diligence investigation of the Property, without first obtaining the written
consent of Sellers (collectively, “Proprietary Information”). The foregoing
shall not preclude Purchaser (i) from discussing the Proprietary Information
with any person who is employed by Purchaser or who, on behalf of Purchaser, is
actively and directly participating in the purchase and sale of the Property,
including, without limitation, to Purchaser’s shareholders, partners, members,
existing or prospective lenders, attorneys,

 

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accountants and other consultants and advisors, or (ii) from complying with all
laws, rules, regulations and court orders, including, without limitation,
governmental regulatory, disclosure, tax and reporting requirements; provided,
however, that if Purchaser is required by applicable law or legal process to
disclose any Proprietary Information, Purchaser agrees to furnish only that
portion of the Proprietary Information which Purchaser is legally compelled to
disclose and to use its best efforts to obtain assurance that, if possible,
confidential treatment will be accorded to the Proprietary Information.
Purchaser shall inform its respective representatives of the confidential nature
of the Proprietary Information and shall direct them to be bound by the terms of
this section. In addition to any other remedies available to Sellers, Seller
shall have the right to seek equitable relief, including, without limitation,
injunctive relief or specific performance, against Purchaser in order to enforce
the provisions of this section. The provisions of this section shall survive any
termination of this Agreement. Purchaser agrees not to contact, directly or
indirectly, any employees of any Hotel prior to the Close of Escrow, and agrees
to be liable for all of Sellers’ damages in the event of any such contact by
Purchaser or any of its agents or representatives.

12.19 Limitation on Liability. In consideration of the benefits accruing
hereunder, Sellers and Purchaser agree that, in the event of any actual or
alleged failure, breach or default of this Agreement by Sellers or Purchaser:

(a) The sole and exclusive remedy shall be against the defaulting party and its
assets;

(b) No owner of the defaulting party shall be sued or named as a party in any
suit or action;

(c) No service of process shall be made against any owner or employee of the
defaulting party (except as may be necessary to secure jurisdiction of the
defaulting party);

(d) No owner or employee of the defaulting party shall be required to answer or
otherwise plead to any service of process;

(e) No judgment may be taken against any owner or employee of the defaulting
party;

(f) Any judgment taken against any owner or employee of the defaulting party may
be vacated and set-aside at any time without hearing;

(g) No writ of execution will ever be levied against the assets of any owner or
employee of the defaulting party; and

(h) These covenants and agreements are enforceable both by the defaulting party
and also by any owner or employee of the defaulting party.

 

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In addition to the foregoing, and notwithstanding any other term or provision of
this Agreement to the contrary, except as to any Seller’s fraud, Sellers shall
have no liability for the breach of any representation, warranty, covenant,
indemnity or other obligation expressly stated to survive the Close of Escrow
(collectively, “Sellers’ Post-Closing Obligations”), unless and until the
aggregate amount of Purchaser’s out-of-pocket damages and third party expenses
directly resulting from such breaches shall exceed, and then only to the extent
the same exceeds, Fifty Thousand Dollars ($50,000). Furthermore, Sellers’
aggregate liability under this Agreement (or otherwise) for the breach of any
and all of Sellers’ Post-Closing Obligations shall, in no event individually or
in the aggregate, exceed two and one-half percent (2.5%) of the Purchase Price.
In no event shall Seller have any liability for punitive damages, consequential
damages, or damages for diminution-in-value, but shall only be liable for
Purchaser’s actual out-of-pocket damages and third party expenses.

12.20 No Third-Party Beneficiaries. Sellers and Purchaser agree that there are
no third parties who are intended to benefit from or who are entitled to rely on
any of the provisions of this Agreement. No third party shall be entitled to
assert any claims or to enforce any rights whatsoever pursuant to this
Agreement. The covenants and agreements provided in this Agreement are solely
for the benefit of Sellers and Purchaser and their permitted successors and
assigns respectively.

12.21 Facsimile Signatures. The execution of this Agreement and all Notices
given hereunder and all amendments hereto, may be effected by facsimile
signatures, all of which shall be treated as originals; provided, however, that
the party receiving a document with a facsimile signature may, by Notice to the
other, require the prompt delivery of an original signature to evidence and
confirm the delivery of the facsimile signature. Purchaser and Sellers each
intend to be bound by its respective facsimile transmitted signature, and is
aware that the other party will rely thereon, and each party waives any defenses
to the enforcement of the Agreement, and documents, and any Notices delivered by
facsimile transmission.

12.22 Purchaser’s Public Company Requirements. Upon Purchaser’s request, for a
period of two (2) years after the Closing, Seller shall make the books and
records of the Property available to Purchaser for inspection, copying and audit
by Purchaser’s designated accountants, and at Purchaser’s expense. Seller shall
provide Purchaser, but without third-party expense to Seller, with copies of, or
access to, such factual information as may be reasonably requested by Purchaser,
and in the possession or control of Seller, to enable Purchaser or any of its
constituent members to comply with applicable filing requirements of the SEC.
Without limiting the foregoing, (x) Purchaser or its designated independent or
other accountants may audit the operating statements of the Property, and Seller
shall supply such documentation in its possession or control as Purchaser or its
accountants may reasonably request in order to complete such audit, and (y)
Seller shall furnish Purchaser with such financial and other information as may
be reasonably required by Purchaser to make any required filings with the SEC or
other governmental authority. This Section 12.22 shall survive the Closing.

[The remainder of this page is intentionally left blank]

[Signatures on following page]

 

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XIII.

EXECUTION

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the 21st day of July, 2006.

 

SELLERS: RLJ ONTARIO HOTEL, LP, a Delaware limited partnership By:   RLJ Ontario
Hotel General Partner, LLC, a Delaware limited liability company   By:  

/s/ Thomas J. Baltimore

   

Thomas J. Baltimore, Jr.

President

RLJ ONTARIO HOTEL - LESSEE, L.P., a Delaware limited partnership By:   RLJ
Ontario Hotel Lessee General Partner, LLC, a Delaware limited liability company
  By:  

/s/ Thomas J. Baltimore, Jr.

   

Thomas J. Baltimore, Jr.

President

[Signatures continued on next page.]

 

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RLJ ANAHEIM SUITES HOTEL, L.P., a Delaware limited partnership By:   RLJ Anaheim
Suites Hotel General Partner, LLC, a Delaware limited liability company   By:  

/s/ Thomas J. Baltimore

    Thomas J. Baltimore, Jr. President RLJ ANAHEIM SUITES HOTEL LESSEE, L.P., a
Delaware limited partnership By:   RLJ Anaheim Suites Hotel Lessee General
Partner, LLC, a Delaware limited liability company   By:  

/s/ Thomas J. Baltimore

    Thomas J. Baltimore, Jr. President RLJ ANAHEIM HOTEL, L.P., a Delaware
limited partnership By:   RLJ Anaheim Hotel General Partner, LLC, a Delaware
limited liability company   By:  

/s/ Thomas J. Baltimore

    Thomas J. Baltimore, Jr. President

[Signatures continued on next page.]

 

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RLJ ANAHEIM HOTEL LESSEE, L.P., a Delaware limited liability company By:   RLJ
Anaheim Hotel Lessee General Partner, LLC, a Delaware limited liability company
  By:  

/s/ Thomas J. Baltimore

    Thomas J. Baltimore, Jr. President RLJ SAN DIEGO - MISSION VALLEY HOTEL,
L.P., a Delaware limited partnership By:   RLJ San Diego - Mission Valley Hotel
General Partner, LLC, a Delaware limited liability company   By:  

/s/ Thomas J. Baltimore

    Thomas J. Baltimore, Jr. President RLJ SAN DIEGO - MISSION VALLEY HOTEL
LESSEE, L.P., a Delaware limited partnership By:   RLJ San Diego - Mission
Valley Hotel Lessee General Partner, LLC, a Delaware limited liability company  
By:  

Thomas J. Baltimore

    Thomas J. Baltimore, Jr. President

[Signatures continued on next page.]

 

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PURCHASER:

INNKEEPERS USA LIMITED PARTNERSHIP, a

Virginia limited partnership,

BY:   Innkeepers Financial corporation, a Virginia corporation, Sole General
Partner   By:  

/s/ Mark A. Murphy

  Name:   Mark A. Murphy   Title:   V.P

 

ESCROW HOLDER HEREBY ACKNOWLEDGES AND AGREES TO THE ESCROW INSTRUCTIONS SET
FORTH IN THIS AGREEMENT. CHICAGO TITLE INSURANCE COMPANY BY:  

LOGO [g41615img3.jpg]

 

Dated:   7/26/06

 

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SCHEDULE “A”

PROPERTIES AND SELLERS

 

PROPERTY

NUMBER

  

PROPERTY NAME AND ADDRESS

  

SELLER

1

  

Hilton Ontario Airport

700 North Haven Avenue

Ontario, California

  

RLJ Ontario Hotel, LP,

a Delaware limited partnership (“Owner”)

 

RLJ Ontario Hotel Lessee, L.P., a Delaware limited liability company (“Lessee”)

2

  

Hilton Suites Anaheim/Orange

400 North State College Boulevard

Orange, California 92868

  

RLJ Anaheim Suites Hotel, L.P., a

Delaware limited partnership (“Owner”)

 

RLJ Anaheim Suites Hotel Lessee, L.P., a Delaware limited partnership (“Lessee”)

3

  

Residence Inn by Marriott – Garden Grove

11931 Harbor Boulevard

Garden Grove, California

  

RLJ Anaheim Hotel, L.P., a Delaware

limited partnership (“Owner”)

 

RLJ Anaheim Hotel Lessee, L.P., a Delaware limited partnership (“Lessee”)

4

  

Residence Inn by Marriott – Mission Valley

1865 Hotel Circle South

San Diego, California

  

RLJ San Diego – Mission Valley Hotel,

L.P., a Delaware limited partnership (“Owner”)

 

RLJ San Diego – Mission Valley Hotel

Lessee, L.P., a Delaware limited

partnership (“Lessee”)

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SCHEDULE “A-1”

ALLOCATION OF PURCHASE PRICE

[To be agreed upon during the Due Diligence Period]

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SCHEDULE “B”

EXISTING INDEBTEDNESS

Property No. 1:

None

Property No. 2:

That certain loan from GMAC Commercial Mortgage Bank, in the original principal
amount of $13,700,000, with a current balance of $13,700,000, as evidenced by a
Promissory Note dated June 14, 2005 and secured by a Deed of Trust, Leasehold
Deed of Trust, Assignment of Leases and Profits, Security Agreement and Fixture
Filing, dated June 14, 2005, and additional security instruments and agreements.

Property No. 3:

None

Property No. 4:

None

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SCHEDULE “C”

CONTRACTS

[to be provided by Seller by close of business on July 25, 2006]

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HILTON ONTARIO

Contracts and Leases

Property #1

Hilton Ontario

 

Muzak   Piped in music Otis Elevator   Maintenance on all elevators Landscape
Care   Outside landscaping service Tyco Fire and Security/Simplex   Fire alarm
system maintenance Ecolab   Pest control On Command   Cable and pay-per-view
Delphi   Group and catering sales software program Securatas (security company)
  Evening security service Market Place cleaners   Provides valet service to
hotel guests Stay On Line   High speed Internet service Gift Shop   Gift shop
Business Center   Provides office services to hotel guests Pitney Bowes  
Postage machine HSM   Fire alarm monitoring Xeta Call Accounting   Call
accounting system Verizon   Telephone basic service HIS   Restaurant point of
sale system TiavelClick   Hotelligence report and sabre - global travel services
The Rubicon Group   Rate shopping Shift 4   Processes credit cards Security
Signal Devices   Fire alarm lease andmonitoring Paradise Plants   Month-to-month
contract Presentation Services   Provides all A/V equipment for banquet

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HILTON SUITES - ORANGE

Contracts and Leases

Property #2

Hilton Suites - Orange

 

Advanced Office Service   Ricoh/AF2045eSP - Copier

Aquatrol

  Water Treatment Chemical ADT Security Services   Alarm System Monotoring BMI  
Music broadcast Coca Cola   Vending Machines Dunbar Armored   Armored Bank
Transportation Charge Equity Office Property   CAM Charges Kone Elevator &
Escalator   Elevator & Escalator maintenance Lodgenet   Cable & Satellite TV
McHenry Plantation I   Landscape Maintenance Interior Plants Micros   POS credit
card agreement Ontario Refigeration   Chiller and HVAC maintenance. Pearce
Building Service   Window Cleaning Service Petro- Analytical   Underground
Storage Tank testing Pitney Bowes   Postage Meter Lease Shift 4   Credit Card
processing South Coast Air Quality Mgmt   Steritech, Inc.   Pest Control Storage
Wesy   Record Retention storage Superclick   High Speed Internet for guests
Telecheck   Check Verification Triple A Pumping Service   Grease Removal Service
Waste Management of Orange   Trash Pickup Xerox   Maintenance Agreement Xeta
Technology   PBX Services

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RESIDENCE INN GARDEN GROVE

Contracts and Leases

Property #3

Residence Inn Garden Grove

 

Alpine Marble    Marble Maintenance ATM (ACFN)    ATM Machine Coastal PlantScape
   Interior plant maintenance Cross Check    Check Cashing Service. Called 7/20
for coy of contract. Davel Communications    Pay Phone Dunbar    Armored
transport Ecolab. Inc.    Pool Maintenance Garden Grove Disposal    Trash Pickup
Service, Container Rental, compactor Green Leaf Industrial    Landscape
Maintenance Holiday Gift - Jean Te Enterprises    Gift Shop Lease Muzak -
Southern Cal    Public Area Sound system/Music on hold National Fail Safe   
Fire system Monitoring On Command    Pay Per View T.V On Command   
Cable/Satellite T.V Pitney Bowes Credit Corporation    Postage Meter Lease
Primetime Games    Commission on Gameroom revenues Savin Corp /Ricoh Business
System    Copier Maintenance + per copy charge Steritech, Inc.    Pest Control
Steritech, Inc.    Quarterly Food Safety Audit Shuttlepoint    Commission on
business center revenues Thyssen Elevators    Elevator Maintenance Xerox   
Maintenance Agreement M20i

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RESIDENCE INN MISSION VALLEY

Contracts and Leases

Property #4

Residence Inn Mission Valley

 

American Consumer Financial Network   ATM cash Alpine Marble   Marble
Maintenance Arch Wireless   Pagers Business Music & Communication/ Muzak  
Public Area Sound system/Music on hold Carpet Care   Carpet Cleaning Coca Cola  
Vending Commissions Coastal Plantscapes   Landscape Maintenance CrossCheck Inc  
Check cashing service-called 7/20 for copy of contract Dunbar   Armored Car
Services Ecolab, Inc.   Pool Maintenance Heartland Waffle   Waffle Machines KBM
Security Services (now US Security)   Security Services Mission Linen Supply Inc
  Clothes/ Napkin Cleaning Omega Services and Communication   Fire Alarm
Monitoring On Command Corporation   Satellite Service/TV/Movie/Internet Otis
Elevator Company - Tarsadia Master   Elevator Maintenance Pitney Bowes Credit
Corporation   Postage Meter Lease Realtime Computer company   Payroll Processing
San Diego Zoo   Purchase and Sale Agreement Ricoh Business Solutionss (Savin
Corp)   Copier Lease and Maintenance (15000 copies/Qtr) SBC Pacific Bell  
Payphone Commission Steritech, Inc.   Pest Control Steritech Food Control   Food
Safety Audit Valley Crest Landscape Maintenance   Landscape Maintenance Waste
Management   Trash Pickup Service & Container Rental West Air Gases and
Equipment   CO2 Cylinder Rental Xerox   Maintenance Agreement

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EXHIBIT “D”

LAND LEGAL DESCRIPTIONS

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PROPERTY 1

PARCEL 1:

LOT “A” OF THAT CERTAIN LOT LINE ADJUSTMENT RECORDED ON AUGUST 24, 1989 AS
INSTRUMENT NO. 89-311209 OFFICIAL RECORDS OF SAN BERNARDINO COUNTY, CALIFORNIA,
MORE PARTICULARLY DESCRIBED AS FOLLOWS:

PARCEL A OF LOT LINE ADJUSTMENT NO. L83-13, IN THE CITY OF ONTARIO, COUNTY OF
SAN BERNARDINO, STATE OF CALIFORNIA, AS APPROVED BY THE CITY COUNSEL OF SAID
CITY ON SEPTEMBER 23, 1983, AND RECORDED OCTOBER 10, 1983, AS INSTRUMENT NO.
83-237239 OF OFFICIAL RECORDS, TOGETHER WITH THE SOUTHWESTERLY 145.18 FEET OF
PARCEL 1 OF PARCEL MAP NO. 8818, AS SHOWN ON A MAP RECORDED IN BOOK 93, PAGES 97
AND 98 OF PARCEL MAPS, BOTH RECORDS OF SAID COUNTY, AND THAT PORTION OF LOT 3,
BLOCK 24, TRACT NO. 2244, AS RECORDED IN BOOK 35, PAGES 50 THROUGH 56 OF MAPS,
RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT THE MOST WESTERLY CORNER OF PARCEL 1 OF PARCEL MAP NO. 8818, AS
RECORDED IN BOOK 93, PAGES 97 AND 98 OF PARCEL MAPS, RECORDS OF SAID COUNTY;
THENCE SOUTH 44°31’22” EAST, 188.64 FEET ALONG THE SOUTHWESTERLY LINE OF SAID
PARCEL 1 TO THE MOST SOUTHERLY CORNER THEREOF; THENCE SOUTH 45°28’38” WEST,
56.16 FEET ALONG THE SOUTHWESTERLY PROLONGATION OF THE SOUTHEASTERLY LINE OF
SAID PARCEL 1 TO THE NORTHERLY RIGHT-OF-WAY LINE OF THE SAN BERNARDINO FREEWAY
(I-10), AS PER DOCUMENT RECORDED IN BOOK 4589, PAGE 306, ET. SEQ. OF OFFICIAL
RECORDS, RECORDS OF SAID COUNTY AND AS SHOWN ON CALIFORNIA STATE DIVISION OF
HIGHWAYS RIGHT-OF WAY MAP FILE NO. 987563; THENCE NORTH 44°31’22” WEST, 188. 64
FEET ALONG SAID RIGHT-OF-WAY LINE; THENCE NORTH 45°28’38” EAST, 56.16 FEET TO
THE POINT OF BEGINNING.

EXCEPTING FROM A PORTION OF SAID LAND ALL OIL, GAS AND OTHER HYDROCARBONS,
GEOTHERMAL RESOURCES AS DEFINED IN SECTION 6903 OF THE CALIFORNIA PUBLIC
RESOURCES CODE AND ALL OTHER MINERALS, WHETHER SIMILAR TO THOSE HEREIN SPECIFIED
OR NOT, WITHIN OR THAT MAY BE PRODUCED FROM THE PROPERTY; PROVIDED, HOWEVER,
THAT ALL RIGHTS AND INTERESTS IN THE SURFACE OF THE PROPERTY WERE CONVEYED TO
GRANTEE, AS SET FORTH IN THE DEED EXECUTED BY CHEVRON LAND AND DEVELOPMENT
COMPANY RECORDED JUNE 14, 1984 AS INSTRUMENT NO. 84-140177 OFFICIAL RECORDS.

ALSO EXCEPTING FROM A PORTION OF SAID LAND ALL OIL, GAS AND OTHER HYDROCARBONS,
NON-HYDROCARBON GASSES OR GASEOUS SUBSTANCES, ALL

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OTHER MINERALS OF WHATSOEVER NATURE, WITHOUT REGARD TO SIMILARITY TO THE
ABOVE-MENTIONED SUBSTANCES, AND ALL SUBSTANCES THAT MAY BE PRODUCED THEREWITH
FROM THE PROPERTY, AND EXCEPTING ALL GEOTHERMAL RESOURCES, EMBRACING INDIGENOUS
STEAM, HOT WATER AND HOT SPRINGS, STEAM AND OTHER GASSES, HOT WATER AND HOT
BRINES RESULTING FROM WATER, GAS OR OTHER FLUIDS ARTIFICIALLY INTRODUCED INTO
SUBSURFACE FORMATIONS, HEAT OR OTHER ASSOCIATED ENERGY FOUND BENEATH THE SURFACE
OF THE EARTH, AND BYPRODUCTS OF ANY OF THE FOREGOING SUCH AS MINERALS (EXCLUSIVE
OF OIL OR HYDROCARBON GAS THAT CAN BE SEPARATELY PRODUCED) WHICH ARE FOUND IN
SOLUTION OR ASSOCIATION WITH OR DERIVED FROM ANY OF THE FOREGOING, THE RIGHTS DO
NOT INCLUDE AND DO NOT EXCEPT OR RESERVE ANY RIGHT TO USE THE SURFACE OF THE
PROPERTY OR THE FIRST 500 FEET BELOW THE SURFACE OF THE PROPERTY OR TO CONDUCT
ANY OPERATIONS THEREON OR THEREIN, AS RESERVED IN THE DEED FROM CHEVRON LAND AND
DEVELOPMENT COMPANY, RECORDED MARCH 31, 1988 AS INSTRUMENT NO. 88-095116,
OFFICIAL RECORDS, AND RESERVED IN THE DEED FROM THE ONTARIO CENTER, A
CORPORATION, RECORDED JULY 11, 1989 AS INSTRUMENT NO. 89-251109 OFFICIAL
RECORDS.

PARCEL 2:

A NON-EXCLUSIVE EASEMENT FOR PARKING AND ACCESS, FOR INGRESS, EGRESS, PARKING
AND MOTOR VEHICLES OVER AND ACROSS A PORTION OF PARCEL 1 OF PARCEL MAP 8818 AS
RECORDED IN BOOK 93 PAGES 97 AND 98 OF PARCEL MAPS, UPON THE CONDITION AND
PROVISIONS SET FORTH IN THAT CERTAIN SHARED, PARKING, ACCESS AND MAINTENANCE
AGREEMENT RECORDED DECEMBER 22, 1989 AS INSTRUMENT NO. 89-499243 OFFICIAL
RECORDS.

PARCEL 3:

RECIPROCAL PARKING EASEMENTS, COMMON AREA EASEMENTS, AND PEDESTRIAN PATHWAYS AS
SET FORTH IN THE DECLARATION OF COVENANTS, CONDITIONS, EASEMENTS AND
RESTRICTIONS, RECORDED DECEMBER 28, 1983 AS INSTRUMENT NO. 83-304769 OFFICIAL
RECORDS AND IN THE SECOND AMENDMENT TO DECLARATION, RECORDED MAY 24, 1986 AS
INSTRUMENT NO. 86-75242 OFFICIAL RECORDS.

PARCEL 4:

NON-EXCLUSIVE RIGHT-OF-WAY EASEMENT AS SET FORTH IN THE PRIVATE ROADWAY EASEMENT
AND SUPPLEMENT TO DECLARATION, RECORDED JANUARY 14, 1988 AS INSTRUMENT NO.
88-011236 OF OFFICIAL RECORDS.

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PROPERTY 2

All that certain real property situated in the County of Orange, State of
California, described as follows:

PARCEL A:

Parcel 5 of Parcel Map No. 86-184, in the City of Orange, County of Orange,
State of California, as shown on a map thereof recorded in Book 221, Page(s) 2
through 10, inclusive of Parcel Maps, in the Office of the County Recorder of
said County.

PARCEL B:

Non-exclusive easements for ingress, egress and traffic circulations; utilities;
encroachments and incidental purposes as set forth in the Declaration of
Establishment of Covenants, Conditions and Restrictions and Grant of Easements
for Koll Center Orange, recorded October 23, 1987, as Instrument No. 87-592636,
of Official Records.

PARCEL C:

Rights to parking spaces and such other rights as set forth in the memorandum of
parking rights and common area maintenance agreement, recorded October 23, 1987,
as Instrument No. 87-592638, of Official Records.

Assessor’s Parcel Number: 232-091-05

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PROPERTY 3

PARCEL 1 AS SHOWN ON EXHIBIT “B” OF LOT LINE ADJUSTMENT NO. LLA-4-03, IN THE
CITY OF GARDEN GROVE, COUNTY OF ORANGE, STATE OF CALIFORNIA, RECORDED 8/26/03 AS
DOC. 2003-1031881 OF OFFICIAL RECORDS OF ORANGE COUNTY.

Assessor’s Parcel No: 233-171-14

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PROPERTY 4

PARCEL 2 IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AS
SHOWN AT PAGE 18040 OF PARCEL MAPS FILED IN THE OFFICE OF THE COUNTY RECORDER OF
SAN DIEGO COUNTY, JUNE 4, 1998. Assessor’s Parcel No: 443-040-39

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SCHEDULE “E”

PROPRIETARY COMPUTER SYSTEMS

Property No. 1:

NONE

Property No. 2:

NONE

Property No. 3:

NONE

Property No. 4:

NONE

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EXHIBIT “F”

LIST OF CURRENT LITIGATION

RLJ Anaheim Hotel, L.P, (“RLJ”) was recently named as a defendant in a complaint
filed by RD Golf Center Company, LLC (“RD Golf), the entity that leases and
operates a driving range near the Residence Inn by Marriott, Garden Grove,
California (the “Hotel”). Specifically, the complaint alleges that RD Golf’s
lease includes the right of ingress and egress over a fifteen-foot strip of land
it calls the “Right of Way.” RD Golf alleges that RLJ has “built over, and/or
used” the Right of Way, creating a trespass. RD Golfs counsel has advised RLJ
that while RD Golf has not yet fully investigated the facts supporting the
allegations against RLJ, the allegation of trespass arises primarily from
parking in the Right of Way.

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SCHEDULE “G”

[Intentionally Omitted]

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EXHIBIT “H”

GRANT DEED

FORM OF GRANT DEED

Recording requested by and

when recorded return to:

 

                                         

                                         

                                         

Assessor’s Parcel No.                     

In accordance with Section 11932 of the California Revenue and Taxation Code,
the Seller has declared the amount of the transfer tax by a separate statement
which is not being recorded with this Grant Deed.

For valuable consideration, receipt of which is acknowledged, the undersigned,
                    , a Delaware limited partnership (“Grantor”), hereby grants
to                     , a Delaware limited liability company (“Grantee”), that
certain land located in                      County, California more
particularly described in Exhibit A attached hereto and incorporated herein by
this reference, together with all buildings, improvements and fixtures located
thereon and owned by Grantor as of the date hereof and all right, title and
interest, if any, that Grantor may have in and to all rights, privileges and
appurtenances pertaining thereto including all of Grantor’s right, title and
interest, if any, in and to all rights-of-way, open or proposed streets, alleys,
easements, strips or gores of land adjacent thereto (herein collectively called
the “Real Property”).

This conveyance is made by Grantor and accepted by Grantee subject to all
covenants, conditions, restrictions and other matters set forth on Exhibit B
hereto (collectively, the “Permitted Exceptions”).

TO HAVE AND TO HOLD the Real Property together with all improvements located
thereon all and singular the rights and appurtenances thereto in anywise
belonging, subject to the Permitted Exceptions, unto Grantee, its legal
representatives, successors and assigns forever; and Grantor does hereby bind
itself, and its successors, to warrant and forever defend all and singular the
Real Property, subject to the Permitted Exceptions, unto the Grantee, its
successors and assigns, against every person whomever lawfully claiming or to
claim the same or any part thereof by, through or under Grantor, but not
otherwise.

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IN WITNESS WHEREOF, this Deed has been executed by Grantor as of
                    , 2006 to be effective as of                     , 2006.

 

                                         , L.P.,

a Delaware limited partnership

By:

 

 

Name:

 

 

Title:

 

 

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STATE OF             §

                                §

COUNTY OF         §

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

 

                                      , Notary Public My Commission Expires:  
                                           

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DOCUMENT NO.                          DATE RECORDED:                         ,
2005

STATEMENT OF TAX DUE AND REQUEST THAT TAX NOT BE MADE A PART OF THE PERMANENT
RECORD IN THE OFFICE OF THE COUNTY RECORDER (PURSUANT TO SECTION 11932 R & T
CODE)

TO: REGISTRAR, COUNTY OF                                         

REQUEST IS HEREBY MADE IN ACCORDANCE WITH THE PROVISIONS OF THE DOCUMENTARY
TRANSFER TAX ACT THAT THE AMOUNT OF TAX DUE NOT BE SHOWN ON THE ORIGINAL
DOCUMENT WHICH NAMES:

                                                             , L.P., a Delaware
limited partnership, as Grantor

AND

                                                             , a Delaware
limited liability company, as Grantee

PROPERTY DESCRIBED IN THE ACCOMPANYING DOCUMENT IS LOCATED IN THE CITY OF
                    , COUNTY OF                     

AMOUNT OF TAX DUE ON THE ACCOMPANYING DOCUMENT IS $                    

 

  x Computed on Full Value of Property Conveyed

 

  ¨ Computed on Full Value Less Liens and Encumbrances Remaining at Time of Sale

I declare under penalty of perjury under the laws of the State of California
that the foregoing is true and correct.

 

 

                                              Title Insurance Company

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EXHIBIT “I”

BILL OF SALE

FORM OF BILL OF SALE

THIS BILL OF SALE (this “Bill of Sale”), is made as of                     ,
2006 by                                          , L.P., a Delaware limited
partnership (“Seller”) to and for the benefit of                             , a
Delaware limited liability company (“Purchaser”).

W I T N E S S E T H:

WHEREAS, pursuant to the terms of that certain Purchase and Sale Agreement,
dated as of July     , 2006, by and between Seller and
                                 (the “Sale Agreement”), Seller agreed to sell
to Purchaser, inter alia, certain real property, the improvements located
thereon and certain rights appurtenant thereto, all as more particularly
described in the Sale Agreement (collectively, the “Real Property”); and

WHEREAS, by deed of even date herewith, Seller conveyed the Real Property to
Purchaser and by assignment of even date herewith Seller assigned to Purchaser
Seller’s rights under certain leases relating to the Real Property, as more
particularly described in such assignment (collectively, the “Leases”); and

WHEREAS, in connection with the above described conveyance Seller desires to
sell, transfer and convey to Purchaser certain items of tangible personal
property as hereinafter described.

NOW, THEREFORE, in consideration of the receipt of TEN AND NO/100 DOLLARS
($10.00) and other good and valuable consideration paid in hand by Purchaser to
Seller, the receipt and sufficiency of which are hereby acknowledged, Seller has
GRANTED, CONVEYED, SOLD, TRANSFERRED, SET OVER and DELIVERED and by these
presents does hereby GRANT, SELL, TRANSFER, SET OVER and DELIVER to Purchaser,
its legal representatives, successors and assigns, and Purchaser hereby accepts
all right, title and interest in and to all furniture, fixtures, artwork,
vehicles and equipment, all supply inventory of Seller (including without
limitation, china, glass and silver, linen, consumables, food and beverage
inventory (whether in open or unopened containers, to the extent permitted by
applicable law), repair parts, keys and supplies) as of the date hereof and
other items of tangible personal property owned by Seller (specifically
excluding (a) any items that are owned by Seller’s manager, and (b) the
reservation system software used in connection with the operation of the Real
Property and other computer software which either (i) is licensed to Seller, or
(ii) is proprietary) located on the Real Property and used in the ownership,
operation and maintenance of any portion of the Real Property and the hotel
operated thereon, and all records and files of Seller relating to the Real
Property or the Leases, but specifically excluding any Excluded Documents (as
such term is defined in the Sale Agreement); provided, however, that,
notwithstanding the foregoing, any items of the personal property transferred
pursuant hereto and

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which are marked with a trade name or trademark shall be assigned to Purchaser
subject to any restrictions on the use of the same that may be applicable to
Seller and/or Purchaser and Purchaser shall comply with the same after Closing
(herein collectively called the “Personal Property”).

This Bill of Sale is made without any covenant, warranty or representation by,
or recourse against, Seller as more expressly set forth in the Sale Agreement
and the documents executed in connection therewith.

IN WITNESS WHEREOF, the undersigned have executed this Bill of Sale as of the
date first set forth hereinabove.

 

SELLER:                                                              , L.P., a
Delaware limited partnership By:  

 

Name:  

 

Title:  

 

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EXHIBIT “J”

ASSIGNMENT OF INTANGIBLE PROPERTY

FORM OF ASSIGNMENT OF INTANGIBLE PROPERTY

THIS ASSIGNMENT OF INTANGIBLE PROPERTY (this “Assignment”), is made as of
                    , 2006 by and between                             , L.P., a
Delaware limited partnership (“Assignor”) and                             , a
Delaware limited liability company (“Assignee”).

W I T N E S S E T H:

WHEREAS, pursuant to the terms of that certain Purchase and Sale Agreement,
dated as of July     , 2006, by and between Assignor and Assignee (the “Sale
Agreement”), Assignor agreed to sell to Assignee, inter alia, certain real
property, the improvements located thereon and certain rights appurtenant
thereto, all as more particularly described in the Sale Agreement (collectively,
the “Real Property”). Initially capitalized terms not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Sale Agreement;
and

WHEREAS, the Sale Agreement provides, inter alia, that Assignor shall assign to
Assignee rights to certain intangible property and that Assignor and Assignee
shall enter into this Assignment.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto hereby agree as follows:

1. Assignment. Assignor hereby assigns, sets over and transfers to Assignee all
of Assignor’s right, title and interest in, to and under the following, if and
only to the extent the same may be assigned or quitclaimed by Assignor without
expense to Assignor:

(a) to the extent that the same are in effect as of the date hereof, any
licenses, permits and other written authorizations necessary for the use,
operation or ownership of the Real Property other than liquor licenses (it being
acknowledged by Assignee that Manager may hold certain licenses and permits in
its name and Assignor shall have no obligation to cause Manager to transfer or
assign to Assignee any such licenses or permits, except to the extent Manager is
required to cooperate with Assignor for such a transfer or assignment under the
Management Agreement, and to the extent that Manager is not required to so
cooperate, Assignor agrees to use commercially reasonable efforts to cause such
a transfer or assignment to occur) (herein collectively called the “Licenses and
Permits”);

(b) all reservation commitments for use of rooms, banquets, or other facilities
at the Hotel;

(c) all guest lists, reservations, catering and banquet records and other
records relating to the operation of the Hotel (current and historical),
including all payroll and employment, repair and improvement, and supply and
inventory records, to the extent that the same are owned by Assignor;

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(d) all petty cash funds in the hands of Assignor in connection with the guest
operations at the Hotel at the Cut-Off Time as described in Section 6.1(b) of
the Sale Agreement, to the extent that Assignor receives a credit for the same
at Closing;

(e) the guest ledger for the Hotel, as described in Section 6.1(b) of the Sale
Agreement, to the extent that Assignor receives a credit for the same at
Closing; and

(f) any guaranties and warranties in effect with respect to any portion of the
Real Property or the Personal Property as of the date hereof.

Assignee hereby accepts the foregoing assignment of the interests described in
this Section 1.

2. “As Is” and Release Provisions. Reference is made to the Sales Agreement,
pursuant to which Assignee has (a) agreed to certain limitations on
representations, warranties, and liabilities of Assignor; and (b) waived and
released certain rights and claims against Assignor and certain of its
affiliates. Such Sections and other express provisions of the Sales Agreement
limiting the liability of the Assignor are binding upon Assignee and its
successors and assigns, including successor owners of an interest in the
Contracts and the Licenses and Permits.

3. Miscellaneous. This Assignment and the obligations of the parties hereunder
shall survive the closing of the transaction referred to in the Sale Agreement
and shall not be merged therein, shall be binding upon and inure to the benefit
of the parties hereto, their respective legal representatives, successors and
assigns, shall be governed by and cons trued in accordance with the laws of the
State of California applicable to agreements made and to be wholly performed
within said State and may not be modified or amended in any manner other than by
a written agreement signed by the party to be charged therewith.

4. Severability. If any term or provision of this Assignment or the application
thereof to any persons or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Assignment or the application of such term
or provision to persons or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby, and each term and
provision of this Assignment shall be valid and enforced to the fullest extent
permitted by law.

5. Counterparts. This Assignment may be executed in counterparts, each of which
shall be an original and all of which counterparts taken together shall
constitute one and the same agreement.

IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the date
first set forth hereinabove.

 

ASSIGNOR:                                                  , L.P.,

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a Delaware limited partnership By:  

 

Name:  

 

Title:  

 

ASSIGNEE:                                       
                                           , a Delaware limited liability
company By:  

 

Name:  

 

Title:  

 

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EXHIBIT “K”

ASSIGNMENT & ASSUMPTION OF CONTRACTS

ASSIGNMENT AND ASSUMPTION OF CONTRACTS

This ASSIGNMENT AND ASSUMPTION OF CONTRACTS (the “Assignment”) is dated the     
day of                     , 2006, and is made by and between
                                    , a Delaware limited partnership
(“Assignor”), and                                 , a Delaware limited liability
company (“Assignee”).

RECITALS

A. Assignor and Assignee have previously entered into that certain Purchase and
Sale Agreement and Escrow Instructions dated July     , 2006 (the “Agreement”)
pursuant to which Assignor has agreed to sell to Assignee, and Assignee has
agreed to purchase from Assignor, all of Assignor’s right title and interest in
and to that certain Property (as defined in the Agreement) located at and more
commonly known as                                              , California, on
which are constructed such improvements in, by and through which is operated a
hotel and hospitality business commonly known as “                             ”
(the “Hotel”).

B. The Hotel and/or the Property are the subject of certain contracts and leases
as set forth on Exhibit A hereto, (together with Bookings, as defined in the
Agreement, collectively the “Contracts”), used and/or executed in connection
with the ownership and/or operation of the Hotel and/or the Property.

C. The effectiveness of this Assignment is dependent upon consummation of the
sale, transfer and delivery of the Property to Assignee pursuant to the
Agreement, and will not supersede any of the obligations of the parties under
the Agreement.

D. All capitalized terms shall have the meanings ascribed to them in the
Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual benefits
accruing to the parties hereto, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as
follows:

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I.

ASSIGNMENT

1.1 Effective Date. This Assignment shall take effect at and as of the date
hereof, and incorporates by this reference all covenants and obligations of
Assignor and Assignee contained in the Agreement with respect to the Contracts
which imply or require performance on and after the date hereof.

1.2 Assignment of Contracts. Assignor hereby assigns and transfers to Assignee
all of its rights and obligations, in, under and to all of the Contracts,
without representation or warranty except as expressly set forth in the
Agreement and subject to the terms of the Agreement, and delegates to Assignee
all of its duties thereunder.

1.3 Assumption of Contracts. Assignee hereby accepts the assignment made hereby
and assumes and agrees to pay and perform, as a direct obligation, all sums,
payments, duties and obligations required to be paid and performed on and after
the date hereof by Assignor under the Contracts assigned hereby to the same
extent as if Assignee had been an original party thereto.

1.4 Indemnification. Assignor agrees to indemnify and hold Assignee harmless
from and against all damages, losses, claims and liabilities (including
attorneys’ fees) pertaining to or arising in connection with the Contracts from
actions or omissions occurring or amounts owing prior to the date hereof.
Assignee agrees to indemnify and hold Assignor harmless from and against all
damages, losses, claims and liabilities (including attorneys’ fees) pertaining
to or arising in connection with the Contracts from actions or omissions
occurring or amounts owing on or after the date hereof.

1.5 Further Assurances. Whenever and so often as requested by a party, the other
party will promptly execute and deliver or cause to be executed and delivered
all such other and further instruments, documents or assurances, and promptly do
or cause to be done all such other and further things as may be necessary and
reasonably required in order to further and more fully vest in such requesting
party all rights, interests, powers, benefits privileges and advantages
conferred or intended to be conferred upon it by this Assignment.

1.6 Successors and Assigns. The rights and obligations of the parties hereto
shall be for the benefit of, and binding upon, the successors and assigns of the
parties hereto.

1.7 Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
made and to be wholly performed within said state.

II.

COUNTERPARTS

This Assignment may be executed in any number of counterparts and by different
parties hereto in separate counterparts and delivered by facsimile, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Assignment shall become effective upon the due execution
and delivery of this Assignment to the parties hereto.

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III.

EXECUTION

IN WITNESS WHEREOF, the parties hereto have executed this Assignment the day and
year first above written.

 

ASSIGNOR:                                                                  ,
L.P., a Delaware limited partnership BY:  

 

NAME:  

 

TITLE:  

 

ASSIGNEE:

 

  , a Delaware limited liability company BY:  

 

NAME:  

 

TITLE:  

 

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EXHIBIT “L”

PIP ESCROW AGREEMENT

PIP ESCROW AGREEMENT

THIS PIP ESCROW AGREEMENT (this “Agreement”), dated as of                     ,
2006, is made by and among (i)                      (“Purchaser”), as assignee
of Innkeepers USA Limited Partnership (“Inkeepers”),
(ii)                                      and (“Seller”), and (iii)
                     Title Insurance Company (“Escrow Agent”).

R E C I T A L S:

A. Reference is made to that certain Purchase and Sale Agreement (“Purchase
Agreement”) dated as of July     , 2006, by and among Innkeepers and each of the
parties named on Schedule A of the Purchase Agreement (collectively, “Sellers”),
relating to the sale of the Properties described in the Purchase Agreement.

B. Seller is the owner of the hotel property located at
                        , and more particularly described on Exhibit A hereto.

C. Section 4.5 of the Purchase Agreement contemplates that Seller may be unable
to complete certain PIP work required by the franchisor of the Property by the
Closing Date, (the PIP work remaining to be done being herein referred to as the
“Remaining PIP Work”).

D. Pursuant to the provisions of Section 4.5 of the Purchase Agreement, Seller
agreed that if it did not provide Purchaser with a credit for the Remaining PIP
Work at Closing in lieu of performing the PIP work or providing a credit to
Purchaser, it would deposit in escrow with Escrow Agent a sum equal to 105% of
the cost of the Remaining PIP Work.

E. Seller, Purchaser and Escrow Agent have agreed to set forth herein their
respective agreements and covenants with respect to the escrow of funds for the
purpose of completing the Remaining PIP Work.

A G R E E M E N T S:

NOW, THEREFORE, in consideration of the foregoing, of the covenants, promises
and undertakings set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller, Purchaser and Escrow Agent covenant and agree as follows:

1. Capitalized Terms. Capitalized terms used in this Agreement and not otherwise
defined herein shall have the meaning set forth in the Purchase Agreement.

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2. Engagement of Escrow Agent. Seller and Purchaser hereby appoint Escrow Agent,
and Escrow Agent hereby accepts such appointment, to act and serve as the escrow
agent under and pursuant to this Agreement.

3. Acknowledgement of Receipt of Escrow Funds. Escrow Agent hereby acknowledges
that it has received from Seller, the sum of
                                              Dollars ($            ) (“PIP Work
Escrow Amount”), and that it shall hold, maintain and disburse the PIP Work
Escrow Amount pursuant to and in accordance with this Agreement.

4. Escrow Account. The PIP Work Escrow Amount shall be held by Escrow Agent in
an interest-bearing escrow account established by Escrow Agent at a bank or
other financial institution selected by Escrow Agent and approved by counsel for
Purchaser and Seller. Interest earned on the PIP Work Escrow Amount shall be
added to the PIP Work Escrow Amount and shall, for income tax purposes, be
deemed earned by Seller. Seller’s federal taxpayer identification number is
                        

5. Completion of Work and Disbursement of Funds.

(a) Seller hereby authorizes and directs Purchaser to cause the Remaining PIP
Work to be completed as soon after Closing as is commercially reasonable, and
Purchaser agrees to undertake and perform the Remaining PIP Work in accordance
with the terms of this Agreement. Deposit by Seller of the PIP Escrow Amount is
in lieu and in full satisfaction of any obligation by Seller to perform the
Remaining PIP Work.

(b) Purchaser shall periodically, but not more frequently than once per month,
submit to Escrow Agent a written request (“PIP Draw Request”) for payment of the
cost of the Remaining PIP Work, as such work is performed. Each PIP Draw Request
shall include either invoices for the completion of the Remaining PIP Work or
receipts for the payment of such invoices. A copy of each PIP Draw Request shall
be submitted to Seller simultaneously with submission of the PIP Draw Request to
Escrow Agent. Unless within five (5) business days of its receipt of a PIP Draw
Request Seller objects to the disbursement of the PIP Draw Request, based solely
on its good faith belief that the work performed for which such PIP Draw Request
is being submitted is not consistent with the Remaining PIP Work required to be
performed and so notifies both Purchaser and Escrow Agent in writing with a
specific statement of its objections, Escrow Agent shall disburse the amount
requested pursuant to the PIP Draw Request. In the event that Seller objects to
a PIP Draw Request, the Escrow Agent shall await a joint instruction from
Purchaser and Seller or an order of a court of competent jurisdiction before
disbursing any additional amount from the PIP Work Escrow Amount.

(c) Upon the full performance of, and payment for, all the Remaining PIP Work in
accordance with the scope of work required by the Franchise Agreement and with
the terms of this Agreement and applicable law, Purchaser agrees to deliver to
Escrow Agent (with a signed copy to Seller) a certificate so certifying to
Seller (the “Completion Certificate”), whereupon the remaining balance of the
PIP Work Escrow Amount shall be promptly paid by Escrow Agent to Seller.

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6. Disbursements to Purchaser. In the event Purchaser fails to deliver the
Completion Certificate within                      months after the Closing
Date, Seller shall have the right at any time thereafter to deliver to Purchaser
and Escrow Agent a written request (“Seller’s Request”) to draw upon the balance
of the PIP Work Escrow Amount, in its entirety, whereupon Escrow Agent shall pay
the balance of the PIP Work Escrow Amount, to Seller. If Purchaser believes in
good faith that Escrow Agent should not honor Seller’s Request, Purchaser shall
provide a notice in writing with a specific statement of its objections to both
Seller and Escrow Agent. Escrow Agent shall then refrain from disbursing any of
the balance of the Remaining PIP Escrow Amount until Escrow Agent receives a
joint instruction from Purchaser and Seller or is instructed to disburse such
funds by an order of a court of competent jurisdiction.

7. Except as otherwise expressly provided in this Agreement, all notices,
requests, demands and other communications hereunder (“Notice”) shall be in
writing and shall be deemed delivered by (i) hand delivery upon receipt,
(ii) registered mail or certified mail, return receipt requested, postage
prepaid, upon delivery to the address indicated in the Notice, (iii) by
confirmed telecopy or facsimile transmission when sent, and (iv) overnight
courier (next business day delivery) on the next business day at 12:00 noon,
whichever shall occur first, as follows:

 

To Seller:    c/o RLJ URBAN LODGING FUND, L.P.    Attention: Thomas J,
Baltimore, Jr.    3 Bethesda Metro Center, Suite 1000    Bethesda, Maryland
20814    Telecopier: (301) 280-7782 With a copy to:    Frederick McKalip, Esq.
   RLJ Urban Lodging Fund, L.P.    3 Bethesda Metro Center, Suite 1000   
Bethesda, Maryland 20814    Telecopier: (301) 280-7782 To Purchaser:    c/o
INNKEEPERS USA LIMITED    PARTNERSHIP    340 Royal Poinciana Way    Suite 306   
Palm Beach, FL 33480    Attention: Mark A. Murphy, Esq.    Telecopier: (561)
857-6395 With a copy to:    ALLEN MATKINS LECK GAMBLE MALLORY    & NATSIS LP   
1901 Avenue of the Stars    Suite 1800    Los Angeles, California 90067   
Attention: Peter J. Roth, Esq.    Telecopier: (310) 788-2410

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Any correctly addressed Notice that is refused, unclaimed or undelivered because
of an act or omission of the party to be notified shall be considered to be
effective as of the first day that the Notice was refused, unclaimed or
considered undeliverable by the postal authorities, messenger or overnight
delivery service. The parties hereto shall have the right from time to time, and
at any time, to change their respective addresses and each shall have the right
to specify as its address any other address within the United States of America,
by giving to the other party at least thirty (30) days prior Notice thereof, in
the manner prescribed herein; provided, however, that to be effective, any such
change of address must be actually received (as evidenced by a return receipt).
Telephone numbers and email addresses, if listed, are listed for convenience
purposes only and not for the purposes of giving Notice pursuant to this
Agreement.

8. Counterparts. This Agreement may be executed and delivered in any number of
counterparts, each of which so executed and delivered shall be deemed to be an
original and all of which shall constitute one and the same instrument.

9. Escrow Agent. In performing any of its duties hereunder, Escrow Agent shall
not incur any liability to anyone for any damages, losses or expenses, except
for those arising out of its willful default, gross negligence or breach of
trust. Seller and Purchaser hereby agree to indemnify and hold harmless Escrow
Agent from and against any and all losses, claims, damages, liabilities and
expenses, including reasonable attorneys’ fees, which may be incurred by Escrow
Agent in connection with its acceptance or performance of its duties hereunder,
including any litigation arising from this Agreement or involving the subject
matter hereof, except in the case of Escrow Agent’s willful default, gross
negligence or breach of trust. In the event of a dispute between Seller and
Purchaser sufficient in the discretion of Escrow Agent to justify its doing so,
Escrow Agent shall be entitled to tender into the registry or custody of any
court of competent jurisdiction the PIP Work Escrow Amount and all other money
or property in its hands under this Agreement, together with such legal
pleadings as it deems appropriate, and thereupon be discharged from all further
duties and liabilities under this Agreement.

[Signature Page Follows]

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

 

PURCHASER:

 

By:  

 

Name:  

 

Title:  

 

SELLER:

 

By:  

 

Name:  

 

Title:  

 

 

By:  

 

Name:  

 

Title:  

 

ESCROW AGENT: CHICAGO TITLE INSURANCE COMPANY By:  

 

Name:  

 

Title:  

 

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EXHIBIT A

TO PIP WORK ESCROW AGREEMENT

LEGAL DESCRIPTION OF PROPERTY

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EXHIBIT B

TO PIP WORK ESCROW AGREEMENT

REMAINING PIP WORK