Exhibit 10.58

Hotel: Huntsville, AL (TPS)

PURCHASE CONTRACT

between

Larry G. Blumberg

Richard H. Blumberg

Helen B. Lifland

Hayne Hollis

Barry Kraselsky

Watson & Downs Investments, LLC

Elizabeth B. Donroe

Melissa L. Blumberg

Steve Becker

(“INTEREST OWNERS”),

SUNBELT – THA, LLC

(“COMPANY”)

AND

APPLE SEVEN HOSPITALITY OWNERSHIP, INC.

(“BUYER”)

AND

joined in by

LARRY BLUMBERG

BARRY KRASELSKY

(“INDEMNITOR”)

Dated: June 19, 2007

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[CONSTRUCTION]

TABLE OF CONTENTS

 

             Page No. ARTICLE I     DEFINED TERMS    1

1.1

  Definitions    1

ARTICLE II

    PURCHASE AND SALE; PURCHASE PRICE; PAYMENT; EARNEST MONEY DEPOSIT    9

2.1

  Purchase and Sale    9

2.2

  Purchase Price    9

2.3

  Allocation    9

2.4

  Payment    9

2.5

  Earnest Money Deposit    10

ARTICLE III

    Review Period    10

3.1

  Review Period    10

3.2

  Due Diligence Examination    11

3.3

  Restoration    12

ARTICLE IV

    SURVEY AND TITLE APPROVAL    12

4.1

  Survey    12

4.2

  Title    12

4.3

  Survey or Title Objections    13

ARTICLE V

    ASSIGNMENT OF MANAGEMENT AGREEMENT AND FRANCHISE AGREEMENT    13

ARTICLE VI

    BROKERS    14

ARTICLE VII

    REPRESENTATIONS, WARRANTIES AND COVENANTS    14

7.1

  Representations, Warranties and Covenants of the Interest Owners    14

7.2

  Representations, Warranties and Covenants of Buyer    23

7.3

  Survival    23

ARTICLE VIII

    ADDITIONAL COVENANTS    23

8.1

  Subsequent Developments    23

8.2

  Obligations of the Company and Interest Owners Before Closing    24

8.3

  Third Party Consents    25

8.4

  Estoppel Certificates    25

 

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8.5

  Access to Financial Information    25

8.6

  Bulk Sales    25

8.7

  Indemnification    25

8.8

  Limitation of Liability of Interest Owners    28

8.9

  Tax Matters    28

8.10

  Construction of Hotel    28

8.11

  Commencement of Construction; Substantial Completion    29

8.12

  (Intentionally Omitted)    29

8.13

  Inspections    29

8.14

  Punch List    29

8.15

  Pre-Opening Program    30

8.16

  Construction Warranty    30

8.17

  Contingent Reserve for Claims    30

ARTICLE IX

     CONDITIONS FOR CLOSING    31

9.1

  Buyer’s Conditions for Closing    31

9.2

  Interest Owner’s Conditions for Closing    32

ARTICLE X

     CLOSING AND CONVEYANCE    32

10.1

  Closing    32

10.2

  Interest Owners’ Deliveries    33

10.3

  Buyer’s Deliveries    34

10.4

  Tax Matters    34

ARTICLE XI

     COSTS    35

11.1

  Interest Owner’s Costs    35

11.2

  Buyer’s Costs    36

ARTICLE XII

     ADJUSTMENTS    36

12.1

  Adjustments    36

12.2

  Reconciliation and Final Payment    37

ARTICLE XIII

     CASUALTY AND CONDEMNATION    37

13.1

  Risk of Loss; Notice    37

13.2

  Buyer’s Termination Right    37

13.3

  Procedure for Closing    38

 

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ARTICLE XIV

     DEFAULT REMEDIES    38

14.1

  Buyer Default    38

14.2

  Interest Owner/Company Default    38

14.3

  Attorney’s Fees    38

ARTICLE XV

     NOTICES    40

ARTICLE XVI

     MISCELLANEOUS    40

16.1

  Performance    40

16.2

  Binding Effect; Assignment    40

16.3

  Entire Agreement    40

16.4

  Governing Law    40

16.5

  Captions    40

16.6

  Confidentiality    40

16.7

  Closing Documents    41

16.8

  Counterparts    41

16.9

  Severability    41

16.10

  Interpretation    41

16.11

  Further Acts    41

16.12

  Joint and Several Obligations    41

ARTICLE XVIII

     SUPPLEMENTAL PROVISIONS    41

 

SCHEDULES:    Schedule 1    Hotel Specific Data Schedule 2    Supplemental
Provisions Schedule 7.1(k)    Leases Schedule 7.1(l)    Company Intellectual
Property Schedule 7.1(n)    Tax Returns Schedule 7.1(o)    Insurance
Schedule 7.1(p)    Agreements EXHIBITS:    Exhibit A    Legal Description
Exhibit B    Management Agreement Exhibit C    Environmental Reports Exhibit D
   Consents and Approvals Exhibit E    Construction Warranty

 

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PURCHASE CONTRACT

This PURCHASE CONTRACT (this “Contract”) is made and entered into as of the date
set forth in Item 1 of Schedule 1 by and between the persons and entities set
forth in Item 2(a) of Schedule 1 (each, an “Interest Owner” and, collectively,
the “Interest Owners”), with an address c/o Larry Blumberg & Associates, Inc.,
2733 Ross Clark Circle, P.O. Box 5566, Dothan, Alabama 36302; the entity set
forth in Item 2(b) of Schedule 1 (the “Company”), with its principal office c/o
Larry Blumberg & Associates, Inc., 2733 Ross Clark Circle, P.O. Box 5566,
Dothan, Alabama 36302; and APPLE SEVEN HOSPITALITY OWNERSHIP, INC., a Virginia
corporation, with its principal office at 814 East Main Street, Richmond,
Virginia 23219, or its affiliates or assigns (“Buyer”).

RECITALS

A. The Company is the fee simple or leasehold owner of the land identified in
Exhibit A attached hereto and incorporated herein by this reference. The Company
is constructing on such land the hotel identified in Item 3 of Schedule 1
attached hereto and incorporated herein by reference.

B. The Interest Owners are the sole owners of one hundred percent (100%) of the
limited liability company interests or stock, as applicable, in the Company.

C. Buyer desires to purchase from the Interest Owners, and the Interest Owners
desire to sell to Buyer, all of Interest Owner’s interests in the Company for
the purchase price and upon terms and conditions hereinafter set forth.

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

ARTICLE I

DEFINED TERMS

1.1 Definitions. The following capitalized terms when used in this Agreement
shall have the meanings set forth below unless the context otherwise requires:

“Additional Deposit” shall mean $100,000.

“Affiliate” shall mean, with respect to the Company, any Interest Owner or
Buyer, any other person or entity directly or indirectly controlling (including
but not limited to all directors and officers), controlled by or under direct or
indirect common control with the Company, any Interest Owner or Buyer, as
applicable. For purposes of the foregoing, a person or entity shall be deemed to
control another person or entity if it possesses, directly or indirectly, the
power to direct or cause direction of the management and policies of such other
person or entity, whether through the ownership of voting securities, by
contract or otherwise.

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“Agreement” means any agreement, contract, obligation, promise or undertaking
(whether written or oral and whether express or implied) that is or purports to
be legally binding.

“Appurtenances” shall mean all rights, titles, and interests of the Company
appurtenant to the Land and Improvements, including, but not limited to, (i) all
easements, rights of way, rights of ingress and egress, tenements,
hereditaments, privileges, and appurtenances in any way belonging to the Land or
Improvements, (ii) any land lying in the bed of any alley, highway, street, road
or avenue, open or proposed, in front of or abutting or adjoining the Land,
(iii) any strips or gores of real estate adjacent to the Land, and (iv) the use
of all alleys, easements and rights-of-way, if any, abutting, adjacent,
contiguous to or adjoining the Land.

“Brand” shall mean the hotel brand or franchise identified in Item 4 of Schedule
1 and under which the Hotel operates.

“Business Day” shall mean any day other than a Saturday, Sunday or legal holiday
in the Commonwealth of Virginia, the State of Alabama or the state in which the
Hotel is located.

“Closing” shall mean the closing of the purchase and sale of the Interests
pursuant to this Contract.

“Closing Date” shall have the meaning set forth in Section 10.1.

“Construction Warranty” shall have the meaning set forth in Section 8.16.

“Contractor” shall mean the contractor for the Hotel identified in Item 12 of
Schedule 1.

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

“Company Intellectual Property” shall have the meaning set forth in
Section 7.1(l).

“Contemplated Transactions” shall mean all of the transactions contemplated by
this Contract and the Exhibits hereto.

“Contract” shall mean this Purchase Contract, as amended from time to time
pursuant to the terms hereof.

“Contracts, Plans and Specs” shall mean the Plans and Specifications and all
other contracts, plans, drawings, specifications, surveys, soil reports,
engineering reports, inspection reports, and other technical descriptions and
reports.

“Deposits” shall mean, to the extent assignable, all prepaid rents and deposits
(including, without limitation, any reserves for capital repairs and/or
improvements), including, but not limited to, refundable security deposits and
rental deposits and all other deposits for advance reservations, banquets or
future services, made in connection with the use or occupancy of the
Improvements, all reserves for replacement of FF&E, reserves for real property
taxes and insurance and utility deposits, credit for which shall be given to the
Interest Owners to the extent hereinafter provided.

“Due Diligence Examination” shall have the meaning set forth in Section 3.2.

 

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“Earnest Money Deposit” shall have the meaning set forth in Section 2.5.

“Effective Date” shall mean the date this Contract is fully executed by all of
the parties hereto, and an original of the executed document (which may be in
the form of counterparts, in which case the last counterpart) is deposited with
the Title Company.

“Effective Time” shall have the meaning set forth in Section 10.1.

“Environment” means soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life and any other environmental medium or natural resource.

“Environmental Requirements” shall have the meaning set forth in
Section 7.1(t)(iii).

“Escrow Agent” shall mean LandAmerica American Title Company, the Person serving
as escrow agent for purposes of the Earnest Money Deposit.

“Exception Documents” shall have the meaning set forth in Section 4.2.

“Existing Franchise Agreement” shall mean the franchise agreement identified in
Item 6 of Schedule 1.

“Existing Management Agreement” shall mean the management agreement identified
in Item 5 of Schedule 1.

“FF&E” shall mean all tangible personal property and fixtures of any kind (other
than personal property (i) owned by guests of the Hotel, or (ii) leased by the
Company pursuant to an FF&E Lease), including, but not limited to, all
furniture, fixtures, equipment, signs and related personal property; all
heating, lighting, plumbing, drainage, electrical, air conditioning, and other
mechanical fixtures and equipment and systems; all elevators, and related motors
and electrical equipment and systems; all hot water heaters, furnaces, heating
controls, motors and equipment, all shelving and partitions, all ventilating
equipment, and all disposal equipment; all spa, health club and fitness
equipment; all equipment used in connection with the use and/or maintenance of
the guestrooms, restaurants, lounges, business centers, meeting rooms, swimming
pools, indoor and/or outdoor sports facilities and other common areas and
recreational areas; all carpet, drapes, beds, furniture, televisions and other
furnishings; all stoves, ovens, freezers, refrigerators, dishwashers, disposals,
kitchen equipment and utensils, tables, chairs, plates and other dishes,
glasses, silverware, serving pieces and other restaurant and bar equipment,
apparatus and utensils.

“FF&E Leases” shall mean all leases of any FF&E and other contracts permitting
the use of any FF&E at the Improvements.

“Force Majeure” shall mean (i) strikes, lockouts or labor disputes, (ii) the
inability through no fault of the Company to obtain labor or materials or
reasonable substitutes therefor, (iii) acts of God and adverse weather
conditions, (iv) enemy or hostile governmental action or acts of terrorism,
(v) governmental restrictions such as embargoes, (vi) civil commotion, (vii)

 

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fire or other casualty or (viii) other conditions similar to those enumerated
above that are beyond the reasonable control of the Company, but in each case
excluding any such events or conditions that merely result in increased costs to
the Company.

“Franchisor” shall mean the franchisor identified in Item 6 of Schedule 1.

“Governmental Body” means any (i) nation, state, county, city, town, borough,
village, district or other jurisdiction; (ii) federal, state, local, municipal,
foreign or other government; (iii) governmental or quasi–governmental authority
of any nature (including any agency, branch, department, board, commission,
court, tribunal or other entity exercising governmental or quasi–governmental
powers); (iv) multinational organization or body; (v) body exercising, or
entitled or purporting to exercise, any administrative, executive, judicial,
legislative, police, regulatory or taxing authority or power; or (vi) any
official of any of the foregoing.

“Hazardous Material” shall have the meaning set forth in Section 7.1(t)(iii).

“Hotel” shall mean the hotel being constructed on the Land, including all
Improvements and Personal Property associated therewith, known generally by the
name and/or identification set forth in Item 3(a) of Schedule 1.

“Improvements” shall mean all buildings, structures, fixtures, parking areas and
other improvements now existing or to be constructed on the Land, including,
without limitation, all improvements and amenities described in Item 3 of
Schedule 1 and all related facilities.

“Indemnified Party” shall have the meaning set forth in Section 8.7(c)(i).

“Indemnifying Party” shall have the meaning set forth in Section 8.7(c)(i).

“Initial Deposit” shall mean $100,000.

“Interest” shall mean the limited liability company interest or corporate stock,
as applicable, owned by each Interest Owner in the Company, and “Interests”
shall mean all of such limited liability company interests or corporate stock.

“Interest Lien” shall mean any claim, lien, pledge, charge, security interest,
equitable interest, option, warrant, right of first refusal, restriction on use,
voting, transfer, receipt of income or other attribute of ownership, or other
encumbrance of any kind, affecting any Interest.

“Land” shall mean the real property described in Exhibit A, which is attached
hereto and incorporated herein by reference, together with all rights (including
without limitation all air rights and development rights), alleys, streets,
strips, gores, waters, privileges, appurtenances, advantages and easements
belonging thereto or in any way appertaining thereto, and all other
Appurtenances.

“Leased Premises” shall have the meaning set forth in Section 7.1(k).

“Leases” shall mean all leases, occupancy agreements, “trade-out” agreements,
advance bookings, convention reservations, or other agreements demising space
in, providing for the use

 

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or occupancy of, or otherwise similarly affecting or relating to the use or
occupancy of, the Improvements or Land, together with all amendments,
modifications, renewals and extensions thereof, and all guaranties by third
parties of the obligations of the tenants, licensees, franchisees,
concessionaires or other entities thereunder.

“Legal Action” shall have the meaning set forth in Section 8.8(c)(ii).

“Legal Requirement” means any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, ordinance, principle of
common law, code, regulation, rule, order, injunction, judgment, decree, ruling,
assessment or arbitration award of any Governmental Body or arbitrator.

“Licenses” shall mean all permits, licenses, franchises, utility reservations,
certificates of occupancy, and other documents issued by any federal, state, or
municipal authority or by any private party related to the development,
construction, use, occupancy, operation or maintenance of the Hotel, including,
without limitation, all licenses, approvals and rights (including any and all
existing waivers of any brand standard) necessary or appropriate for the
operation of the Hotel under the Brand.

“Manager” shall mean LBAM-Investors Group, L.L.C., an Alabama limited liability
company and an Affiliate of the Company as of the date of this Contract.

“New Franchise Agreement” shall mean the franchise agreement to be entered into
by the Company and the Franchisor at the Closing.

“New Management Agreement” shall mean the management agreement to be entered
into by the Company and the Manager at the Closing, in the form of the agreement
attached hereto as Exhibit B.

“Organizational Documents” means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
the certificate of partnership of a partnership; (c) the articles of
organization or certificate of formation and any operating or limited liability
company agreement of a limited liability company; (d) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person, and (e) any amendment to any of the foregoing.

“Pending Claims” shall have the meaning set forth in Section 7.1(t)(ii).

“Permitted Exceptions” shall have the meaning set forth in Section 4.3.

“Person” means an individual or any entity, including a corporation,
partnership, joint venture, limited liability company, trust, estate or other
unincorporated association, whether or not a legal entity.

“Personal Property” shall mean, collectively, all of the Property other than the
Real Property.

 

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“Plans and Specifications” shall have the meaning set forth in
Section 7.1(t)(viii), as the same may be revised during construction with the
approval of the Franchisor (to the extent such approval is required), provided
that any material revisions also shall be subject to the approval of Buyer,
which approval shall not be unreasonably withheld or delayed.

“Pre-Closing Tax Period” shall have the meaning set forth in Section 10.4(a).

“Pre-Opening Costs” shall have the meaning set forth in Section 8.15.

“Pre-Opening Program” shall have the meaning set forth in Section 8.15.

“Property” shall mean, collectively, (i) all of the following with respect to
the Hotel: the Land, Improvements, Appurtenances, FF&E, Supplies, Leases,
Deposits, Records, Service Contracts, Warranties, Licenses, FF&E Leases,
Contracts, Plans and Specs, Tradenames, Utility Reservations, as well as all
other real, personal or intangible property of the Company related to any of the
foregoing and (ii) any and all of the following that relate to or affect in any
way the design, construction, ownership, use, occupancy, leasing, maintenance,
service or operation of the Real Property, FF&E, Supplies, Leases, Deposits or
Records: Service Contracts, Warranties currently in effect, Licenses,
Tradenames, Contracts, Plans and Specs and FF&E Leases.

“Property Lien” means any deed of trust or mortgage, lien, security interest,
easement, right of way, encroachment, lease, purchase contract, option to
purchase, right of first refusal, servitude, restrictive covenant, limitation on
use or other encumbrance or title defect of any kind.

“Punch List Items” shall mean such items (i) as are reasonably necessary or
appropriate to fully complete the construction, equipping and furnishing of the
Hotel in accordance with this Contract and (ii) that, unless otherwise agreed by
Buyer in its sole discretion, (a) individually and in the aggregate do not and
will not prohibit, cause a delay in or otherwise adversely affect, under
applicable Legal Requirements, the Management Agreement, the Franchise Agreement
or otherwise, the opening of the Hotel for business to the public or the
continued occupancy and operation of the Hotel as contemplated under the Brand
and (b) may be corrected or completed, subject to delays caused by Force
Majeure, within not more than sixty (60) days.

“Purchase Price” shall have the meaning set forth in Section 2.2.

“Real Property” shall mean, collectively, all Land and Improvements with respect
to the Hotel.

“Records” shall mean all books, records, promotional material, tenant data,
guest history information (other than any such information owned exclusively by
the Franchisor), marketing and leasing material and forms (including but not
limited to any such records, data, information, material and forms in the form
of computerized files located at the Hotel), market studies prepared in
connection with the Company’s current annual plan and other materials,
information, data, legal or other documents or records (including, without
limitation, all documentation relating to any litigation or other proceedings,
all zoning and/or land use notices, relating to or affecting the Property, all
business plans and projections and all studies, plans, budgets and contracts
related to the development, construction and/or operation of the Hotel, and all
Tax Returns and work papers and filings related to Taxes for the current tax
year and the previous

 

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three (3) tax years) owned by the Company and/or in the Company’s possession or
control, or to which the Company has access or may obtain from the Franchisor,
that are used in or relating to the Property and/or the operation of the Hotel,
including the Land, the Improvements or the FF&E, and the Company shall furnish
to Buyer (and the term “Records” shall include) a list of the general
contractors, architects and engineers providing goods and/or services in
connection with the construction of the Hotel, all construction warranties and
guaranties currently in effect and copies of the final plans and specifications
for the Hotel, it being understood that the Company may not have in its
possession all change orders and other modifications to the original plans and
specifications.

“Release” shall have the meaning set forth in Section 7.1(t)(iii).

“Review Period” shall have the meaning set forth in Section 3.1.

“SEC” shall have the meaning set forth in Section 8.5.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller Liens” shall have the meaning set forth in Section 4.3.

“Service Contracts” shall mean contracts or agreements, such as maintenance,
supply, service or utility contracts.

“Straddle Period” shall have the meaning set forth in Section 10.4(b).

“Substantial Completion” including variations thereof such as “Substantially
Complete” and “Substantially Completed” shall mean: (i) the Company and the
Contractor have issued a certificate of substantial completion in form and
substance satisfactory to Buyer certifying that the Hotel has been constructed
substantially in accordance with the Plans and Specifications and the Legal
Requirements, (ii) a certificate of occupancy authorizing the opening of the
Hotel for business to the public and for operation under the Brand has been
issued by the local governing authority and is in full force and effect,
(iii) all other final and unconditional consents, approvals, licenses and
operating permits necessary or appropriate for the Hotel to open for business to
the public and to operate under the Brand have been issued by and obtained from
all applicable governmental and regulatory authorities, subject to Punch List
Items; (iv) the Hotel is fully furnished, fitted and equipped and ready to open
for business to the public and operate under the Brand, subject to Punch List
Items; (iii) all contractors, subcontractors, suppliers, mechanics, materialmen
and other persons or entities providing labor or materials for the construction
and development of the Hotel shall have been paid (or adequate provision for
payment of such persons or entities, which is not required to be an actual
escrow of funds, has been made to Buyer’s reasonable satisfaction), subject to
Punch List Items and (iv) the Franchisor has approved the completion, furnishing
and equipping of the Hotel and is prepared to commence (or authorize the
commencement of) operation of the Hotel, and all of the other conditions set
forth in the Management Agreement and the Franchise Agreement have been
satisfied, subject to Punch List Items.

“Supplemental Provisions” shall have the meaning set forth in Article XVII.

 

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“Supplies” shall mean all merchandise, supplies, inventory and other items used
for the operation and maintenance of guest rooms, restaurants, lounges, swimming
pools, health clubs, spas, business centers, meeting rooms and other common
areas and recreational areas located within or relating to the Improvements,
including, without limitation, all food and beverage (alcoholic and
non-alcoholic) inventory, office supplies and stationery, advertising and
promotional materials, china, glasses, silver/flatware, towels, linen and
bedding (all of which shall be 2-par level for all suites or rooms in the
Hotel), guest cleaning, paper and other supplies, upholstery material, carpets,
rugs, furniture, engineers’ supplies, paint and painters’ supplies, employee
uniforms, and all cleaning and maintenance supplies, including those used in
connection with the swimming pools, indoor and/or outdoor sports facilities,
health clubs, spas, fitness centers, restaurants, business centers, meeting
rooms and other common areas and recreational areas.

“Survey” shall have the meaning set forth in Section 4.1.

“Tax” or “Taxes” means any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental, windfall
profit, customs, vehicle, airplane, boat, vessel or other title or registration,
capital stock, franchise, employees’ income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever
and any interest, penalty, addition or additional amount thereon imposed,
assessed or collected by or under the authority of any Governmental Body or
payable under any tax-sharing agreement or any other Contract, including any
interest, penalty, or addition thereto, whether disputed or not and including
any obligations to indemnify or otherwise assume or succeed to the Tax liability
of any other Person.

“Tax Return” means any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.

“Third Party Consents” shall have the meaning set forth in Section 8.3.

“Title Commitment” shall have the meaning set forth in Section 4.2.

“Title Company” shall have the meaning set forth in Section 4.2.

“Title Policy” shall have the meaning set forth in Section 4.2.

“Title Review Period” shall have the meaning set forth in Section 4.3.

“Tradenames” shall mean all telephone exchanges and numbers, trade names, trade
styles, trade marks, and other identifying material, and all variations thereof,
together with all related goodwill (it being understood and agreed that all
franchise, license, management and other agreements granting a right to use the
name of such hotel chain or any other trademark or trade name and all waivers of
any brand standard shall remain in full force and effect after the acquisition
of the Interests by Buyer).

 

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“Utility Reservations” shall mean the Company’s interest in the right to receive
and continuously consume (including, without limitation, from and after Closing)
water service, sanitary and storm sewer service, electrical service, gas service
and telephone service on and for the Land and Improvements in capacities that
are adequate continuously to use and operate the Improvements for the purposes
for which they were intended, including, but not limited to (i) any right to the
present and future use of wastewater, drainage, water and other utility
facilities to the extent such use benefits the Real Property, (ii) any
reservations of or commitments covering any such use in the future, and
(iii) any wastewater capacity reservations relating to the Real Property.

“Warranties” shall mean all warranties, guaranties, indemnities and claims,
currently in effect, for the benefit of the Company with respect to the Hotel,
the Property or any portion thereof, including, without limitation, all
warranties and guaranties of the development, construction, completion,
installation, equipping and furnishing of the Hotel, and all indemnities, bonds
and claims of the Company related thereto.

ARTICLE II

PURCHASE AND SALE; PURCHASE PRICE; PAYMENT;

EARNEST MONEY DEPOSIT

2.1 Purchase and Sale. Each Interest Owner agrees to sell and convey to Buyer or
its Affiliates and/or assigns, and Buyer or its assigns agrees to purchase from
the Interest Owners, all of the Interests, in consideration of the Purchase
Price, subject to and upon the terms and conditions hereof. All of the Interests
shall be conveyed, assigned, and transferred to Buyer at Closing, free and clear
of all Interest Liens.

2.2 Purchase Price. Buyer agrees to pay, and the Interest Owners agree to
accept, as consideration for the conveyance of all of the Interests, subject to
the adjustments provided for in this Contract, the amount set forth in Item 7 of
Schedule 1; provided, however, that if the actual cost of construction of the
Hotel is less than the amount set forth in Item 14 of Schedule 1, the purchase
price shall be reduced by an amount equal to twenty percent (20%) of the
difference between such actual construction costs and the amount set forth in
Item 14 of Schedule 1 (the “Purchase Price”).

2.3 Allocation. The Purchase Price shall be allocated among the Interest Owners
in accordance with their percentage interest in the Company as set forth in
Item 2(a) of Schedule 1.

2.4 Payment. The Purchase Price, plus any positive adjustments under
Section 12.1, less (i) the Earnest Money Deposit and interest earned thereon, if
any, which Buyer elects to have applied against the Purchase Price (as provided
below), (ii) any applicable reserve for Punch List Items as provided in
Section 8.14 hereof and (iii) any negative adjustments under Section 12.1, shall
be paid to the Interest Owners in cash, certified funds or wire transfer, at the
Closing of the purchase and sale of the Interests. At the Closing, the Earnest
Money Deposit, together with interest earned thereon, if any, shall, at Buyer’s
election, be returned to Buyer or shall be paid over to the Interest Owners by
Escrow Agent to be applied to the Purchase Price on behalf of Buyer.

 

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2.5 Earnest Money Deposit.

(a) Within three (3) Business Days after the full execution and delivery of this
Contract, Buyer shall deposit the sum of One Hundred Thousand and No/100 Dollars
($100,000.00) in cash, certified bank check or by wire transfer of immediately
available funds (the “Initial Deposit”) with the Title Company, as escrow agent
(“Escrow Agent”), which sum shall be held by Escrow Agent as earnest money. If,
pursuant to the provisions of Section 3.1 of this Contract, Buyer elects to
terminate this Contract at any time prior to the expiration of the Review
Period, then the Escrow Agent shall return the Earnest Money Deposit to Buyer
promptly upon written notice to that effect from Buyer. If Buyer does not elect
to terminate this Contract on or before the expiration of the Review Period,
Buyer shall, within three (3) Business Days after the expiration of the Review
Period deposit the Additional Deposit with the Escrow Agent. The Initial Deposit
and the Additional Deposit (if any), and all interest accrued thereon, shall
hereinafter be referred to as the “Earnest Money Deposit.”

(b) The Earnest Money Deposit shall be held by Escrow Agent subject to the terms
and conditions of an Escrow Agreement dated as of the date of this Contract
entered into by Seller, Buyer and Escrow Agent (the “Escrow Agreement”). The
Earnest Money Deposit shall be held in an interest-bearing account in a
federally insured bank or savings institution reasonably acceptable to Seller
and Buyer, with all interest to accrue to the benefit of the party entitled to
receive it and to be reportable by such party for income tax purposes.

ARTICLE III

REVIEW PERIOD

3.1 Review Period. Buyer shall have a period through 6:00 p.m. Eastern Time on
the date that is sixty (60) days after the Effective Date, unless a longer
period of time is otherwise provided for in this Contract and except as
otherwise agreed to by the parties hereto (the “Review Period”), to evaluate the
legal, title, survey, construction, engineering, physical condition, structural,
mechanical, environmental, zoning, economic, permit status, franchise status,
marketing and economic data, financial statements and information, property
statements, franchise agreements, loan documents and other documents and
information related to the Property and the business of the Hotel. Within two
(2) Business Days following the Effective Date, the Company, at the sole cost
and expense of the Interest Owners, will deliver to Buyer for Buyer’s review, to
the extent not previously delivered to Buyer, true, correct and complete copies
of the following, together with all amendments, modifications, renewals or
extensions thereof:

(a) All Warranties currently in effect and Licenses relating to the Hotel, the
Real Property or any part thereof;

(b) All real estate and personal property tax statements with respect to the
Real Property and notices of appraised value for the Real Property for the
current year (if available) and for the lesser of the time period the Real
Property was owned or leased by the Company or each of the three (3) calendar
years prior to the current year;

 

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(c) Engineering, mechanical, architectural and construction plans, drawings,
specifications and contracts, payment and performance bonds, title policies,
reports and commitments, zoning information and marketing and economic data
relating to the Real Property or the Hotel and the construction, development,
installation and equipping thereof, as well as copies of all environmental
reports and information, topographical, boundary or “as built” surveys,
engineering reports, subsurface studies and other Contracts, Plans and Specs
relating to or affecting the Hotel, which the Company has in its possession or
control. Buyer acknowledges that the Contracts, Plans and Specs in the Company’s
possession may not include all change orders and other modifications made during
the course of construction of the Hotel, but in such case the Company will cause
the general contractor for the Hotel to furnish copies of such change orders and
other modifications upon Buyer’s request at any time during the Review Period;

(d) All agreements for real estate commissions, brokerage fees, finder’s fees or
other compensation payable by the Company in connection therewith; and

(e) All notices received from governmental authorities in connection with the
Real Property for the current year and for the lesser of the time period the
Real Property was owned or leased by the Company or each of the three
(3) calendar years prior to the current year and all other notices received from
governmental authorities received at any time that relate to any noncompliance
or violation of law that has not been corrected.

The Company shall, upon request of Buyer, make available to Buyer and Buyer’s
representatives and agents, for inspection and copying during normal business
hours, Records located at the Company’s corporate offices, and the Company
agrees to provide Buyer copies of all other reasonably requested information
that is relevant to the management, operation, use, occupancy or leasing of or
title to the Real Property and the plans and specifications for development of
the Hotel. At any time during the Review Period, Buyer may, in its sole and
absolute discretion, elect not to proceed with the purchase of the Property for
any reason whatsoever by giving written notice thereof to the Company, in which
event: (i) the Initial Earnest Money Deposit shall be promptly returned by
Escrow Agent to Buyer together with all accrued interest, if any, (ii) this
Contract shall be terminated automatically, (iii) all materials supplied by the
Company to Buyer shall be returned promptly to the Company, and (iv) the parties
will be relieved of all other rights, obligations and liabilities hereunder,
except for the parties’ obligations pursuant to Sections 3.3 and 16.6 below.
Upon expiration of the Review Period, Buyer may not terminate this Contract and
receive a refund of the Earnest Money Deposit for any reason except the failure
of any of the conditions set forth in Section 9.1.

Buyer acknowledges and agrees that certain of the items requested to be
delivered to Buyer in this Section 3.1 have been delivered to and received by
Buyer. The Company agrees to cooperate with Buyer and to provide any documents
or instruments described herein which have not been delivered by the Company for
Buyer’s due diligence and review.

3.2 Due Diligence Examination. At any time during the Review Period, and
thereafter through Closing of the Property, Buyer and/or its representatives and
agents shall have the right to enter upon the Property at all reasonable times
for the purposes of reviewing all Records and other data, documents and/or
information relating to the Property and conducting

 

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such surveys, appraisals, engineering tests, soil tests (including, without
limitation, Phase I environmental site assessments), inspections of construction
and other inspections and other studies as Buyer deems reasonable and necessary
or appropriate to evaluate the Property, subject to providing advance (not less
than 24 hours) notice to the Company unless otherwise agreed to by Buyer and the
Company (the “Due Diligence Examination”). The Company shall have the right to
have its representative present during Buyer’s physical inspections of the
Property, provided that failure of the Company to do so shall not prevent Buyer
from exercising its due diligence, review and inspection rights hereunder. Buyer
agrees to exercise reasonable care when visiting the Property, in a manner which
shall not materially adversely affect the completion or operation of the
Property. Buyer may not conduct a Phase II environmental site assessment or any
other invasive environmental procedure without the prior written consent of the
Company.

3.3 Restoration and Indemnity. Buyer covenants and agrees not to damage or
destroy any portion of the Property in conducting its examinations and studies
of the Property during the Due Diligence Examination and, if closing does not
occur, shall repair any portion of the Property damaged by the conduct of Buyer,
its agents or employees, to substantially the condition such portion(s) of the
Property were in immediately prior to such examinations or studies. Buyer
further hereby indemnifies and holds the Company and the Interest Owners
harmless from and against any damage, personal injury or death caused by or
arising from any action or omission by Buyer, its agents or employees in the
examination and study of the Property.

ARTICLE IV

SURVEY AND TITLE APPROVAL

4.1 Survey. The Company and the Interest Owners, at the Interest Owners’ sole
cost and expense, prior to the execution hereof have delivered to Buyer, true,
correct and complete copies of the most recent survey of the Real Property. In
the event that an update of the survey or a new survey (such updated or new
survey being referred to as the “Survey”) are desired by Buyer, then Buyer shall
be responsible for all costs related thereto.

4.2 Title. The Company, at the Interest Owners’ sole cost and expense, prior to
the execution hereof have delivered to Buyer, within two (2) Business Days after
the execution in full of this Contract, the Company’s existing title insurance
policy, including copies of all documents referred to therein, for the Real
Property. Buyer’s obligations under this Contract are conditioned upon Buyer
being able to obtain (i) a Commitment for Title Insurance (the “Title
Commitment”) issued by LandAmerica American Title Company, 8201 Preston Road,
Suite 280, Dallas, Texas 75225, Attention: David Long (the “Title Company”), for
the most recent standard form of owner’s policy of title insurance in the state
in which the Real Property is located, covering the Real Property, setting forth
the current status of the title to the Real Property, showing all Property Liens
and pursuant to which the Title Company agrees to issue at Closing an Owner’s
Policy of Title Insurance on the most recent form of ALTA (where available)
owner’s policy available in the state in which the Land is located, with
extended coverage and, to the extent applicable and available in such state,
comprehensive, access, single tax parcel, contiguity, Fairway and such other
endorsements as may be required by Buyer (collectively, the “Title Policy”); and
(ii) true, complete, legible and, where applicable, recorded copies of all

 

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documents and instruments (the “Exception Documents”) referred to or identified
in the Title Commitment, including, but not limited to, all deeds, plats,
surveys and Property Liens affecting the Real Property. Buyer shall promptly
provide the Company with a copy of the Title Commitment issued by the Title
Company.

4.3 Survey or Title Objections. If Buyer discovers any title or survey matter
which is objectionable to Buyer, Buyer may provide the Company and the Interest
Owners with written notice of its objection to same within fifteen (15) Business
Days after Buyer’s receipt of both the Survey and the Title Commitment, together
with copies of all exceptions noted therein (the “Title Review Period”). If
Buyer fails to so object in writing to any such matter set forth in the Survey
or Title Commitment, it shall be conclusively assumed that Buyer has approved
same, except as otherwise provided in Section 9.1(g). If Buyer disapproves any
condition of title, survey or other matters by written objection to the Company
and the Interest Owners on or before the expiration of the Title Review Period,
the Company and the Interest Owners shall elect either to attempt to cure, at
the Interest Owners’ sole cost and expense, or not cure any such item by written
notice sent to Buyer within five (5) days after receipt by the Company and the
Interest Owners of notice from Buyer, and if the Company and the Interest Owners
commit in writing to attempt to cure any such item, the Company and the Interest
Owners shall be given until the Closing Date to cure any such defect. In the
event the Company and the Interest Owners shall fail to cure a defect which they
have committed in writing to cure prior to Closing, or if a new title defect
arises after the date of Buyer’s Title Commitment or Survey, as applicable, but
prior to Closing, then Buyer may elect, in Buyer’s sole and absolute discretion:
(i) to waive such objection and proceed to Closing, or (ii) to terminate this
Contract and receive a return of the Earnest Money Deposit, and any interest
thereon. The items shown on the Survey or the Title Commitment or which are
apparent by physical inspection of the Property and which are not objected to by
Buyer as set forth above (other than (x) exceptions and title defects arising
after the Title Review Period, (y) those standard exceptions which are
ordinarily and customarily omitted in the state in which the Hotel is located,
so long as the Company and/or the Interest Owners, as the case may be, provide,
at the Interest Owners’ sole cost and expense, the appropriate owner’s
affidavit, gap indemnity or other documentation reasonably required by the Title
Company for such omission, and (z) as provided in Section 9.1(h)) are
hereinafter referred to as the “Permitted Exceptions.” In no event shall
Permitted Exceptions include mortgages or other documents evidencing or securing
indebtedness or any mechanics’ or materialmen’s lens or any claims or potential
claims therefor covering the Property or any portion thereof (“Seller Liens”),
each of which shall be paid in full by the Interest Owners, at the Interest
Owners’ sole cost and expense, and released at Closing.

ARTICLE V

MANAGEMENT AGREEMENT AND FRANCHISE AGREEMENT

The Company has entered into the Existing Management Agreement and the Existing
Franchise Agreement for the operation and management of the Hotel. At the
Closing, subject to the approval of the Franchisor, (i) the Company and the
Existing Manager shall terminate the Existing Management Agreement, (ii) the
Company and the Franchisor shall terminate the Existing Franchise Agreement,
(iii) the Company and the Manager shall enter into the New Management Agreement
and (iv) the Company and the Franchisor shall enter into the New Franchise
Agreement. The Interest Owners shall be solely responsible for all claims and

 

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liabilities arising under the Existing Management Agreement and the Existing
Franchise Agreement, whether accruing before or after the Closing. The Company
and the Interest Owners shall obtain the Existing Manager’s consent to the
termination of the Existing Management Agreement, and the Company and the
Interest Owners shall cause the Manager to enter into the New Management
Agreement. Before the Closing, the Company and Buyer shall request the
Franchisor to approve the transfer of the Interests to Buyer, the termination of
the Existing Management Agreement, the execution of the New Management Agreement
and the execution of the New Franchise Agreement. The Company and the Interest
Owners shall use their best efforts to promptly provide all information required
by the Franchisor in connection with the foregoing request for approval, and the
Company, the Interest Owners and Buyer shall diligently pursue obtaining the
Franchisor’s approval. The Interest Owners understand that Buyer expects the New
Franchise Agreement to be upon financial terms and conditions no less favorable
to the Company than the Existing Franchise Agreement.

ARTICLE VI

BROKERS

Each Interest Owner, the Company and Buyer represents and warrants to the other
that it has not engaged any broker, finder or other party in connection with the
transaction contemplated by this Contract. Each Interest Owner agrees to save
and hold harmless Buyer from any and all losses, damages, liabilities, costs and
expenses (including, without limitation, attorneys’ fees) involving claims made
by any agent, broker, or other person by or through the acts of any Interest
Owner or the Company, as the case may be, in connection with the Contemplated
Transactions. Buyer agrees to save and hold harmless each Interest Owner and the
Company from any and all losses, damages, liabilities, costs and expenses
(including, without limitation, attorneys’ fees) involving claims made by any
agent, broker, or other person by or through the acts of Buyer in connection
with the Contemplated Transactions.

ARTICLE VII

REPRESENTATIONS, WARRANTIES AND COVENANTS

7.1 Representations, Warranties and Covenants of Interest Owners. Each Interest
Owner represents, warrants and covenants to Buyer as follows:

(a) Organization and Existence of the Company. The Company is a limited
liability company or corporation duly organized or incorporated and validly
existing under the laws of the state indicated in Item 2(b) of Schedule 1, and
the Company has the full power and authority to own all of its property and
assets and to carry on its business as presently conducted. The Company is not
required to qualify to transact business in any jurisdiction other than the
state is which it is organized or incorporated. The copies of the Company’s
Organizational Documents that the Company has delivered to Buyer or delivers to
Buyer during the Review Period are or will be true, correct and complete copies
of the Organizational Documents of the Company as in effect as of the date
hereof and have not been amended or supplemented further. The Company is not a
general or limited partner of, or a party to any joint venture with, any other
entity and does not, directly or indirectly, own any interest in any other
Person.

 

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(b) Authorization and Validity. Each Interest Owner and the Company have the
power and authority to execute and deliver this Contract and the other
agreements contemplated hereby and to consummate the Contemplated Transactions.
This Contract has been duly executed and delivered by and constitutes a valid
and binding agreement of the Company, each Interest Owner, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency or
similar laws. The execution and delivery hereof by the Company and each Interest
Owner and the consummation by the Company and each Interest Owner of such
transactions have been fully authorized by the Company and each Interest Owner.

(c) Ownership of Interests. The Interest Owners are the owners of all of the
Interests, each owning the percentage set forth in Item 2(a) of Schedule 1, and
have good and valid title thereto, with no restrictions on, or any agreements
with respect to, voting rights or any other incidents of ownership thereof,
except as set forth in the Company’s Organizational Documents. The Interests
represent one hundred percent (100%) of the record and beneficial interests in
the Company and all other right, title and interest in and to the equity of the
Company. The Interest Owners have the absolute right to sell and transfer all of
the Interests to Buyer free and clear of all Interest Liens. Each Interest Owner
acquired its Interest in compliance with all applicable laws. On consummation of
the Contemplated Transactions, in accordance with the terms hereof, Buyer will
acquire good and marketable title to the Interests free and clear of all
Interest Liens.

(d) Related Party Transactions. No Interest Owner has any direct or indirect
interest in any property used by, or relating to, the Company, except through
the ownership of its Interest.

(e) Non-Contravention. The execution and delivery by each Interest Owner and the
Company of this Contract and the other agreements contemplated hereby do not,
and the consummation by each Interest Owner and the Company of the transactions
contemplated hereby or thereby will not (i) violate any provision of the any
Organizational Documents of any Interest Owner or the Company, (ii) violate, or
result with the passage of time in a violation of, any provision of, or result
in the acceleration of or entitle any party to accelerate any obligation under,
or result in the creation or imposition of any Property Lien upon, any of the
property of any Interest Owner or the Company pursuant to any provision of any
mortgage, deed of trust, lease, agreement, license or instrument to which any
Interest Owner or the Company is a party or to which any of them is subject
(collectively, the “Restrictive Documents”) except to the extent consents,
waivers, satisfactions or terminations therefor will be delivered on or before
Closing, (iii) constitute an event permitting termination of any mortgage, deed
of trust, lease, agreement, license or instrument to which any Interest Owner or
the Company is a party, except for those Restrictive Documents which represent
obligations to be satisfied or for which consents to assignment or waivers of
termination will be delivered on or before Closing or (iv) violate any judgment,
order, writ, injunction, decree, regulation or rule of any court or governmental
authority applicable to any Interest Owner or the Company or the assets of any
of them.

(f) Consents and Approvals. No consent, approval, notification, authorization or
order of, or declaration, filing or registration with, any governmental agency,
is required to be obtained or made by the Company or any Interest Owner in
connection with the consummation by the Company and each Interest Owner of the
Contemplated Transactions.

 

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(g) No Undisclosed Liabilities. The Company does not have, as of the date of
this Contract, any debts, liabilities or obligations, whether accrued, absolute,
contingent or otherwise, that are material to the financial condition, assets,
liabilities, income or prospects of the business of the Company except as
disclosed in this Contract or otherwise disclosed in writing to Buyer on or
before the date of this Contract.

(h) Litigation. There are no actions, suits, claims, investigations or
proceedings (legal, administrative or arbitrative) pending or, to the knowledge
of any of the Interest Owners or the Company, threatened against any of the
Interest Owners or the Company, whether at law or in equity and whether civil or
criminal in nature, before or by any federal, state, municipal or other court,
arbitrator, governmental department, commission, agency or instrumentality,
domestic or foreign. There are no judgments, decrees or orders of any such
court, arbitrator, governmental department, commission, agency or
instrumentality outstanding against any of the Interest Owners or the Company,
(i) which relate to the Company or any Interest Owner and which have or could
reasonably be expected to have an adverse effect on the financial condition,
assets, liabilities, income or prospects of the business of the Company, or
(ii) which seek specifically to prohibit, restrict or delay consummation of the
transactions contemplated hereby or fulfillment of any of the conditions of this
Contract.

(i) Title to Properties. The Company has good and marketable title to all of the
Property (whether real, fee or leasehold, personal or mixed, tangible or
intangible) and enjoys quiet possession of all such properties and interests,
free and clear of all mortgages and other encumbrances (except for Seller Liens
to be paid off at Closing, Permitted Exceptions and current taxes and liens
which arise by operation of law with respect to obligations not yet due and
payable). The Property includes all real estate, intangible assets and physical
assets of the Company and all of the property reasonably required to own and
operate the Hotel as it is contemplated to be operated and in accordance with
the Existing Franchise Agreement.

(j) Condemnation and Special Assessments. There are no pending or, to the
knowledge of the Company or any Interest Owner, threatened proceedings for
condemnation or the exercise of the right of eminent domain as to any part of
the Real Property or for limiting or denying any right of access thereto. None
of the Interest Owners or the Company has any knowledge of any special taxes or
assessments relating to any part of the Real Property or any planned public
improvements that may result in a special assessment against any part of the
Real Property.

(k) Lease of Real and Personal Property. Schedule 7.1(k) sets forth a list of
(a) all leases pursuant to which the Company leases, as lessee, real property
(the “Leased Premises”), (b) all leases pursuant to which the Company leases, as
lessor, real property, (c) all leases pursuant to which the Company leases, as
lessee, personal property and (d) all prepaid expenses, rents and security
deposits paid by or to the Company with respect to any of the foregoing leases.
The Company has performed all material obligations required to be performed by
it to date under all leases set forth in Schedule 7.1(k) and is not in default
nor, to the best knowledge of the Company and any Interest Owner, alleged to be
in default in any material respect under any thereof. To the best knowledge of
[the Company and any Interest Owner, there exists no default, or any event which
upon the giving of notice or passage of time would give rise to any default, in
the performance of any obligation to be performed by any other party

 

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to any of such leases. Immediately after the Closing, Buyer will possess all
right, title and interest of each Interest Owner and the Company will continue
to possess its right, title and interest, as the case may be, in and to the
leases set forth in Schedule 7.1(k).

(l) Trade Names, Trade Marks, Etc. Subject to the terms of the Existing
Franchise Agreement with respect to trade names, trademarks and service marks
licensed thereunder, the Company owns or has the right to use all trade marks,
trade names and/or business names used or useful in the business of the Company
(the “Company Intellectual Property”). There are no claims or proceedings
pending or, to the knowledge of the Interest Owners or the Company, threatened
against the Company asserting that its use of any Company Intellectual Property
infringes the rights of any other person. None of the Interest Owners or the
Company has knowledge of any use by the Company that may, with notice or passage
of time, give rise to such a claim. The Company has not licensed or otherwise
assigned any Company Intellectual Property to any third party, and there are no
existing infringing uses of the Company Intellectual Property by any third
parties. Other than the terms of the Existing Franchise Agreement, there are no
restrictions or other obligations of the Company with respect to the ownership
or use of the Company Intellectual Property. The trade marks, trade names,
service marks and/or business names described on Schedule 7.1(l) include all of
the Company Intellectual Property.

(m) Governmental Authorization and Compliance with Laws. Since the Company was
organized, its business has been and is strictly limited to acquisition of the
Land and construction and equipping of the Hotel. In addition, the Company has
been operated at all times in compliance with all laws, orders, regulations,
policies and guidelines of all governmental entities (including, without
limitation, those relating to building codes and zoning, environmental and
safety matters), (ii) the Company has all permits, certificates, licenses,
approvals and other authorizations required in connection with the operation of
its business as now conducted, such licenses, permits and approvals are in full
force and effect, and there is no reason to believe that any such license,
permit or approval will be recalled, and (iii) each Interest Owner and the
Company have complied in all material respects with all applicable laws,
regulations and restrictions relating to the business of the Company.

(n) Taxes.

(i) Tax Status. At all times during its existence as a limited liability
company, the Company has been treated as a partnership for Tax purposes or, if
the Company is a corporation, the Company made an S election under Section 1362
of the Code and, at the time of making such election and at all times
thereafter, it qualified as a “small business corporation” within the meaning of
Section 1361(b) of the Code.

(ii) Tax Returns. Each Interest Owner and the Company have filed all Tax Returns
that they were required to file under applicable laws and regulations. All such
Tax Returns were correct and complete in all respects and were prepared in
substantial compliance with all applicable laws and regulations. All Taxes due
and owing by each Interest Owner and the Company (if any), whether or not shown
on any Tax Return, have been paid. Neither the Company nor any of the Interest
Owners currently is the beneficiary of any extension of time within which to
file any Tax Return.

 

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No claim has ever been made by an authority in a jurisdiction where Company or
any of the Interest Owners does not file Tax Returns that Company or any of the
Interest Owners is or may be subject to taxation by that jurisdiction. There are
no liens for Taxes (other than Taxes not yet due and payable) upon any of the
assets of the Company or upon any Interest of any of the Interest Owners.

(iii) Withholding. The Company withheld and paid all Taxes required to have been
withheld and paid in connection with any amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party

(iv) No Expected Assessments. No Interest Owner or manager or officer (or
employee responsible for Tax matters) of the Company expects any authority to
assess any additional Taxes for any period for which Tax Returns have been
filed. No foreign, federal, state, or local tax audits or administrative or
judicial Tax proceedings are pending or being conducted with respect to the
Company or any of the Interest Owners with respect to any item of income, gain,
loss, deduction, or credit from the Company. Neither the Company nor any of the
Interest Owners has received from any foreign, federal, state, or local taxing
authority (including jurisdictions where the Company or the Interest Owners have
not filed Tax Returns) any (i) notice indicating an intent to open an audit or
other review, (ii) request for information related to Tax matters, or
(iii) notice of deficiency or proposed adjustment for any amount of Tax
proposed, asserted, or assessed by any taxing authority against the Company or
any of the Interest Owners with respect to any item of income, gain, loss,
deduction, or credit from the Company. Schedule 7.1(n) attached hereto lists all
federal, state, local, and foreign income Tax Returns filed with respect to the
Company or any Interest Owner for taxable periods ended on or after December 31,
2001, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The Company has delivered
to Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by the Company or the Interest Owner filed or received since December 31,
2001; provided, however, that an Interest Owner is required to deliver such
information only for a Tax Return for which there has been a notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any taxing authority against the Interest Owner with respect to any
item of income, gain, loss, deduction, or credit from the Company.

(v) No Extension of Statute of Limitations. Neither the Company nor any of the
Interest Owners has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to any Tax assessment or deficiency
with respect to any item of income, gain, loss, deduction, or credit from the
Company.

(vi) Post Closing Inclusion of Income. Neither the Company nor any of the
Interest Owners will be required to include any item of income in, or exclude
any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any:

(A) change in method of accounting for a taxable period ending on or prior to
the Closing Date;

 

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(B) “closing agreement” as described in Code § 7121 (or any corresponding or
similar provision of state, local, or foreign income Tax law);

(C) installment sale or open transaction disposition made on or prior to the
Closing Date; or

(D) prepaid amount received on or prior to the Closing Date.

(o) Insurance. Schedule 7.1(o) is a true and complete list, showing company,
type and amount of coverage, of all insurance policies carried by the Company
for the benefit of the Company or third parties. To the best of the knowledge of
the Interest Owners and the Company, the Company is not in default with respect
to any provision of any of its insurance policies and has not failed to give any
notice or present any claim thereunder in due or timely fashion or as required
by any of such insurance policies which would result in failure to recover in
full under such policies. To the best of the knowledge of the Interest Owners
and the Company, the Company has complied with the insurance requirements of all
leases and other Agreements to which it is a party.

(p) Agreements. Except (i) as listed on Schedule 7.1(p) and Schedule 7.1(k) and
(ii) for the Franchise Agreement, the Permitted Exceptions and the Seller Liens
to be released at Closing, the Company is not a party to and neither the Company
nor the Property is otherwise bound by any Agreements. No Interest Owner has any
interest in any of the Property other than the interest of a member or
shareholder under the provisions of the Company’s Organizational Documents. All
Agreements to which the Company is a party or by which it or any of its assets
or properties are bound or affected are in full force and effect and binding
obligations of the parties thereto. No event or condition has occurred or
exists, or is alleged by any of the other parties thereto to have occurred or
existed, which constitutes, or with lapse of time or giving of notice or both
might constitute, default or a basis for acceleration of any obligations, force
majeure or other claim of excusable delay or non-performance thereunder or in
respect thereof, whether on the part of the Company or any other party. The
Company is not a party to any Agreement or any arrangement (whether or not in
writing) with any of Interest Owners.

(q) Full Disclosure. To the best knowledge of the Company and the Interest
Owners, no statement contained in any document, certificate or other writing
furnished or to be furnished by the Company or any of the Interest Owners to
Buyer pursuant to the provisions of this Contract contains or shall contain any
untrue statement of a material fact or shall omit to state any material fact
necessary, in the light of the circumstances under which it was made, to make
the statements therein not misleading.

(r) FIRPTA. No Interest Owner is a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those items are defined in the Code and
Income Tax Regulations).

 

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(s) Bankruptcy. Neither the Company nor any Interest Owner is insolvent or the
subject of any bankruptcy proceeding, receivership proceeding or other
insolvency, dissolution, reorganization or similar proceeding.

(t) Representations as to the Hotel, Etc.

(i) Property Agreements. There are no, and as of the Closing there shall be no,
leases, license agreements, leasing agent’s agreements, equipment leases,
building service agreements, maintenance contracts, suppliers contracts,
warranty contracts, operating agreements, or other Agreements relating to the
ownership, occupancy, operation, management or maintenance of the Real Property,
FF&E, Supplies or Tradenames, (A) to which the Company is a party or an
assignee, or (B) binding upon the Real Property, except for (x) those Service
Contracts, Leases, Warranties and FF&E Leases to which the Company becomes a
party with the approval of Buyer, (y) those which Buyer may enter into before
the Closing, or (z) those which are disclosed on Schedule 7.1(k) and Schedule
7.1(p). As of the Closing, any Service Contracts, Leases, Warranties and FF&E
Leases to which the Company has become a party with the approval of Buyer shall
be in full force and effect, and no default shall have occurred and be
continuing thereunder and no circumstances shall exist which, with the giving of
notice, the lapse of time or both, would constitute such a default. No party
has, and as of the Closing no party shall have, any right or option to acquire
the Real Property, the Hotel or any portion thereof, or any interest therein or
in the Company, other than Buyer.

(ii) Pending Claims. To the knowledge of any of the Interest Owners, there are
not (A) any claims, demands, litigation, proceedings or governmental
investigations pending or threatened related to the Real Property, (B) any
special assessments or extraordinary taxes except as set forth in the Title
Commitment or (C) any pending or threatened condemnation or eminent domain
proceeding which would affect the Property or any part thereof. There are no:
pending arbitration proceedings or unsatisfied arbitration awards, or judicial
proceedings or orders respecting awards, which might become a Property Lien on
the Property or any portion thereof, pending unfair labor practice charges or
complaints, unsatisfied unfair labor practice orders or judicial proceedings or
orders with respect thereto, pending charges or complaints with or by city,
state or federal civil or human rights agencies, unremedied orders by such
agencies or judicial proceedings or orders with respect to obligations under
city, state or federal civil or human rights or antidiscrimination laws or
executive orders affecting the Real Property, or other pending, actual or, to
the knowledge of the Company or any Interest Owner, threatened litigation
claims, charges, complaints, petitions or unsatisfied orders by or before any
administrative agency or court which affect the Real Property or might become a
Property Lien on the Real Property or any portion thereof (collectively, the
“Pending Claims”).

(iii) Environmental. With respect to environmental matters, except as otherwise
disclosed in the environmental reports and documents identified in Exhibit C,
(i) to the Company’s and each of the Interest Owner’s knowledge, there has been
no Release or threat of Release of Hazardous Materials in, on, under, to, from
or in the area of the Real Property, (ii) no portion of the Property is being
used for the treatment,

 

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storage, disposal or other handling of Hazardous Materials or machinery
containing Hazardous Materials other than standard amounts of cleaning supplies,
gas-fired maintenance equipment and chlorine for the swimming pool to be
constructed on the Land, all of which shall be stored on the Property in strict
accordance with applicable Environmental Requirements and shall not exceed
limits permitted under applicable laws, including without limitation
Environmental Requirements, (iii) no underground storage tanks are currently
located on or in the Real Property or any portion thereof, (iv) no environmental
investigation, administrative order, notification, consent order, litigation,
claim, judgment or settlement with respect to the Property or any portion
thereof is pending or, to the knowledge of the Company and each of the Interest
Owners, threatened, and (v) there are no reports or other documentation
regarding the environmental condition of the Real Property in the possession of
the Company, any Interest Owner or their Affiliates, consultants, contractors or
agents except for those which have been or during the Review Period will be
delivered to Buyer. Buyer acknowledges that the Property is located in a high
humidity belt of the southern United States and that mold and mildew are common.
The Company has treated, and until Closing will treat, the Property for mold and
mildew as needed in the ordinary course of business to protect the health of
guests and employees of the Hotel and so as to comply with applicable law. As
used in this Contract: “Hazardous Materials” means (1) “hazardous wastes” as
defined by the Resource Conservation and Recovery Act of 1976, as amended from
time to time (“RCRA”), (2) “hazardous substances” as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. 9601 et seq.), as amended by the Superfund Amendment and Reauthorization
Act of 1986 and as otherwise amended from time to time (“CERCLA”); (3) “toxic
substances” as defined by the Toxic Substances Control Act, as amended from time
to time (“TSCA”), (4) “hazardous materials” as defined by the Hazardous
Materials Transportation Act, as amended from time to time (“HMTA”),
(5) asbestos, oil or other petroleum products, radioactive materials, urea
formaldehyde foam insulation, radon gas and transformers or other equipment that
contains dielectric fluid containing polychlorinated biphenyls and (6) any
substance whose presence is detrimental or hazardous to health or the
Environment, or is otherwise regulated by federal, state and local environmental
laws (including, without limitation, RCRA, CERCLA, TSCA, HMTA), rules,
regulations and orders, regulating, relating to or imposing liability or
standards of conduct concerning any Hazardous Materials or environmental, health
or safety compliance (collectively, “Environmental Requirements”). As used in
this Contract: “Release” means spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing.

(iv) Title and Liens. The Company has good and marketable fee simple absolute
title to the Real Property (or, if so indicated in Item 4 of Schedule 1,
leasehold title to the Land pursuant to the ground lease described therein and
fee simple absolute title to the Improvements during the term of such ground
lease), subject only to the Permitted Exceptions. Except for the FF&E subject to
the FF&E Leases and any applicable Permitted Exceptions, the Company has good
and marketable title to the Personal Property, free and clear of all
encumbrances except for the Permitted Exceptions, and there are no other
encumbrances or other rights pending or of which the Company or any Interest
Owner has received notice or which are otherwise known to the Company or any
Interest Owner related to any other Personal Property.

 

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(v) Utilities. All appropriate utilities, including sanitary and storm sewers,
water, gas, telephone, cable and electricity, are available at the boundaries of
the Land and the Company is entitled to connect the Hotel thereto, and upon
connection to the Hotel and payment of all connection or “tap-on”, usage and
similar fees to be paid by the Interest Owners or the Company, as applicable,
such utilities shall be sufficient to and available to service the Hotel.

(vi) Licenses. To the knowledge of the Company and each of the Interest Owners
the Real Property complies with, and upon construction of the Hotel the Real
Property shall comply with, all applicable Licenses and Legal Requirements
including, without limitation, those regarding zoning, land use, building, fire,
health, safety, environmental, subdivision, water quality, sanitation controls
and the Americans with Disabilities Act, and similar rules and regulations
relating and/or applicable to the ownership, use and operation of the Property
as it is contemplated to be operated. The Company has received, or by Closing
shall have received, all Licenses required or needed for the lawful conduct,
occupancy and operation of the business of the Hotel, and each License is in
full force and effect, and will be received and in full force and effect as of
the Closing. No Licenses necessary for the lawful conduct, occupancy or
operation of the business of the Hotel shall require any approval of a
Governmental Body for transfer of Interests except as set forth in Exhibit D.

(vii) Management Agreement and Franchise Agreement. The Company has furnished to
Buyer true and complete copies of the Existing Management Agreement and the
Existing Franchise Agreement, which constitute the entire agreement of the
parties with respect to the subject matter thereof and which have not been
amended or supplemented in any respect except as provided in Item 5 and Item 6
of Schedule 1. There are no other management agreements, franchise agreements,
license agreements or similar agreements for the operation or management of the
Hotel or relating to the Brand, to which the Company is a party or which are
binding upon the Property, except for the Existing Management Agreement and the
Existing Franchise Agreement. The Existing Management Agreement and the Existing
Franchise Agreement are in full force and effect. No default has occurred and is
continuing under the Existing Management Agreement or the Existing Franchise
Agreement, and no circumstances exist which, with the giving of notice, the
lapse of time or both, would constitute such a default.

(viii) Plans and Specifications. The plans and specifications for the
construction of the Hotel that were submitted to Buyer before the execution of
this Contract (the “Plans and Specifications”) have been approved by the
Franchisor and have not been modified in any material respect except as approved
by the Franchisor.

(u) Hart Scott Rodino Filing. All of the assets owned by or in which the Company
or any of its Affiliates have an interest are hotels or motels, related
improvements such as golf, swimming, tennis, restaurant, health club or parking
facilities (but excluding ski facilities), and assets incidental to the
ownership and operation of hotels or motels (e.g., prepaid

 

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taxes or insurance, management contracts and licenses to use trademarks
associated with the hotel or motel being acquired), as contemplated by the
regulations promulgated under the Hart Scott Rodino Act, except that the Company
and its Affiliates each may own other assets but the aggregate value thereof is
less than $50,000,000.

(v) Employees. Except as may be provided in the Supplemental Provisions, the
Company has never had, does not currently have, and shall not have on the
Closing Date, (i) any employees, (ii) any employee benefit plans or (iii) any
other trusts, escrows, agreements, liabilities or other arrangements related to
any type of employee benefits or plans, whether for any past, existing or future
employees, members, stockholders, officers, directors or other party affiliated
in any way with the Company.

7.2 Representations, warranties and covenants of Buyer. Buyer represents,
warrants and covenants:

(a) Authority. Buyer is a corporation duly incorporated, validly existing and in
good standing in the Commonwealth of Virginia. Buyer has received or will have
received by the applicable Closing Date all necessary consents of the Board of
Directors of Buyer and is fully authorized to complete the transactions
contemplated by this Contract. No other consent or approval of any person,
entity or governmental authority is required for the execution, delivery or
performance by Buyer of this Contract, and this Contract is hereby binding and
enforceable against Buyer, subject to the effect of bankruptcy and other laws
applicable to creditors generally and to equitable principles.

(b) Bankruptcy. Buyer is not insolvent nor the subject of any bankruptcy
proceeding, receivership proceeding or other insolvency, dissolution,
reorganization or similar proceeding.

7.3 Survival. All of the representations and warranties are true, correct and
complete in all material respects as of the date hereof and the statements set
forth therein (without qualification or limitation as to a party’s knowledge
thereof except as expressly provided for in this Article VII) shall be true,
correct and complete in all material respects as of the Closing Date. All of the
representations and warranties made herein shall survive Closing for a period of
one year (i.e., 12 months) expiring on the first anniversary date of the
Closing; provided, however, that the representations and warranties set forth in
Section 7.1(n) shall survive Closing for a period ending on the later of
(i) three (3) years following the date on which the Company files its Tax Return
for the tax period ended December 31, 2004 or (ii) the expiration of any
applicable statute of limitations that may be extended.

ARTICLE VIII

ADDITIONAL COVENANTS

8.1 Subsequent Developments. After the date of this Contract and until the
Closing Date, the Company shall keep Buyer fully informed of all subsequent
developments (“Subsequent Developments”) which would cause any of the
representations or warranties of the Company or the Interest Owners contained in
this Contract to be no longer accurate in any material respect.

 

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8.2 Obligations of the Company and the Interest Owners Before Closing. From and
after the date hereof the Company and/or the Interest Owners, as applicable,
shall:

(a) Continue to maintain the Property generally in accordance with past
practices and pursuant to and in compliance with the Existing Management
Agreement and the Existing Franchise Agreement, including, without limitation,
(i) accepting booking contracts for the use of the Hotel’s facilities and
retaining such bookings in accordance with the terms of the Existing Franchise
Agreement, (ii) maintaining the current level of advertising and other
promotional activities for the Hotel’s facilities, (iii) maintaining the present
level of insurance with respect to the Property in full force and effect until
the Closing Date and (iv) remaining in compliance in all material respects with
all current Licenses;

(b) Keep, observe, and perform in all material respects all obligations under
and pursuant to the Leases, the Service Contracts, the FF&E Leases, the Existing
Management Agreement, the Existing Franchise Agreement, the Contracts, Plans and
Specs, the Warranties and all other applicable contractual arrangements relating
to the Hotel or the Company;

(c) Advise Buyer promptly of any litigation, arbitration, or administrative
hearing before any court or governmental agency concerning or affecting the
Property which is instituted or threatened after the date of this Contract or if
any representation or warranty contained in this Contract shall become false;

(d) Not take, or purposefully omit to take, any action that would have the
effect of violating any of the representations, warranties, covenants or
agreements contained in this Contract;

(e) Pay or cause to be paid all taxes, assessments and other impositions levied
or assessed on the Property or any part thereof prior to the delinquency date,
and comply with all Legal Requirements relating to the Property;

(f) Not sell or assign, or enter into any agreement to sell or assign or create,
or permit to exist any Property Lien (other than a Permitted Exception) on, the
Property or any portion thereof;

(g) Not allow any License currently in existence with respect to the
construction, operation, use, occupancy or maintenance of the Property to
expire, be canceled or otherwise terminated;

(h) Not incur any indebtedness that will not be paid on or prior to the Closing
Date; and

(i) Not take any other action other than in the ordinary course of business
consistent with past practice.

The Company shall not, and the Interest Owners shall not permit the Company to,
without first obtaining the written approval of Buyer, which approval shall not
be unreasonably withheld, enter into any FF&E Leases, Service Contracts, Leases
or other contracts or agreements related to the Hotel other than those leases
and agreements listed on Schedule 7.1(k)

 

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and Schedule 7.1(p), or extend any existing such agreements, unless such
agreements (x) can be terminated, without penalty, upon thirty (30) days’ prior
notice or (y) will expire prior to the Closing Date.

8.3 Third Party Consents. Prior to the Closing Date, Interest Owners, at their
expense unless otherwise provided in Section 11.2, shall obtain any and all
other third party consents and approvals (x) required in order to transfer all
of the Interests to Buyer or (y) which, if not obtained, would materially
adversely affect the operation of the Hotel or the value of the Company,
including, without limitation, all consents and approvals referred to on Exhibit
D and (iii) use best efforts to obtain all other third party consents and
approvals (all of such consents and approvals in (i) and (ii) above being
referred to collectively as, the “Third Party Consents”).

8.4 Estoppel Certificates. It shall be a condition to Buyer’s obligations under
this Contract that the Company obtain, and the Interest Owners shall cause the
Company to obtain, from (i) each tenant under any Lease affecting the Hotel (but
not from current or prospective occupants of hotel rooms and suites within the
Hotel) and (ii) each lessor under each FF&E Lease for the Hotel identified by
Buyer as a material FF&E Lease, the estoppel certificates substantially in the
forms provided by Buyer to the Company during the Review Period, and deliver to
Buyer not less than five (5) days before the Closing.

8.5 Access to Financial Information. Buyer’s representatives shall have access
to, and the Company and the Interest Owners and their Affiliates shall cooperate
with Buyer and furnish upon request, all financial and other information
relating to the Property to the extent necessary to enable Buyer’s
representatives to prepare audited financial statements in conformity with
Regulation S-X of the Securities and Exchange Commission (the “SEC”) and other
applicable rules and regulations of the SEC and to enable them to prepare a
registration statement, report or disclosure statement for filing with the SEC
on behalf of Buyer or its Affiliates, whether before or after Closing and
regardless of whether such information is included in the Records to be
transferred to Buyer hereunder. Each Interest Owner shall also provide to
Buyer’s representative a signed representation letter in form and substance
reasonably acceptable to Buyer sufficient to enable an independent public
accountant to render an opinion on the financial statements related to the
Property. The provisions of this Section shall survive Closing or termination of
this Contract.

8.6 Bulk Sales. The Interest Owners, at their expense, shall take all steps
necessary to comply with the requirements of a transferor under all bulk
transfer laws, if any, that are applicable to the transactions contemplated by
this Contract.

8.7 Indemnification. If the transactions contemplated by this Contract are
consummated as provided herein:

(a) Indemnification of Buyer. Without in any way limiting or diminishing the
warranties, representations or agreements herein contained or the rights or
remedies available to Buyer for a breach hereof, each Interest Owner hereby
agrees to indemnify, defend and hold harmless Buyer and, if the Closing occurs
hereunder, the Company and their respective designees, successors and assigns
from and against all losses, judgments, liabilities, claims, damages or expenses
(including reasonable attorneys’ fees) of every kind, nature and description in
existence before, on or after Closing, whether known or unknown, absolute or
continent, joint or several, arising out of or relating to:

(i) any claim made or asserted against Buyer or the Company, or any of the
Property by a creditor of the Company or any Interest Owner, including any
claims based on or alleging a violation of any bulk sales act or other similar
laws;

 

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(ii) the breach of any representation, warranty, covenant or agreement of the
Company or any Interest Owner contained in this Contract;

(iii) any liability or obligation of the Company assumed or incurred prior to
the Closing Date; and

(iv) the conduct and operation by or on behalf of the Company of the Hotel or
the ownership, use or operation of the Property prior to Closing.

The indemnification under this Section 8.7(a) shall terminate and be of no
further force and effect, as to the matters described in clauses (i) through
(v) above, on and after the first anniversary date of the Closing; provided,
however, that (A) to the extent any of the representations and warranties
survive for a longer period pursuant to Section 7.3, the foregoing
indemnification relating to such representations and warranties shall terminate
and be of no further force and effect on and after the expiration of such longer
period and (B) the indemnification shall not terminate as to claims asserted in
writing by Buyer or the Company before such first anniversary date or longer
period, as the case may be. Any other indemnification by Interest Owners under
this Agreement (except for the indemnification as to matters described in clause
(vi) above) also shall terminate and be of further force and effect on and after
the first anniversary date of the Closing, except as to claims asserted in
writing by Buyer or the Company before such anniversary date.

(b) Indemnification of the Interest Owners. Without in any way limiting or
diminishing the warranties, representations or agreements herein contained or
the rights or remedies available to the Interest Owners for a breach hereof,
Buyer hereby agrees, with respect to this Contract, to indemnify, defend and
hold harmless the Interest Owners from and against all losses, judgments,
liabilities, claims, damages or expenses (including reasonable attorneys’ fees)
of every kind, nature and description in existence before, on or after Closing,
whether known or unknown, absolute or contingent, joint or several, arising out
of or relating to:

(i) the breach of any representation, warranty, covenant or agreement of Buyer
contained in this Contract;

(ii) the conduct and operation by the Company of its business at the Hotel after
the Closing; and

(iii) the failure of the Company after the Closing to pay any rent or otherwise
comply with its obligations under the ground lease, if any, identified in Item 4
of Schedule 1.

 

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The indemnification under this Section 8.7(b) shall terminate and be of no
further force and effect on and after the first anniversary date of the Closing
except as to claims asserted in writing by an Interest Owner before such date.

(c) Indemnification Procedure for Claims of Third Parties. Indemnification, with
respect to claims resulting from the assertion of liability by those not parties
to this Contract (including governmental claims for penalties, fines and
assessments), shall be subject to the following terms and conditions:

(i) The party seeking indemnification (the “Indemnified Party”) shall give
prompt written notice to the party or parties from which it is seeking
indemnification (the “Indemnifying Party”) of any assertion of liability by a
third party which might give rise to a claim for indemnification based on the
foregoing provisions of this Section 8.7, which notice shall state the nature
and basis of the assertion and the amount thereof, to the extent known;
provided, however, that no delay on the part of the Indemnified Party in giving
notice shall relieve the Indemnifying Party of any obligation to indemnify
unless (and then solely to the extent that) the Indemnifying Party is prejudiced
by such delay.

(ii) If in any action, suit or proceeding (a “Legal Action”) the relief sought
is solely the payment of money damages, and if the Indemnifying Party
specifically agrees in writing to indemnify such Indemnified Party with respect
thereto and demonstrates to the reasonable satisfaction of such Indemnified
Party its financial ability to do so, the Indemnifying Party shall have the
right, commencing thirty (30) days after such notice, at its option, to elect to
settle, compromise or defend, pursuant to this paragraph, by its own counsel and
at its own expense, any such Legal Action involving such Indemnified Party’s
asserted liability. If the Indemnifying Party does not undertake to settle,
compromise or defend any such Legal Action, such settlement, compromise or
defense shall be conducted in the sole discretion of such Indemnified Party, but
such Indemnified Party shall provide the Indemnifying Party with such
information concerning such settlement, compromise or defense as the
Indemnifying Party may reasonably request from time to time. If the Indemnifying
Party undertakes to settle, compromise or defend any such asserted liability, it
shall notify such Indemnified Party in writing of its intention to do so within
thirty (30) days of notice from such Indemnified Party provided above.

(iii) Notwithstanding the provisions of the previous subsection of this
Contract, until the Indemnifying Party shall have assumed the defense of the
Legal Action, the defense shall be handled by the Indemnified Party.
Furthermore, (x) if the Indemnified Party shall have reasonably concluded that
there are likely to be defenses available to it that are different from or in
addition to those available to the Indemnifying Party; (y) if the Legal Action
involves other than money damages and seeks injunctive or other equitable
relief; or (z) if a judgment against Buyer, as the Indemnified Party, in the
Legal Action will, in the good faith opinion of Buyer, establish a custom or
precedent which will be adverse to the best interest of the continuing business
of the Hotel, the Indemnifying Party, shall not be entitled to assume the
defense of the Legal Action and the defense shall be handled by the Indemnified
Party, provided that, in the case of clause

 

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(z), the Indemnifying Party shall have the right to approve legal counsel
selected by the Indemnified Party, such approval not to be unreasonably
withheld, delayed or conditioned. If the defense of the Legal Action is handled
by the Indemnified Party under the provisions of this subsection, the
Indemnifying Party shall pay all legal and other expenses reasonably incurred by
the Indemnified Party in conducting such defense.

(iv) In any Legal Action initiated by a third party and defended by the
Indemnified Party (w) the Indemnified Party shall have the right to be
represented by advisory counsel and accountants, at its own expense, (x) the
Indemnifying Party shall keep the Indemnified Party fully informed as to the
status of such Legal Action at all stages thereof, whether or not the
Indemnified Party is represented by its own counsel, (y) the Indemnifying Party
shall make available to the Indemnified Party and its attorneys, accounts and
other representatives, all of the Indemnifying Party’s books and records
relating to such Legal Action and (z) the parties shall render to each other
such assistance as may be reasonably required in order to ensure the proper and
adequate defense of such Legal Action.

(v) In any Legal Action initiated by a third party and defended by the
Indemnifying Party, the Indemnifying Party shall not make settlement of any
claim without the written consent of the Indemnified Party, which consent shall
not be unreasonably withheld. Without limiting the generality of the foregoing,
it shall not be deemed unreasonable to withhold consent to a settlement
involving injunctive or other equitable relief against Buyer or its respective
assets, employees, Affiliates or business, or relief which Buyer reasonably
believes could establish a custom or precedent which will be adverse to the best
interests of its continuing business.

8.8 Limitations on Liability of Interest Owners. Notwithstanding anything
contained herein to the contrary, the liability of each Interest Owner with
respect to its representations, warranties, covenants and indemnifications
contained in this Contract shall be limited to a percentage of the total
liability of the Interest Owners with respect thereto equal to such Interest
Owner’s percentage interest in the Company.

8.9 Tax Matters. Without the prior written consent of Buyer, neither the Company
nor any of the Interest Owners shall make or change any election, change an
annual accounting period, adopt or change any accounting method, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment relating to the Company, surrender any right to claim a refund of
Taxes, consent to any extension or waiver of the limitation period applicable to
any Tax claim or assessment relating to the Company, or take any other similar
action relating to the filing of any Tax Return or the payment of any Tax, if
such election, adoption, change, amendment, agreement, settlement, surrender,
consent or other action would have the effect of increasing the Tax liability of
the Company for any period ending after the Closing Date or decreasing any Tax
attribute of the Company existing on the Closing Date.

8.10 Construction of the Hotel. Subject to the terms and conditions of this
Contract, the Company shall, and the Interest Owners shall cause the Company to,
(i) construct the Hotel on the Land (a) in a good, workmanlike and diligent
manner, (b) in accordance with development standards for comparable projects,
(c) in compliance in all material respects with the Plans and

 

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Specifications and with all Legal Requirements and (d) in accordance with all
requirements of the Existing Franchise Agreement and (ii) cause the Hotel to be
fully equipped with the FF&E and otherwise fully furnished and stocked with
merchandise, supplies, inventory and other Personal Property as required by the
Existing Franchise Agreement, including, without limitation, linens, bath towels
and other supplies at least at a 2-par level for all suites or rooms of the
Hotel, in each case such that the Hotel can be opened for business to the public
and operated to full capacity under the Brand. All expenses of constructing,
equipping and furnishing the Hotel in accordance with this Contract shall be the
sole responsibility of the Interest Owners, and Buyer shall have no obligation
whatsoever to adjust the Purchase Price or pay any additional costs as a result
of unforeseen events or circumstances affecting the cost of constructing,
equipping or furnishing the Hotel.

8.11 Commencement of Construction; Substantial Completion. The Company shall use
commercially reasonable efforts to obtain, or cause the Contractor to obtain, a
building permit and all other permits, licenses and approvals of governmental
authorities required for the construction, equipping and furnishing of the Hotel
in accordance with the Plans and Specifications and this Contract. The Company
shall diligently pursue construction of the Hotel in accordance with this
Contract and shall cause the Contractor to Substantially Complete the Hotel no
later than the date set forth in Item 10 of Schedule 1 attached hereto, subject
only to delays caused by Force Majeure. The Company shall promptly notify Buyer
of each event or condition of Force Majeure and the anticipated delay caused
thereby.

8.12 (Intentionally Omitted)

8.13 Inspections. Buyer shall have the right to inspect the Property to monitor
and observe the development and construction of the Hotel. All such inspections
shall require reasonable prior notice to the Interest Owners and shall be
conducted in a manner that will minimize any interference with the development
and construction of the Hotel. Buyer shall indemnify, defend and hold the
Interest Owners harmless from and against any and all expenses, costs and
liabilities (including but not limited to reasonable attorneys’ fees) for damage
or injury to persons or property arising out of or relating to its entry onto
the Land for any such inspections.

8.14 Punch List. Upon notification from the Contractor that the Hotel is
Substantially Completed and ready for inspection, the Company shall prepare a
“punch list” with the assistance of a representative of Buyer and the
Franchisor. The Company and the Interest Owners acknowledges that final
acceptance of the work on the Hotel shall be made only with the approval of
Buyer and the Franchisor. The costs of completing the Punch List Items that are
not completed as of the date of Closing, as reasonably estimated by the Interest
Owners with the approval of Buyer, such approval not to be unreasonably
withheld, plus fifty percent (50%) of such costs, shall be reserved by Buyer
from the Purchase Price and shall be disbursed to the Interest Owners only upon
Buyer’s reasonable determination that all of the Punch List Items have been
satisfactorily completed. The Interest Owners shall correct or complete all
Punch List Items, or cause the same to be corrected or completed, at their
expense, with all diligence and in any event within sixty (60) days after
Substantial Completion of the Hotel.

 

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8.15 Pre-Opening Program. It is contemplated that certain activities must be
undertaken prior to the Closing Date so that the Hotel can function in an
orderly and businesslike manner at the Effective Time (“Pre-Opening Program”).
The Company and the Interest Owners shall cooperate in good faith with the
Pre-Opening Program and shall provide the Franchisor and Buyer reasonable access
to the Property in advance of the Closing in order to conduct their activities
related to the Pre-Opening Program; provided that the Pre-Opening Program shall
not be permitted to interfere with or delay the activities of the Interest
Owners or the Company in completing the Hotel. The Interest Owners shall pay in
a timely manner all costs associated with the Pre-Opening Program or otherwise
related to the pre-opening operations of the Property up to but not including
the Effective Time, regardless of when such costs are payable (the “Pre-Opening
Costs”). The Interest Owners shall also fund all reserve accounts and other
accounts required under the Franchise Agreement, as applicable, to be funded
before the Effective Time. Notwithstanding the foregoing, at the Closing, the
Interest Owners shall receive a credit in an amount equal to all such accounts
funded by the Interest Owners before the Closing Date, provided that (i) such
accounts were required by the Franchisor or otherwise approved by Buyer (which
approval shall not be unreasonably withheld), and (ii) the Interest Owners shall
not receive a credit for any account to the extent the same is intended to cover
Pre-Opening Costs.

8.16 Construction Warranty. At the Closing, the Company shall be the named
beneficiary of all construction warranties with respect to the Hotel, including
a warranty by the Contractor, for the period ending not sooner than one (1) year
after the date the Hotel is Substantially Completed, in the form of the warranty
attached hereto as Exhibit H (the “Construction Warranty”).

8.17 Contingent Reserve for Claims. Contingent reserves shall be established for
the purposes and in the amounts specified below:

(a) Notwithstanding anything contained in this Contract to the contrary, at the
Closing, Buyer shall be entitled to hold in reserve from the Purchase Price the
sum of One Hundred Thousand Dollars ($100,000) (the “Post-Closing Reserve”) to
pay for any Post-Closing Claims (as hereinafter defined) under this Contract, as
such sum may be reduced as hereinafter provided. For purposes of this
Section 8.17, “Post-Closing Claims” shall mean any post-closing claim by Buyer
under this Contract, including (i) all claims under Section 8.7(a) hereof,
(ii) all adjustments under Article XII thereof and (iii) all other obligations
of the Interest Owners thereunder that survive Closing, but only if such claim
is asserted by Buyer within six (6) months after the Closing under this Purchase
Contract (the “Post-Closing Claim Period”). Except to the extent any
Post-Closing Claims remain outstanding, any funds remaining in the Post-Closing
Reserve shall be paid to the Interest Owners upon the expiration of the
Post-Closing Claim Period.

(b) Nothing contained in this Section 8.17 shall limit the personal liability of
the Interest Owners for post-closing claims under this Purchase Contract to the
extent the same may exceed in the aggregate the Post-Closing Reserve or to the
extent the same may be asserted by Buyer after any applicable Post-Closing Claim
Period, subject to any other limitations and conditions set forth in this
Contract.

 

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ARTICLE IX

CONDITIONS FOR CLOSING

9.1 Buyer’s Conditions for Closing. Unless otherwise waived in writing, and
without prejudice to Buyer’s right to cancel this Contract during the Review
Period, the duties and obligations of Buyer to proceed to Closing under the
terms and provisions of this Contract are and shall be expressly subject to
strict compliance with, and satisfaction or waiver of, each of the conditions
and contingencies set forth in this Section 9.1, each of which shall be deemed
material to this Contract. In the event of the failure of any of the conditions
set forth in this Section 9.1 or of any other condition to Buyer’s obligations
provided for in this Contract, which condition is not waived in writing by
Buyer, Buyer shall have the right at its option to declare this Contract
terminated, in which case the Earnest Money Deposit and any interest thereon
shall be immediately returned to Buyer and each of the parties shall be relieved
from further liability to the other, except as otherwise expressly provided
herein, with respect to this Contract.

(a) All representations and warranties of the Company and each Interest Owner
contained in or made pursuant to this Contract shall be true and correct in all
material respects as if made again on the Closing Date.

(b) Buyer shall have received all of the instruments listed in Section 10.2.

(c) The Company and each Interest Owner shall have performed, observed and
complied in all material respects with all of the covenants, agreements, closing
requirements and conditions required by this Contract to be performed, observed
and complied with by the Company and each Interest Owner, as and when required
hereunder.

(d) All Third Party Consents in form and substance satisfactory to Buyer shall
have been obtained and furnished to Buyer.

(e) The Existing Management Agreement and the Existing Franchise Agreement shall
have been terminated. The Manager and the Company shall have entered into the
New Management Agreement. The Franchisor and the Company shall have entered into
the New Franchise Agreement on terms and conditions acceptable to Buyer in its
sole discretion and in any event upon financial terms that are no less favorable
than the Existing Franchise Agreement.

(f) The Hotel shall be Substantially Completed.

(g) Buyer shall have obtained an as-built plat of survey of the Property as
completed, dated within 30 days of the Closing Date and prepared in compliance
with the then current ALTA/ACSM standards for urban properties, and such plat of
survey shall not disclose any encroachments, boundary line discrepancies or
other survey matters that, in Buyer’s reasonable judgment, would materially and
adversely affect the use, operation or value of the Property.

(h) Buyer shall have obtained an ALTA owner’s title insurance policy (or, if an
ALTA form of policy is not customarily issued in the state in which the Real
Property is located, in the form customarily issued in such state), issued by
the Title Company pursuant to

 

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the Title Commitment, insuring Buyer’s fee simple ownership in the Real Property
(i) with an effective date as of the Closing Date, (ii) with no exceptions for
filed or unfiled mechanics’ and materialmen’s liens, (iii) with no exceptions
for encroachments or other matters of survey unless approved by Buyer and
(iv) with no other exceptions to title other than the Permitted Exceptions.

9.2 Interest Owners’ Conditions for Closing. Unless otherwise waived in writing,
and without prejudice to the Interest Owners’ right to cancel this Contract
during the Review Period, the duties and obligations of the Interest Owners to
proceed to Closing under the terms and provisions of this Contract are and shall
be expressly subject to strict compliance with, and satisfaction or waiver of,
each of the conditions and contingencies set forth in this Section 9.2, each of
which shall be deemed material to this Contract. In the event of the failure of
any of the conditions set forth in this Section 9.2, which condition is not
waived in writing by the Interest Owners, the Interest Owners shall have the
right at their option to declare this Contract terminated and null and void, in
which case the remaining Earnest Money Deposit and any interest thereon shall be
immediately returned to Buyer and each of the parties shall be relieved from
further liability to the other, except as otherwise expressly provided herein.

(a) All of Buyer’s representations and warranties contained in or made pursuant
to this Contract shall be true and correct in all material respects as if made
again on the Closing Date.

(b) The Interest Owners shall have received all of the money, instruments and
conveyances listed in Section 10.3.

(c) Buyer shall have performed, observed and complied in all material respects
with all of the covenants, agreements, closing requirements and conditions
required by this Contract to be performed, observed and complied with by Buyer,
as and when required hereunder.

(d) Buyer shall have received the consents of the Franchisor to the termination
of the Existing Management Agreement and the Existing Franchise Agreement.

ARTICLE X

CLOSING AND CONVEYANCE

10.1 Closing. Unless otherwise agreed by Buyer and the Interest Owners, the
Closing on the Property shall occur on the date on which the Hotel opens for
business to the public in accordance with the Franchise Agreement, or as soon as
practicable thereafter, but in no event later than fifteen (15) Business Days
after Substantial Completion of the Hotel, provided that all conditions to
Closing hereunder have been satisfied. Buyer will provide Interest Owners at
least five (5) days prior written notice of the Closing Date selected by Buyer.
The date on which the Closing is to occur as provided in this Section 10.1, or
such other date as may be agreed upon by Buyer and the Interest Owners, is
referred to in this Contract as the “Closing Date” for the Property. The Closing
shall be held at 10:00 a.m. at the offices of the Title Company, or as otherwise
determined by Buyer and the Interest Owners. Regardless of the Closing Date, the
Closing shall be effective as of 12:01 a.m. on the date which is the later of
(i) the Substantial Completion Date or (ii) the date on which the Hotel opens
for business to the public in accordance with the Franchise Agreement (the
“Effective Time”).

 

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10.2 Interest Owners’ Deliveries. At Closing, the Interest Owners or the
Company, as applicable, shall deliver to Buyer the following, and, as
appropriate, all instruments shall be properly executed and conveyance
instruments shall be acknowledged in recordable form (the terms, provisions and
conditions of all instruments not attached hereto as Exhibits shall be mutually
agreed upon by Buyer and the Interest Owners prior to such Closing).

(a) An assignment or assignments duly executed and acknowledged transferring to
Buyer all of the Interests, free and clear of Interest Liens, in form and
substance acceptable to Buyer;

(b) Resignations of all officers, managers, directors and other agents of the
Company;

(c) The original Organizational Documents of the Company, including the articles
of organization or articles of incorporation certified by the appropriate
official of the state in which the Company is organized or incorporated, and a
certificate issued by such official that the Company is in valid existence and
good standing as of the Closing Date;

(d) Certified copies of resolutions and/or other evidence reasonably
satisfactory to Buyer that the person or persons executing the closing documents
on behalf of the Company and the Interest Owners have full right, power and
authority to do so, along with a certificate of good standing of each Interest
Owner that is an entity from the state in which Interest Owner is organized or
incorporated;

(e) To the extent not previously delivered to and in the possession of Buyer,
all Contracts, Plans and Specs, all Warranties and all keys for the Hotel (which
keys shall be properly tagged for identification);

(f) A closing statement to evidence the parties’ agreement regarding the
allocations, pro-rations and hold-backs relating to the Property, the payment of
closing costs as allocated hereunder, and any resulting adjustment of the
Purchase Price;

(g) Evidence satisfactory to Buyer of the termination of the Existing Management
Agreement and the Existing Franchise Agreement and execution and delivery by the
Manager of the New Management Agreement;

(h) All affidavits, gap indemnity agreements and other documents reasonably
required by the Title Company. At Buyer’s sole expense, Buyer shall have
obtained an irrevocable commitment directly from the Title Company for issuance
of an Owner’s Policy of Title Insurance to the Company insuring good and
marketable fee simple absolute title (or leasehold title if so identified in
Item 4 of Schedule 1) to the Real Property constituting part of the Property,
subject only to the Permitted Exceptions in the amount of the Purchase Price,
together with an nonimputation endorsement; and

 

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(i) Such other instruments as are contemplated by this Contract to be executed
or delivered by the Company or any Interest Owner, or reasonably required by
Buyer or the Title Company, or customarily executed in the jurisdiction in which
the Hotel is located, to effectuate the assignment of all of the Interests to
Buyer and the other Contemplated Transactions, with the effect that, after the
Closing, Buyer will have succeeded to all of the rights, titles, and interests
in the Company and the Company will own good and marketable fee simple title to
the Land and the Hotel in accordance with this Contract.

10.3 Buyer’s Deliveries. On or prior to the Closing Date, Buyer shall pay the
Interest Owners the Purchase Price, as adjusted pursuant to this Contract, and
shall deliver or cause to be delivered to the Interest Owners the following
agreements, documents and other items, which shall be in form and substance
reasonably satisfactory to the Interest Owners:

(a) a closing statement to evidence the parties’ agreement regarding the
allocations, pro-rations and hold-backs relating to the Property, the payment of
closing costs as allocated hereunder, and any resulting adjustment of the
Purchase Price; and

(b) such additional documents as might be reasonably requested by the Interest
Owners to evidence Buyer’s authority to consummate the purchase of the Interests
from the Interest Owners.

10.4 Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and the Interest Owners for certain tax matters
following the Closing Date:

(a) Tax Indemnification. Each of the Interest Owners shall indemnify Buyer, and
hold it harmless from and against (without duplication), any loss, claim,
liability, expense, or other damage attributable to (i) all Taxes (or the
non-payment thereof) of the Company for all taxable periods ending on or before
the Closing Date and the portion through the end of the Closing Date for any
taxable period that includes (but does not end on) the Closing Date
(“Pre-Closing Tax Period”), and (ii) any and all Taxes of any person (other than
the Company) imposed on the Company as a transferee or successor, by contract or
pursuant to any law, rule, or regulation, which Taxes relate to an event or
transaction occurring before the Closing.

(b) Straddle Period. In the case of any taxable period that includes (but does
not end on) the Closing Date (a “Straddle Period”), the amount of any Taxes
based on or measured by income or receipts of the Company for the Pre-Closing
Tax Period shall be determined based on an interim closing of the books as of
the close of business on the Closing Date (and for such purpose, the taxable
period of any partnership or other pass-through entity in which the Company
holds a beneficial interest shall be deemed to terminate at such time) and the
amount of other Taxes of the Company for a Straddle Period that relates to the
Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the
entire taxable period multiplied by a fraction the numerator of which is the
number of days in the taxable period ending on the Closing Date and the
denominator of which is the number of days in such Straddle Period.

(c) Responsibility for Filing Tax Returns. Buyer shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for the Company that are
filed after the Closing Date. Buyer shall permit the Interest Owners to review
and comment on each such Tax Return described in the preceding sentence prior to
filing.

 

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(d) Cooperation on Tax Matters.

(i) Buyer, the Company, and the Interest Owners shall cooperate fully, as and to
the extent reasonably requested by the other Party, in connection with the
filing of Tax Returns pursuant to this section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other Party’s request) the provision of records and
information that are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Interest Owners agree (A) to retain all books and records with
respect to Tax matters pertinent to the Company relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or the Company or Interest
Owners, any extensions thereof) of the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing authority, and
(B) to give Buyer reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if Buyer so requests, the Interest
Owners shall allow Buyer to take possession of such books and records.

(ii) Buyer, the Company, and the Interest Owners further agree, upon request, to
use their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).

(iii) Buyer, the Company, and the Interest Owners further agree, upon request,
to provide the other Party with all information that either Party may be
required to report pursuant to Code §6043 and all Treasury Regulations
promulgated thereunder.

(e) Survival. The provisions of this Section 10.4 shall survive the Closing for
a period ending on the later of (i) three (3) years after the date on which the
Company files its Tax Returns for the tax period ended December 31, 2004 or
(ii) the expiration of any applicable statute of limitations that may be
extended.

ARTICLE XI

COSTS

All Closing costs shall be paid as set forth below:

11.1 Interest Owner’s Costs. Interest Owners shall be responsible for all
transfer, recordation, sales, use, income, bulk transfer taxes or like taxes in
connection with the sale of the Interests hereunder and for all sales and use,
hotel occupancy and other taxes of the Company or the Hotel for the period prior
to Closing. Interest Owners shall be responsible for all costs related to the
termination of the Existing Management Agreement and the Existing Franchise

 

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Agreement. Interest Owners shall also be responsible for the costs and expenses
of their and the Company’s attorneys, accountants, appraisers and other
professionals, consultants and representatives. Interest Owners shall also be
responsible for payment of all prepayment penalties, premiums and other charges
or amounts payable in connection with the pay-off of any Property Liens
encumbering the Property. Interest Owners shall be responsible for all
Pre-Opening Costs as provided in Section 8.15.

11.2 Buyer’s Costs. In connection with the purchase of the Interests
contemplated under this Contract, Buyer shall be responsible for the costs and
expenses of its attorneys, accountants and other professionals, consultants and
representatives. Buyer shall also be responsible for the costs and expenses in
connection with the preparation of any environmental report, any update to the
survey and the costs and expenses of preparation of the title insurance
commitment and the issuance of the title insurance policy contemplated by
Article IV. Buyer shall be responsible for costs related to the execution of the
New Franchise Agreement. Buyer shall also be responsible for the costs incurred
after the Effective Time as provided in Section 12.1.

ARTICLE XII

ADJUSTMENTS

12.1 Adjustments. Unless otherwise provided herein, at Closing, adjustments
between the parties of income and expenses related to the Property shall be made
as of the Effective Time, with the income and expenses accrued prior to the
Effective Time being allocated to the Interest Owners and the income and
expenses accruing on and after the Effective Time being allocated to Buyer, as
if the Contemplated Transactions were a transfer of the Hotel rather than a
transfer of the Interests, all as set forth below. Subject to the foregoing and
except as otherwise expressly provided herein, all apportionments and
adjustments shall be made on an accrual basis in accordance with the Uniform
System of Accounts for the Lodging Industry (9th Revised Edition) published by
the American Hotel & Lodging Association.

(a) Taxes. All real estate taxes, personal property taxes, or any other taxes
and special assessments (special or otherwise) of any nature upon the Property
levied, assessed or pending for the calendar year in which the Closing occurs
(including the period prior to Closing, regardless of when due and payable)
shall be prorated as of the Effective Time and, if no tax bills or assessment
statements for such calendar year are available, such amounts shall be estimated
on the basis of the best available information for such taxes and assessments
that will be due and payable on the Hotel for the calendar year in which Closing
occurs.

(b) Utilities. All suppliers of utilities shall be instructed to read meters or
otherwise determine the charges owing as of the Effective Time for services
prior thereto, which charges shall be allocated to the Interest Owners. Charges
accruing after the Effective Time shall be allocated to Buyer.

(c) Accounts. The Interest Owners shall be entitled to retain the Hotel’s
working capital account, if any, and to withdraw all funds contained therein as
of the Effective Time. The Interest Owners shall receive a credit in the amount
of the aggregate balance as of the Effective Time in the FF&E reserve account
and similar accounts, if any, and utility deposits,

 

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petty cash and cash in registers, all of which shall remain with the Company
after the Closing. All other accounts, reserves and escrows, if any, held by the
Company or any other Person on the Company’s behalf shall remain the property of
the Company and be credited to Buyer, without additional charge to Buyer and
without Buyer being required to fund the same.

(d) Advance Deposits. All income generated by the Hotel, including receipts from
guest room or suite rentals, all prepaid rentals, room rental deposits, and all
other deposits for advance registration, banquets or services, whether
attributable to the period before the Effective Time or to the period after the
Effective Time, shall be credited to Buyer.

(e) Accounts Payable. Any indebtedness, accounts payable, liabilities or
obligations of any kind or nature related to the Company or the Property for the
periods prior to the Effective Time shall be allocated to the Interest Owners,
and Buyer shall not be or become liable therefor, except as expressly assumed by
Buyer pursuant to this Contract, and invoices received in the ordinary course of
business prior to Closing shall be allocated to the Interest Owners at Closing.

(f) Other Costs. All other costs attributable to the period before the Effective
Time, including the cost of property and liability insurance and all Pre-Opening
Costs, shall be allocated to the Interest Owners, and all costs attributable to
the period after the Effective Time shall be allocated to Buyer.

12.2 Reconciliation and Final Payment. The Interest Owners and Buyer shall
reasonably cooperate after Closing to make a final determination of the
allocations and prorations required under this Contract within sixty (60) days
after the Closing Date. Upon the final reconciliation of the allocations and
prorations under this Section, the party which owes the other party any sums
hereunder shall pay such party such sums within ten (10) days after the
reconciliation of such sums. The obligations to calculate such prorations, make
such reconciliations and pay any such sums shall survive the Closing.

ARTICLE XIII

CASUALTY AND CONDEMNATION

13.1 Risk of Loss; Notice. Prior to Closing and the sale of the Interests to
Buyer in accordance with this Contract, all risk of loss to the Property
(whether by casualty, condemnation or otherwise) shall be borne by the Interest
Owners. In the event that (a) any loss or damage to the Hotel shall occur prior
to the Closing Date as a result of fire or other casualty, or (b) the Company
receives notice that a governmental authority has initiated or threatened to
initiate a condemnation proceeding affecting the Hotel, the Interest Owners
shall give Buyer immediate written notice of such loss, damage or condemnation
proceeding (which notice shall include a certification of (i) the amounts of
insurance coverages in effect with respect to the loss or damage and (ii) if
known, the amount of the award to be received in such condemnation).

13.2 Buyer’s Termination Right. If, prior to Closing and the sale of the
Interests to Buyer in accordance with this Contract, (a) any condemnation
proceeding shall be pending against a substantial portion of the Hotel or
(b) there is any substantial casualty loss or damage to the Hotel, Buyer shall
have the option to terminate this Contract, provided Buyer delivers written

 

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notice to the Company of its election within twenty (20) days after the date the
Interest Owners have delivered to Buyer written notice of any such loss, damage
or condemnation as provided above, and in such event, the Earnest Money Deposit,
and any interest thereon, shall be delivered to Buyer and thereafter, except as
expressly set forth herein, no party shall have any further obligation or
liability to the other under this Contract. In the context of condemnation,
“substantial” shall mean condemnation of such portion of the Hotel (or access
thereto) as could, in Buyer’s reasonable judgment, render use of the remainder
impractical or unfeasible for the uses herein contemplated, and, in the context
of casualty loss or damage, “substantial” shall mean a loss or damage in excess
of One Hundred Thousand and No/100 Dollars ($100,000.00) in value.

13.3 Procedure for Closing. If Buyer shall not timely elect to terminate this
Contract under Section 13.2 above, or if the loss, damage or condemnation is not
substantial, all insurance proceeds or condemnation awards which the Company has
received as a result of the same, plus an amount equal to the insurance
deductible shall be paid or credited to Buyer, and all insurance proceeds and
condemnation awards payable as a result of the same shall be paid or credited to
Buyer, in which event the Closing shall occur without replacing or repairing
such damage. In the case of damage or casualty, at Buyer’s election, the
Property shall be repaired and restored to its condition immediately prior to
such damage or casualty, and all excess insurance proceeds shall be credited to
Buyer.

ARTICLE XIV

DEFAULT REMEDIES

14.1 Buyer Default. If Buyer defaults under this Contract after the Review
Period, and such default continues for ten (10) days following written notice
from the Company (provided no notice shall extend the time for Closing), then at
the election of a majority of the Interest Owners by written notice to Buyer,
this Contract shall be terminated and of no effect, in which event the Earnest
Money Deposit, including any interest thereon, shall be paid to and retained by
the Interest Owners as the sole and exclusive remedy of the Interest Owners and
the Company hereunder, as liquidated damages for Buyer’s default or failure to
close, and both Buyer and the Interest Owners shall thereupon be released from
all obligations hereunder.

14.2 Interest Owner/Company Default. If any Interest Owner or (before the
Closing) the Company defaults under this Contract, and such default continues
for ten (10) days following written notice from Buyer, Buyer may elect, as
Buyer’s sole and exclusive remedy, either (i) to terminate this Contract by
written notice to the Company delivered at any time prior to the completion of
such cure, in which event the Earnest Money Deposit, including any interest
thereon, shall be returned to the Buyer, and thereafter both the Buyer and the
Interest Owners shall thereupon be released from all obligations with respect to
this Contract, except as otherwise expressly provided herein; or (ii) to treat
this Contract as being in full force and effect by written notice to the Company
delivered at any time prior to the completion of such cure, in which event the
Buyer shall have the right to an action against the Interest Owners and/or the
Company for damages, specific performance and all other rights and remedies
available at law or in equity.

14.3 Attorney’s Fees. Anything to the contrary herein notwithstanding, if it
shall be necessary for either the Buyer or the Interest Owners to employ an
attorney to enforce its rights

 

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pursuant to this Contract because of the default of the other party, and the
non-defaulting party is successful in enforcing such rights, then the defaulting
party shall reimburse the non-defaulting party for the non-defaulting party’s
reasonable attorneys’ fees, costs and expenses.

ARTICLE XV

NOTICES

All notices required herein shall be deemed to have been validly given, as
applicable: (i) if given by telecopy, when the telecopy is transmitted to the
party’s telecopy number specified below and confirmation of complete receipt is
received by the transmitting party during normal business hours or on the next
Business Day if not confirmed during normal business hours, (ii) if hand
delivered to a party against receipted copy, when the copy of the notice is
receipted or rejected, (iii) if given by certified mail, return receipt
requested, postage prepaid, two (2) Business Days after it is posted with the
U.S. Postal Service at the address of the party specified below or (iv) on the
next delivery day after such notices are sent by recognized and reputable
commercial overnight delivery service marked for next day delivery, return
receipt requested or similarly acknowledged:

 

If to Buyer:  

Apple Seven Hospitality Ownership, Inc.

814 East Main Street

Richmond, Virginia 23219

Attention: Justin G. Knight, President

Fax No.: (804) 727-6350

with a copy to:  

Apple Seven Hospitality Ownership, Inc.

814 East Main Street

Richmond, Virginia 23219

Attention: Legal Dept.

Fax No.: (804) 727-6349

If to the Company,   Managing Member or President identified in Item 2(c) of
Schedule 1 the Interest Owners:  

c/o Larry Blumberg & Associates, Inc.

2733 Ross Clark Circle

P.O. Box 5566, Dothan, Alabama 36302

Attn: Barry Kraselsky

Fax No.: (334) 671-1356

with a copy to:  

Johnston, Hinesley, Flowers & Clenney, P.C.

Post Office Box 2246 (36302)

291 North Oates Street

Dothan, Alabama 36303

Attn: William W. Hinesley

Fax No.: (334) 793-6603

 

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Addresses may be changed by the parties hereto by written notice in accordance
with this Section.

ARTICLE XVI

MISCELLANEOUS

16.1 Performance. Time is of the essence in the performance and satisfaction of
each and every obligation and condition of this Contract.

16.2 Binding Effect; Assignment. This Contract shall be binding upon and shall
inure to the benefit of each of the parties hereto, their respective successors
and assigns.

16.3 Entire Agreement. This Contract and the Exhibits constitute the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof. No modification of this Contract shall be binding unless signed by the
parties hereto.

16.4 Governing Law. The validity, construction, interpretation and performance
of this Contract shall in all ways be governed and determined in accordance with
the laws of the Commonwealth of Virginia (without regard to conflicts of law
principles).

16.5 Captions. The captions used in this Contract have been inserted only for
purposes of convenience and the same shall not be construed or interpreted so as
to limit or define the intent or the scope of any part of this Contract.

16.6 Confidentiality. Except as either party may reasonably determine is
required by law (including without limitation laws and regulations applicable to
Buyer or its Affiliates who may be public companies): (i) prior to Closing, none
of Buyer, any Interest Owner or the Company shall disclose the existence of this
Contract or their respective intentions to purchase and sell the Property or
generate or participate in any publicity or press release regarding this
transaction, except to those Persons necessary for a party to meet its
obligations hereunder, including their respective legal counsel, consultants and
agents, the Manager, the Franchisor and the Title Company and except as
necessitated by Buyer’s Due Diligence Examination and/or shadow management,
unless both Buyer and the Company agree in writing and (ii) following Closing,
the parties shall coordinate any public disclosure or release of information
related to the transactions contemplated by this Contract, and no such
disclosure or release shall be made without the prior written consent of Buyer,
and no press release shall be made without the prior written approval of Buyer.

 

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16.7 Closing Documents. To the extent any Closing documents are not attached
hereto at the time of execution of this Contract, Buyer and the Company shall
negotiate in good faith with respect to the form and content of such Closing
documents prior to Closing.

16.8 Counterparts. This Contract may be executed in counterparts by the parties
hereto, and by facsimile signature, and each shall be considered an original and
all of which shall constitute one and the same agreement.

16.9 Severability. If any provision of this Contract shall, for any reason, be
adjudged by any court of competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Contract but shall be confined in its operation to the provision or provisions
hereof directly involved in the controversy in which such judgment shall have
been rendered, and this Contract shall be construed as if such provision had
never existed, unless such construction would operate as an undue hardship on
the Interest Owners or Buyer or would constitute a substantial deviation from
the general intent of the parties as reflected in this Contract.

16.10 Interpretation. For purposes of construing the provisions of this
Contract, the singular shall be deemed to include the plural and vice versa and
the use of any gender shall include the use of any other gender, as the context
may require.

16.11 Further Acts. In addition to the acts, instruments and agreements recited
herein and contemplated to be performed, executed and delivered by Buyer and the
Interest Owners, Buyer and the Interest Owners shall perform, execute and
deliver or cause to be performed, executed and delivered at the Closing or after
the Closing, any and all further acts, deeds, instruments and agreements and
provide such further assurances as the other party or the Title Company may
reasonably require to consummate the transaction contemplated hereunder.

16.12 Joint and Several Obligations. If any Interest Owner consists of more than
one person or entity, each such person or entity shall be jointly and severally
liable with respect to the obligations of such Interest Owner under this
Contract.

ARTICLE XVII

SUPPLEMENTAL PROVISIONS

All of the terms, conditions, representations, warranties, covenants and other
provisions, if any, set forth in the supplemental provisions attached hereto as
Schedule 2 (the “Supplemental Provisions”) are hereby incorporated into this
Contract and shall be considered a part hereof. In the event of any conflict or
inconsistency between the Supplemental Provisions and the other provisions of
this Contract, the Supplemental Provisions shall control.

 

S-1

Purchase Contract

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IN WITNESS WHEREOF, this Contract has been executed, to be effective as of the
date first above written, by the parties hereto.

 

INTEREST OWNERS:

 

  ,

a  

 

 

By:  

 

  , a

 

 

 

  By:  

 

  Name:  

 

  Title:  

 

COMPANY:

SUNBELT-THA, LLC, an

Alabama Limited Liability Company

By:  

/s/ Larry Blumberg

Name:   Larry Blumberg Title:   Its Manager INDEMNITOR:

 

  , a

 

 

By:  

 

  , a

 

 

 

  By:  

 

  Name:  

 

  Title:  

 

 

2

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BUYER:

APPLE SEVEN HOSPITALITY OWNERSHIP,

INC., a Virginia corporation

By:  

/s/ Justin G. Knight

Name:   Justin G. Knight Title:   President

 

3

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SCHEDULE 1

HOTEL SPECIFIC DATA

 

1. Date of Purchase Contract: June     , 2007

 

2. Interest Owners:

 

   Name    % Interest     EIN         

(a)

   Larry G. Blumberg    25 %               Richard H. Blumberg    25 %        
      Helen B. Lifland    20 %               Hayne Hollis    1 %              
Barry Kraselsky    1 %               Watson & Downs Investments, LLC    25 %  
            Elizabeth B. Donroe    1 %               Melissa L. Blumberg    1 %
              Steve Becker    1 %           

 

  (b) Company: Sunbelt-THA, LLC, an Alabama limited liability company

 

3. Description of Hotel:

 

  (a) Name/Identification of Hotel: TownPlace Suites Huntsville

 

  (b) Number of Rooms:     

 

  (c) Other Improvements/Amenities: [             sq. ft. aggregate meeting room
space; indoor swimming pool, exercise room, spa, business center]

 

4. Hotel Brand/Franchise: TownPlace Suites

 

5. Manager and Management Agreement:                                         

 

6. Franchisor and Franchise Agreement:                                         
    

 

7. Purchase Price: Eight Million Nine Hundred Twenty-seven Thousand One Hundred
Forty-one and 00/100 Dollars ($8,927,141.00), allocated as follows:

 

(a)

  

Real Property:

   $                                 

(b)

  

Personal Property:

   $                                 

(c)

  

Intangibles:

   $                                 

 

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  Total Purchase Price: $                        

 

8. Interest Owners’ Tax Identification Numbers:

 

  (a) Federal:                                                  

 

  (b) State:                                                      

 

9. Construction Commencement Date:                                         

 

10. Substantial Completion Date:                                         
        

 

11. Architect:                                                          

 

12. Contractor:                                                  

 

13. End of Review Period: 60 days after the date of this Contract

 

14. Construction Budget:

 

2

Purchase Contract

Schedule 1 – Hotel Specific Data

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SCHEDULE 2

SUPPLEMENTAL PROVISIONS

1. Liquor Licenses. The Interest Owners represent and warrant that (i) the brand
standard requirements of the Franchisor do not require the sale or complimentary
service of alcoholic beverages at the Hotel, (ii) alcoholic beverages are not
sold or otherwise served at the Hotel, and, (ii) the Hotel as currently operated
and in order to comply with the brand standard requirements of the Franchisor
does not require any license, permit or other authorization of governmental
authorities related to the sale or service of alcoholic beverages and (iii) the
Hotel, the Company and the Manager are in compliance in all material respects
with all applicable laws and regulations relating to the sale or service of
alcoholic beverages.

2. Allocation of Purchase Price. The Company, the Interest Owners and Buyer
agree that the Purchase Price shall be allocated in the manner set forth in
Exhibit J attached hereto and that such parties shall file all Tax Returns
(including amended returns and claims for refund) and information reports in a
manner consistent with such allocation.

 

1

Purchase Contract

Schedule 2 – Supplemental Provisions

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EXHIBIT A

LEGAL DESCRIPTION

Lot 2 according to the Final Plat of a Resubdivision of Lots 1 & 2 of a
Resubdivsion of Lot 22, Block 2, of West Park and Lot 2 of Residence Inn, a
Resubdivision of Lots 23 and 24, Block 2, of West Park as recorded in Plat Book
43 at page 23 in the Office of the Judge of Probate of Madison County, Alabama.

 

Purchase Contract

Exhibit A – Legal Description

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EXHIBIT B

(Intentionally Omitted)

 

Purchase Contract

Exhibit B – List of FF&E

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EXHIBIT C

EXISTING CONTRACTS AND LICENSES

 

Purchase Contract

Exhibit C – List of Hotel Contracts

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EXHIBIT D

CONSENTS AND APPROVALS

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EXHIBIT E

ENVIRONMENTAL REPORTS

Phase I Environmental Site Assessment dated September 15, 2006, Project
No. 06-651, prepared

by GEO Solutions, L.L.C.

[Signatures Begin on Following Page]

 

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EXHIBIT F

(Intentionally Omitted)

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EXHIBIT G

(Intentionally Omitted)

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EXHIBIT H

CONSTRUCTION WARRANTY