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Exhibit 10.1

EXECUTION COPY
 
 
 

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MEMBERSHIP INTERESTS CONTRIBUTION AGREEMENT

by and among

WATERFORD HOSPITALITY GROUP, LLC

and

MYSTIC HOTEL INVESTORS, LLC

and

HERSHA HOSPITALITY LIMITED PARTNERSHIP

 
 
Dated as of: June 15, 2005

 

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TABLE OF CONTENTS

1.
 
DEFINITIONS.
2
2.
 
CONTRIBUTION OF THE MEMBERSHIP INTERESTS.
5
3.
 
ISSUANCE OF MEMBERSHIP INTERESTS AND CASH PAYMENT.
5
   
3.1
Cash Payments by Investor.
5
   
3.2
Cash Payment to Contributor.
6
   
3.3
Payment of Costs
6
   
3.4
Issuance to Contributor.
6
   
3.5
Issuance to Investor
6
4.
 
DEPOSIT; DUE DILIGENCE REVIEW.
6
   
4.1
Deposit.
6
   
4.2
Payment.
6
   
4.3
Escrow Terms.
7
   
4.4
Protection of Escrow Agent.
7
   
4.5
Due Diligence Review
7
5.
 
MANAGEMENT AND OPERATING COVENANTS PRIOR TO CLOSING.
9
   
5.1
Pre-Closing Actions.
9
   
5.2
Property Condition.
10
   
5.3
Franchise Agreements
10
6.
 
ADJUSTMENTS AND PRORATIONS.
10
   
6.1
Adjusted Items.
10
   
6.2
Proration of Inventory
13
   
6.3
Basis of Adjustments.
13
   
6.4
Accounts Receivable.
13
   
6.5
No Overcharge of Tenants.
14
   
6.6
Closing Statement; Post-Closing Adjustment
14
7.
 
TITLE AND SURVEY.
15
   
7.1
Title Commitment and Survey.
15
   
7.2
Investor’s Review.
15
   
7.3
Correction of Defects.
16
   
7.4
Failure to Correct.
16
   
7.5
Effect of Corrected Defects.
16
8.
 
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CONTRIBUTOR.
17
   
8.1
Organization and Power.
17
   
8.2
Authority.
17
   
8.3
Consents.
17
   
8.4
Violations.
17
   
8.5
No Litigation.
18
   
8.6
No Attachments or Bankruptcy Events.
18
   
8.7
Environmental Matters.
18
   
8.8
Space Leases.
18
   
8.9
Ground Leases.
19
   
8.10
Assessments.
19
   
8.11
Other Agreements.
19
   
8.12
Service Contracts.
19

 
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8.13
Permits.
20
   
8.14
Taxes.
20
   
8.15
Employees
20
   
8.16
Signatories.
21
   
8.17
No Conflicts with Agreements.
21
   
8.18
No Options.
21
   
8.19
Franchise Agreements.
21
   
8.20
Existing Debt.
21
   
8.21
Owner Entities.
22
   
8.22
Insurance.
22
   
8.23
Condemnation Proceedings; Roadways.
22
   
8.24
Financial Statements.
22
   
8.25
Capitalization.
22
   
8.26
Owner Entity Investments.
22
   
8.27
Compliance with Legal Requirements.
23
   
8.28
Liabilities.
23
   
8.29
Prior Activities of the Owner Entities.
23
   
8.30
Survival.
23
9.
 
REPRESENTATIONS, WARRANTIES AND COVENANTS OF INVESTOR.
23
   
9.1
Authority.
23
   
9.2
Signatories.
23
   
9.3
No Litigation.
23
   
9.4
No Agency.
24
   
9.5
Securities Matters.
24
   
9.6
No Registration.
24
   
9.7
Survival.
24
10.
 
DAMAGE AND DESTRUCTION.
24
11.
 
EMINENT DOMAIN.
25
12.
 
EXISTING DEBT.
25
   
12.1
Repayment of Existing Debt
25
   
12.2
Refinancings
25
   
12.3
Costs
26
13.
 
PART OWNED PROPERTY.
26
14.
 
CONDITIONS TO CLOSING.
27
   
14.1
Conditions to Investor’s Obligations.
27
   
14.2
Conditions to Contributor’s Obligations
27
15.
 
THE CLOSING.
28
   
15.1
Location and Date.
28
   
15.2
Contributions and Payments.
28
   
15.3
Contributor’s Closing Deliveries.
29
   
15.4
Management Agreements.
30
   
15.5
Lessee Formation and Leases.
30
   
15.6
Fees and Costs.
30
   
15.7
Further Assurances Regarding Documentation.
31
16.
 
ASSIGNMENT; DESIGNATION OF GRANTEES.
31
17.
 
TERMINATION OF THE AGREEMENT; DEFAULT REMEDIES; INDEMNITIES.
31

 
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17.1
Failure to Satisfy Conditions Precedent.
31
   
17.2
Investor’s Remedies.
32
   
17.3
Contributor’s Remedies.
32
   
17.4
Nature of Liquidated Damages
32
   
17.5
Legal Fees.
33
   
17.6
Agreements to Indemnify.
33
18.
 
BROKERS.
34
19.
 
PRESS RELEASES; CONFIDENTIALITY.
34
20.
 
MISCELLANEOUS.
35
   
20.1
Amendment
35
   
20.2
Waivers
35
   
20.3
No Assignments; Binding Effect
35
   
20.4
Notices
35
   
20.5
Certain Waivers
36
   
20.6
Preservation of Intent
36
   
20.7
Entire Agreement
36
   
20.8
Counterparts
36
   
20.9
Governing Law; Venue
36

EXHIBITS

Exhibit 1.1
Membership Interests and Owner Entities
Exhibit 1.2
Description of the Property
Exhibit 1.3
Form of LLC Agreement
Exhibit 1.4
Asset Management Agreement
Exhibit 1.5
Lessee LLC Agreement
Exhibit 1.6
Lease Agreement
Exhibit 1.7
Management Agreement
Exhibit 1.8
Allocation of the Contribution Value
Exhibit 1.9
Permitted Exceptions
Exhibit 1.10
Existing Debt and Reserves
Exhibit 8.3
Required Consents
Exhibit 8.5
Litigation
Exhibit 8.7
Environmental Matters
Exhibit 8.8
Space Leases and Security Deposits
Exhibit 8.12
Service Contracts
Exhibit 8.13
Pending Applications
Exhibit 8.19
Franchise Agreements
Exhibit 8.21
Owner Entities, Part Owned Property Owners and Minority Interest holders
Exhibit 8.22
Insurance
Exhibit 8.28
Liabilities
Exhibit 9.5
Securities Law Matters
Exhibit 15.3.1
Omnibus Assignment

 
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INDEX OF DEFINED TERMS

1933 Act
24
 
Lessee Company Affiliate
2
Adjustment Amount
2
 
Lessee LLC Agreement
2
Agreement
1
 
Liabilities
3
Asset Management Agreement
1
 
LLC Agreement
1
Asset Manager
1
 
Management Agreement
2
Cash Payment
5
 
Manager
2
CBA
20
 
Managing Member
1
Closing
2
 
Membership Interest
1
Closing Date
28
 
Minority Interest Acquisition Expenses
26
Closing Statement
14
 
Minority Interests
26
Commission
8
 
Mortgage
3
Company
1
 
Mortgage Escrows
12
Contribution Value
2
 
Mystic
1
Contributor
1
 
Outside Accountants
15
Credit Reserves
12
 
Outside Closing Date
28
Cutoff Time
10
 
Owner Entities
1
Debt
3
 
Part Owned Property
4
Deferred Property
28
 
Part Owned Property Lessee Company
30
Deferred Property Outside Closing Date
28
 
Permitted Exceptions
4
Development Assets
3
 
Person
4
Effective Date
35
 
Personal Property
4
ERISA
20
 
PIP
10
Escrow Agent
3
 
Plans
20
Existing Debt
3
 
Properties
1, 4
Existing Debt Documents
3
 
Property
1, 4
Existing Lender
3
 
Repaid Debt
34
Franchise Agreement
3
 
Representatives
7
Franchise Fees
10
 
Review Period
4
Franchisor
10
 
Security Deposits
4
Ground Lease Estoppel Certificates
29
 
Service Contracts
4
Ground Leases
19
 
Space Lease(s)
4
Guest Ledger Receivables
11
 
Stabilized Assets
5
Information
35
 
Subsidiaries
5
Initial Deposit
3
 
Survey
15
Investor
1
 
Tax
5
Investor Lessee Member
1
 
Tax Return
5
IRC
3
 
Title Commitment
15
IRS
3
 
Title Company
5
Lease Agreement
2
 
Title Correction
16
Lessee Company
2
 
Waterford
1

 
iv

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MEMBERSHIP INTERESTS CONTRIBUTION AGREEMENT

This Membership Interests Contribution Agreement is made as of the 15th day of
June, 2005 (this “Agreement”), by and among:

Mystic Hotel Investors, LLC, a Delaware limited liability company (“Mystic”),
having an address at 914 Hartford Turnpike, P.O. Box 715, Waterford, CT 06385,

Waterford Hospitality Group, LLC a Delaware limited liability company
(“Waterford”) having an address at 914 Hartford Turnpike, P.O. Box 715,
Waterford, CT 06385 (Waterford and Mystic, collectively, “Contributor”), and

Hersha Hospitality Limited Partnership, a Virginia limited partnership
(“Investor”) having an address at 510 Walnut Street, 9th fl., Philadelphia, PA
19106.
 
WITNESSETH:

WHEREAS, Contributor is the owner of the membership interests specified on
Exhibit 1.1 (the “Membership Interests”) in the limited liability companies (the
“Owner Entities”) specified on Exhibit 1.1;

WHEREAS, each of the Owner Entities owns or has a leasehold interest in the
respective land, as identified on Exhibit 1.2, and the hotel and other
improvements located thereon (each, individually, a “Property” and collectively,
the “Properties”), all as more particularly described on Exhibit 1.2;

WHEREAS, Contributor and Investor desire to form a limited liability company
under the laws of the State of Delaware (the “Company”), and to enter into a LLC
Agreement in the form attached hereto as Exhibit 1.3 (the “LLC Agreement”) with
respect to the Company, pursuant to which LLC Agreement Contributor shall
contribute to the Company the Membership Interests;

Contributor desires to form or cause to be formed a limited liability company
under the laws of the State of Delaware to serve as the managing member of the
Company, unless Contributor, itself, shall serve in that capacity (in either
case, “Managing Member”);

WHEREAS, Managing Member shall act as the managing member of the Company and
Investor shall become a non-managing member of the Company;

WHEREAS, Contributor and Investor desire to cause the Owner Entities (or the
Manager) to enter into Asset Management Agreements in the form attached as
Exhibit 1.4 (the “Asset Management Agreement”) with an affiliate of Investor
(“Asset Manager”) with respect to all of the Properties;

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WHEREAS, Contributor and Investor, each through a respective Affiliate
(“Investor Lessee Member”) desire to form a limited liability company under the
laws of the State of Delaware (the “Lessee Company”), and to enter into an LLC
Agreement in the form attached hereto as Exhibit 1.5 (the “Lessee LLC
Agreement”);

WHEREAS, Contributor and Investor desire to cause each of the Owner Entities to
lease its respective Property to the Lessee Company (or an Affiliate of the
Lessee Company with an equity structure reflecting the ownership of the relevant
Owner Entity, for Part Owned Properties each, a “Lessee Company Affiliate”)
pursuant to a Lease Agreement substantially in the form attached hereto as
Exhibit 1.6 (the “Lease Agreement”); and

WHEREAS, Contributor and Investor desire to cause the Lessee Company and each
Lessee Company Affiliate to enter into a Management Agreement with Waterford
Hotel Group, Inc., a Connecticut corporation (the “Manager”) in the form
attached hereto as Exhibit 1.7 (the “Management Agreement”) for each Property.

NOW, THEREFORE, in consideration of Ten Dollars ($10) and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, and the mutual covenants herein contained, the parties hereto
hereby agree as follows:
 
 
1.
DEFINITIONS.

As used herein, defined terms shall have the meanings given to them in the text
of this Agreement (refer to the Index of Defined Terms in the Table of
Contents), and in addition, the following terms shall have the meanings
indicated.

“Adjustment Amount”: the net amount of all adjustments (as set forth in Article
6 or elsewhere in this Agreement) subtracted from (or, in the case of a negative
Adjustment Amount, added to) the Contribution Value of the Properties. The
Adjustment Amount will begin at zero and decrease with amounts owed to
Contributor and increase with amounts owed to Investor or the Company, as set
forth herein.

“Closing”: the transfer by Contributor of the Membership Interests to the
Company, the payment (in cash and in kind) of the Contribution Value in
connection therewith and the Company’s issuance of membership interests to
Investor and Contributor, each subject to and otherwise in accordance with the
terms of this Agreement.

“Contribution Value”: as of the Closing: Two Hundred Forty-Eight Million Three
Hundred Twenty-Five Thousand Dollars ($248,325,000) (which the parties have
agreed to allocate among the Properties in accordance with Exhibit 1.8 attached
hereto), adjusted as follows: (i) plus or minus the Adjustment Amount, (ii)
minus the amount of any Existing Debt (interest and principal) outstanding as of
the Closing, (iii) minus any debt obligations incurred after the date hereof in
replacement of Repaid Debt, (iv) minus an amount equal to the product of the
allocated value of each Part Owned Property, as adjusted by the result of items
(i), (ii) and (iii) with respect to such Part Owned Property, multiplied by the
percentage equity ownership of the Minority Interests with respect to such Part
Owned Property, (v) plus any Minority Interest Acquisition Expenses, and (vi)
plus any costs and expenses that the members have agreed that the Company may
incur, or have otherwise agreed to treat as Company expenses, as of the Closing
Date pursuant to the terms of this Agreement. The parties shall confirm the
final Contribution Value pursuant to the Closing Statement as of the Closing
Date.

2

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“Debt” of any Person at any date means, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services, except
trade accounts payable arising in the ordinary course of business, (d) all
obligations of such Person under leases which are or should be, in accordance
with GAAP, recorded as capital leases in respect of which such Person is liable,
(e) all obligations of such Person to purchase securities (or other property)
which arise out of or in connection with the sale of the same or substantially
similar securities (or property), (f) all deferred obligations of such Person to
reimburse any bank or other Person in respect of amounts paid or advanced under
a letter of credit or other instrument, (g) all Debt of others secured by a Lien
on any asset of such Person, whether or not such Debt is assumed by such Person,
and (h) all Debt of others guaranteed directly or indirectly by such Person or
as to which such Person has an obligation substantially the economic equivalent
of a guarantee.

“Development Assets” the following Properties: Hartford Hilton, Hartford, CT;
and Hartford Marriott, Hartford, CT, as more particularly described on Exhibit
1.2.

“Escrow Agent”: First American Title Insurance Company.

“Existing Debt”: all Debt (including principal and interest) of the Owner
Entities, including all Debt secured by a lien on certain of the Properties in
favor of the lenders (in each case, an “Existing Lender”).

“Existing Debt Documents”: all documents, agreements, instruments and
understandings evidencing, securing or otherwise relating to the Existing Debt.

“Franchise Agreement”: any franchise agreement or similar agreement affecting
any Property.

“Initial Deposit”: a deposit in the amount of One Million Dollars ($1,000,000),
payable by Investor, and a deposit in the amount of Two Hundred Fifty Thousand
Dollars ($250,000), payable by Contributor.

“IRC”: the Internal Revenue Code of 1986, as amended, and as it may further be
amended from time to time, and any successor statutes thereto.

“IRS”: the Internal Revenue Service, an agency of the United States Department
of the Treasury.

“Liabilities”: monetary claims, debts, liabilities, obligations, duties and
responsibilities of any kind and description, whether absolute or contingent,
direct or indirect, known or unknown or matured or unmatured.

“Mortgage”: each mortgage securing any of the Existing Debt with respect to the
relevant Property.

3

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“Part Owned Property”: any Property that is not wholly owned by Contributor, the
Company or by a wholly owned subsidiary of Contributor or the Company. On the
date hereof, the following Properties are Part Owned Property:

Hartford Marriott, Hartford, CT;
Hartford Hilton, Hartford, CT;
Dunkin Donuts, 790 West St., Southington, CT;
Residence Inn Southington, Southington, CT; and
Residence Inn by Marriott, Danbury, CT.

“Permitted Exceptions”: the Franchise Agreements, the Existing Debt Documents,
the Service Contracts, the Space Lease, the Ground Lease, the documents
identified on Exhibit 1.9, and any matter indicated on a Title Commitment or
Survey and not objected to by Investor prior to the Closing.

“Person”: any individual, partnership, limited liability company, joint venture,
corporation, trust, or other similar entity.

“Personal Property”: any furniture, furnishings, tools, equipment, supplies
(consumable and otherwise) and other movable property (if any) located at and
used in connection with the ownership, use and operation of the Properties or
portion thereof that are now or at the Closing owned by Contributor or any Owner
Entity; files that are in the possession of Contributor or any Owner Entity and
are necessary or appropriate for the efficient operation of the Properties or a
portion thereof, including sepias, drawings, surveys, plans and specifications;
and all licenses, permits, certificates of occupancy (or local equivalent) in
the possession of or available to Contributor or any Owner Entity.

“Property” and “Properties”: those plots, pieces and parcels of land described
on Exhibit 1.2, and all of the buildings, fixtures and equipment (including
permanent signs) and other improvements thereon, together with the Personal
Property, the tenant’s interest under the Ground Lease, the landlord’s interest
under the Space Leases, the Owner’s interest under the Franchise Agreements and
all the other assets described in Article 2 pertaining thereto.

“Repaid Debt”: any Existing Debt to be repaid on or before the Closing Date
(including principal and interest).

“Security Deposits”: all security deposits held by Contributor pursuant to any
Space Leases, which Security Deposits Contributor shall assign to the Company at
the Closing.

“Service Contracts”: all written or oral agreements (including purchase orders)
pursuant to which goods, services, supplies or other items are furnished on a
continuing basis for the operation of the Properties or any portion thereof.

“Space Lease(s)”: all tenant space leases, licenses, concessions or other
occupancy or use agreements, including all written modifications, addenda and
supplements thereto and guarantees thereof, applicable to the Properties or any
portion thereof.
 
4

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“Stabilized Assets”: the following Properties: (1) Residence Inn by Marriott and
Whitehall Mansion, Mystic, CT; (2) Courtyard by Marriott, Warwick, RI; (3)
Courtyard by Marriott and Rosemont Suites, Norwich, CT; (4) SpringHill Suites by
Marriott, Waterford, CT; (5) Mystic Marriott Hotel and Spa, Groton, CT; (6)
Residence Inn by Marriott, Southington, CT, and ancillary Dunkin Donuts; (7)
Residence Inn by Marriott, Danbury, CT.

“Subsidiary”: any Person in which a Person owns, directly or indirectly, a
majority of the member interests, partnership interests, or similar equity
interests and of which that Person, as the case may be, has the power, directly
or through a Subsidiary, to direct the management and policies of such Person.

“Tax”: any federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.

“Tax Return”: any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.

“Title Company”: First American Title Insurance Company.

A reference to any agreement, budget, document or schedule shall include such
agreement, budget, document or schedule as revised, amended, modified or
supplemented from time to time in accordance with its terms and the terms of
this Agreement. The singular includes the plural and the plural includes the
singular. The words “include”, “includes” and “including” are not limiting.
Reference to a particular “Section” or “Articles” refers to that section or
articles of this Agreement unless otherwise indicated. The words “herein”,
“hereof”, “hereunder” and words of like import shall refer to this Agreement as
a whole and not to any particular section or subdivision of this Agreement.

2.
CONTRIBUTION OF THE MEMBERSHIP INTERESTS.

On the terms and subject to the conditions set forth herein, at the Closing,
Contributor shall contribute and convey to the Company and the Company shall
accept from Contributor the Membership Interests free and clear of all liens,
claims, encumbrances or interests of others.

3.
ISSUANCE OF MEMBERSHIP INTERESTS AND CASH PAYMENT.

 
Subject to the terms, conditions and provisions of this Agreement, at the
Closing:
 
3.1   Cash Payments by Investor. Investor shall contribute to the Company as a
capital contribution a cash payment (the “Cash Payment”) in presently available
funds in the amount of sixty-six and seven-tenths percent (66.7%) of the
adjusted Contribution Value attributable to the Stabilized Assets, plus fifty
percent (50%) of the adjusted Contribution Value attributable to the Development
Assets.

5

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3.2   Cash Payment to Contributor. The Company shall distribute to Contributor
the Cash Payment.
 
3.3   Payment of Costs. Investor shall pay to the Company 57.96% of the costs
payable by the Company pursuant to Section 15.6.1 and Contributor shall pay to
the Company 42.04% of the costs payable by the Company pursuant to Section
15.6.1, unless any particular cost may reasonably be attributed to a specific
Property, in which case Investor shall pay to the Company 50% of the costs, with
respect to Development Assets, and 66.7% of the costs, with respect to
Stabilized Assets, and Contributor shall pay to the Company 50% of the costs,
with respect to Development Assets, and 33.3% of the costs, with respect to
Stabilized Assets.
 
3.4   Issuance to Contributor. The Company shall issue to Contributor, pursuant
to the LLC Agreement, in partial consideration for the contribution of the
Membership Interests, limited liability company interests in the Company with an
initial Capital Account (as defined in the LLC Agreement) with respect to such
limited liability company interest equal to thirty-three and three-tenths
percent (33.3%) of the Contribution Value attributable to the Stabilized Assets
and fifty percent (50%) of the Contribution Value attributable to the
Development Assets. The parties acknowledge and agree that the contribution of
the Membership Interests shall be treated as a part disguised sale, described in
Section 707 of the IRC and the Treasury Regulations promulgated thereunder, part
reimbursement of capital expenditures described in Treasury Regulations Section
1.707-4(d) and as a part capital contribution described in Section 721.
 
3.5   Issuance to Investor. The Company shall issue to Investor, pursuant to the
LLC Agreement, limited liability company interests in the Company with an
initial Capital Account (as defined in the LLC Agreement) with respect to such
limited liability company interest equal sixty-six and seven-tenths percent
(66.7%) of the Contribution Value attributable to the Stabilized Assets and
fifty percent (50%) of the Contribution Value attributable to the Development
Assets.

4.
DEPOSIT; DUE DILIGENCE REVIEW.

 
4.1   Deposit. Within three days after the date hereof, Investor and Contributor
shall each place their respective portions of the Initial Deposit in escrow with
Escrow Agent.
 
4.2   Payment. Escrow Agent shall invest the Initial Deposit in escrow in a
money market fund or bank account paying interest or dividends, in Escrow
Agent’s name, separate from its personal and other business accounts. Investor
shall make all investment decisions; Contributor shall have no control over such
investment decisions with respect to the escrowed funds. At the Closing, the
Initial Deposit (plus all interest and dividends earned thereon) shall be paid
to Contributor, and Investor shall receive a credit against the Cash Payment in
the amount of the Initial Deposit deposited by it, and all interest and
dividends earned thereon. If the Closing does not occur as a result of a default
by Contributor, the Initial Deposit (plus all interest and dividends earned
thereon) shall be paid to Investor. If the Closing does not occur as a result of
a default by Investor, the Initial Deposit (plus all interest and dividends
earned thereon) shall be paid to Contributor. If the Closing does not occur for
any reason other than a default by Investor or Contributor, then Escrow Agent
shall return the Initial Deposit to Investor and Contributor in the amounts
deposited by them (plus all interest and dividends earned thereon). The parties
shall furnish Escrow Agent with their respective tax identification numbers.
Contributor and the Company shall share equally all escrow fees, if any, charged
by Escrow Agent.

6

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4.3   Escrow Terms. Escrow Agent shall hold the Initial Deposit as set forth in
Section 4.2 unless (i) Escrow Agent receives any instructions jointly executed
by Investor and Contributor directing Escrow Agent with respect to distribution
of the Initial Deposit, in which event Escrow Agent shall forthwith apply the
Initial Deposit as instructed without any further requirement; or (ii) Investor
or Contributor makes a written demand upon Escrow Agent for the Initial Deposit
accompanied by an affidavit signed by the party making the demand stating
sufficient facts to show that said party is entitled to receive the Initial
Deposit pursuant to the terms of this Agreement, provided that the following
procedures of this Section shall have been complied with. Upon receipt of such
demand, Escrow Agent shall give ten days’ written notice to the other party of
such demand and of Escrow Agent’s intention to remit the Initial Deposit to the
party making the demand on the stated date, together with a copy of the
affidavit. If Escrow Agent does not receive a written objection before the
proposed date for remitting the Initial Deposit, Escrow Agent is hereby
authorized to so remit. However, if Escrow Agent actually receives written
objection from any other party before the proposed date on which the Initial
Deposit is to be remitted, Escrow Agent shall continue to hold the Initial
Deposit until otherwise directed by joint written instructions from Investor and
Contributor or until a final judgment by an appropriate court is made. In the
event of such dispute, Escrow Agent may deposit the Initial Deposit with an
appropriate court and, after giving written notice of such action to the
parties, Escrow Agent shall have no further obligations with respect to the
Initial Deposit.
 
4.4   Protection of Escrow Agent. The parties acknowledge that Escrow Agent is
acting as a stakeholder at their request and for their convenience, that Escrow
Agent shall not be deemed to be the agent of either of the parties, and Escrow
Agent shall not be liable to the parties for any act or omission on its part
unless taken or suffered in bad faith or in willful or negligent disregard of
this Agreement. Contributor and Investor shall jointly and severally indemnify
and hold Escrow Agent harmless from and against all costs, claims and expenses,
including reasonable attorneys’ fees, incurred in connection with the faithful
performance of Escrow Agent’s duties hereunder. Escrow Agent acknowledges its
consent to the provisions of this Agreement applicable to it by signing on the
signature page of this Agreement.
 
4.5   Due Diligence Review. For the purposes hereof, “Review Period” means a
period of time that commences on the date of this Agreement and shall expire at
midnight on July 8, 2005. Investor shall have the Review Period within which to
inspect and examine the Owner Entities, Properties, Personal Property; Space
Leases, Service Contracts and other customary legal, financial, environmental
and engineering matters with respect to the Owner Entities and the Properties.
However, Investor may not conduct any invasive environmental or engineering
tests without the express prior, written consent of Contributor, not to be
unreasonably withheld. Further, Investor will give Contributor advance notice
(which may be oral) prior to making any site visits. Investor agrees to restore
any damage caused or relating to any test or investigation it has performed, and
Investor shall indemnify and hold harmless Contributor from any loss, cost,
damage or expense caused thereby, which obligation shall survive the expiration
or sooner termination of this Agreement.

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4.5.1   From and after the date hereof and until the Closing (or the termination
of this Agreement by Investor pursuant to Article 17), Investor and its
designated representatives shall have access to the Properties for the purpose
of making reasonable engineering, survey or other inspections and independent
investigations. During the Review Period, Contributor shall provide Investor and
its agents promptly and without charge with all material and necessary
information within its or its affiliates’ possession or control with respect to
the Properties, including full and accurate copies of Space Leases, Service
Contracts, title information or instruments, surveys, all tax bills for the past
year, and an inventory of all tangible Personal Property owned or leased (as
lessee) by Contributor or Owner Entities and located on the Properties, and
access to and, upon request, copies of all books and records of the Owner
Entities and Contributor relating to the Owner Entities and the ownership,
management, development and financing of the Properties. Contributor also shall
provide access by Investor’s representatives, to all financial and other
information relating to the Owner Entities and the Properties which would be
sufficient to enable them to prepare audited financial statements in conformity
with Regulation S-X of the Securities and Exchange Commission (the “Commission”)
and to enable them to prepare a registration statement, report or disclosure
statement for filing with the Commission. Contributor shall also provide to
Investor’s representatives a signed representative letter and a hold harmless
letter which would be sufficient to enable an independent public accountant to
render an opinion on the financial statements related to the Owner Entities and
the Properties.

4.5.2   Investor shall undertake all inspections, investigations and
examinations by Investor’s representatives, agents and/or consultants at the
Company’s sole cost and expense. Investor shall endeavor not to unreasonably
disturb or interfere with the rights of any hotel guest and any tenant under a
Space Lease with respect to the Properties and shall otherwise comply with all
notice and other requirements under applicable law and such Space Leases. The
performance of any invasive tests shall be scheduled only upon receipt by
Contributor of prior written notice and its consent thereto (such consent not to
be unreasonably withheld or delayed). Investor shall, at its sole cost and
expense, restore any portion of any Property that may be damaged or otherwise
disturbed by reason of such tests and/or inspections to its condition existing
immediately prior to conducting such test or inspection.

4.5.3   Investor shall defend, indemnify and hold Contributor and any affiliate
or Subsidiary of Contributor, and all shareholders, employees, officers,
partners, members and directors of Contributor or such affiliate or Subsidiary,
as the case may be, harmless from any and all liability, cost and expense
(including reasonable attorneys’ fees, court costs and costs of appeal) such
party suffered or incurred for injury to person or property caused by or as a
result of Investor’s inspection of the Properties.

4.5.4   In the event that during the Review Period, Investor, in its sole and
exclusive judgment based in good faith on the results of on its due diligence
review, determines to terminate this Agreement and not to enter into the LLC
Agreement, then, on or prior to the last day of the Review Period, Investor
shall have the right to cancel and terminate this Agreement without liability to
Investor, by so sending notice to Contributor (with a copy to Escrow Agent) on
or prior to such day (as of which date time shall be of the essence), in which
case each party shall be entitled to a return of the portion of the Initial
Deposit deposited by it and all interest earned thereon, less one half of any
fees of the Escrow Agent. In the event Investor does not cancel and terminate
this Agreement prior to the end of the period set forth in Section 4.5, then
this Agreement shall remain in full force and effect.

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4.5.5   If Investor cancels and terminates this Agreement pursuant to this
Section, all non-public information obtained by Investor from Contributor during
the Review Period shall be kept confidential, except to the extent disclosure is
required pursuant to applicable law, regulation or court proceeding. Investor
shall deliver to Contributor copies of all environmental and engineering reports
it has obtained after Contributor has reimbursed Investor for Investor’s costs
in obtaining such items.

5.
MANAGEMENT AND OPERATING COVENANTS PRIOR TO CLOSING.

 
5.1   Pre-Closing Actions. During the period from the date of this Agreement
until the Closing, except as consented to in writing by Investor, Contributor
shall, and shall cause the Owner Entities to: (i) conduct its business and cause
the Properties to be operated only in the ordinary course and in substantially
the same manner as heretofore conducted and in compliance with all applicable
insurance company requirements, all federal, state and local laws, ordinances
and requirements; (ii) use commercially reasonable efforts to preserve intact
its business organizations and goodwill; (iii) not offer any interest in the
Owner Entities or the Properties for sale to any Person, consider unsolicited
offers from any Person for the purchase of any interest in the Owner Entities or
the Properties or enter into a contract for the sale of any interest in the
Owner Entities or the Properties to any Person, whether or not such contract is
contingent on the termination of this Agreement; (iv) not enter into discussions
with any other Person regarding the sale of any interest in the Property LLCs or
the Properties directly or indirectly; (v) timely comply with all of
Contributor’s and the Owner Entities material obligations under all Franchise
Agreements, Space Leases, Ground Leases, Service Contracts, Existing Debt
Documents and other Permitted Exceptions and timely make all payments due and
payable thereunder, (vi) maintain the Properties and the related Personal
Property or cause the same to be maintained in the same condition as exists on
the date hereof, reasonable wear and tear excepted, and shall keep the same or
cause the same to be kept fully insured against fire and extended coverage
consistent with prior practice insurance company requirements, all federal,
state and local laws, ordinances and requirements; (vii) not modify, amend or
terminate or permit the modification, amendment or termination of any Franchise
Agreements, Space Leases, Ground Leases, Service Contracts, Existing Debt
Documents and other Permitted Exceptions; or (viii) enter into any lease,
contract or other agreement that would be binding upon any Property or any of
the Owner Entities after Closing. Notwithstanding the foregoing, Investor agrees
that with respect to items (vii) and (viii), no Investor consent shall be
required for the amendment, termination or incurrence of any obligation that
either (a) is terminable by the Company without penalty on 30 days or less
notice, or (b) with respect to the relevant Property, aggregates an obligation
of not more than $50,000 in any year with respect to that Property (without
taking into account obligations that Investor has consented to hereunder).
Investor covenants not to unreasonably withhold any consent with respect to
items (vii) and (viii), and further agrees that its failure to respond to any
request for consent within three days after receipt thereof shall be deemed a
consent. Within three business days after the execution of such new Space Lease,
Service Contract or any other item listed in clause (viii) after the date
hereof, Contributor shall provide Investor with a copy of the same. Contributor
shall promptly notify Investor of any material adverse change in the physical
condition of the Properties.

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5.2   Property Condition. Except as otherwise stated to the contrary in this
Agreement, the Company shall, at the Closing, accept the Properties in their “As
Is, Where Is” condition as exists on the date hereof, subject also to the
provisions of Section 5.1.
 
5.3   Franchise Agreements. Contributor shall use its commercially reasonable
efforts to obtain a new franchise agreement (“New Franchise Agreement”) issued
by each franchisor (“Franchisor”) under the existing Franchise Agreements in the
name of the Lessee Company for each property substantially in the form of the
existing Franchise Agreement for such Property, with any changes or
modifications to such Existing Franchise Agreement approved in writing by
Investor (which approval shall not be unreasonably withheld) to the extent
required by any Franchisor, a Property Improvement Plan (“PIP”) shall have been
obtained by and at the cost of the Company from each Franchisor. The estimated
cost (exclusive of any licensing fees) of any improvements to any Property
required by any PIP shall be paid by the application of the Credit Reserves, to
the extent available, and otherwise shall be an expense of the Company. In the
event that any franchise fees (“Franchise Fees”) currently payable with respect
to each Property under the Franchise Agreements are increased in the New
Franchise Agreements, the present value of any such increase (with respect to
the term up to the franchise expiration date as in effect on the date hereof,
only) shall be deducted as an adjustment to the Contribution Value. For the
purpose of determining present value, projected payments shall be discounted at
the same rate of interest as the secured Debt affecting the relevant Property as
of the Closing Date.

6.
ADJUSTMENTS AND PRORATIONS.

 
6.1   Adjusted Items. Contributor shall be entitled to all income produced from
the operation of the Properties that is allocable to the period prior to 12:01
A.M. on the day the Closing occurs (the “Cutoff Time”) and shall be responsible
for all expenses allocable to that period, and the Company shall be entitled to
all income and responsible for all expenses from the operations of the
Properties allocable to the period beginning at the Cutoff Time. At the Closing,
all items of income and expense listed below with respect to the Properties
shall be prorated in accordance with the foregoing principles and the rules for
the specific items set forth hereafter:

6.1.1   Contributor shall arrange for a billing under all those Service
Contracts for which fees are based on usage and with utility companies for a
billing for utilities not paid directly by tenants, to include all utilities or
service used up to the day the Closing occurs, and shall pay or cause to be paid
the resultant bills. If any of the Service Contracts set forth on Exhibit 8.12
cover periods beyond the Closing, the same shall be prorated on a per diem
basis.

6.1.2   Real estate taxes and personal property taxes on the Properties shall be
prorated based upon the period (i.e., calendar or other tax fiscal year) to
which they are attributable, regardless of whether or not any such taxes are
then due and payable or are a lien. Contributor shall pay or cause to be paid at
or prior to the Closing (or the Company shall receive credit for) any unpaid
taxes attributable to periods prior to the Closing Date (whether or not then due
and payable or a lien as aforesaid). Contributor shall receive credit for any
previously paid or prepaid taxes attributable to periods from and after the
Closing Date. If as of the date the Closing occurs, the actual tax bills for the
tax year or years in question are not available and the amount of taxes to be
prorated as aforesaid cannot be ascertained, then rates, millages and assessed
valuation of the previous year, with known changes, shall be used; and after the
Closing occurs and when the actual amount of taxes for the year or years in
question shall be determinable, the parties shall re-prorate such taxes to
reflect the actual amount of such taxes. Notwithstanding the foregoing
provisions, Section 8.10 shall govern with respect to all general, special
and/or betterment assessments with respect to the Properties.

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6.1.3   Rentals and other payments that are payable pursuant to Space Leases
shall be prorated on a per diem basis as and when collected. The Company shall
not be obligated to make any payment or give any credit to Contributor on
account of or by reason of any rental or other payments that are unpaid as of
the Closing Date, but shall be required merely to turn over Contributor’s share
of the same within fourteen days if, as and when received by the Company after
the Closing. Investor and the Company shall not be required to institute any
action or proceeding to collect any rent delinquencies.

6.1.4   All amounts, including room charges, accrued to the accounts of guests
occupying rooms in the Properties (collectively, “Guest Ledger Receivables”) as
of the Cutoff Time shall be prorated. Contributor shall receive a credit for all
Guest Ledger Receivables for all room nights up to and including the room night
during which the Cutoff Time occurs, and the Company shall be entitled to the
amounts of Guest Ledger Receivables for the room nights after the Cutoff Time.
Contributor and the Company shall each receive a credit equal to one half of the
amount of Guest Ledger Receivables for the full room night during which the
Cutoff Time occurs. All restaurant and bar facilities will be closed as of the
Cutoff Time and Contributor shall receive the income from the same until the
Cutoff Time.

6.1.5   The Company shall receive a credit for advance payments, if any, and
prepaid room reservation deposits received by Contributor, to the extent the
foregoing related to a period after the Cutoff Time.

6.1.6   Cashier's cash funds and the petty cash funds used by Contributor in
operating the Properties shall be adjusted at a price equal to the face amount
thereof as of the Closing Date.

6.1.7   If applicable, franchise payments prepaid pursuant to the Franchise
Agreements and applied by the Franchisor to periods subsequent to the Closing
Date shall be prorated. All amounts known to be due under the Franchise
Agreements with reference to periods prior to the Closing Date shall be paid by
Contributor or credited to the Company. Any additional amounts not known at the
Closing will be subject to post closing adjustment.

6.1.8   Gas, water, electricity, heat, fuel, sewer and other utilities charges
to which Section 6.1.1 cannot be applied, and the governmental licenses, permit
fees and inspection fees and operating expenses relating to the Properties shall
be prorated on a per diem basis;

6.1.9   All management fees or other compensation due or accrued prior or
subsequent to the date of the Closing to any manager, broker, agent, or other
person in connection with the Properties for services rendered to the Owning
Entities or any predecessor of Owning Entities in connection with the management
and/or leasing of the Properties shall be credited to the Company to the extent
not paid by Contributor prior to the Closing (it being agreed that payment of
all of the foregoing shall be the sole responsibility of Contributor).

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6.1.10     Any prepaid rentals, other prepaid payments, security deposits,
electric, gas, sewer and water deposits deposited with the Owning Entities or
Contributor by tenants (including all accrued interest on all of the foregoing,
unless Contributor is entitled to retain the benefit thereof) under any Space
Leases, license agreements or concession agreements relating to the Properties,
shall all belong to the Company and all shall be assigned and delivered to the
Company at the Closing with respect to the Properties. At Investor’s option, the
Company may take a cash credit in the amount of all Security Deposits to be
delivered to the Company at the Closing, and Contributor may retain same.

6.1.11     All salaries and benefits of employees whose employment is assumed by
the Company or its Lessee pursuant to Section 8.15 hereof shall be prorated.

6.1.12     The parties shall make the following additional
prorations/adjustments with respect to the Existing Debt:

A.    Contributor shall be responsible for all interest payments attributable to
the period up to and including the day before the Closing, and the Company shall
be responsible for all interest payments attributable to periods on and after
the Closing Date.

B.    Tax and insurance escrows and other deposits held by a lender as of the
Closing Date with respect to Existing Debt (in the aggregate, the “Mortgage
Escrows”) with respect to the Properties shall remain the property of the Owner
Entities at the Closing, and Contributor shall receive a credit at the Closing
for the amount thereof (ratably reduced to reflect the interest of Minority
Interest holders, with respect to any Part Owned Property).

6.1.13     Premiums with respect to any insurance policies of the Owning
Entities not terminated as of the Closing Date shall be prorated as of the
Closing Date.

6.1.14     Any Ground Lease obligations shall be prorated between the Company
and Contributor as of the Closing Date on an accrual basis, based on the actual
number of days in the applicable period during which the Closing occurs. The
Company shall be credited with and Contributor shall be charged with an amount
equal to all accrued Ground Lease obligations. The Company shall be fully
responsible for and shall pay all Ground Lease obligations accruing after the
Closing Date. Any additional rent or other pass-throughs under the Ground Lease
shall be pro-rated in a manner reasonably estimated by Contributor on the basis
of prior periods, but shall be subject to post-closing adjustment to reflect
final billed amounts.

6.1.15     The Company shall receive a credit for the following capital
improvement reserves (the “Credit Reserves”), less any amount of Credit Reserves
actually expended between the date hereof and the Closing Date in the ordinary
course of business:

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Residence Inn Danbury - $636,000
Mystic Marriott - $2,020,000
Residence Inn Southington - $354,000 (ratably reduced to reflect the Minority
Interests)
Courtyard Warwick - $250,000.
 
6.2   Proration of Inventory. Usable and in current use inventories of the
following items shall also be prorated:

6.2.1   uncooked and unopened food, including food in room “mini bars” and sides
and shells of frozen meat in storage freezers; and

6.2.2   beverages, wine, beer, and liquor in unopened bottles, including
beverages in room “mini bars”.

Contributor shall remove all vending machine moneys as of the Cutoff time and
retain same.
 
6.3   Basis of Adjustments.
 
6.3.1   Uniform System. Except as otherwise expressly provided herein, all
apportionments and adjustments shall be made in accordance with the Uniform
System of Accounts for the Lodging Industry, 9th revised edition, as amended, as
adopted by the American Hotel and Lodging Association.

6.3.2   Generally. Each of the foregoing prorations and adjustments shall be
adjusted to reflect that the transaction does not include the Minority
Interests, with respect to the Part Owned Property Owners, by multiplying the
respective adjustment or proration by the percent of equity in the Part Owned
Property Owner that is not subject to the Minority Interests. The parties shall
make all prorations and payments under the foregoing provisions based on a
written statement or statements delivered to Investor by Contributor and
approved by Investor. In the event any prorations, apportionments or
computations shall prove to be incorrect for any reason, then either party shall
be entitled to an adjustment to correct the same, provided that it makes written
demand on the party obligated to make such payment for such adjustment within
one year after the erroneous payment or computation was made.
 
6.4   Accounts Receivable. All accounts receivable arising from the Properties
shall be disposed of as follows:

6.4.1   Contributor shall retain the receivables of the Properties as of the
Cutoff Time, other than Guest Ledger Receivables. The Company shall promptly
remit to Contributor in accordance with written instructions from Contributor
any funds received by the Company in payment of such accounts receivable arising
prior to the Cutoff Time. With regard to any collection made from a person or
entity who has accounts receivable arising both prior and subsequent to the
Cutoff Time, such collection shall be applied as designated by the account
debtor (and if designated as payment of an accounts receivable arising prior to
the Cutoff Time, the Company shall promptly remit such funds to Contributor in
accordance with the preceding sentence), but if there is no designation, then
any such collection received shall be applied first to accounts receivable of
such debtor arising after the Cutoff Time and then to accounts receivable of
such debtor arising prior to the Cutoff Time.

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6.4.2   The Company and Contributor shall treat all rental payments received
from a tenant at the Properties (other than room guests) as first applicable to
rent that was owed by that tenant, if any, for the month in which the Closing
occurs until the rental amount due to Contributor for such period has been
collected. If there remains any unpaid rent for a period prior to the month of
the Closing, all payments of rent received from such tenant shall be applied
first to sums owed to Company with respect to the month after the Closing, then
to any amounts owed to Contributor from such tenant, and finally, any excess
shall be treated as belonging to the Company.

6.4.3   Neither Contributor nor the Company may enter into any transactions that
purport to compromise claims belonging to the other, without the other party’s
prior written consent.

6.4.4   If at the time of the Closing any tenants or guests with respect to the
Properties owe Contributor any money, Contributor shall have the right,
subsequent to the Closing, to collect such sums directly from such tenants, but
shall not have the right to bring lawsuits against such tenants for such
collection without the Company’s prior written consent. The Company shall have
no obligation to join in any lawsuit and/or cooperate with Contributor (at
Contributor’s expense) in its collection attempts.
 
6.5   No Overcharge of Tenants. Contributor represents, warrants and covenants
that no tenants have been overcharged for any item of rent or additional rent
(including real estate taxes, or insurance reimbursements), for any periods
prior to the Closing Date. If, within one year following the Closing, any tenant
makes a claim against the Company or any Owner Entity for any such overcharge
(including any withholding of rent by reason thereof), Contributor will and
hereby agrees to defend, indemnify and hold the Company and such Owner Entity
harmless from and against any loss, expense, or damage (including withheld rents
or reasonable attorney’s fees) arising from or relating to any such alleged
overcharge or rent withholding in connection therewith). The provisions of this
Section shall survive the Closing for a period of one year (and for such
additional period as may be necessary to resolve any such claim made within a
one-year period).
 
6.6   Closing Statement; Post-Closing Adjustment.

6.6.1   Contributor shall cause its accounting staff to make such inventories,
examinations and audits of the Properties, and of the books and records of the
Properties, as Contributor’s Accountants may deem necessary to make the
adjustments and prorations required under this Article, or under any other
provisions of this Agreement. Investor or its designated representatives may be
present at such inventories, examinations and audits of the Properties. Based
upon such audits and inventories, Contributor’s accountants will prepare and
deliver to the parties no later than two days prior to the Closing a closing
statement (the “Closing Statement”). The Closing Statement shall contain
Contributor’s best estimate of the amounts of the items requiring the prorations
and adjustments in this Agreement. The amounts set forth on the Closing
Statement shall be the basis upon which the prorations and adjustments provided
for herein shall be made at the Closing.

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6.6.2   The Closing Statement shall be binding and conclusive on all parties
hereto to the extent of the items covered by the Closing Statement, unless
within 30 days after receipt by Investor of the Closing Statement, either
Investor or Contributor notifies the other that it disputes such Closing
Statement, and specifies in reasonable detail the items and reasons that it so
disputes. The parties shall attempt to resolve such dispute. If such dispute is
not resolved within 45 days after delivery of the original notice by Company or
Contributor, then the parties shall submit such dispute to the affiliate office
of Pannel Kerr Forster nearest to Waterford, Connecticut (the “Outside
Accountants”), and the determination of the Outside Accountants, which shall be
made within a period of 15 days after such submittal by the parties, shall be
conclusive. The fees and expenses of the Outside Accountants shall be paid
equally by Investor and Contributor.

6.6.3   Within 90 days following the Closing Date, Contributor’s accountants
shall deliver a final report to Company setting forth the final determination of
all items to be included on the Closing Statement. In the event that, at any
time within said 90-day period, either party discovers any items which should
have been included in the Closing Statement but were omitted therefrom, such
items shall be adjusted in the same manner as if their existence had been known
at the time of the preparation of the Closing Statement. The foregoing
limitation shall not apply to any item that, by its nature, cannot be finally
determined within the period specified. However, no further adjustments shall be
made beyond 12 months after the Closing Date.

7.
TITLE AND SURVEY.

At the Closing, each Owner Entity shall own valid, marketable and insurable fee
title to its respective Property other than the Ground Lease Properties, and
valid and enforceable leasehold interests in its respective Ground Lease
Property under its respective Property Ground Lease, subject only to the
Permitted Exceptions.
 
7.1   Title Commitment and Survey. Promptly following the execution of this
Agreement, Investor shall obtain, and deliver a copy to Contributor of, a
binding, irrevocable commitment for an ALTA Form B Fee Title Policy to be issued
to each Owner Entity (in each case, a “Title Commitment”) from the Title Company
in the amounts set forth on Exhibit 1.8 to each Property, evidencing that each
Owner Entity owns valid and marketable fee title to its respective Property
other than the Ground Lease Properties, and that the applicable Owner Entities
own a valid and enforceable leasehold interest under the Ground Lease to the
Ground Lease Properties, free and clear of all encumbrances except the Permitted
Exceptions. Investor may, at its option, order and obtain an “as-built”, current
ALTA/ACSM Land Title Survey made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted by the
American Land Title Association and the American Congress on Surveying and
Mapping in 1999 and meeting the accuracy requirements as defined therein,
certified to the appropriate Owner Entity, Investor, the Company and the Title
Company, which shows all easements of record, all parking spaces (including a
count thereof) and curb cuts, all setback restrictions of record, and flood zone
designations (the “Survey”).

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7.2   Investor’s Review. Within ten business days after Investor’s receipt of
all Title Commitments and Surveys, Investor shall furnish Contributor with a
schedule of (i) any liens, encumbrances or other title exceptions or state of
facts shown on the Title Commitment or Survey that Investor, in its reasonable
judgment, does not approve or finds unsatisfactory, and (ii) any Title Company
requirements that Investor, in its sole and exclusive judgment, contends
Contributor must satisfy. In addition, if Investor has requested endorsements
providing coverage for (i) a perimeter metes and bounds description and
contiguity between the parcels of the Properties (or any portion thereof) and
between the Properties (or any portion thereof) and the applicable public
streets, (ii) access from the Properties or any portion thereof to a public
street, (iii) extended coverage over the Title Company’s general exceptions,
(iv) zoning as provided in ALTA Zoning Endorsement 3.1, (v) affirmative
insurance that easements are not encroached upon by any structures on the
Properties or that there are no violations of any restrictive covenants or
agreements and that no future violation would cause any reversion of title, (vi)
a survey endorsement, (vii) “non-imputation” endorsements or (viii) or any other
reasonable endorsements, and the Title Company has refused to grant such
coverages, Investor shall so inform Contributor.
 
7.3   Correction of Defects. Contributor shall have a period of ten business
days following receipt of the foregoing schedule to remove, correct, cure or
satisfy to Investor’s satisfaction, any survey or title exceptions (other than
Permitted Exceptions) or Title Company requirements set forth on the schedule
and to obtain from the Title Company the endorsements set forth on that
schedule, unless such endorsements or cures are not available in the absence of
a Survey and Investor has not obtained a Survey, Contributor shall not be
required to remove any title objections, regardless of whether the underlying
cause of the objection or defect is a Permitted Exception. If Contributor fails
to remove any mortgage or other lien prior to or at the Closing, Investor may,
but shall not be obligated to, close title subject to such mortgage or lien with
an abatement of the Contribution Value in the amount required to remove same.
For purposes of this Article, a deed of trust or similar instrument shall be
deemed a mortgage.
 
7.4   Failure to Correct. If Contributor is unable or elects not, subject to
Section 7.3, within said ten business-day period, to remove, correct, cure or
obtain endorsements or cause the same to be removed, corrected, caused or
obtained as aforesaid (a “Title Correction”), then Investor may (i) based on a
good-faith determination, terminate this Agreement, in which event the
provisions of Section 17.1 shall control, or (ii) accept such state of facts and
such title as is disclosed by the Survey and Title Commitment without a Title
Correction, thereby waiving any rights against Contributor with respect thereto,
provided that there shall nevertheless be an abatement for unremoved mortgages
or other liens as above set forth. Investor shall make said initial election
within ten business days following Investor’s receipt of written notification by
Contributor that Contributor has not been able to or will not obtain a Title
Correction.
 
7.5   Effect of Corrected Defects. If Contributor shall undertake or cause to be
undertaken a Title Correction as aforesaid, and shall be successful, then this
Agreement shall continue in full force and effect with respect to the Properties
and the Company shall close the Properties in accordance with the terms hereof.
If Contributor shall only be partially successful in obtaining a Title
Correction, Investor shall have the same alternative rights as Investor would
have in the event Contributor had declined to seek a Title Correction (as set
forth in the preceding Section). Investor shall make its election within ten
days after Investor’s receipt of written notice from Contributor to Investor of
the extent to which title has been corrected.

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8.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CONTRIBUTOR.

Each Contributor, with respect to itself and the Properties (and each entity
constituting Contributor, jointly and severally), covenants, represents and
warrants to Investor (and to the Company, as its Permitted Designee) the
following, all of which shall be required to be true and correct on and as of
the date hereof and the Closing Date:
 
8.1   Organization and Power. Each Contributor and each Owner Entity is a duly
formed, validly existing entity, as specified on Exhibit 8.21, in good standing
under the laws of the jurisdiction indicated on Exhibit 8.21 and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations hereunder and under any document contemplated by this
Agreement.
 
8.2   Authority. This Agreement has been duly executed by each Contributor and
is enforceable against Contributor in accordance with its terms. The documents
delivered by either Contributor or any Owner Entity at the Closing will be duly
executed by each Contributor and enforceable against each Contributor in
accordance with their terms. Neither the execution and delivery of this
Agreement nor the performance hereof will (i) be in violation of the
organizational documents of either Contributor or any Owner Entity, or (ii)
conflict with any law, decree, judgment, regulation or decree of any court or
governmental agency.
 
8.3   Consents. Except as provided in the next sentence, each Contributor and
Owner Entity has or will, as the Closing have, obtained all consents required
under any law or regulation, shareholder agreement, limited liability company
agreement, trust agreement, covenant or other agreement concerning each Property
or to which either Contributor or any Owner Entity is a party to permit the
transactions contemplated hereunder (including, but not limited to, the
contribution of the Membership Interests to the Company). Each Contributor will
use its best efforts to obtain any consents required pursuant to the terms of
the Ground Leases to permit the transactions contemplated hereunder. Except as
set forth in Exhibit 8.3, the contribution of the Membership Interests to the
Company and the other transactions contemplated by this Agreement does not
require the consent or approval of any public or private party that Contributor
has not already obtained.
 
8.4   Violations. No Contributor or Owner Entity has received a written notice
from any governmental authority, mortgagee, tenant, insurer or other party (i)
that the Properties or any portion thereof or the use or operation thereof, the
Owner Entities or any of them are currently in violation of any zoning,
environmental or other land use regulations; (ii) that there is currently a
violation of the requirements of any ordinance, law or regulation or order of
any government or any agency, body or subdivision thereof (including the local
building department) or the recommendations of any insurance carrier or Board of
Fire Underwriters affecting the Properties or any portion thereof; or (iii)
asserting that work must be performed at the Properties or any portion thereof
and to each Contributor’s knowledge no such notice has been issued. If a notice
is received or a violation is issued or filed prior to the Closing, Contributor
shall promptly notify Investor and shall promptly cure such violation, and if
such cure would require an alteration of or addition to the Properties or
otherwise require an expenditure to cure the violation, the cost of which would
exceed $150,000, then Contributor and Investor shall have the benefit of the
provisions contained in Section 17.1.

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8.5   No Litigation. Except as set forth in Exhibit 8.5, no pending litigation
or proceeding has been brought by or against any Contributor or any Owner Entity
that relates to any Owner Entity or any of the Properties or affects any Owner
Entity or any of the Properties or the operation thereof or that might prevent
any of the transactions contemplated by this Agreement; or that might result in
a consummation of judgment against Investor or the Company or any Owner Entity
and, to Contributor’s knowledge, no such litigation or proceeding has been
threatened. If Contributor is served with process or receives notice that
litigation may be commenced against it with respect to the matters set forth
above, Contributor shall promptly notify Investor.
 
8.6   No Attachments or Bankruptcy Events. There are no attachments, levies,
executions, assignments for the benefit of creditors, receiverships,
conservatorships or voluntary or involuntary proceedings in bankruptcy or any
other debtor relief actions contemplated by either Contributor or any Owner
Entity or filed by either Contributor or any Owner Entity, or to the best of
each Contributor’s knowledge, threatened in writing against or pending in any
current judicial or administrative proceeding against either Contributor or any
Owner Entity.
 
8.7   Environmental Matters. To the best of each Contributor’s knowledge and
except as disclosed in any environmental report identified on Exhibit 8.7, a
true, correct and complete copy of which previously has been delivered to
Investor: (i) neither Contributor nor any Owner Entity have received notice to
the effect that any Property is in violation of, or has been or is it currently
under investigation for, a violation of any federal, state or local law,
ordinance or regulation relating to industrial hygiene or to the environmental
conditions in, at, on, under or about the Properties including, but not limited
to, soil and ground water condition; (ii) neither Contributor nor any Owner
Entity have used, generated, manufactured, stored or disposed in, at, on, under
or about the Properties or transported to or from the Properties any hazardous
material except in accordance with applicable governmental regulations; and
(iii) neither Contributor nor any Owner Entity have received notice to the
effect that there has been any discharge, migration or release of any hazardous
material from, into, on, under or about the Properties that has not been abated
to the extent required by law.
 
8.8   Space Leases. The Space Leases described on Exhibit 8.8 comprise all the
Space Leases presently existing; each is in full force and effect; no Space
Lease has been modified or supplemented except (if at all) as set forth on
Exhibit 8.8 and in accordance with the provisions of Section 5.1; no rent has
been paid more than one month in advance by any tenant and, except as set forth
on Exhibit 8.8, no tenant is entitled to any “free rent” period, defense,
credit, allowance or offset against rental; the information set forth on Exhibit
8.8 is true, correct and complete. There is no default of either landlord or (to
either Contributor’s knowledge) any tenant under any of the Space Leases, and no
state of facts that with notice and/or the passage of time would ripen into a
default, except as set forth on Exhibit 8.8. No persons or entities are entitled
to possession of the Properties or any portion thereof other than those listed
on Exhibit 8.8. All work has been fully completed and all tenant improvements
specified in any Space Lease to be the responsibility of the landlord have been
completed and all tenant construction allowances have been paid. No leasing
commissions are due, nor will any become due in connection with any Space Lease
or the renewal thereof that are not adjusted for pursuant to the terms hereof
and no understanding or agreement exists in regard to payment of any leasing
commissions or fees for future Space Leases. Contributor has previously
delivered to Investor a true, correct and complete copy of each Space Lease.

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8.9   Ground Leases. Contributor is the sole owner (subject to the Minority
Interests) of the tenant’s interest under (1) the ground lease among Capital
City Economic Development Authority, as landlord, the State of Connecticut,
acting by and through the Secretary of the Office of Policy and Management, and
Adriaen’s Hotel Landing, LLC, as tenant, dated as of September 16, 2003 in
respect of the Property known as the Hartford, Marriott, Hartford, CT; and (2)
three Air Space Leases, between the City of Hartford, as landlord, and Hartford
Center Hotel Partnership, as tenant, dated March 13, 1973; between the City of
Hartford, as landlord, and Aetna Life and Casualty Company, as tenant, dated
March 13, 1973; and between the City of Hartford, as landlord, and Aetna Life
and Casualty Company, as tenant, dated October 25, 1974, as amended, in respect
of the Property known as the Hartford Hilton, Hartford, CT (items (1) and (2),
collectively, the “Ground Lease”). The Ground Lease is the only ground lease
affecting the Properties. The Ground Lease is in full force and effect and is
valid, binding and enforceable in accordance with its terms. There is no
material default of either tenant or (to each Contributor’s knowledge) any
landlord under any of the Ground Lease, and no state of facts that with notice
and/or the passage of time would ripen into a default. No party to any Ground
Lease has given Contributor notice or made any claim with respect to any breach
or default. None of the rights of Contributor under any of the Ground Lease will
be subject to termination or modification as the result of the consummation of
the Closing, and upon the consummation of the Closing, as contemplated hereby,
the Company will have succeeded to all of the right, title and interest of the
Owner Entities under the Ground Lease. Contributor has previously delivered to
Investor with a true, correct and complete copy of the Ground Lease.
 
8.10     Assessments. Contributor shall pay on or before the Closing Date all
general, special and/or betterment assessments with respect to the Properties or
any portion thereof that are due and payable prior to the Closing Date, at no
cost or expense to Investor and the Company; and if on the Closing Date the
Properties shall be affected by an assessment or assessments that is (or are) or
may become payable in annual installments, of which the first installment is
then a charge or lien, or has been paid, then for the purposes of this Agreement
all the unpaid installments of any such assessment, including those that are to
become due and payable after the Closing Date, shall be deemed to be due and
payable and to be liens upon the Properties and shall be paid and discharged by
Contributor at the Closing.
 
8.11     Other Agreements. There are not now and will not be on the Closing Date
any agreements or understandings binding upon any of the Owner Entities or
relating to the Properties, except for Permitted Exceptions and agreements to be
entered into pursuant to the terms of this Agreement. Contributor has previously
delivered to Investor a true, correct and complete copy of each document or
instrument constituting a Permitted Exception.
 
8.12     Service Contracts. All Service Contracts are listed on Exhibit 8.12.
All information with respect to Service Contracts on Exhibit 8.12 is true and
complete. To Contributor’s knowledge, there is no material default, or event
that with notice or passing of time or both would constitute a material default,
by any party to any Service Contract. Contributor has previously delivered to
Investor a true, correct and complete copy of each Service Contract.

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8.13     Permits. All licenses, permits, approvals and authorizations required
to operate the Properties or any portion thereof are in full force and effect
and will be in full force and effect as of, and will be delivered to the Company
on, the Closing Date. Pending applications, if any, will not be withdrawn or
permitted to lapse without Investor’s consent, and Contributor shall promptly
notify Investor of all pending applications. All such pending applications are
identified in Exhibit 8.13.
 
8.14     Taxes. Contributor has furnished to Investor true and complete copies
of the most recent real property Tax bill(s) for the Properties. No tenant is
entitled to any refund of any Tax or other payment by reason of Tax reduction
proceedings affecting current or prior years. Each Owner Entity has filed all
material Tax Returns that it was required to file prior to the date hereof. All
such Tax Returns were correct and complete in all material respects. All Taxes
owed by any of the Owner Entities (whether or not shown on any Tax Return) have
been paid. None of the Owner Entities is a current beneficiary of any extension
of time within which to file a Tax Return that has not yet been filed. No audit
or other examination of any Tax Return of, or any administrative or judicial
proceeding relating to the Taxes of, any Owner Entity is in progress, nor has
any Owner Entity been notified of any request for such audit or other
examination. None of the Owner Entities has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency. There is no material dispute or claim concerning any
Tax liability of any Owner Entity either (A) claimed or raised in writing or (B)
as to which Contributor has knowledge. Each Owner Entity has always been treated
as a partnership or as an entity that is disregarded for federal income tax
purposes and has not been treated as a publicly traded partnership taxable as a
corporation under the rules of Section 7704 of the IRC.
 
8.15     Employees. At the Closing, the Lessee Company or one of its Affiliates
shall hire all persons then employed by the Contributor or any Owner Entity in
connection with the management, operation or maintenance of the Properties
(collectively, the “Employees”). Immediately after the Closing, the Employees
shall be employed on terms substantially similar in the aggregate as those in
effect on the Closing. Contributor has previously delivered to the Investor a
copy of all collective bargaining agreements related to the Properties or any
part thereof (collectively, the “CBA”). With respect to the business or
operations of the Properties (a) the Owner Entities and Contributor are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours; (b) neither
the Owner Entities nor Contributor has received written notice of any unfair
labor practice complaint against Contributor pending before the National Labor
Relations Board; (c) there is no labor strike, slowdown or stoppage actually
pending or threatened against or affecting the Owner Entities or Contributor;
(d) neither the Owner Entities nor Contributor has received notice that any
representation petition respecting the employees of the Owner Entities or
Contributor has been filed with the National Labor Relations Board; (e) no
arbitration proceeding arising out of or under the CBA is pending against the
Owner Entities or Contributor and (f) neither the Owner Entities nor Contributor
has experienced any primary work stoppage in the past five years. True, correct
and complete copies of all material employee benefit plans (“Plans”) maintained
by the Contributor or any of the Owner Entities (collectively, the “Existing
Employer”) for the Employees have been made available to the Investor. All Plans
are in substantial compliance with the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”) and no Existing Employer has engaged in a
transaction with respect to any benefit plan that, assuming the taxable period
of such transaction expired as of the date hereof, could subject the Company or
any of the Owner Entities to a tax or penalty imposed by either Section 4975 of
the IRC of Section 502(i) of ERISA. No liability under Subtitle C or D of Title
IV of ERISA has been or is expected to be incurred by Contributor, the Company
or any of the Owner Entities with respect to any ongoing, frozen or terminated
Plan which is a single employer defined benefit pension plan and neither
Contributor nor any of the Owner Entities has incurred or expects to incur any
withdrawal liability with respect to any multiemployer plan under Subtitle E of
Title IV of ERISA No Plan has an accumulated funding deficiency, within the
meaning of Section 412 of the IRC or Section 302 of ERISA. Contributor has not
provided, nor is it required to provide security to any Plan pursuant to Section
401(a)(29) of the IRC.

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8.16     Signatories. The persons or parties signing this Agreement and the
documents contemplated hereby on behalf of Contributor and the Owner Entities
have the power and authority to enter into this Agreement and the documents
contemplated hereby, to bind Contributor and the Owner Entities to the
provisions hereof and to comply with the obligations of Contributor and the
Owner Entities hereunder and thereunder.
 
8.17     No Conflicts with Agreements. Neither the execution and delivery of
this Agreement nor the consummation of the transactions herein contemplated
will, to the best of Contributor’s knowledge, conflict with, result in a breach
of or constitute (with or without the giving of notice or the passing of time,
or both) a default under, or otherwise adversely affect any Space Lease,
Franchise Agreement, or other contract, agreement, instrument, license or
undertaking to which Contributor or any of its affiliates or any Owner Entity is
a party or by which any of them or any of their respective property or assets is
or may be bound or that relates to the Properties in any respect, other than
documents evidencing or securing the Existing Debt, provided such violation is
waived effective as of the Closing.
 
8.18     No Options. No tenant under a Space Lease, holder of a Minority
Interest or other person has any option, right of first refusal or other right
to purchase any Property any Membership Interest or any other interest in any
Owner Entity or any part thereof or interest therein, other than, in the case of
Minority Interest holders, rights of first refusal that will be waived with
respect to the transaction on or before the Closing Date.
 
8.19     Franchise Agreements. All Franchise Agreements are listed on Exhibit
8.19. All information with respect to Franchise Agreements on Exhibit 8.19 is
true and complete. Each Franchise Agreement is in full force and effect and has
not been modified or supplemented except as set forth in a recorded instrument.
There is no default under any Franchise Agreement, and, to Contributors
knowledge, no state of facts that with notice and/or the passage of time would
ripen into a default. Contributor has previously delivered to Investor with a
true, correct and complete copy of each Franchise Agreement.
 
8.20     Existing Debt. All Existing Debt is accurately identified on Exhibit
1.10. With regard to the Existing Debt: (i) Contributor has heretofore delivered
to Investor true, correct and complete copies of each Existing Debt Document,
(ii) no event has occurred that, with the giving of notice, passing of time, or
both, would constitute a default that remains uncured on the part of Contributor
in the due performance or observance of any material term, covenant or condition
contained in the Existing Debt Documents and (iii) the amounts set forth on
Exhibit 1.10, including the amounts shown as escrows, reserves and other
deposits (other than tax and insurance escrows and reserves) held by lenders of
the Existing Debt are true and correct as of the effective date stated thereon.
None of the Owner Entities has incurred any Debt that remains outstanding other
than Existing Debt.

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8.21     Owner Entities. With regard to each Owner Entity: (i) Contributor has
heretofore delivered to Investor true, correct and complete copies of the
organizational documents of such Owner Entity, and (ii) no event has occurred
that, with the giving of notice, passing of time, or both, would constitute a
default that remains uncured on the part of Contributor in the due performance
or observance of any term, covenant or condition contained in any Owner Entity
organizational documents. With respect to each Owner Entity, the information set
forth on Exhibit 8.21 is true and correct as of the date hereof.
 
8.22     Insurance. All of the Insurance Policies are listed on Exhibit 8.22.
Contributor as previously delivered to Investor true, correct and complete
copies of all of the Insurance Policies. All of the Insurance Policies are valid
and in full force and effect, all premiums for such policies were paid when due
and all future premiums for such policies (and any replacements thereof) shall
be paid by Contributor on or before the due date therefor. Contributor shall pay
all premiums on, and shall not cancel or voluntarily allow to expire, any of the
Insurance.
 
8.23     Condemnation Proceedings; Roadways. Neither Contributor nor any Owner
Entity has received notice of any condemnation or eminent domain proceeding
pending or threatened against any Property or any part thereof. Contributor has
no knowledge of any change or proposed change in the route, grade or width of,
or otherwise affecting, any street or road adjacent to or serving any Property.
 
8.24     Financial Statements. The consolidated, audited 2002, 2003, and 2004
financial statements and internally-prepared Property-level trailing 2005
financial statements provided to Investor are true, complete and accurate in all
material respects and, with respect to such information and the notes thereto,
fairly present the assets, liabilities and financial condition of the Owner
Entities as of the dates and for the periods indicated and, with respect to
statements of income, fairly present the results of operations of Owner Entities
for the periods referred to therein and, in the case of the audited 2004
statements, in accordance with GAAP.
 
8.25     Capitalization. The names of the respective holders of all of the
membership interests in the Owner Entities, as of the date hereof, are as set
forth on Exhibit 8.21. Except for the interests of the Part Owned Property
Owners, there are no other membership or other equity interests in any of the
Owner Entities outstanding nor are there any outstanding options or other rights
to convert any obligation into or otherwise acquire any membership interest or
other equity interest in any Owner Entity and Contributor owns all of the
membership interests in the Owner Entities free and clear of all liens, claims,
encumbrances or interests of others.
 
8.26     Owner Entity Investments. Each Contributor owns its Membership
Interests in the Owner Entities free and clear of all liens, claims,
encumbrances or interests, of others. Each Owner Entity owns its respective
Property free and clear of all liens, claims, encumbrances or interests of
others, other than the Permitted Exceptions, title exceptions set forth in
Schedule B to the title insurance policies of Contributor made available to
Investor prior to the date hereof, any state of facts shown on surveys of
Contributor made available to Investor prior to the date hereof, and any matter
that would be readily apparent from a physical inspection of the Properties. The
Owner Entities do not own directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust, limited liability company or other entity (other than
investments in short-term investment securities).

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8.27     Compliance with Legal Requirements. Each of the Owner Entities is in
material compliance with all applicable requirements of any ordinance, law or
regulation or order of any government or any agency, body or subdivision thereof
(including the local building department), other than such requirements that, if
breached, could not foreseeably have a material adverse effect on the relevant
Owner Entity or Property.
 
8.28     Liabilities. Except as set forth on Exhibit 8.28, none of the Owner
Entities has any Liabilities other than Liabilities reflected on the
consolidated, audited 2002, 2003, and 2004 financial statements and
internally-prepared Property-level trailing 2005 financial statements provided
to Investor prior to the date hereof.
 
8.29     Prior Activities of the Owner Entities. None of the Owner Entities has,
directly or indirectly, engaged in any business or activity other than owning
the Properties.
 
8.30     Survival. The representations and warranties of Contributor contained
in or made pursuant to this Article shall survive the Closing until the first
anniversary of the Closing Date and, in the case of the representations and
warranties made in Section 8.14, until 90 days after the expiration of the
applicable statute of limitations.

9.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF INVESTOR.

Investor hereby warrants, represents and covenants to Contributor that each of
the following statements is true and correct as of the date of this Agreement
and the Closing Date:
 
9.1   Authority. Investor has full power and authority to enter into and perform
this Agreement in accordance with its terms and this Agreement has been duly
executed by Investor and is enforceable against Investor in accordance with its
terms, and the documents delivered to Contributor at the Closing will be duly
executed by the Company and enforceable against the Company in accordance with
their terms. Neither the execution and delivery of this Agreement nor the
performance hereof will (i) be in violation of the organizational documents of
Investor, (ii) to the best of Investor’s knowledge, conflict with any law,
decree, judgment, regulation or decree of any court or governmental agency, or
(iii) conflict with any agreement or instrument to which Investor may be bound.
 
9.2   Signatories. The persons or parties signing this Agreement on behalf of
Investor have the power and authority to enter into this Agreement and the
documents contemplated hereby, to bind Investor to the provisions hereof and to
comply with the obligations of Investor hereunder and thereunder.
 
9.3   No Litigation. No litigation is in effect or, to the knowledge of
Investor, threatened, affecting the transactions contemplated hereby. There is
no action or proceeding pending or, to the knowledge of Investor, threatened
against Investor, before a court or other governmental authority to restrain,
prohibit or otherwise challenge the transactions contemplated hereby, or that
might result in the consummation of a judgment against Contributor, the Company
or any Owner Entity.

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9.4   No Agency. Investor is acquiring the limited liability company interests
in the Company for its own account, as principal, for investment, and not with a
view toward resale or distribution thereof.
 
9.5   Securities Matters. Investor makes the acknowledgments, representations,
warranties and agreements set forth on Exhibit 9.5 annexed hereto. In addition,
Investor is an “Accredited Investor” as that term is defined under Regulation D
under the Securities Act of 1933, as amended (the “1933 Act”). Investor
understands that the Company has not been registered under the 1933 Act or the
securities laws of any state and, as a result thereof, is subject to substantial
restrictions on transfer. Neither any Investor, nor any Person receiving limited
liability company interests in the Company, will hold or take such interests
with a view to a distribution of such interests in violation of the 1933 Act.
 
9.6   No Registration. Investor understands that (i) Contributor and the Company
have no obligation or intention to register the limited liability company
interest in the Company issued to Investor for resale under any federal or state
securities laws, or to take any action (including the filing of reports or the
publication of information required by Rule 144 under the 1933 Act) that would
make available any exemption from the registration requirements of such laws,
and (ii) therefore Investor may be precluded from selling or otherwise
transferring or disposing (other than pursuant to the terms and provisions of
the LLC Agreement) of any limited liability company interests in the Company or
any portion thereof and may have to bear the economic risk of investment in such
limited liability company interests for an indefinite period.
 
9.7   Survival. The representations and warranties of Investor contained in or
made pursuant to this Article shall survive the Closing until the first
anniversary of the Closing Date.

10.
DAMAGE AND DESTRUCTION.

Until the Closing, if any damage to or destruction of the Properties (or any
portion thereof) occurs (notice of which Contributor shall give to Investor as
soon as practicable following its occurrence), then Contributor shall promptly
repair or replace such damage or destruction, except that if the cost of such
repair or replacement exceeds ten percent (10%) of the Contribution Value
allocated to the particular Property in accordance with Exhibit 1.8, or the
damage or destruction would take more than sixty days to repair or rebuild, then
in either of such cases Contributor shall not be required to commence such
repair or replacement, but (i) Investor may terminate this Agreement with
respect to the relevant Property in accordance with Section 17.1 by giving
Contributor written notice of its intention to do so, such notice by Investor to
Contributor to be given not later than five business days after Investor shall
have received the notice from Contributor as aforesaid; or (ii) if Investor
elects not to terminate this Agreement, this Agreement shall continue in full
force and effect with respect thereto except that at the Closing, Contributor
shall pay or assign to the Company its rights to collect casualty insurance
proceeds for such loss, except that Contributor shall retain insurance proceeds
sufficient to pay costs incurred for repair or replacement approved by Investor
and completed by Contributor, plus rent loss proceeds for periods prior to the
Closing, and Contributor additionally shall pay to the Company at the Closing
the amount of the insurance deductible in effect at the time of the casualty.

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11.
EMINENT DOMAIN.

If any eminent domain proceedings affecting the Properties or any material
portion thereof shall be threatened, contemplated, commenced or consummated
prior to the Closing (notice of which Contributor shall give to Investor as soon
as practicable after receipt by Contributor), Investor shall have the right by
written notice given within fifteen days after Contributor has given Investor
the aforesaid notice, (i) to terminate this Agreement by giving Contributor
notice thereof (in which event the provisions of Section 17.1 shall control); or
(ii) if Investor elects not to terminate this Agreement with respect to the
Property so affected, this Agreement shall continue in full force and effect
with respect thereto without any reduction or abatement of the Contribution
Value. If this Agreement is not terminated, as aforesaid, then Contributor at
Closing shall assign to the Company its entire right, title and interest in and
to any condemnation award.

12.
EXISTING DEBT.

 
12.1     Repayment of Existing Debt. Except as expressly provided in Section
12.2, Contributor shall repay all Existing Debt on the Closing Date. The Company
shall reimburse Contributor and shall bear, as a Company expense, all fees and
prepayment penalties in connection with such prepayment.
 
12.2     Refinancings. Contributor agrees to seek the consent of the Existing
Lenders with respect to the Marriott Mystic Property to increase the amount of
Existing Debt encumbering the Marriott Mystic, to the following target levels on
or prior to the Closing Date:

Property
 
Target resized amount
         
Marriott Mystic, Mystic, CT:
 
$
34,800,000
 

Investor agrees to seek to refinance each of the following Properties to the
following target levels on the Closing Date:

Property
 
Target new financing amount
         
Courtyard by Marriott and Rosemont Suites, Norwich CT:
 
$
9,400,000
 
SpringHill Suites by Marriott, Waterford, CT:
 
$
6,100,000
 
Residence Inn by Marriott, Danbury, CT:
 
$
8,364,000
 
Residence Inn Southington, CT:
 
$
11,400,000
 
Hartford Hilton, Hartford, CT:
 
$
22,000,000
 
Courtyard Hotel, Warwick, RI:
 
$
7,200,000
 
Hartford Marriott, Hartford, CT:
 
$
45,000,000
 
 
 $109,464,000 in the aggregate. 
 

 
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The parties agree to cooperate in considering minor changes to the foregoing
amounts. Any refinancing proceeds in excess of the repayment of Existing Debt
and all other amounts payable in respect thereof shall be distributed to
Contributor (or, in the case of any Part Owned Property), to Contributor and the
Minority Interest holder. The Company shall bear any costs of resizing or
refinancing Existing Debt (including legal fees and origination charges), which
shall be considered expenses of the Company and shall be reimbursed by the
Company at the Closing. All documents, executed in connection with any such
resizing or refinancing shall be subject to the consent of Contributor and
Investor, which shall not be unreasonably withheld in either case.
 
12.3     Costs. The Company shall pay to each Existing Lender in respect of
Existing Debt outstanding as of the Closing, at or prior to the Closing, the
costs of any and all transfer, assumption, legal, title, and other fees, costs
and expenses of each Existing Lender in connection with delivery of such
Existing Lender’s consent to assignment of the Membership Interests to the
Company. All the foregoing payments, costs and expenses shall be expenses of the
Company for all purposes hereof and of the LLC Agreement. The Company shall bear
such expenses regardless of whether any Existing Lender shall refuse its consent
or the provisions of this Article shall otherwise be unsatisfied. Any
application or commitment fees incurred prior to the Closing Date shall be paid
(subject to the reimbursement outlined above) first, by Investor, up to the
amount of $175,000, which Investor represents has been expended as of the date
hereof, and then by Contributor up to the amount of $175,000, then by
Contributor and Investor, in the ratio of 33.3% by Contributor and 66.7% by
Investor with respect to Stabilized Assets, and 50% by Contributor and 50% by
Investor, with respect to Development Assets. In the event that the Closing does
not occur, Contributor shall reimburse Investor for all application and
commitment fees paid to lenders in accordance with this Section.

13.
PART OWNED PROPERTY.

The parties acknowledge that, on the date hereof, Contributor does not hold the
100% equity interests with respect to the owners of the Part Owned Properties,
as set forth on Exhibit 8.21. The equity interests in the Part Owned Property
Owners that is not held by Contributor are collectively referred to as the
“Minority Interests”. Contributor’s and Investor’s obligations at the Closing
with respect to the Property are not conditioned upon the acquisition by the
Company of the Minority Interests with respect to the Part Owned Property.
However, Contributor shall, upon prior notice to Investor, bid on or negotiate
to acquire the Minority Interests, on or prior to the Closing, at a price and
upon other terms pre-approved by Investor in its sole discretion. In the event
that Contributor agrees to so purchase the Minority Interests, then Contributor
shall either (i) assign the respective Minority Interests acquisition agreements
to the Company at the Closing, or (ii) close on the acquisition of the Minority
Interests and terminate the Minority Interests. In either such event, the
Company shall, at the Closing, reimburse Contributor and bear as a Company
expense all reasonable third party costs and expenses incurred in acquiring and
terminating the Minority Interests. “Minority Interest Acquisition Expenses”
shall mean the total cost incurred in the acquisition of the Minority Interests
through the operation of this Article.

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14.
CONDITIONS TO CLOSING.

 
14.1     Conditions to Investor’s Obligations. Investor’s obligations at the
Closing with respect to the Properties are expressly conditioned upon the
following conditions being satisfied or complied with (unless waived in writing
by Investor).

14.1.1     Contributor’s warranties and representations set forth herein shall
be true and correct in all material respects as of the relevant Closing Date and
Contributor shall have performed each and all of its covenants and agreements
hereunder within the time provided.

14.1.2     New Franchise Agreements or commitments for New Franchise Agreements
reasonably acceptable to Investor shall have been issued to the Lessee.

14.1.3     There shall have been no breach on the part of Contributor of any of
the covenants set forth in Article 5.

14.1.4     Subject only to payment of its premium for same, the Title Company
shall be prepared to issue at the Closing (or prepared to unconditionally commit
to issue at the Closing, with no “gap”), its title policy, in the form
(including all endorsements) contemplated in Article 7.

14.1.5     Contributor shall have obtained all necessary consents and approvals
of governmental authorities or third parties to the consummation of the
transactions contemplated by this Agreement.

14.1.6     Contributor and Investor shall have effectuated the resizings and
refinancings contemplated under Article 12 with respect to the Existing Debt.

14.1.7     No order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered, promulgated
or enforced by any court of competent jurisdiction or governmental or regulatory
authority or instrumentality that prohibits the consummation of the transactions
contemplated by this Agreement, and no litigation or governmental proceeding
seeking such an order shall be pending or threatened.
 
14.2     Conditions to Contributor’s Obligations. Contributor’s obligations at
the Closing are expressly conditioned upon the following conditions being
satisfied or complied with (unless waived in writing by Contributor):

14.2.1     Investor’s warranties and representations set forth herein shall be
true and correct in all material respects as of Closing Date; and

14.2.2     Contributor and Investor shall have effectuated the resizings and
refinancings contemplated under Article 12 with respect to the Existing Debt.

14.2.3     No order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered, promulgated
or enforced by any court of competent jurisdiction or governmental or regulatory
authority or instrumentality that prohibits the consummation of the transactions
contemplated by this Agreement, and no litigation or governmental proceeding
seeking such an order shall be pending or threatened.

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14.2.4     Hartford Marriott Deferred Closing. The parties agree that in the
event that the conditions to Investor’s obligations at the closing contained in
Section 14.1 hereof are not satisfied solely with respect to the Property known
as the Hartford Marriott (in such circumstances, the “Deferred Property”), the
Deferred Property is not open for business to the public or a valid permanent or
temporary certificate of occupancy has not been issued for the Deferred
Property, then provided that (x) the conditions to Closing are otherwise
satisfied with respect to the remainder of the Properties, and (y) Contributor
has received a forward loan commitment reasonably satisfactory to it and to
Investor with respect to the permanent financing of the Deferred Property, then
the transaction shall nonetheless proceed and the Closing shall occur with
respect to all Properties other than the Deferred Property. In such event the
Contribution Value on the initial Closing Date shall be adjusted (lowered) by
the amount allocated to the Deferred Property on Exhibit 1.8. The Closing with
respect to the Deferred Property shall occur when (i) the conditions to
Investor’s obligations with respect to such Deferred Property have been
satisfied, (ii) the Deferred Property is open for business to the public, (iii)
a valid permanent or temporary certificate of occupancy has been issued for the
Deferred Property and (iv) the closing of financing contemplated by Section 12.2
for the Deferred Property. In the event that such conditions are not satisfied
on or before November 1, 2005 (the “Deferred Property Outside Closing Date”),
then such Deferred Property shall be deleted from the transaction and the
parties shall have no further obligations with respect thereto, except as
specifically provided in this Agreement. The adjusted Contribution Value with
respect to the Deferred Property shall be calculated in the same manner as all
other properties, as of the Closing Date with respect to the Deferred Property,
and based on the Contribution Value allocated to the Deferred Property on
Exhibit 1.8.

15.
THE CLOSING.

 
15.1     Location and Date. The Closing shall occur on a date (the “Closing
Date”) no later than fifteen days following the later to occur of the
satisfaction of all conditions to Closing identified in Article 14 (but in no
event later than July 15, 2005 (the “Outside Closing Date”)), at the offices of
Contributor’s attorneys, Latham & Watkins LLP, 885 Third Avenue, New York, NY
10022-4802 at 10:00 A.M. At the Closing, the parties shall perform all
obligations required to be performed at the Closing with respect to the
Properties.
 
15.2     Contributions and Payments. At the Closing:

15.2.1     Contributor shall contribute the Membership Interests to the Company;

15.2.2     Investor shall deliver to the Company presently available funds in
the amount of the Cash Payment;

15.2.3     The Company shall deliver to Contributor presently available funds in
the amount of the Cash Payment;

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15.2.4     Contributor (or, in the event that either entity constituting
Contributor, or any other Affiliate of Contributor, has succeeded to the
ownership of the Membership Interests, then such single entity) and Investor
shall execute the LLC Agreement evidencing issuance of the various membership
interests in the Company; and

15.2.5     Each party shall execute and deliver such instruments as the other
party may reasonably desire in connection with or to consummate the transactions
contemplated by this Agreement, or cause the same to be executed and delivered,
including the LLC Agreement.
 
15.3    Contributor’s Closing Deliveries. At the Closing, Contributor shall
execute and/or deliver or cause the same to be executed and delivered to
Investor or the Company (or another Permitted Designee, which shall be deemed
substituted for “the Company” in the following subsections) the following items:

15.3.1     Transfer documents:

A.    An omnibus assignment of all of the Membership Interests in the Owner
Entities in the form attached as Exhibit 15.3.1, which shall be joined in by the
Company;

B.     If clause 13(i) applies, then at the Closing, Contributor shall execute
and/or deliver or cause to be executed and delivered to the Company an
Assignment Agreement (substantially similar in the form to Exhibit 15.3.1), to
be joined in by the Company, by which Contributor assigns to the Company all of
Contributor’s right, title and interest, in and to the acquisition of the
Minority Interests.

15.3.2     Estoppels, consents, notices and New Franchise Agreements:
Contributor shall deliver:

A.    With respect to the Ground Lease, original estoppel certificates, in forms
and upon terms and conditions to be negotiated by Contributor and approved by
Investor (which approval shall not be unreasonably withheld) (the “Ground Lease
Estoppel Certificates”) duly executed by the ground lessor, which shall provide,
among other matters, for the ground lessors’ certification that (i) true,
correct and complete copies of the applicable Ground Lease, including all
amendments thereto, are attached to the estoppel certificate, (ii) to the ground
lessor’s knowledge, Contributor is not then in default under the applicable
Ground Lease;

B.    The New Franchise Agreements or commitments for New Franchise Agreements
acceptable to Investor; and

C.    The consents of the Minority Interest holders.

15.3.3     Affidavits and Certificates: Contributor shall deliver:

A.    An affidavit in form reasonably satisfactory to Investor to the effect
that Contributor is not a “foreign person” (as defined in IRC Section 1445(f)(3)
and the regulations issued thereunder);

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B.     All real property transfer forms, and any other documents, instruments or
forms required by municipal or other authorities in connection with the transfer
of the Properties Membership Interests;

C.     Such affidavits; “mechanic’s lien”, “gap”, “parties in possession” or
other Contributor indemnities; evidence of authority; releases of liens; or
other instruments as the Title Company may reasonably request to issue a title
policy satisfactory to the Company in accordance with Article 7; and

D.    The pro-forma title insurance policies contemplated by the final Title
Commitments.

15.3.4     At the Closing, Contributor shall terminate the existing management
agreement with respect to the Properties.

15.3.5     At the Closing, Contributor shall (i) deliver the consent required
from the Existing Lenders, as contemplated by Article 12, and (ii) execute and
deliver such documents and instruments as each Existing Lender reasonably
requests to evidence or effectuate the transfer to the Company and the Company’s
assumption of the Existing Debt (provided, however, that Investor and the
Company will not be obligated to assume any obligations or liabilities in
connection therewith (other than obligations under the loan documents, as
currently existing, that accrue following the Closing, and subject to the
exculpation provisions thereof)) and (iii) deliver an assignment of the Mortgage
escrows in form reasonably acceptable to Investor.
 
15.4     Management Agreements. At the Closing, the Company shall enter into the
Asset Management Agreement with Asset Manager and the Management Agreement with
Manager.
 
15.5     Lessee Formation and Leases. At the Closing,

15.5.1     Investor Lessee Member and Contributor shall execute a Lessee LLC
Agreement in the case of any Property that is not a Part Owned Property, and
Lessee Company and the holder of the Minority Interests with respect to any Part
Owned Property shall execute a limited liability company agreement under the
laws of the State of Delaware (in each case, a “Part Owned Property Lessee
Company”) on terms mutually acceptable to Contributor, Investor and the holder
of the relevant Minority Interest; and

15.5.2     Lessee Company or the Part Owned Property Lessee Company (on one
side) and each of the Owner Entities (on the other side) shall execute a Lease
Agreement demising the Property owned by such Owner Entity to the Lessee.
 
15.6     Fees and Costs. At the Closing,

15.6.1     the Company shall pay, as Company expenses, (a) all costs of the
owners title policy (i.e., the cost of the Title Commitment and cost of
converting same to a title policy or endorsement to the existing title policy,
including search and/or exam fees and premium costs) to be issued in the amount
of the adjusted Contribution Value, (b) all transfer, assumption, legal, title
and other fees to each Existing Lender as set forth in Article 12, (c) all costs
of any Survey for the Properties required by any lender, as well as any
reasonable costs of its due diligence paid to third party consultants, but
excluding any internal costs, any travel costs of the parties or their
professional advisors, and (d) all reasonable third-party out of pocket costs of
Investor and Contributor incurred in forming the Company, including preparing
and negotiating this Agreement and the LLC Agreement, including, but not limited
to, professional advisors, attorneys, and closing costs (including legal), but
excluding any travel costs of the parties or their professional advisors, and

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15.6.2     Contributor shall pay any transfer taxes in connection with the
contribution of the Membership Interests, whether state, city or local. The
Company shall pay any sales taxes in connection with the contribution of the
Membership Interests, to the extent such obligation is ordinarily imposed upon
the buyer as a matter of local custom.
 
15.7     Further Assurances Regarding Documentation. During the term of this
Agreement, Contributor and Investor hereby agree to cooperate in good faith to
negotiate, and on or prior to the Outside Closing Date to execute and deliver
the LLC Agreement, the Lessee LLC Agreements, the Leases, the Management
Agreements, and the Asset Management Agreements, substantially in the forms
attached hereto as Exhibits 1.3 - 1.7, subject to conforming changes and other
revisions reasonably necessary or requested to effect the intent of the
transactions contemplated hereby.

16.
ASSIGNMENT; DESIGNATION OF GRANTEES.

Neither party hereto shall assign its rights or its interests in and to this
Agreement, unless such assignment is necessary to comply with the terms of the
Existing Debt and, upon such assignment such assignee shall, in writing,
affirmatively assume Investor’s obligations hereunder. Neither party hereto
shall be deemed to be discharged of any of its duties hereunder as a result of
any assignment or of any delegation by such party of any such duties.

17.
TERMINATION OF THE AGREEMENT; DEFAULT REMEDIES; INDEMNITIES.

 
17.1     Failure to Satisfy Conditions Precedent. If by the Outside Closing Date
not all of the conditions precedent to Investor’s Closing obligations have been
fulfilled, including the satisfaction of any representations or warranties
intended to be fulfilled between the date hereof and the Closing, but Section
17.2 hereof is not applicable, then Investor shall have only the following
rights and remedies: (i) to close the transactions contemplated by this
Agreement without any abatement of the Contribution Value (except as
specifically set forth in this Agreement to the contrary), or (ii) to treat this
Agreement as terminated and of no further force or effect. If Investor elects to
exercise its rights under clause (i), above, such defect, exception, condition,
matter or thing shall thereafter be deemed waived by Investor with the same
force and effect as if such defect, exception, condition, matter or thing had at
all times been a Permitted Exception (provided the same has been disclosed to
Investor in writing or Investor has other written notice thereof) and, in such
event, Investor shall close the transactions contemplated by this Agreement in
accordance with the provisions of this Agreement without any reduction or
abatement in the Contribution Value (except as specifically set forth in this
Agreement to the contrary). If, however, Investor shall elect to exercise its
rights under clause (ii) above, then (A) all costs incurred by either
Contributor or Investor that would have been payable by the Company pursuant to
Section 15.6.1 (if a Closing had occurred) shall be paid 42.04% by Contributor
and 57.96% by Investor, unless any particular cost may reasonably be attributed
to a specific Property, in which case Investor shall pay to the Company 50% of
the costs, with respect to Development Assets, and 66.7% of the costs, with
respect to Stabilized Assets, and Contributor shall pay to the Company 50% of
the costs, with respect to Development Assets, and 33.3% of the costs, with
respect to Stabilized Assets other than fees paid in respect of refinancings,
pursuant to Section 12.3, which shall be for the account of Contributor, (B)
Investor shall receive a refund of the portion of the Initial Deposit deposited
by it and all interest accrued thereon in accordance with Article 4 as its sole
remedy hereunder and (C) Contributor shall receive a refund of the portion of
the Initial Deposit deposited by it and all interest accrued thereon in
accordance with Article 4 as its sole remedy hereunder.
 
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17.2     Investor’s Remedies. If Investor shall have performed all of its
obligations under this Agreement and all conditions to Contributor’s obligation
to proceed with the Closing shall have been satisfied or waived, and if
Contributor shall fail or refuse to close as required by the terms of this
Agreement, or shall intentionally or negligently fail to satisfy the conditions
precedent to the Closing, which default shall continue unremedied for seven
business days after notice thereof from Investor, or shall be in material breach
of any representation or warranty made by Contributor hereunder then Investor
shall be entitled to the following: a payment of the entire Initial Deposit and
all interest accrued thereon to Investor in accordance with the provisions of
Article 4, and, in addition, Contributor shall be liable to pay to Investor a
“break up fee” in the amount of Two Hundred Fifty Thousand Dollars ($250,000),
as liquidated damages. In such event, this Agreement shall terminate, be null
and void and of no further force or effect. It is specifically understood that
specific performance and injunctive relief shall not be available remedies.
 
17.3     Contributor’s Remedies. If Contributor shall have performed all of its
obligations under this Agreement and all conditions to Investor’s obligation to
proceed with the Closing shall have been satisfied or waived, and if Investor
shall fail or refuse to close as required by the terms of this Agreement, or if
Investor shall otherwise be in material breach of any representation, warranty
or covenant hereunder, the parties hereto agree that the damages that
Contributor would sustain as a result thereof would be substantial, but would be
difficult to ascertain. Accordingly, the parties hereto agree that in the event
of such default, failure or refusal by Investor, Contributor’s sole remedy shall
be payment to it of the entire Initial Deposit and all interest accrued thereon
in accordance with the provisions of Article 4, and in addition, Investor shall
be liable to pay to Contributor a “break up fee” in the amount of One Million
Dollars ($1,000,000), as liquidated damages. It is specifically understood that
specific performance and injunctive relief shall not be available remedies.
 
17.4     Nature of Liquidated Damages. Each party recognizes that, if it fails
to perform its obligations hereunder, then the other party shall be entitled to
compensation for the detriment caused thereby. However, the parties agree that
it is extremely difficult and impractical to ascertain the extent of the
detriment and, to avoid such difficulties, the parties agree that if either
party fails to perform its obligations hereunder and this Agreement is
terminated by reason thereof, the party not in default may retain the Initial
Deposit (plus all interest and dividends earned thereon) and shall be entitled
to the “break up” fees enumerated above as liquidated damages for default. All
parties agree that such amount stated as liquidated damages shall be in lieu of
any other relief to which the party not in default might otherwise be entitled
to by virtue of this Agreement or by operation of law.

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17.5     Legal Fees. If either party brings an action to recover the Initial
Deposit, the non-prevailing party shall (notwithstanding the “exclusive
remedies” language above set forth in Section 4.5) pay the prevailing party’s
reasonable legal fees, disbursements and court costs expended to obtain a
judgment.
 
17.6     Agreements to Indemnify.

17.6.1     In the event Closing occurs, the entities constituting Contributor,
jointly and severally, hereby agree to indemnify and hold harmless Investor, its
officers, directors, employees, members, representatives, agents, shareholders,
partners and affiliates (and their respective officers, directors, employees,
members, representatives, agents, shareholders, partners and affiliates) (the
“Investor Indemnified Parties”), from and against all Liability, damage,
deficiency, loss, costs, claims, encumbrances or expense, including interest or
reasonable attorneys’ fees and disbursements (collectively, “Damages”) incurred
by any of them arising prior to the first anniversary of the Closing Date (or 90
days after the expiration of the applicable statute of limitations with respect
to a breach of the representation and warranty made by Contributor in Section
8.14) and that arise out of or as a result of (i) any breach of the
representations and warranties made by Contributor in Article 8 hereof, (ii) any
breach of any other representation or warranty made by Contributor herein or
(iii) any breach or nonperformance of any covenant or agreement made by
Contributor herein, unless, in the case of any of the foregoing items (i)
through (iii), the indemnified party had written notice of such breach or
nonperformance in advance of the Closing Date.

17.6.2     In the event Closing occurs, Investor hereby agrees to indemnify and
hold harmless Contributor, its respective officers, directors, employees,
members, representatives, agents, shareholders, partners and affiliates (and
their respective officers, directors, employees, members, representatives,
agents, shareholders, partners and affiliates) (the “Contributor Indemnified
Parties”) from and against all Damages incurred by any of them and which arise
prior to the first anniversary of the Closing Date and that arise out of or as a
result of (i) any breach of the representations and warranties of Investor in
Article hereof, (ii)  any breach of any other representation or warranty made by
Investor herein or (iii) any breach or nonperformance of any covenant or
agreement made by Investor herein, unless, in the case of any of the foregoing
items (i) through (iii), the indemnified party had written notice of such breach
or nonperformance in advance of the Closing Date.

17.6.3     If any Person benefited by Section 17.6 (an “Indemnified Person”) is
threatened with any claim, or any claim is presented to or made to an
Indemnified Person, or any action is commenced against an Indemnified Person,
that may give rise to a right to indemnification hereunder, such Indemnified
Person shall, with reasonable promptness, give written notice of such claim to
the Person obligated to provide indemnification with respect thereto pursuant to
Section 17.6 (the “Indemnifying Person”) and, without prejudice to the
Indemnified Person’s right of indemnification under this Section 17.6 shall,
before taking any action with respect to the subject claim, make itself
available to meet with the Indemnifying Person and, along with the Indemnifying
Person, attempt to resolve and/or settle the subject claim.

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17.6.4     The Indemnifying Person may elect before the earlier of the 30th day
after receipt of such notice or the fifth day before the return date required by
any claim, citation or other statute, to contest and defend against such claim
at the Indemnifying Person’s expense, and shall give written notice to the
Indemnified Person of the commencement of such contest or defense with
reasonable promptness after the giving of the written notice of such claim by
the Indemnified Person. The Indemnified Person shall be entitled to participate
with the Indemnifying Person in such event, but shall not be entitled in any way
to release, waive, settle, modify or pay such claim without the written consent
of the Indemnifying Person if the Indemnifying Person shall have assumed the
defense of, or otherwise be contesting, such claim (provided that such written
consent shall not be unreasonably withheld). If the Indemnifying Person shall
have assumed the defense of any claim, and has employed counsel with respect
thereto, the Indemnified Person shall also be entitled to employ counsel at its
own cost and expense.

17.6.5     If the Indemnifying Person does not elect to contest or defend the
claim as provided in this Section 17.6, the Indemnified Person, shall have the
exclusive right to prosecute, defend, compromise, settle or pay the claim in its
sole discretion and pursue its rights under this Agreement. If the Indemnifying
Person shall assume the defense, the parties hereto shall cooperate in the
defense of such action and the records of each shall be available to the other
and to the Indemnified Person with respect to such defense.

18.
BROKERS.

Investor and Contributor each represents and warrants that it has dealt with no
broker or finder in connection with this transaction, except that Contributor
has dealt with Hodges Ward Elliott, whom Contributor will pay pursuant to a
separate agreement. Investor and Contributor agree to defend, indemnify and hold
the other harmless from and against any and all loss, liability and expense,
including reasonable attorney’s fees, the indemnified party may incur arising by
reason of the above representation being false. The provisions of this Article
shall survive the Closing.

19.
PRESS RELEASES; CONFIDENTIALITY.

Prior to the Closing, neither Investor nor Contributor shall issue any press
releases regarding the LLC Agreement or this Agreement without the mutual prior
consent of both parties, except that if the parties are unable to agree on a
press release and legal counsel for one party determines that such press release
is required by law, then such party may issue the legally required press
release. The terms and conditions of this Agreement and the proposed
transaction, including the identities of all parties referred to herein, will be
held by the parties in strict confidence and will not be disclosed to anyone,
other than directors, officers, partners, employees, agents or representatives
including attorneys, accountants, partners, experts, consultants and other
agents and representatives (collectively, “Representatives”) who need to know
such information in connection with the transaction, or otherwise as advisable,
except if legal counsel for one party determines that such disclosure is
required by applicable law, then such party may make such legally required
disclosure (which may be in the form of a filing with the Securities and
Exchange Commission) without the prior consent of the other party, which consent
shall not be unreasonably withheld or delayed. In addition, each of the parties
hereto will be furnishing to each other certain information that is either
non-public, confidential or proprietary in nature. Each of the parties agrees
that all such information furnished or otherwise obtained, directly or
indirectly, by such party, its Representatives, and all reports, analysis,
compilations, data, studies or other documents prepared by such party or its
Representatives containing or based, in whole or in part, on any such furnished
information (collectively, the “Information”) will be kept strictly confidential
and will not, without the prior written consent of the other party, be disclosed
to any other individual or entity in any manner whatsoever, in whole or in part,
and will not be used for any purpose other than evaluating the transaction
described herein; provided that if either party is advised by its counsel that
it is legally obligated to release the Information, such party may do so after
notice to and consultation with the other party.
 
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20.
MISCELLANEOUS.

 
20.1     Amendment. The written approval of each party hereto shall be required
to amend or waive any provision of this Agreement.
 
20.2     Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement hereof shall be deemed to be a waiver of any
other provision, condition or requirement hereof; nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it hereafter.
 
20.3     No Assignments; Binding Effect. This Agreement shall not be assigned or
otherwise transferred (by operation of law or otherwise) by any party (except as
may be expressly permitted in this Agreement). This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and assigns permitted in
accordance with this Agreement and the Act.
 
20.4     Notices. Any notice, approval, consent or other communication required
or permitted to any party under this Agreement shall be in writing and shall be
deemed to have been duly given or made: (i) if delivered personally by courier
or otherwise, then as of the date delivered (the “Effective Date”) or if
delivery is refused, then as of the date presented (also an “Effective Date”),
or (ii) if sent or mailed by Federal Express, Express Mail or other overnight
mail service to the Company and to each party, then as of the first Business Day
after the date so mailed (also an “Effective Date”). Each communication shall be
addressed as follows:

If to Investor:
Hersha Hospitality Limited Partnership
 
510 Walnut Street, 9th fl.
 
Philadelphia, PA 19106
 
Attn: Jay A. Shah
   
with a copy to:
Hunton & Williams LLP
 
1900 K Street, NW Suite 1200
 
Washington, DC 20006
 
Attn: John M. Ratino

 
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If to Contributor:
c/o Waterford Group, LLC
 
914 Hartford Turnpike
 
P.O. Box 715
 
Waterford, CT 06385
 
Attn: Len Wolman
   
with a copy to:
Latham & Watkins LLP
 
885 Third Ave.
 
New York, NY 10022
 
Attn: Raymond Lin (024576-0017)

The parties may change their addresses for subsequent notice, by a notice sent
to each other party. The parties may also send courtesy notices by facsimile to
Investor party at (215) 238-0157, or to Contributor at (860) 447-8554, although
such facsimile notices shall not be considered to have been officially given
hereunder.
 
20.5  Certain Waivers. The parties waive any and all rights they may have to a
jury trial, and any and all rights they may have to punitive, special,
exemplary, or consequential damages, in respect of any dispute based on this
Agreement.
 
20.6  Preservation of Intent. If any provision of this Agreement is determined
by any court having jurisdiction to be illegal or in conflict with any laws of
any state or jurisdiction, then the parties agree that such provision shall be
modified to the extent legally possible so that the intent of this Agreement may
be legally carried out. If any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect or for any reason, then the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the parties’ rights and privileges shall be enforceable to
the fullest extent permitted by law.
 
20.7  Entire Agreement. This Agreement sets forth the entire and only agreement
or understanding between the parties relating to the subject matter hereof and
supersedes and cancels all previous agreements negotiations, commitments and
representations in respect thereof among them, and no party shall be bound by
any conditions, definitions, warranties or representations with respect to the
subject matter of this Agreement.
 
20.8  Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
 
20.9  Governing Law; Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

[SIGNATURES COMMENCE ON FOLLOWING PAGE]
 
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IN WITNESS WHEREOF, Contributor, Investor and Escrow Agent have executed this
Agreement as of the day and year first above written.

 
CONTRIBUTOR:
 
WATERFORD HOSPITALITY GROUP, LLC
     
By:  Slavik Suites, Inc., its member
               
By:____________________________
   
Name: Del Lauria
   
Title: Vice President
         
By:  LMW Investments, Inc., its member
         
By:____________________________
   
Name: Len Wolman
   
Title: President
       
By:  MYSTIC HOTEL INVESTORS, LLC
             
By:  Waterford Hospitality Group, LLC, Member
         
By:  Slavik Suites, Inc., its member
         
By:____________________________
   
Name:  Del Lauria
   
Title:  Vice President
         
By:  LMW Investments, Inc., its member
         
By:____________________________
   
Name:  Len Wolman
   
Title:  President
       
By:  Norwich Lodgings, LLC, Member
         
By:____________________________
   
Name:  Glenn A. Jette
   
Title:  Member Manager

 
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By:  Mystic Suites, LLC
         
By:____________________________
   
Name:  Len Wolman, Member
         
By:____________________________
   
Name:  Alan Angel, Member
         
By:____________________________
   
Name:  Mark Wolman, Member
               
By:  EWHG, LLC, Member
         
By:____________________________
   
Name:__________________________
   
Title:___________________________
               
By:  Glenn A. Jette, Member
          ___________________    
Name:  Glenn A. Jette
         
By:  Slavik, Inc., Member
         
By:____________________________
   
Name:  Del Lauria
   
Title:  Vice President
         
By:  Slavik Suites, Inc., Member
         
By:____________________________
   
Name:  Del Lauria
   
Title:  Vice President
         
INVESTOR:
   
HERSHA HOSPITALITY LIMITED PARTNERSHIP
   
By:  Hersha Hospitability Trust,
   
    its general partner

 
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By:____________________________
   
Name:__________________________
   
Title:___________________________
         
ESCROW AGENT:
   
FIRST AMERICAN TITLE INSURANCE COMPANY
         
By:____________________________
   
Name:__________________________
   
Title:___________________________

 
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EXHIBIT 1.1
MEMBERSHIP INTERESTS AND OWNER ENTITIES

 
Property
Ownership
 
1. Hartford Marriott (ground leased)
Columbus Blvd
Hartford, CT 06106
Adriaen's Landing Hotel, LLC, composed of:
46.875% Mystic Hotel Investors, LLC
46.875% Waterford Hospitality Group, LLC
(Approximation: fractional interests change as construction progresses)
 
2. Hartford Hilton (ground leased)
315 Trumbull St.
Hartford, CT 06103
315 Trumbull Street Associates, LLC, composed of:
5% Norwich Lodgings, LLC
5% Slavik, Inc.
78% Waterford Hospitality Group, LLC
 
3. Residence Inn Southington
778 West St.
Southington, CT 06489
 
Southington Suites, LLC, composed of:
67% Mystic Hotel Investors, LLC
4. Dunkin Donuts
790 West St.
Southington, CT 06489
 
790 West Street LLC, composed of:
67% Mystic Hotel Investors, LLC
5. Residence Inn by Marriott
22 Segar St.
Danbury, CT 06810
 
Danbury Suites, LLC, composed of:
40% Danbury Hotel, LLC (Danbury Hotel, LLC is 100% owned by Mystic Hotel
Investors, LLC)
6. Mystic Marriott Hotel and Spa
625 North Road
Groton, CT 06320
Exit 88 Hotel, LLC composed of:
99.9% Mystic Hotel Investors, LLC
0.10% Mystic Hotel Investors Remote Entity, Inc.
7. Courtyard Hotel Warwick
55 Jefferson Park Road
Warwick, RI 02888
 
Warwick Lodgings, LLC, composed of:
100% Mystic Hotel Investors, LLC
8. Residence Inn by Marriott and Whitehall Mansion
40-42 Whitehall Ave.
Mystic, CT 06355
Whitehall Mansion Partners, LLC, composed of: 100% Mystic Hotel Investors, LLC
9. Courtyard by Marriott and Rosemont Suites
181 West Town St.
Norwich, CT 06360
 
Norwich Hotel, LLC, composed of:
100% Mystic Hotel Investors, LLC
10. Springhill Suites by Marriott
401 North Frontage Road
Waterford, CT 06385
Waterford Suites, LLC, composed of:
100% Mystic Hotel Investors, LLC

 

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EXHIBIT 1.8
ALLOCATION OF THE CONTRIBUTION VALUE

Courtyard by Marriott, Warwick, RI: $9,300,000.

Residence Inn by Marriott and Whitehall Mansion, Mystic, CT: $17,800,000.

Courtyard by Marriott and Rosemont Suites, Norwich, CT: $12,600,000.

SpringHill Suites by Marriott, Waterford, CT: $8,000,000.

Mystic Marriott Hotel and Spa, Groton, CT: $54,500,000.

Hartford Marriott, Hartford, CT: $87,150,000.

Hartford Hilton, Hartford, CT: $35,175,000.

Dunkin Donuts, 790 West St., Southington, CT: combined with Residence Inn by
Marriott, Southington, CT.

Residence Inn by Marriott, Southington, CT: $14,100,000

Residence Inn by Marriott, Danbury, CT: $9,700,000.
 

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