Exhibit 10.24           

South Bend, IN (Fairfield Inn & Suites)

PURCHASE CONTRACT

between

KRG/WHITE LS HOTEL, LLC

and

KITE REALTY/WHITE HOTEL LS OPERATORS, LLC

(“SELLER”)

and

APPLE TEN HOSPITALITY OWNERSHIP, INC.

(“BUYER”)

Dated: March 1, 2011

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TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

Page No.

 

 

 

 

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ARTICLE I

DEFINED TERMS

 

1

 

1.1

 

Definitions

 

1

 

ARTICLE II

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

 

7

 

2.1

 

Purchase and Sale

 

7

 

2.2

 

Purchase Price

 

 

 

2.3

 

Allocation

 

7

 

2.4

 

Payment

 

7

 

2.5

 

Earnest Money Deposit

 

7

 

ARTICLE III

REVIEW PERIOD

 

8

 

3.1

 

Review Period

 

8

 

3.2

 

Due Diligence Examination

 

9

 

3.3

 

Restoration

 

10

 

3.4

 

Seller Exhibits

 

10

 

ARTICLE IV

SURVEY AND TITLE APPROVAL

 

10

 

4.1

 

Survey

 

10

 

4.2

 

Title

 

10

 

4.3

 

Survey or Title Objections

 

11

 

ARTICLE V

MANAGEMENT AGREEMENT AND FRANCHISE AGREEMENT

 

12

 

ARTICLE VI

BROKERS

 

12

 

ARTICLE VII

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

12

 

7.1

 

Seller’s Representations, Warranties and Covenants

 

12

 

7.2

 

Buyer’s Representations, Warranties and Covenants

 

15

 

7.3

 

Survival

 

16

 

ARTICLE VIII

ADDITIONAL COVENANTS

 

17

 

8.1

 

Subsequent Developments

 

17

 

8.2

 

Operations

 

17

 

8.3

 

Third Party Consents

 

18

 

8.4

 

Employees

 

18

 

8.5

 

Estoppel Certificates

 

18

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8.6

 

Access to Financial Information

 

19

 

8.7

 

Bulk Sales

 

19

 

8.8

 

Indemnification

 

19

 

8.9

 

Escrow Funds

 

22

ARTICLE IX

CONDITIONS FOR CLOSING

 

22

 

9.1

 

Buyer’s Conditions for Closing

 

22

 

9.2

 

Seller’s Conditions for Closing

 

23

 

ARTICLE X

CLOSING AND CONVEYANCE

 

24

 

10.1

 

Closing

 

24

 

10.2

 

Deliveries of Seller

 

24

 

10.3

 

Buyer’s Deliveries

 

25

 

ARTICLE XI

COSTS

 

26

 

11.1

 

Seller’s Costs

 

26

 

11.2

 

Buyer’s Costs

 

26

 

ARTICLE XII

ADJUSTMENTS

 

27

 

12.1

 

Adjustments

 

27

 

12.2

 

Reconciliation and Final Payment

 

28

 

12.3

 

Employees

 

29

 

ARTICLE XIII

CASUALTY AND CONDEMNATION

 

29

 

13.1

 

Risk of Loss; Notice

 

29

 

13.2

 

Buyer’s Termination Right

 

29

 

13.3

 

Procedure for Closing

 

30

 

ARTICLE XIV

DEFAULT REMEDIES

 

30

 

14.1

 

Buyer Default

 

30

 

14.2

 

Seller Default

 

30

 

14.3

 

Attorney’s Fees

 

30

 

ARTICLE XV

NOTICES

 

30

 

ARTICLE XVI

MISCELLANEOUS

 

31

 

16.1

 

Performance

 

31

 

16.2

 

Binding Effect; Assignment

 

32

 

16.3

 

Entire Agreement

 

32

 

16.4

 

Governing Law

 

32

 

16.5

 

Captions

 

32

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16.6

 

Confidentiality

 

32

 

16.7

 

Closing Documents

 

32

 

16.8

 

Counterparts

 

32

 

16.9

 

Severability

 

32

 

16.10

 

Interpretation

 

33

 

16.11

 

Further Acts

 

33

 

16.12

 

Joint and Several Obligations

 

33

 

16.13

 

Relationships

 

33

 

16.14

 

Like-Kind Exchange

 

33

 

 

 

 

 

 

SCHEDULES:

 

 

 

 

 

 

 

Schedule 3.1

Due Diligence List

 

 

 

 

 

 

 

EXHIBITS:

 

 

 

 

 

 

 

 

Exhibit A

 

Legal Description of Land

 

 

Exhibit B

 

Environmental Reports

 

 

Exhibit C

 

Escrow Agreement

 

 

Exhibit D

 

FF&E List

 

 

Exhibit E

 

Post-Closing Agreement

 

 

Exhibit F

 

Consents and Approvals

 

 

Exhibit G

 

Property Agreements

 

 

Exhibit H

 

Pending Claims or Litigation

 

 

Exhibit I

 

New Management Agreement

 

 

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PURCHASE CONTRACT

          This PURCHASE CONTRACT (this “Contract”) is made and entered into as
of March 1, 2011, by and between KRG/WHITE LS HOTEL, LLC, an Indiana limited
liability company (“Fee Owner”), and KITE REALTY/WHITE LS HOTEL OPERATORS, LLC,
an Indiana limited liability company (“Lessee”) (collectively, “Seller”) with a
principal office at 701 East 83rd Avenue, Merrillville, Indiana 46410 and APPLE
TEN HOSPITALITY OWNERSHIP, INC., a Virginia corporation, with its principal
office at 814 East Main Street, Richmond, Virginia 23219 (“Buyer”)

RECITALS

          A. Fee Owner is the fee simple owner and Lessee is the operating
lessee of that certain hotel property commonly known as the Fairfield Inn &
Suites South Bend at Notre Dame, located at 1220 East Angela Boulevard, South
Bend, Indiana 46616 (the “Hotel”) identified in on Exhibit A attached hereto and
incorporated by reference.

          B. Buyer is desirous of purchasing the Hotel from Seller, and Seller
is desirous of selling the Hotel to Buyer, for the purchase price and upon terms
and conditions hereinafter set forth.

AGREEMENT

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

ARTICLE I
DEFINED TERMS

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

          “Additional Deposit” shall mean Five Hundred Thousand and No/100
Dollars ($500,000.00).

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

          “Appurtenances” shall mean all rights, titles, and interests of Seller
appurtenant to the Land and Improvements, including, but not limited to, (i) all
easements, rights of way, rights of ingress and egress, tenements,
hereditaments, privileges, and appurtenances in any way belonging to the Land or
Improvements, (ii) any land lying in the bed of any alley, highway,

1

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street, road or avenue, open or proposed, in front of or abutting or adjoining
the Land, (iii) any strips or gores of real estate adjacent to the Land, and
(iv) the use of all alleys, easements and rights-of-way, if any, abutting,
adjacent, contiguous to or adjoining the Land.

          “Brand” shall mean Fairfield Inn & Suites, the hotel brand or
franchise under which the Hotel operates.

          “Business Day” shall mean any day other than a Saturday, Sunday or
legal holiday in the state in which the Property is located.

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

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

          “Construction Plans” shall mean the construction plans, surveys, soil
reports, engineering reports, inspection reports, and other technical
descriptions and reports to the extent the same are (i) in the possession or
control of Seller and (ii) can be transferred or assigned by Seller without
default, penalty or payment of a fee or charge.

          “Deed” shall have the meaning set forth in Section 10.2(a).

          “Deposits” shall mean, all prepaid rents and deposits received by
Seller from any tenant or guest of the Property, refundable security deposits
and rental deposits received by Seller from any tenant or guest of the Property,
and all other deposits for advance reservations, banquets or future services
received by Seller from any tenant or guest of the Property, to the extent the
same is received or collected in connection with the use or occupancy of the
Improvements. “Deposits” shall exclude all reserves and/or accounts funded by
Seller, including without limitation, reserves for real property taxes, reserves
to pay insurance, reserves to cover all other potential liabilities and claims,
utility deposits, any reserves for replacement of FF&E and for capital repairs
and/or improvements.

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

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

          “Environmental Reports” shall mean those environmental reports and
studies relating to the Land as are listed on Exhibit B attached hereto.

          “Escrow Agent” shall have the meaning set forth in Section 2.5(a).

          “Escrow Agreement” shall have the meaning set forth in Section 2.5(b),
and shall be in the form attached hereto as Exhibit C.

          “Escrow Funds” shall have the meaning set forth in Section 8.9.

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

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          “Existing Deed” shall mean the Corrective Limited Warranty executed
December 30, 2008 (but effective May 20, 2008) and recorded January 5, 2009 in
the St. Joseph County, Indiana Recorder’s Office as Instrument Number 0900199.

          “Existing Franchise Agreement” shall mean that certain franchise
license agreement between the Seller and the Franchisor, granting to Seller a
franchise to operate the Hotel under the Brand.

          “Existing Management Agreement” shall mean that certain management
agreement between the Seller and the Manager for the operation and management of
the Hotel.

          “FF&E” shall mean all appliances, machinery, devices, fixtures,
appurtenances, equipment, furniture, furnishings and articles of tangible
personal property of every kind and nature whatsoever owned by Seller, and
located at or used in connection with the ownership, operation or maintenance of
the Real Property, but expressly excluding (i) all property owned by Seller or
any of its Affiliates not normally located at such Real Property and used, but
not exclusively, in connection with the operation of such Real Property, (ii)
all items, tangible or intangible, containing proprietary information, (iii)
computer software, except to the extent that such software is used in connection
with the operation of the Real Property and may be assigned upon assignment of a
license to Buyer, which Buyer agrees to assume, (iv) all cash in vending
machines and ATMs at the Real Property and in cash accounts in Seller’s or
Manager’s name, and (v) such other items as are specifically reserved for herein
by Seller. A current list of FF&E is attached hereto as Exhibit D.

          “FF&E Leases” shall mean, to the extent assignable by Seller without
default, penalty or payment of a fee or charge, all leases of any FF&E by Seller
and other contracts to which Seller is a party permitting the use of any FF&E at
the Improvements.

          “Financial Statements” shall have the meaning set forth in Section
3.1(b).

          “Franchisor” shall mean Marriott International, Inc., a Delaware
corporation.

          “Hotel Contracts” shall have the meaning set forth in Section 10.2(d).

          “Improvements” shall mean all buildings, structures, fixtures, parking
areas and other improvements to the Land, and all related facilities.

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

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

          “Initial Deposit” shall have the meaning set forth in Section 2.5(a).

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

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          “Leases” shall mean, to the extent assignable by Seller, all leases
and occupancy agreements, if any, “trade-out” agreements, advance bookings,
convention reservations, or other agreements demising space in, providing for
the use or occupancy of, or otherwise similarly affecting or relating to the use
or occupancy of, the Improvements or Land, together with all amendments,
modifications, renewals and extensions thereof, and all guaranties by third
parties of the obligations of the tenants, concessionaires or other entities
thereunder.

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

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

          “Manager” shall mean White Lodging Services Corporation, an Indiana
corporation.

          “Marriott ROFR” shall have the meaning set forth in Section 7.1(d).

          “New Franchise Agreement” shall mean the franchise license agreement
to be entered into between Buyer and the Franchisor, granting to Buyer a
franchise to operate the Hotel under the Brand on and after the Closing Date.

          “New Management Agreement” means the management agreement to be
entered into between Buyer and the Manager for the operation and management of
the Hotel on and after the Closing Date.

          “Notre Dame ROFO” shall have the meaning set forth in Section 7.1(d).

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

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

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

          “PIP” shall mean a product improvement plan for the Hotel, as required
by the Manager or the Franchisor, if any.

          “Post-Closing Agreement” shall have the meaning set forth in Section
8.9 and shall be in the form attached hereto as Exhibit E.

          “Property” shall mean, collectively, (i) all of the following with
respect to the Hotel: the Real Property, FF&E, Supplies, Leases, Deposits,
Records, Service Contracts, Warranties, Licenses, FF&E Leases, Construction
Plans, Tradenames, Utility Reservations, as well as all other real, personal or
intangible property of Seller related to any of the foregoing and (ii) any and
all of the following, to the extent the same are transferable or assignable
without default,

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penalty or the payment of a fee or charge, that relate to or affect in any way
the design, construction, ownership, use, occupancy, leasing, maintenance,
service or operation of the Real Property, FF&E, Supplies, Leases, Deposits,
Records, Service Contracts, Warranties, Licenses, Tradenames, Construction Plans
and FF&E Lease.

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

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

          “Records” shall mean, to the extent the same are transferable or
assignable, all books, records, promotional material, tenant data, guest history
information (other than any such information owned exclusively by the Manager),
marketing and leasing material and forms (including but not limited to any such
records, data, information, material and forms in the form of computerized files
located at the Hotel), market studies prepared in connection with Seller’s
current annual plan and other materials, information, data, legal or other
documents or records (including, without limitation, all documentation relating
to any litigation or other proceedings, all zoning and/or land use notices,
relating to or affecting the Property, all business plans and projections and
all studies, plans, budgets and contracts related to the development,
construction and/or operation of the Hotel) owned by Seller and/or in Seller’s
possession or control, or to which Seller has access or may obtain from the
Manager, that are used in or relating to the Property and/or the operation of
the Hotel, including the Land, the Improvements or the FF&E, and proforma
budgets and projections and construction budgets and contracts related to the
development and construction of the Hotel and a list of the general contractors,
architects and engineers providing goods and/or services in connection with the
construction of the Hotel, all construction warranties and guaranties in effect
at Closing and copies of the final plans and specifications for the Hotel.

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

          “SEC” shall have the meaning set forth in Section 8.6.

          “Seller’s knowledge” shall mean the actual (and not constructive or
imputed) knowledge of Lawrence E. Burnell or Deno Yiankes.

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

          “Seller Parties” shall have the meaning set forth in Section 7.1(e).

          “Service Contracts” shall mean, to the extent the same are
transferable or assignable without default, penalty or the payment of a fee or
charge, all maintenance, supply, service or utility contracts or agreements in
effect as of the Closing Date.

          “Supplies” shall mean all merchandise, supplies, inventory and other
items owned by Seller and used for the operation and maintenance of guest rooms,
restaurants, lounges, swimming pools, health clubs, spas, business centers,
meeting rooms and other common areas and recreational areas located within or
relating to the Improvements, including, without limitation, all food and
beverage (alcoholic and non-alcoholic) that may legally be transferred

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and assigned, inventory (opened or unopened), office supplies and stationery,
advertising and promotional materials, china, glasses, silver/flatware, towels,
linen and bedding (all of which shall be 2-par level for all suites or rooms in
the Hotel), guest cleaning, paper and other supplies, upholstery material,
engineers’ supplies, paint and painters’ supplies, employee uniforms, and all
cleaning and maintenance supplies, including those used in connection with the
swimming pools, indoor and/or outdoor sports facilities, health clubs, spas,
fitness centers, restaurants, business centers, meeting rooms and other common
areas and recreational areas.

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

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

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

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

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

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

          “Tradenames” shall mean, to the extent assignable or transferable
without default, penalty or the payment of a fee or charge, all of Seller’s
interest in any telephone exchanges and numbers, trade names, trade styles,
trade marks, and other identifying material, and all variations thereof,
together with all related goodwill (it being understood and agreed that the name
of the hotel chain to which the Hotel is affiliated by franchise or license is a
protected name or registered service mark of such hotel chain and cannot be
transferred to Buyer by this Contract, provided that all such franchise,
license, and other agreements granting a right to use the name of such hotel
chain or any other trademark or trade name and all waivers of any brand standard
shall be assigned to Buyer if assignable without default, penalty or the payment
of a fee or charge).

          “Utility Reservations” shall mean Seller’s interest in the right to
receive immediately on and after Closing and continuously consume thereafter
water service, sanitary and storm sewer service, electrical service, gas service
and telephone service on and for the Land and Improvements in capacities that
are adequate continuously to use and operate the Improvements for the purposes
for which they were intended, including, but not limited to (i) any right to the
present and future use of wastewater, drainage, water and other utility
facilities to the extent such use benefits the Real Property, (ii) any
reservations of or commitments covering any such use in the future, and (iii)
any wastewater capacity reservations relating to the Real Property. Seller shall
be responsible for any requests or documents to transfer the Utility
Reservations, at Seller’s sole cost and expense.

          “Warranties” shall mean, to the assignable or transferable without
default, penalty, voiding or payment of a fee or charge, all warranties,
guaranties, indemnities and claims for the benefit of Seller with respect to the
Hotel, the Property or any portion thereof, including, without limitation, all
warranties and guaranties of the development, construction, completion,
installation, equipping and furnishing of the Hotel, and all indemnities, bonds
and claims of Seller related thereto and available as of Closing.

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ARTICLE II
PURCHASE AND SALE; PURCHASE PRICE; PAYMENT;
EARNEST MONEY DEPOSIT

          2.1 Purchase and Sale. Seller agrees to sell and convey to Buyer or
its assigns, and Buyer or its assigns agrees to purchase from Seller, the
Property, in consideration of the Purchase Price and upon the terms and
conditions hereof. All of the Property shall be conveyed, assigned, and
transferred to Buyer at Closing, free and clear of all mortgages, liens,
franchises (other than any hotel franchises assumed by Buyer), security
interests, prior assignments or conveyances, conditions, restrictions,
rights-of-way, easements, encumbrances, encroachments, claims and other matters
affecting title or possession, except for the Permitted Exceptions.

          2.2 Purchase Price. Buyer agrees to pay, and Seller agrees to accept,
as consideration for the conveyance of the Property, subject to the adjustments
provided for in this Contract, the amount of SEVENTEEN MILLION FIVE HUNDRED
THOUSAND and No/100 Dollars ($17,500,000.00) (the “Purchase Price”).

          2.3 Allocation. Buyer and Seller shall attempt to agree, prior to the
expiration of the Review Period, on an allocation of the Purchase Price among
Real Property, tangible Personal Property and intangible property related to the
Property. In the event Buyer and Seller do not agree, each party shall be free
to allocate the Purchase Price to such items as they deem appropriate, subject
to and in accordance with applicable laws.

          2.4 Payment. The portion of the Purchase Price, less the Earnest Money
Deposit, to the extent that Buyer elects to have it applied against the Purchase
Price (as provided below), less the Escrow Funds, shall be paid to Seller in
cash, certified funds or wire transfer, at the Closing of the Property. At the
Closing, the Earnest Money Deposit, shall, at Buyer’s election, be returned to
Buyer or shall be paid over to Seller by Escrow Agent to be applied to the
portion of the Purchase Price on behalf of Buyer and the Escrow Funds shall be
deposited into an escrow account pursuant to the Post-Closing Agreement as
contemplated by Section 8.9.

          2.5 Earnest Money Deposit.

                    (a) Within three (3) Business Days after the full execution
and delivery of this Contract, Buyer shall deposit the sum of Three Hundred
Thousand and No/100 Dollars ($300,000.00) in cash, certified bank check or by
wire transfer of immediately available funds (the “Initial Deposit”) with the
Title Company, as escrow agent (“Escrow Agent”), which sum shall be held by
Escrow Agent as earnest money. If, pursuant to the provisions of Section 3.1 of
this Contract, Buyer elects to terminate this Contract at any time prior to the
expiration of the Review Period, then the Escrow Agent shall return the Earnest
Money Deposit to Buyer promptly upon written notice to that effect from Buyer.
If Buyer does not elect to terminate this Contract on or before the expiration
of the Review Period, Buyer shall, prior to the expiration of the Review Period,
deposit the Additional Deposit with the Escrow Agent. The Initial Deposit and
the Additional Deposit, and all interest accrued thereon, shall hereinafter be
referred to as the “Earnest Money Deposit.”

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                    (b) The Earnest Money Deposit shall be held by Escrow Agent
subject to the terms and conditions of an Escrow Agreement dated as of the date
of this Contract entered into by Seller, Buyer and Escrow Agent (the “Escrow
Agreement”). The Earnest Money Deposit shall be held in an interest-bearing
account in a federally insured bank or savings institution reasonably acceptable
to Seller and Buyer, with all interest to accrue to the benefit of the party
entitled to receive it and to be reportable by such party for income tax
purposes; provided, however, to the extent that Buyer instructs the Escrow Agent
to apply the Earnest Money Deposit toward the Purchase Price in accordance with
Section 2.4, interest shall be deemed to have accrued to the benefit of Buyer
and be reportable by Buyer for income tax purposes.

ARTICLE III
REVIEW PERIOD

          3.1 Review Period. Buyer shall have a period through 6:00 p.m. Eastern
Time on the date that is forty-five (45) days after the date of this Contract,
unless a longer period of time is otherwise provided for in this Contract (the
“Review Period”), to evaluate the legal, title, survey, construction, physical
condition, structural, mechanical, environmental, economic, permit status,
franchise status, financial and other documents and information related to the
Property. Within five (5) Business Days following the date of this Contract,
Seller, at Seller’s sole cost and expense, will deliver, or cause the Manager to
deliver to Buyer to the extent the same are in the possession or control of
Seller for Buyer’s review, to the extent not previously delivered to Buyer,
true, correct and complete copies of the following, together with all
amendments, modifications, renewals or extensions thereof:

                    (a) All Warranties and Licenses relating to the Hotel or any
part thereof;

                    (b) Income and expense statements and budgets for the Hotel,
for the current year to date and each of the three (3) prior fiscal years (the
“Financial Statements”), and Seller shall provide to Buyer copies of all income
and expense statements generated by Seller or any third party and in Seller’s
possession or control that relate to the operations of the Hotel and that
contain information not included in the financial statements, if any, provided
to Buyer by the Manager, provided that Seller also agrees to provide to Buyer’s
auditors and representatives all financial and other information necessary or
appropriate for preparation of audited financial statements for Buyer and/or its
Affiliates as provided in Section 8.6, below;

                    (c) All real estate and personal property tax statements
with respect to the Hotel and notices of appraised value for the Real Property
for the current year (if available) and each of the three (3) calendar years
prior to the current year;

                    (d) All Construction Plans (regardless of whether the same
can be transferred or assigned), the most recent title policies, reports or
commitments, current zoning information and marketing and economic data relating
to the Hotel and the construction thereof, as well as copies of the most recent
environmental reports, topographical, boundary or “as built” surveys,
engineering reports, subsurface studies and other Construction Plans relating to
or affecting the Hotel.

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                    (e) All FF&E Leases, Services Contracts, Leases and, if
applicable, a schedule of such Leases of space in the Hotel, and all agreements
for real estate commissions, brokerage fees, finder’s fees or other compensation
payable by Seller in connection therewith;

                    (f) All notices received from governmental authorities in
connection with the Hotel and all other notices received from governmental
authorities received at any time that relate to any noncompliance or violation
of law that has not been corrected.

                    (g) Any other information described on Schedule 3.1 attached
hereto.

          Seller shall, upon request of Buyer, make available to Buyer and
Buyer’s representatives and agents, for inspection and copying during normal
business hours, Records located at Seller’s corporate offices, and Seller agrees
to provide Buyer copies of all other reasonably requested information that is in
the possession and control of Seller and relevant to the management, operation,
use, occupancy or leasing of or title to the applicable Hotel and the plans
specifications for development of the Hotel. Notwithstanding any contrary
provision of this Contract, such materials shall, at Seller’s election, be
placed in an e-room to which Buyer shall have secured access and subject to the
provisions of Section 16.6.

          At any time during the Review Period, Buyer may, in its sole and
absolute discretion, elect not to proceed with the purchase of the Property for
any reason whatsoever by giving written notice thereof to Seller, in which
event: (i) the Earnest Money Deposit shall be promptly returned by Escrow Agent
to Buyer, (ii) this Contract shall be terminated automatically, (iii) all
materials supplied by Seller to Buyer shall be returned promptly to Seller, and
(iv) both parties will be relieved of all other rights, obligations and
liabilities hereunder, except for the parties’ obligations pursuant to Sections
3.3 and 16.6 below. Upon Buyer’s election to terminate this Contract in
accordance to this or any other provision herein, upon the request of Seller and
reimbursement to Buyer for the cost thereof, Buyer shall deliver to Manager
copies of all third-party reports and studies obtained by Buyer and relating to
the Property. All such reports and studies shall be delivered by Buyer without
representation or warranty as to accuracy.

          3.2 Due Diligence Examination. At any time during the Review Period,
and thereafter through Closing of the Property, Buyer and/or its representatives
and agents shall have the right to enter upon the Property at all reasonable
times and after providing reasonable notice to Seller for the purposes of
reviewing all Records except such materials that are available in the e-room,
and other reasonably requested data, documents and/or information relating to
the Property and conducting such surveys, appraisals, engineering tests, soil
tests (including, without limitation, Phase I and Phase II environmental site
assessments), inspections of construction and other inspections and other
studies as Buyer deems reasonable and necessary or appropriate to evaluate the
Property (the “Due Diligence Examination”). Seller shall have the right to have
its designated representative present during Buyer’s physical inspections of its
Property, provided that failure of Seller to do so shall not prevent Buyer from
exercising its due diligence, review and inspection rights hereunder. Buyer
agrees to exercise reasonable care when visiting the Property, in a manner which
shall not materially adversely affect the operation of the Property. Prior to
such inspections, Buyer and its representatives shall be covered by a policy of
insurance (which may be a master or umbrella policy) insuring Buyer, Buyer’s
agents, Manager and Seller, against any and all liability arising out of Buyer’s
or Buyer’s agents’ entry upon and inspection of

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the Property, including, without limitation, any loss or damage to the Property,
with coverage in the amount of not less than Two Million Dollars ($2,000,000)
per occurrence. All policies of insurance shall name Manager and Seller as
additional insureds and shall be primary, for occurrences related to entry on
the Property by Buyer and its agents. Buyer shall provide a certificate of such
insurance coverage to Manager.

          3.3 Restoration. Buyer covenants and agrees not to damage or destroy
any portion of the Property in conducting its examinations and studies of the
Property during the Due Diligence Examination. To the extent that, in connection
with its investigations, Buyer or its agents, representatives or contractors,
damages or disturbs the Property, Buyer shall be responsible for returning the
same to substantially the same condition that existed immediately prior to such
damage or disturbance. To the extent that Seller elects, in its sole discretion,
to undertake the restoration of the Property damaged by Buyer or its agents,
representatives or contractors, Buyer shall reimburse Seller for the reasonable
costs of such restoration provided that Seller has notified Buyer of the actions
proposed to be taken by Seller and the anticipated cost thereof prior to Seller
commencing such restoration. The preceding sentence notwithstanding, Seller
shall have no obligation to notify Buyer (and Buyer shall not be relieved of its
obligation to reimburse Seller) prior to undertaking restoration of a Property
if Seller determines, in its reasonable judgment, that immediate remediation is
or may be required to prevent injury to persons or the Property. In addition,
Buyer shall indemnify, defend and hold harmless Seller and Manager from and
against any and all expense, loss or damage (including, without limitation,
reasonable attorneys’ fees) which Seller (as owner of the Property) or Manager
(as manager) may incur as a result of any act or omission of Buyer or its agents
in connection with any such inspections. The foregoing indemnification agreement
shall survive the termination of this Contract or the Closing hereunder, as
applicable, for a period of one year.

          3.4 Seller Exhibits. Buyer shall have until the end of the Review
Period to review and approve the information on Exhibits B, D, F, G, and H. In
the event Buyer does not approve any such Exhibit or the information contained
therein, Buyer shall be entitled to terminate this Contract by notice to Seller
and the Earnest Money Deposit shall be returned to Buyer and both parties shall
be relieved of all rights, obligations and liabilities hereunder except for the
parties’ obligations pursuant to Sections 3.3 and 16.6.

ARTICLE IV
SURVEY AND TITLE APPROVAL

          4.1 Survey. Seller has delivered to Buyer copies of the most recent
surveys of the Real Property. In the event that an update of the survey or a new
survey (such updated or new surveys being referred to as the “Survey”) are
desired by Buyer, then Buyer shall be responsible for all costs related thereto.
In the event that Buyer shall arrange for the preparation of any survey for the
Real Property, Buyer agrees to instruct the surveyor preparing such survey to
deliver copies to (i) Ann Bowman at the address provided in Article XV and (ii)
Anne-Therese Bechamps, at Venable LLP, 210 Allegheny Avenue, Towson, Maryland
21204, atbechamps@venable.com.

          4.2 Title. Seller has delivered to Buyer its existing title insurance
policy, for its Real Property. During the Review Period, Buyer shall have
obtained at its sole cost and expense (i) a

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title commitment (the “Title Commitment”) issued by Chicago Title Company, Attn:
Debby Moore, 5501 LBJ Freeway, Ste. 200, Dallas, Texas 75240 (the “Title
Company”) for the most recent standard form of owner’s policy of title insurance
in the state in which the Real Property is located, covering the Real Property,
setting forth the current status of the title to the Real Property, showing all
liens, claims, encumbrances, easements, rights of way, encroachments,
reservations, restrictions and any other matters affecting the Real Property;
and (ii) true, complete, legible and, where applicable, recorded copies of all
documents and instruments (the “Exception Documents”) referred to or identified
in the Title Commitment, including, but not limited to, all deeds, lien
instruments, leases, plats, surveys, reservations, restrictions, and easements
affecting the Real Property. Buyer’s obligations under this Contract are
conditioned upon Buyer being able to obtain, at its sole cost and expense, for
the Real Property an Owner’s Policy of Title Insurance on the most recent form
of ALTA (where available) owner’s policy available in the state in which the
Land is located, (collectively, the “Title Policy”) consistent in all material
respects with the Title Commitment. Buyer agrees to instruct the Title Company
to deliver copies of the Title Commitment and Exception Documents to (i) Ann
Bowman and (ii) Anne-Therese Bechamps as provided in Section 4.1.

          4.3 Survey or Title Objections. If Buyer discovers any title or survey
matter which is objectionable to Buyer, Buyer may provide Seller with written
notice of its objection to same. Any contrary provisions of Article XV
concerning what does or does not constitute delivery notwithstanding, Buyer
shall provide and Seller must actually receive, any notice of objections on or
before the fifth (5th) day prior to the expiration of the Review Period (the
“Title Review Period”). If Seller has not actually received a written notice of
objection to any such matter set forth in the Survey or Title Commitment prior
to the expiration of the Title Review Period, it shall be conclusively assumed
that Buyer has approved same. If Buyer disapproves any condition of title,
survey or other matters by written objection to Seller on or before the
expiration of the Title Review Period, Seller shall elect either to attempt to
cure or not cure any such item and shall notify Buyer of its election by written
notice within five (5) days after its receipt of notice from Buyer setting forth
title or survey objection. If Seller commits in writing to attempt to cure any
such item, then Seller shall be given until the Closing Date to cure any such
defect. In the event Seller shall fail to cure a defect which Seller has
committed in writing to cure prior to Closing, or if a new title defect arises
after the date of Buyer’s Title Commitment or Survey, as applicable, but prior
to Closing, then Buyer may elect, in Buyer’s sole and absolute discretion: (i)
to waive such objection and proceed to Closing, or (ii) to terminate this
Contract and receive a return of the Earnest Money Deposit. The items shown on
the Title Commitment which are not objected to by Buyer as set forth above
(other than exceptions and title defects arising after the Title Review Period
and other than those standard exceptions which are ordinarily and customarily
omitted in the state in which the applicable Hotel is located, so long as Seller
provides the appropriate owner’s affidavit, gap indemnity or other documentation
reasonably required by the Title Company for such omission) are hereinafter
referred to as the “Permitted Exceptions.” In no event shall Permitted
Exceptions include liens, or documents evidencing liens, securing any
indebtedness (including vehicle or FF&E leases or financing arrangements) any
mechanics’ or materialmen’s liens or any claims or potential claims therefor
covering the Property or any portion thereof (“Seller Liens”), each of which
shall be paid in full by Seller and released at Closing, except to the extent
caused by Buyer. If a vehicle or FF&E lease or other financing cannot be
released at Closing, Seller shall credit Buyer at Closing with the amount
necessary to fully pay off such lease or financing over its term.

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ARTICLE V
MANAGEMENT AGREEMENT AND FRANCHISE AGREEMENT

                    (a) At or prior to the Closing, Seller shall terminate the
Existing Management Agreement and the Existing Franchise Agreement, and Seller
shall be solely responsible for all claims and liabilities arising thereunder
on, prior to or following the Closing Date, except termination or similar fees,
which shall be paid by Buyer. Seller shall be responsible for paying all costs
related to the termination of the Existing Management Agreement and Buyer shall
be responsible for paying all reasonable and actual costs of the Franchisor
related to the assignment or termination, as applicable, of the Existing
Franchise Agreement.

                    (b) At Closing, Buyer shall enter into the New Management
Agreement substantially similar to the management agreement attached as Exhibit
I and the New Franchise Agreement, effective as of the Closing Date, containing
terms and conditions acceptable to Buyer (including, without limitation, such
terms and conditions as may be required to accommodate Buyer’s and/or Buyer’s
Affiliates’ REIT structure).

                    (c) Seller shall use best efforts to promptly provide all
information required by the Franchisor in connection with the New Franchise
Agreement. Prior to the expiration of the Review Period, Buyer and Franchisor
shall agree on the form and substance of the New Franchise Agreement. Except as
otherwise provided in this Contract, the New Franchise Agreement shall contain
such terms and conditions as are acceptable to Buyer in its sole and absolute
discretion.

ARTICLE VI
BROKERS

          Seller and Buyer each represents and warrants to the other that it has
not engaged any broker, finder or other party in connection with the transaction
contemplated by this Contract. Buyer and Seller each agree to save and hold the
other harmless from any and all losses, damages, liabilities, costs and expenses
(including, without limitation, attorneys’ fees) involving claims made by any
other agent, broker, or other person by or through the acts of Buyer or Seller,
respectively, in connection with this transaction.

ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS

          7.1 Seller’s Representations, Warranties and Covenants. Seller hereby
represents, warrants and covenants to Buyer as follows:

                    (a) Authority; No Conflicts. Seller is a limited liability
company duly formed, validly existing and in good standing in the State of
Indiana. Seller has obtained all necessary consents to enter into and perform
this Contract and is fully authorized to enter into and perform this Contract
and to complete the transactions contemplated by this Contract. No consent or
approval of any person, entity or governmental authority is required for the
execution, delivery or performance by Seller of this Contract, except as set
forth in Exhibit F, and this Contract is hereby binding and enforceable against
Seller. Neither the execution nor the performance of, or compliance with, this
Contract by Seller has resulted, or will result, in any

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violation of, or default under, or acceleration of, any obligation under any
articles of organization, limited liability company agreement or regulations, or
other organizational documents and under any, mortgage indenture, lien
agreement, promissory note, contract, or permit, or any judgment, decree, order,
restrictive covenant, statute, rule or regulation, applicable to Seller, or to
the Hotel, except as set forth in Exhibit F.

                    (b) FIRPTA. Seller is not a foreign corporation, foreign
partnership, foreign trust or foreign estate (as those items are defined in the
Internal Revenue Code and Income Tax Regulations).

                    (c) Bankruptcy. Neither Seller, nor, to Seller’s knowledge,
any of its members, is insolvent or the subject of any bankruptcy proceeding,
receivership proceeding or other insolvency, dissolution, reorganization or
similar proceeding.

                    (d) Property Agreements. A complete list of all FF&E Leases,
Service Contracts and Leases (other than those entered into by the Manager on
its own behalf) used in or otherwise relating to the operation and business of
the Hotel is attached hereto as Exhibit G. The assets constituting the Property
to be conveyed to Buyer hereunder constitute all of the property and assets of
Seller (other than that of the Manager) used in connection with the operation
and business of the Hotel. The Service Contracts, Leases, Warranties and FF&E
Leases disclosed on Exhibit G or to be delivered to Buyer pursuant to Section
3.1 are in full force and effect, and to Seller’s knowledge, no default has
occurred and is continuing thereunder and no circumstances exist which, with the
giving of notice, the lapse of time or both, would constitute such a default.
Except for (i) the right of first offer in favor of the University of Notre Dame
Du Lac, or its successors and assigns (the “University”) (“Notre Dame ROFO”) as
reflected in the Existing Deed, and (ii) the right of first refusal in favor of
Franchisor, and its successors and assigns (“Marriott ROFR”), no party has any
right or option to acquire the Hotel or any portion thereof, other than Buyer.
The Notre Dame ROFO has been waived by the University subject to the
requirements set forth in this Contract. In connection with the New Franchise
Agreement, Seller shall seek an appropriate waiver of the Marriott ROFR.

                    (e) Pending Claims. There are no (i) claims, demands,
litigation, proceedings or governmental investigations pending or to Seller’s
knowledge threatened, against Seller, the Manager or any Affiliate of any of
them (collectively, “Seller Parties”) or related to the business or assets of
the Hotel, except as set forth on Exhibit H attached hereto and incorporated
herein by reference, (ii) special assessments or extraordinary taxes except as
set forth in the Title Commitment or (iii) pending or threatened condemnation or
eminent domain proceedings which would affect the Property or any part thereof.
To Seller’s knowledge, there are no other: pending arbitration proceedings or
unsatisfied arbitration awards, or judicial proceedings or orders respecting
awards, which might become a lien on the Property or any portion thereof,
pending unfair labor practice charges or complaints, unsatisfied unfair labor
practice orders or judicial proceedings or orders with respect thereto, pending
charges or complaints with or by city, state or federal civil or human rights
agencies, unremedied orders by such agencies or judicial proceedings or orders
with respect to obligations under city, state or federal civil or human rights
or antidiscrimination laws or executive orders affecting the Hotel, or other
pending, actual or, to Seller’s knowledge, threatened litigation claims,
charges, complaints, petitions or

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unsatisfied orders by or before any administrative agency or court which affect
the Hotel or might become a lien on the Hotel (collectively, the “Pending
Claims”).

                    (f) Environmental. Seller has received no written notice
that the Real Property is in violation of any Federal, State or local laws
governing the storage, release or disposal of any hazardous waste, contaminants,
oil, radioactive or other hazardous material on the Real Property, or any
portion thereof; and to Seller’s knowledge, except as otherwise disclosed in the
Environmental Reports included on Exhibit B hereto, copies of which shall be
made available to Buyer, the Real Property is free from any such hazardous
waste, contaminants, oil, radioactive and other hazardous materials, except for
amounts of any such materials as are reasonably necessary for the maintenance,
repair and operation of the Hotel on the Real Property and which are stored,
maintained and used in accordance with applicable law.

                    (g) Title and Liens. Except for Seller Liens to be released
at Closing, to Seller’s knowledge, Seller has good and marketable fee simple
absolute title to the Real Property, subject only to the Permitted Exceptions.
Except for the FF&E subject to the FF&E Leases and any applicable Permitted
Exceptions, to Seller’s knowledge, Seller has good and marketable title to the
Personal Property, free and clear of all liens, claims, encumbrances or other
rights whatsoever (other than the Seller Liens which must be released at
Closing), and there are no other liens, claims, encumbrances or other rights
pending or of which any Seller Party has received notice or which are otherwise
known to any Seller Party related to any other Personal Property.

                    (h) Utilities. All appropriate utilities, including sanitary
and storm sewers, water, gas, telephone, cable and electricity, are, to Seller’s
knowledge, currently sufficient and available to service the Hotel and all
installation, connection or “tap-on”, usage and similar fees have been paid.

                    (i) Licenses, Permits and Approvals. Seller has not received
any written notice, and Seller has no knowledge that the Property fails to
comply with all applicable licenses, permits and approvals and federal, state or
local statutes, laws, ordinances, rules, regulations, requirements and codes
including, without limitation, those regarding zoning, land use, building, fire,
health, safety, environmental, subdivision, water quality, sanitation controls
and the Americans with Disabilities Act, and similar rules and regulations
relating and/or applicable to the ownership, use and operation of the Property
as it is now operated. To Seller’s knowledge, (i) Seller has received all
licenses, permits and approvals required or needed for the lawful conduct,
occupancy and operation of the business of the Hotel, and (ii) each applicable
license and permit is in full force and effect, and will, if assignable or
transferable as provided in this Contract, be received and in full force and
effect as of the Closing. No licenses, permits or approvals necessary for the
lawful conduct, occupancy or operation of the business of the Hotel, to Seller’s
knowledge, requires any approval of a governmental authority for transfer of the
Property except as set forth in Exhibit F.

                    (j) Financial Statements. Seller has delivered copies of all
material (i) Financial Statements for the Hotel, (ii) operating statements
prepared by the Manager for the Hotel, and (iii) monthly financial statements
prepared by the Manager for the Hotel. Each of

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such statements is, to Seller’s knowledge, complete and accurate in all material
respects and, except in the case of budgets prepared in advance of the
applicable operating period to which such budgets relate, fairly presents the
results of operations of the Hotel for the respective periods represented
thereby. Seller has relied upon the Financial Statements in connection with its
ownership and operation of the Hotel, and there are no independent audits or
financial statements prepared by third parties relating to the operation of the
Hotel other than the Financial Statements prepared by or on behalf of the
Manager.

                    (k) Employees. All employees employed at the Hotel are the
employees of the Manager. There are, to Seller’s knowledge, no (i) unions
organized at the Hotel, (ii) union organizing attempts, strikes, organized work
stoppages or slow downs, or any other labor disputes pending or threatened with
respect to any of the employees at the Hotel, or (iii) collective bargaining or
other labor agreements to which Seller or the Manager or the Hotel is bound with
respect to any employees employed at the Hotel.

                    (l) Operations. The Hotel has at all times been operated by
Manager in substantial compliance with all applicable laws, rules, regulations,
ordinances and codes.

                    (m) Construction of Hotel.

                                        (i) To Seller’s knowledge, the Hotel has
been constructed in a good and workmanlike manner without encroachments except
as noted on the Survey and in accordance in all material respects with the
Construction Plans. To Seller’s knowledge, the Hotel has received all building
permits and certificates of occupancy necessary for the operation thereof, and
is in compliance with applicable zoning, platting, subdivision, health, safety
and similar laws, rules, regulations, ordinances and codes.

                                        (ii) To the best of Seller’s knowledge,
the Personal Property is in good condition and operating order.

                    (n) Liability for Breach of Seller Representations. Buyer
shall give written notice to Seller if it determines that Seller has breached
any representation or warranty made in this Section 7.1. If, as a consequence of
such breach, Buyer shall have suffered a loss or incurred damages, then Seller
shall be liable to Buyer for payment of such damages. The preceding sentence
notwithstanding, in no event shall the liability of Seller with respect to
breaches of any representations or warranties made in this Section 7.1 exceed,
in the aggregate, the sum of ten percent (10%) of the Purchase Price.

                    (o) Disclaimer of Express or Implied Representations. Except
as otherwise expressly provided in this Contract, Seller disclaims the making of
any representations or warranties, express or implied, regarding the Property or
matters affecting the Property.

          7.2 Buyer’s Representations, Warranties and Covenants. Buyer
represents, warrants and covenants:

                     (a) Authority. Buyer is a corporation duly formed, validly
existing and in good standing in the Commonwealth of Virginia. Buyer has
received or will have received

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during the Review Period all necessary authorization of the Board of Directors
of Buyer to complete the transactions contemplated by this Contract. No other
consent or approval of any person, entity or governmental authority is required
for the execution, delivery or performance by Buyer of this Contract, and this
Contract is hereby binding and enforceable against Buyer.

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

                    (c) Buyer’s Independent Investigations. Pursuant to the
terms of this Contract, Seller has agreed to give Buyer the opportunity to
investigate all physical aspects of the Property, and to make all such
independent inspections and/or investigations of the Property, as Buyer deems
necessary or desirable. Buyer acknowledges that it has entered into this
Contract with the intention of making and relying upon its own investigation or
that of third parties with respect to the physical, environmental, economic and
legal condition of the Property.

                    (d) No Reliance. SUBJECT ONLY TO THE EXPRESS COVENANTS,
REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN MADE BY SELLER FOR THE BENEFIT
OF BUYER: IN ENTERING INTO THIS CONTRACT, BUYER HAS NOT RELIED ON ANY
REPRESENTATION, WARRANTY, PROMISE OR STATEMENT, EXPRESS OR IMPLIED, OF SELLER OR
ANYONE (INCLUDING MANAGER) ACTING FOR OR ON BEHALF OF SELLER; AND THAT, AS A
MATERIAL INDUCEMENT TO THE EXECUTION AND DELIVERY OF THIS CONTRACT BY SELLER,
BUYER ACKNOWLEDGES THAT THE PROPERTY WILL BE ACQUIRED BY BUYER IN ITS “AS IS”
CONDITION, WITH ALL FAULTS.

                    (e) Liability for Breach of Buyer Representations. Seller
shall give written notice to Buyer if it determines that Buyer has breached any
representation or warranty made in this Section 7.2. If, as a consequence of
such breach, Seller shall have suffered a loss or incurred damages, then Buyer
shall be liable to Seller for payment of damages. The preceding sentence
notwithstanding, in no event shall the liability of Buyer with respect to
breaches of any representations or warranties made in this Section 7.2 exceed,
in the aggregate, the sum of ten percent (10%) of the Purchase Price.

                    (f) Seller Representations Deemed Waived. To the extent that
Buyer has actual (not imputed or constructive) knowledge, prior to Closing, that
any of Seller’s representations or warranties are inaccurate, untrue, or
incorrect and Buyer proceeds to close hereunder, then such misrepresentation or
breach of warranty shall be deemed waived by Buyer.

          7.3 Survival. All of the representations and warranties are true,
correct and complete in all material respects as of the date hereof and the
statements set forth therein (without qualification or limitation as to a
party’s knowledge thereof except as expressly provided for in this Article VII)
shall be true, correct and complete in all material respects as of the Closing
Date. The representations and warranties made herein shall survive Closing for a
period of one (1) year and shall not be deemed to merge into or be waived by the
Deed.

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ARTICLE VIII
ADDITIONAL COVENANTS

          8.1 Subsequent Developments. After the date of this Contract and until
the Closing Date, Seller shall use best efforts to keep Buyer fully informed of
all subsequent developments of which Seller has knowledge (“Subsequent
Developments”) which would cause any of Seller’s representations or warranties
contained in this Contract to be no longer accurate in any material respect.

          8.2 Operations. From and after the date hereof through the Closing on
the Property, Seller shall substantially comply with the Existing Management
Agreement and the Existing Franchise Agreement and keep the same in full force
and effect and shall perform and comply with all of the following subject to and
in accordance with the terms of such agreements:

                    (a) Continue to maintain the Property generally in
accordance with prudent business practices and pursuant to and in substantial
compliance with the Existing Management Agreement and the Existing Franchise
Agreement, including, without limitation, (i) using reasonable efforts to keep
available the services of all present employees at the Hotel and to preserve its
relations with guests, suppliers and other parties doing business with Seller
with respect to the Hotel, (ii) accepting booking contracts for the use of the
Hotel’s facilities retaining such bookings in accordance with the terms of the
Existing Management Agreement and the Existing Franchise Agreement, (iii)
maintaining the current level of advertising and other promotional activities
for the Hotel’s facilities, (iv) maintaining the present level of insurance with
respect to the Hotel in full force and effect until the Closing Date for the
Hotel and (v) remaining in compliance in all material respects with all current
Licenses;

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

                    (c) Not cause or permit the removal of FF&E from the Hotel
except for the purpose of discarding worn and valueless items that have been
replaced with FF&E of equal or better quality; timely make all repairs,
maintenance, and replacements to keep all FF&E and all other Personal Property
and all Real Property in good operating condition; keep and maintain the Hotel
in a good state of repair and condition, reasonable and ordinary wear and tear
excepted; and not commit waste of any portion of the Hotel;

                    (d) Maintain the levels and quality of the Personal Property
generally at the levels and quality existing on the date hereof and keep
merchandise, supplies and inventory adequately stocked, consistent with good
business practice, as if the sale of the Hotel hereunder were not to occur,
including, without limitation, maintaining linens and bath towels at least at a
2-par level for all suites or rooms of the Hotel;

                    (e) Advise Buyer promptly of any litigation, arbitration, or
administrative hearing before any court or governmental agency concerning or
affecting the Hotel which is

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instituted or threatened after the date of this Contract or if any
representation or warranty contained in this Contract shall become false;

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

                    (g) Pay or cause to be paid all taxes, assessments and other
impositions levied or assessed on the Hotel or any part thereof prior to the
delinquency date, and comply with all material federal, state, and municipal
laws, ordinances, regulations and orders relating to the Hotel;

                    (h) Not sell or assign, or enter into any agreement to sell
or assign, or create or permit to exist any lien or encumbrance (other than a
Permitted Exception) on, the Property or any portion thereof except agreements
with guests in the ordinary course of business; and

                    (i) Except as described in this Contract, not allow any
permit, receipt, license, franchise or right currently in existence with respect
to the operation, use, occupancy or maintenance of the Hotel to expire, be
canceled or otherwise terminated.

          Neither Seller nor Manager shall, without first obtaining the written
approval of Buyer, which approval shall not be unreasonably withheld, enter into
any new FF&E Leases, Service Contracts, Leases or other contracts or agreements
related to the Hotel other than agreements with guests in the ordinary course of
business, or extend any existing agreements, unless such agreements (x) can be
terminated, without payment or penalty, upon thirty (30) days’ prior notice or
(y) will expire prior to the Closing Date.

          8.3 Third Party Consents. Prior to the Closing Date and subject to
Buyer’s satisfaction of its obligations as provided in this Agreement, Seller
shall, at its expense except as expressly provided in this Contract, (i) obtain
any and all third party consents and approvals (x) required in order to transfer
the Hotel to Buyer, or (y) which, if not obtained, would materially adversely
affect the operation of the Hotel, including, without limitation, all consents
and approvals referred to on Exhibit F and (ii) use best efforts to obtain all
other third party consents and approvals (all of such consents and approvals in
(i) and (ii) above being referred to collectively as, the “Third Party
Consents”).

          8.4 Employees. Upon reasonable prior notice to Seller by Buyer, Buyer
and its employees, representatives and agents shall have the right to
communicate with Seller’s staff, and, subject to the approval of the Manager,
the following persons on the Hotel staff and the Manager’s staff: the general
manager, the director of sales, and the director of engineering, at any time
before Closing and in the presence of a Seller-designated representative. Buyer
covenants and agrees that it shall not interfere with the operations of the
Hotel while engaging in such communications, and further agrees that no such
communications shall materially or adversely affect the operation of the
Property or the Existing Management Agreements.

          8.5 Estoppel Certificates. If requested in writing by Buyer not less
than twenty (20) days prior to Closing, Seller shall obtain from (i) each tenant
under any Lease affecting the Hotel (but not from current or prospective
occupants or guests of hotel rooms and suites within the

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Hotel) and (ii) each lessor under any FF&E Lease for the Hotel identified by
Buyer as a material FF&E Lease, the estoppel certificates substantially in the
forms provided by Buyer to Seller, and deliver to Buyer not less than five (5)
days before the Closing.

          8.6 Access to Financial Information. Buyer’s representatives shall
have access to, and Seller and its Affiliates shall cooperate with Buyer and
furnish upon request, all financial and other information relating to the
Hotel’s operations to the extent necessary to enable Buyer’s representatives to
prepare audited financial statements in conformity with Regulation S-X of the
Securities and Exchange Commission (the “SEC”) and other applicable rules and
regulations of the SEC and to enable them to prepare a registration statement,
report or disclosure statement for filing with the SEC on behalf of Buyer or its
Affiliates, whether before or after Closing with respect to the transaction
contemplated by this Contract and regardless of whether such information is
included in the Records to be transferred to Buyer hereunder. Seller shall also
provide to Buyer’s representative a signed representation letter in form and
substance reasonably acceptable to Seller sufficient to enable an independent
public accountant to render an opinion on the financial statements related to
the Hotel. Buyer will reimburse Seller for costs reasonably incurred by Seller
to comply with the requirements of the preceding sentence to the extent that
Seller is required to incur costs not in the ordinary course of business for
third parties to provide such representation letters. The provisions of this
Section shall survive Closing or termination of this Contract.

          8.7 Bulk Sales. At Seller’s risk and expense, Seller shall take all
steps necessary to comply with the requirements of a transferor under all bulk
transfer laws, if any, that are applicable to the transactions contemplated by
this Contract.

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

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

 

 

 

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

 

 

 

                              (ii) the breach of any representation, warranty,
covenant or agreement of Seller contained in this Contract, subject, however, to
the applicable provisions in Section 7.1 and 7.2 of this Contract;

 

 

 

                              (iii) any liability or obligation of Seller not
expressly assumed by Buyer pursuant to this Contract;

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                              (iv) any claim made or asserted by an employee of
Seller arising out of Seller’s decision to sell the Property; and

 

 

 

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

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

 

 

 

                              (i) the breach of any representation, warranty,
covenant or agreement of Buyer contained in this Contract, subject, however, to
the applicable provisions in Section 7.1 and 7.2 of this Contract;

 

 

 

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

 

 

 

                              (iii) any liability or obligation of Buyer
expressly assumed by Buyer at Closing.

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

 

 

 

                              (i) The party seeking indemnification (the
“Indemnified Party”) shall give prompt written notice to the party or parties
from which it is seeking indemnification (the “Indemnifying Party”) of any
assertion of liability by a third party which might give rise to a claim for
indemnification based on the foregoing provisions of this Section 8.8, which
notice shall state the nature and basis of the assertion and the amount thereof,
to the extent known; provided, however, that no delay on the part of the
Indemnified Party in giving notice shall relieve the Indemnifying Party of any
obligation to indemnify unless (and then solely to the extent that) the
Indemnifying Party is prejudiced by such delay.

 

 

 

                              (ii) If in any action, suit or proceeding (a
“Legal Action”) the relief sought is solely the payment of money damages, and if
the Indemnifying Party specifically agrees in writing to indemnify such
Indemnified Party with respect thereto and demonstrates to the reasonable
satisfaction of such Indemnified Party its financial ability to do so, the
Indemnifying Party shall have the right, commencing twenty (20) days after such
notice, at its option, to elect to settle, compromise or defend, pursuant to
this paragraph, by its own counsel and at its own expense, any such Legal Action
involving such Indemnified Party’s asserted liability. If the Indemnifying Party
does not undertake to settle, compromise or defend any such Legal Action, such
settlement,

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compromise or defense shall be conducted in the sole discretion of such
Indemnified Party, but such Indemnified Party shall provide the Indemnifying
Party with such information concerning such settlement, compromise or defense as
the Indemnifying Party may reasonably request from time to time. If the
Indemnifying Party undertakes to settle, compromise or defend any such asserted
liability, it shall notify such Indemnified Party in writing of its intention to
do so within twenty (20) days of notice from such Indemnified Party provided
above.

 

 

 

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

 

 

 

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

 

 

 

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

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          8.9 Escrow Funds. To provide for the timely payment of any
post-closing claims by Buyer against Seller hereunder, at Closing, Seller agrees
that Two Hundred Thousand and No/100 Dollars ($200,000.00) (the “Escrow Funds”)
shall be withheld from the Purchase Price payable to Seller and shall be
deposited for a period of one (1) year in an escrow account with the Title
Company pursuant to an escrow agreement in the form attached hereto as Exhibit E
(the “Post-Closing Agreement”). Buyer and Seller agree that six (6) months after
the Closing Date, the Escrowed Funds shall be reduced to One Hundred Thousand
and No/100 Dollars ($100,000.00). If no claims have been asserted by Buyer
against Seller, or all such claims have been satisfied, within such 1-year
period, the Escrow Funds deposited by Seller, together with interest thereon,
shall be released to Seller.

ARTICLE IX
CONDITIONS FOR CLOSING

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

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

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

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

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

                    (e) The Existing Franchise Agreement shall have been
terminated.

                    (f) The Existing Management Agreement shall have been
terminated and Buyer and the Manager shall have executed and delivered the New
Management Agreement.

                    (g) Buyer and Franchisor shall have executed (or Franchisor
has unconditionally committed to execute) the New Franchise Agreement.

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                    (h) All terms, conditions, restrictions and limitations
relating to the sale or disposition of the Property set forth in the Existing
Franchise Agreement shall have been fully and completely satisfied and the
Franchisor shall have acknowledged that Buyer is not a Competitor (as defined in
the Existing Franchise Agreement) and the Franchisor waived or released any
rights with respect to first offer..

                    (i) Fee Owner and Lessee shall terminate the operating lease
with respect to the Hotel immediately prior to the Closing.

                    (j) The University shall have executed and delivered into
escrow a recordable waiver of the Notre Dame ROFO as to this transaction and
shall have consented in writing to the conveyance of the Property from Seller to
Buyer which consent the parties hereto acknowledge may be withheld if Buyer’s
net worth is less than $50,000,000 as of the Closing Date. Buyer shall provide
evidence of its net worth to the University in the form of unaudited financial
statements

                    (k) All terms, conditions, restrictions and limitations set
forth in Existing Deed relating to the sale or disposition of the Property shall
have been satisfied in full as to Seller and assumed by Buyer.

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

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

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

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

                    (d) To the extent required under the Existing Franchise
Agreement, Franchisor shall have waived or released its rights with respect to
first offer and consented to a sale of the Property to Buyer and the Existing
Franchise Agreement shall have been terminated.

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                    (e) All terms, conditions, restrictions and limitations
relating to the sale or disposition of the Property set forth in the Existing
Franchise Agreement shall have been fully and completely satisfied and the
Franchisor shall have acknowledged that Buyer is not a Competitor (as defined in
the Existing Franchise Agreement).

                    (f) All terms, conditions, restrictions and limitations set
forth in Existing Deed relating to the sale or disposition of the Property shall
have been satisfied in full as to Seller and assumed by Buyer.

                    (g) The University shall have executed and delivered into
escrow a recordable waiver of the Notre Dame ROFO as to this transaction and
shall have consented in writing to the conveyance of the Property from Seller to
Buyer which consent the parties hereto acknowledge may be withheld if Buyer’s
net worth is less than $50,000,000 as of the Closing Date. Buyer shall provide
evidence of its net worth to the University in the form of unaudited financial
statements

ARTICLE X
CLOSING AND CONVEYANCE

          10.1 Closing. Unless otherwise agreed by Buyer and Seller, the Closing
on the Property (“Closing Date”) shall occur on October 4, 2011 provided that
all conditions to Closing hereunder have been satisfied. The foregoing
provisions of this Section 10.1 notwithstanding, the Closing Date shall not be
later than November 1, 2011. The Closing shall be held via escrow at the offices
of the Title Company, or as otherwise determined by Buyer and Seller.

          10.2 Deliveries of Seller. At Closing, Seller shall deliver to Buyer
the documents and materials set forth in (a) through (l) below. All instruments
shall be properly executed and conveyance instruments shall be acknowledged and
in recordable form (the terms, provisions and conditions of all instruments not
attached hereto as Exhibits shall be mutually agreed upon by Buyer and Seller
prior to the conclusion of the Review Period):

                    (a) Deed. A Special Warranty deed conveying to Buyer fee
simple title to the Real Property, subject only to the Permitted Exceptions and
containing provisions with respect to the Existing Deed applicable to the
grantee (the “Deed”).

                    (b) Bills of Sale. Bills of sale to Buyer and/or its
designated Lessee, conveying title to the tangible Personal Property (other than
the alcoholic beverage inventories, which, at Buyer’s election, shall be
transferred by Seller to the Manager as holder of the liquor license required
for operation of the Hotel if allowed by law).

                    (c) Existing Management and Franchise Agreements. Evidence,
reasonably satisfactory to Buyer that the Existing Management Agreement has been
terminated and the Existing Franchise Agreement has been terminated.

                    (d) General Assignments. Assignments of all of Seller’s
right, title and interest in and to all FF&E Leases, Service Contracts and
Leases identified on Exhibit G. The assignment shall also be a general
assignment and shall provide for the assignment of all of Seller’s right, title
and interest in all Records, Warranties, Licenses, Tradenames, Construction

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Plans and all other intangible Personal Property applicable to the Hotel. The
assignments shall contain cross-indemnities by Buyer and Seller for their
respective periods of ownership.

                    (e) FIRPTA; 1099. A FIRPTA Affidavit or Transferor’s
Certificate of Non-Foreign Status as required by Section 1445 of the Internal
Revenue Code and an IRS Form 1099.

                    (f) Title Company Documents. All affidavits, gap indemnity
agreements and other documents reasonably required by the Title Company as a
condition to issuance of the Owner’s Title Policy.

                    (g) Possession; Estoppel Certificates. Possession of the
Property, subject only to rights of guests in possession and tenants pursuant to
written leases included in the Leases, and estoppel certificates from tenants
under Leases and the lessors under FF&E Leases in form and substance acceptable
to Buyer.

                    (h) Vehicle Titles. The necessary certificates of titles
duly endorsed for transfer together with any required affidavits and other
documentation necessary for the transfer of title or assignment of leases from
Seller to Buyer of any motor vehicles used in connection with the Hotel’s
operations.

                    (i) Authority Documents. Certified copy of resolutions of
the Seller authorizing the sale of the Property contemplated by this Contract,
and/or other evidence reasonably satisfactory to Buyer and the Title Company
that the person or persons executing the closing documents on behalf of Seller
have full right, power and authority to do so, along with a certificate of good
standing of Seller from the State in which Seller was formed.

                    (j) Miscellaneous. Such other instruments as are
contemplated by this Contract to be executed or delivered by Seller, reasonably
required by Buyer or the Title Company, or customarily executed in the
jurisdiction in which the Hotel is located, to effectuate the conveyance of
property similar to the Hotel, with the effect that, after the Closing, Buyer
will have succeeded to all of the rights, titles, and interests of Seller
related to the Hotel and Seller will no longer have any rights, titles, or
interests in and to the Hotel.

                    (k) Plans, Keys, Records, Etc. To the extent not previously
delivered to and in the possession of Buyer, the Construction Plans, all keys
for the Hotel (which keys shall be properly tagged for identification), all
Records, including, without limitation, all Warranties, Licenses, Leases, FF&E
Leases and Service Contracts.

                    (l) Closing Statements. Seller’s Closing Statement, and a
certificate confirming the truth of Seller’s representations and warranties
hereunder as of the Closing Date.

                    (m) Lease Termination. Evidence, reasonably satisfactory to
Buyer that the Seller has terminated, at no cost to Buyer, that certain
operating lease between Fee Owner and Operating Lessee.

          10.3 Buyer’s Deliveries. At Closing of the Hotel, Buyer shall deliver
the following:

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                    (a) Purchase Price. The balance of the Purchase Price,
adjusted for the adjustments provided for in Section 12.1, below, and less any
sums to be deducted therefrom as provided in Section 2.4.

                    (b) Authority Documents. Certified copy of resolutions of
the Board of Directors of Buyer authorizing the purchase of the Hotel
contemplated by this Contract, and/or other evidence satisfactory to Seller and
the Title Company that the person or persons executing the closing documents on
behalf of Buyer have full right, power and authority to do so.

                    (c) General Assignments. Assumptions of all of Seller’s
right, title and interest in and to all FF&E Leases, Service Contracts and
Leases identified on Exhibit G. The assignments shall contain cross-indemnities
by Buyer and Seller for their respective periods of ownership.

                    (d) Miscellaneous. Such other instruments as are
contemplated by this Contract to be executed or delivered by Buyer, reasonably
required by Seller or the Title Company, or customarily executed in the
jurisdiction in which the Hotel is located, to effectuate the conveyance of
property similar to the Hotel, with the effect that, after the Closing, Buyer
will have succeeded to all of the rights, titles, and interests of Seller
related to the Hotel and Seller will no longer have any rights, titles, or
interests in and to the Hotel.

                    (e) Closing Statements. Buyer’s Closing Statement, and a
certificate confirming the truth of Buyer’s representations and warranties
hereunder as of the Closing Date.

ARTICLE XI
COSTS

          All Closing costs shall be paid as set forth below:

          11.1 Seller’s Costs. In connection with the sale of the Property
contemplated under this Contract, Seller shall be responsible for all transfer
and recordation taxes, including, without limitation, all transfer, mansion,
excise, sales, use or bulk transfer taxes or like taxes on or in connection with
the transfer of the Real Property and the Personal Property constituting part of
the Property pursuant to the Bill of Sale, and all accrued taxes of Seller prior
to Closing and income, sales and use taxes and other such taxes of Seller
attributable to the sale of the Property to Buyer. Seller shall be responsible
for all costs related to the termination of the Existing Management Agreement as
provided in Article V. Seller shall also be responsible for any costs and
expenses of its attorneys, accountants, appraisers and other professionals,
consultants and representatives. Seller shall also be responsible for payment of
all prepayment penalties and other amounts payable in connection with the
pay-off of any liens and/or indebtedness encumbering all or any portion of the
Property.

          11.2 Buyer’s Costs. In connection with the purchase of the Property
contemplated under this Contract, Buyer shall be responsible for the costs and
expenses of its attorneys, accountants and other professionals, consultants and
representatives. Buyer shall also be responsible for the costs and expenses in
connection with the preparation of any environmental report, any update to the
survey and the costs and expenses of preparation of the title insurance

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commitment and the issuance of the title insurance policy contemplated by
Article IV and the per page recording charges and clerk’s fee for the Deed (if
applicable). Buyer shall also be responsible for the fees for and all costs
associated with the performance of the PIP, all costs incurred in performing due
diligence and securing financing to complete the transaction, including without
limitation: (i) appraisals; (ii) fees and costs paid to any lender in connection
with obtaining financing for the Property; (iii) fees, charges or costs to
record any mortgages or deeds of trust to secure Buyer’s obligations to any
lender; and (iv) fees or charges paid or payable to the Title Company to secure
a mortgagee title policy.

ARTICLE XII
ADJUSTMENTS

          12.1 Adjustments. Unless otherwise provided herein, at Closing,
adjustments between the parties shall be made as of 11:59 p.m. on the eve of the
Closing Date (the “Cutoff Time”), with the income and expenses accrued prior to
the Cutoff Time being allocated to Seller and the income and expenses accruing
on and after the Cutoff Time being allocated to Buyer, all as set forth below.
All of such adjustments and allocations shall be made in cash at Closing and
shall be collected through and/or adjusted in accordance with the terms of the
Existing Management Agreement. Except as otherwise expressly provided herein,
all apportionments and adjustments shall be made on an accrual basis in
accordance with generally accepted accounting principles. Buyer and Seller agree
that Manager shall determine the apportionments, allocations, prorations and
adjustments as of the Cutoff Time.

                    (a) Taxes. All real estate taxes, personal property taxes,
or any other taxes and special assessments (special or otherwise) of any nature
upon the Property levied, assessed or pending for the calendar year in which the
Closing occurs (including the period prior to Closing, regardless of when due
and payable) shall be prorated as of the Cutoff Time and, if no tax bills or
assessment statements for such calendar year are available, such amounts shall
be estimated on the basis of the best available information for such taxes and
assessments that will be due and payable on the Hotel for the calendar year in
which Closing occurs. Until final tax bills that cover the entire year during
which Closing occurred (such that tax liability can reasonably be determined),
Seller’s obligation to pay its share of taxes shall continue.

                    (b) Utilities. All suppliers of utilities shall be
instructed to read meters or otherwise determine the charges owing as of the
Closing Date for services prior thereto. Charges accruing prior to the Closing
Date shall be allocated to Seller and charges accruing after Closing Date shall
be allocated to Buyer. If elected by Seller, Seller shall be given credit, and
Buyer shall be charged, for any utility deposits transferred to and received by
(or assigned for the benefit of) Buyer at Closing.

                    (c) Income/Charges. All rents, income and charges receivable
or payable under any Leases and Hotel Contracts applicable to the Property, and
any deposits, prepayments and receipts thereunder, shall be prorated between
Buyer and Seller as of the Cutoff Time.

                     (d) Accounts. All working capital accounts, reserve
accounts and escrow accounts of any nature shall remain the property of Seller.

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                    (e) Guest Ledger. Subject to (f) below, all accounts
receivable of registered guests at the Hotel who have not checked out and were
occupying rooms as of the Cutoff Time, shall be prorated as provided herein.
Seller shall receive a credit for all guest ledger receivables, net of credit
card commissions, for all room nights and other charges up to but not including
the room night during which the Cutoff Time occurs.

                    (f) Room Rentals. All receipts from guest room rentals and
other suite revenues for the night in which the Cutoff Time occurs shall be
split 50/50 between Buyer and Seller.

                    (g) Advance Deposits. All prepaid rentals, room rental
deposits, and all other deposits for advance registration, banquets or future
services to be provided on and after the Closing Date shall be credited to
Buyer.

                    (h) Accounts Receivable. To the extent not apportioned at
Closing and subject to (e) and (f) above, all accounts receivable and credit
card claims as of the Cutoff Time shall remain the property of Seller, and
Seller and Buyer agree that the monies received from debtors owing such accounts
receivable balances after Closing, unless otherwise provided in the New
Management Agreement, shall be applied as expressly provided in such remittance,
or if not specified then to the Seller’s outstanding invoices to such account
debtors in chronological order beginning with the oldest invoices, and
thereafter, to Buyer’s account.

                    (i) Accounts Payable. To the extent not apportioned at
Closing, any indebtedness, accounts payable, liabilities or obligations of any
kind or nature related to Seller or the Property for the periods prior to and
including the Closing Date shall be retained by Seller and promptly allocated to
Seller and evidence thereof shall be provided to Buyer, and Buyer shall not be
or become liable therefor, except as expressly assumed by Buyer pursuant to this
Contract, and invoices received in the ordinary course of business prior to
Closing shall be allocated to Seller at Closing.

                    (j) Restaurants, Bars, Machines, Other Income. All monies
received in connection with bar, restaurant, banquet and similar and other
services at the Hotel (other than amounts due from any guest and included in
room rentals) prior to the close of business for each such operation for the
night in which the Cutoff Time occurs shall belong to Seller, and all other
receipts and revenues (not previously described in this Section 12.1) from the
operation of any department of the Hotel shall be prorated between Seller and
Buyer at Closing.

                    (k) Inventories. No adjustment shall be made for any
merchandise, food or beverages held for sale at the Property, all of which shall
be included in the Purchase Price. The preceding sentence notwithstanding,
merchandise, food and beverages that are owned by third-party tenants do not
convey.

          12.2 Reconciliation and Final Payment. Seller and Buyer shall
reasonably cooperate after Closing to make a final determination of the
allocations and prorations required under this Contract within one hundred
eighty (180) days after the Closing Date; provided, however, failure to make a
final determination within such period shall not relieve the parties of the
obligation to make a final determination nor shall it relieve any party of the
obligation to pay the other any

- 28 -

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true-up amounts owed. Upon the final reconciliation of the allocations and
prorations under this Section, the party which owes the other party any sums
hereunder shall pay such party such sums within ten (10) days after the
reconciliation of such sums. The obligations to calculate such prorations, make
such reconciliations and pay any such sums shall survive the Closing.

          12.3 Employees. None of the employees of the Hotel shall become
employees of Buyer, as of the Closing Date; instead, such employees shall become
employees of the Manager. Seller shall not give notice under any applicable
federal or state plant closing or similar act, including, if applicable, the
Worker Adjustment and Retraining Notification Provisions of 29 U.S.C., Section
2102, the parties having agreed that a mass layoff, as that term is defined in
29 U.S.C., 2101(a)(3), will not have occurred. Any liability for payment of all
wages, salaries and benefits, including, without limitation, accrued vacation
pay, sick leave, bonuses, pension benefits, COBRA rights, and other benefits
accrued or earned by and due to employees at the Hotel through the Cutoff Time,
together with F.I.C.A., unemployment and other taxes and benefits due with
respect to such employees for such period, shall be charged to Seller, in
accordance with the Existing Management Agreement, for the purposes of the
adjustments to be made as of the Cutoff Time. All liability for wages, salaries
and benefits of the employees accruing in respect of and attributable to the
period from and after Closing shall be charged to Buyer, in accordance with the
New Management Agreement. To the extent applicable, all such allocations and
charges shall be adjusted in accordance with the provisions of the Existing
Management Agreement.

ARTICLE XIII
CASUALTY AND CONDEMNATION

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

          13.2 Buyer’s Termination Right. If, prior to Closing (a) any
condemnation proceeding shall be pending against a substantial portion of the
Hotel or (b) there is any substantial casualty loss or damage to the Hotel,
Buyer shall have the option to terminate this Contract, provided Buyer delivers
written notice to Seller of its election within twenty (20) days after the date
Seller has delivered Buyer written notice of any such loss, damage or
condemnation as provided above, and in such event, the Earnest Money Deposit
shall be delivered to Buyer and thereafter, except as expressly set forth
herein, no party shall have any further obligation or liability to the other
under this Contract. In the context of condemnation, “substantial” shall mean
condemnation of such portion of a Hotel (or access thereto) as could, in Buyer’s
reasonable judgment, render use of the remainder impractical or unfeasible for
the uses herein contemplated, and, in the context of casualty loss or damage,
“substantial” shall mean a loss or damage in excess of Five Hundred Thousand and
No/100 Dollars ($500,000.00) in value.

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          13.3 Procedure for Closing. If Buyer shall not timely elect to
terminate this Contract under Section 13.2 above, or if the loss, damage or
condemnation is not substantial, Seller agrees to pay to Buyer at the Closing
all insurance proceeds or condemnation awards which Seller has received as a
result of the same, plus an amount equal to the insurance deductible, and assign
to Buyer all insurance proceeds and condemnation awards payable as a result of
the same, in which event the Closing shall occur without Seller replacing or
repairing such damage.

ARTICLE XIV
DEFAULT REMEDIES

          14.1 Buyer Default. If Buyer defaults under this Contract after the
Review Period, and such default continues for thirty (30) days following written
notice from Seller, then at Seller’s election by written notice to Buyer, this
Contract shall be terminated and of no effect, in which event the Earnest Money
Deposit shall be paid to and retained by the Seller as Seller’s sole and
exclusive remedy hereunder, and as liquidated damages for Buyer’s default or
failure to close, and except as otherwise expressly provided herein, both Buyer
and Seller shall thereupon be released from all obligations hereunder.

          14.2 Seller Default. If Seller defaults under this Contract, and such
default continues for thirty (30) days following written notice from Buyer,
Buyer may elect, as Buyer’s sole and exclusive remedy, either (i) to terminate
this Contract by written notice to Seller delivered to that Seller at any time
prior to the completion of such cure, in which event the Earnest Money Deposit
shall be returned to the Buyer, Seller shall reimburse Buyer for Buyer’s actual
and verifiable due diligence costs and expenses (not to exceed $75,000) and
thereafter both the Buyer and Seller shall thereupon be released from all
obligations with respect to this Contract, except as otherwise expressly
provided herein; or (ii) to treat this Contract as being in full force and
effect by written notice delivered to Seller at any time prior to the completion
of such cure, in which event the Buyer shall have the right to an action against
the defaulting Seller for specific performance.

          14.3 Attorney’s Fees. Anything to the contrary herein notwithstanding,
if it shall be necessary for either the Buyer or Seller to employ an attorney to
enforce its rights pursuant to this Contract because of the default of the other
party, and the non-defaulting party is successful in enforcing such rights, then
the defaulting party shall reimburse the non-defaulting party for the
non-defaulting party’s reasonable attorneys’ fees, costs and expenses.

ARTICLE XV
NOTICES

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

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overnight delivery service marked for next day delivery, return receipt
requested or similarly acknowledged:

 

 

 

 

If to Buyer:

Apple Nine Hospitality Ownership, Inc.

 

 

814 E. Main Street

 

 

Richmond, Virginia 23219

 

 

Attention: Justin Knight

 

 

Fax No.: (804) 344-8129

 

 

 

 

with a copy to:

Apple Nine Hospitality Ownership, Inc.

 

 

814 E. Main Street

 

 

Richmond, Virginia 23219

 

 

Attention: Legal Dept.

 

 

Fax No.: (804) 727-6349

 

 

 

 

If to Seller:

c/o White Lodging Services Corporation

 

 

701 E. 83rd Avenue

 

 

Merrillville, Indiana 46410

 

 

Attention: Deno Yiankes

 

 

Fax No.: (219) 472-2034

 

 

 

 

with a copy to:

 

 

 

Carol Ann Bowman

 

 

1000 East 80th Place, Suite 700 North

 

 

Merrillville, Indiana 46410

 

 

Fax No.: (219) 680-4226

 

 

 

 

 

and to:

 

 

 

 

 

M. Jay Yurow

 

 

Venable LLP

 

 

8010 Towers Crescent Drive

 

 

Suite 300

 

 

Vienna, Virginia 22182

 

 

Fax No. (703) 821-8949

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

ARTICLE XVI
MISCELLANEOUS

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

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

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

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

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

          16.6 Confidentiality. Except as either party may reasonably determine
is required by law (including without limitation laws and regulations applicable
to Buyer or its Affiliates who may be public companies): (i) prior to Closing,
Buyer and Seller shall not disclose the existence of this Contract or their
respective intentions to purchase and sell the Property or generate or
participate in any publicity or press release regarding this transaction, except
to Buyer’s and Seller’s legal counsel and lender, Buyer’s consultants and
agents, the Manager, the Franchisor and the Title Company and except as
necessitated by Buyer’s Due Diligence Examination and/or shadow management,
unless both Buyer and Seller agree in writing and as necessary to effectuate the
transactions contemplated hereby and (ii) following Closing, the parties shall
coordinate any public disclosure or release of information related to the
transactions contemplated by this Contract, and no such disclosure or release
shall be made without the prior written consent of Buyer, and no press release
shall be made without the prior written approval of Buyer and Seller. In
addition, Buyer agrees that all materials placed in the e-room and otherwise
made available for review by Buyer and its consultants and agents shall be
handled and treated in a confidential manner; provided, however, that the
forgoing provisions shall not be deemed to limit Buyer’s right to disclose the
details of the transaction contemplated hereby or to share the materials made
available by Seller to Buyer with its legal and financial advisors.

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

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

          16.9 Severability. If any provision of this Contract shall, for any
reason, be adjudged by any court of competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Contract but shall be confined in its operation to the
provision or provisions hereof directly involved in the controversy in which
such judgment shall have been rendered, and this Contract shall be construed as
if such provision had never

- 32 -

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existed, unless such construction would operate as an undue hardship on Seller
or Buyer or would constitute a substantial deviation from the general intent of
the parties as reflected in this Contract.

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

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

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

          16.13 Relationship. Nothing herein contained shall be deemed or
construed by the parties hereto, nor by any third party, as creating the
relationship of principal and agent or of partnership or joint venture between
the parties hereto, it being understood and agreed that (except as and to the
extent specifically provided for herein) no provision contained herein, nor any
acts of the parties hereto shall be deemed to create any relationship between
the parties hereto other than the relationship of seller and purchaser.

           16.14 Like-Kind Exchange. Seller shall have the right to structure
its transfer of the Property as part of a like-kind exchange to be designated by
Seller (including the ability to have title taken in the name of an entity
established in order to effectuate such exchange), by providing Buyer with
notice of such exchange by not later than ten (10) days prior to the Closing
Date (with any documents to be reviewed by Buyer in connection therewith to be
submitted to Buyer by not later than five (5) days prior to the Closing Date),
with the result that the exchange shall qualify for non-recognition of gain or
loss under Section 1031 of the Internal Revenue Code of 1986, as amended. Buyer
shall cooperate with a Seller in effecting such exchange (such cooperation to be
limited to the review and execution of an assignment to a qualified exchange
intermediary and other reasonable requests of Seller and expressly to exclude
any arrangement to provide for installment sale treatment), provided that: (i)
any costs and expenses incurred by Buyer as a result of structuring such
transaction as an exchange, as opposed to an outright sale, shall be borne by
Seller, (ii) Seller shall indemnify and hold harmless Buyer from and against any
and all liabilities, costs, damages, claims or demands arising from the
cooperation of Buyer in effecting the exchange contemplated hereby, including,
but not limited to, Buyer’s reasonable attorneys’ fees; and (iii) such exchange
shall not result in any delay in Closing the transaction described in this
Contract.

[Signatures Begin on Following Page]

- 33 -

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

 

 

 

 

 

 

SELLER:

 

 

 

 

 

KRG/WHITE LS HOTEL, LLC, an Indiana limited liability company

 

 

 

By:

WHITE LODGING SERVICES CORPORATION, an Indiana corporation, its Manager

 

 

 

 

 

 

 

By:

/s/ Lawrence E. Burnell

 

 

 

 

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

 

 

 

 

Lawrence E. Burnell

 

 

 

Chief Operating Officer

 

 

 

 

 

 

KITE REALTY/WHITE LS HOTEL OPERATORS, LLC, an Indiana limited liability company

 

 

 

By:

WHITE LODGING SERVICES CORPORATION, an Indiana corporation, its Manager

 

 

 

 

 

 

 

By:

/s/ Lawrence E. Burnell

 

 

 

 

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

 

 

 

 

Lawrence E. Burnell

 

 

 

Chief Operating Officer

- 34 -

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

 

 

 

 

 

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

 

 

 

 

 

BUYER:

 

 

 

 

 

APPLE TEN HOSPITALITY OWNERSHIP, INC.

 

 

 

By:

/s/ Justin G. Knight

 

 

 

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

 

 

Name:  Justin G. Knight

 

Title:  President

 

- 35 -

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Schedule 3.1

Due Diligence List

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

EXHIBIT A

LEGAL DESCRIPTION OF LAND

Lot Numbered Five (5) as shown on the recorded Plat of Eddy Street Commons First
Minor Subdivision, recorded December 31, 2008 as Document Number 0841270 in the
Office of the Recorder of St. Joseph County, Indiana.

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

EXHIBIT B

ENVIRONMENTAL REPORTS

Phase I Environmental Site Assessment, Dated June 1, 2007 Prepared by Keramida
Environmental, Inc. for Kite Realty Group.

Addendum to Phase I Environmental Site Assessment, Dated August 13, 2007,
Prepared by Keramida Environmental, Inc. for Kite Realty Group.

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

ESCROW AGREEMENT

          THIS ESCROW AGREEMENT (this “Agreement”) made the ___ day of February,
2011 by and among KRG/WHITE LS HOTELS, LLC, an Indiana limited liability company
(“Seller”), APPLE TEN HOSPITALITY OWNERSHIP, INC., a Virginia corporation, or
its assigns (“Buyer”, together with Seller, the “Parties”), and CHICAGO TITLE
COMPANY (“Escrow Agent”).

R E C I T A L S

          WHEREAS, pursuant to the provisions of Section 2.5 of that certain
Purchase Contract dated February ___, 2011 (the “Contract”) between Seller, Kite
Realty/White Hotel LS Operator, LLC, an Indiana limited liability company and
Buyer, the Parties have requested Escrow Agent to hold in escrow in accordance
with the provisions, upon the terms, and subject to the conditions, of this
Agreement, the Earnest Money Deposit as defined in the Contract (the “Deposit”);
and

          WHEREAS, the Deposit shall be delivered to Escrow Agent in accordance
with the terms of the Contract and this Agreement.

          NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Parties and Escrow Agent as follows:

                    1. Seller and Buyer hereby appoint Escrow Agent to serve as
escrow agent hereunder, and the Escrow Agent agrees to act as escrow agent
hereunder in accordance with the provisions, upon the terms and subject to the
conditions of this Agreement. The Escrow Agent hereby acknowledges receipt of
the Deposit. Escrow Agent shall invest the Deposit in a federally-insured
interest-bearing account in a national banking association or such other
institution as Buyer and Seller may approve. Escrow Agent further acknowledges
that all interest accruing on the Deposit shall be paid to the party entitled to
the Deposit under the terms of the Contract.

                    2. Subject to the rights and obligations to transfer,
deliver or otherwise dispose of the Deposit, Escrow Agent shall keep the Deposit
in Escrow Agent’s possession pursuant to this Agreement.

                    3. A. Buyer shall be entitled to an immediate return of the
Deposit at any time prior to the expiration of the Review Period (as defined in
Section 3.1 of the Contract) by providing written notice to Escrow Agent stating
that Buyer has elected to terminate the Contract pursuant to Section 3.1.

                              B. If, at any time after the expiration of the
Review Period, Buyer claims entitlement to all or any portion of the Deposit,
Buyer shall give written notice to Escrow Agent stating that Seller has
defaulted in the performance of its obligations under the Contract beyond the
applicable grace period, if any, or that Buyer is otherwise entitled to the
return of the

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

Deposit or applicable portion thereof and shall direct Escrow Agent to return
the Deposit or applicable portion thereof to Buyer (the “Buyer’s Notice”).
Escrow Agent shall promptly deliver a copy of Buyer’s Notice to Seller. Seller
shall have three (3) business days after receipt of the copy of Buyer’s Notice
to deliver written notice to Escrow Agent and Buyer objecting to the release of
the Deposit or applicable portion thereof to Buyer (“Seller’s Objection
Notice”). If Escrow Agent does not receive a timely Seller’s Objection Notice,
Escrow Agent shall release the Deposit or applicable portion thereof to Buyer.
If Escrow Agent does receive a timely Seller’s Objection Notice, Escrow Agent
shall release the Deposit or applicable portion thereof only upon receipt of,
and in accordance with, written instructions signed by Seller and Buyer, or the
final order of a court of competent jurisdiction.

                              C. If, at any time after the expiration of the
Review Period, Seller claims entitlement to the Deposit or applicable portion
thereof, Seller shall give written notice to Escrow Agent stating that Buyer has
defaulted in the performance of its obligations under the Contract, and shall
direct Escrow Agent to release the Deposit or applicable portion thereof to
Seller (the “Seller’s Notice”). Escrow Agent shall promptly deliver a copy of
Seller’s Notice to Buyer. Buyer shall have three (3) business days after receipt
of the copy of Seller’s Notice to deliver written notice to Escrow Agent and
Seller objecting to the release of the Deposit or applicable portion thereof to
Seller (“Buyer’s Objection Notice”). If Escrow Agent does not receive a timely
Buyer’s Objection Notice, Escrow Agent shall release the Deposit or applicable
portion thereof to Seller. If Escrow Agent does receive a timely Seller’s
Objection Notice, Escrow Agent shall release the Deposit or applicable portion
thereof only upon receipt of, and in accordance with, written instructions
signed by Buyer and Seller, or the final order of a court of competent
jurisdiction.

                    4. In the performance of its duties hereunder, Escrow Agent
shall be entitled to rely upon any document, instrument or signature purporting
to be genuine and purporting to be signed by and of the Parties or their
successors unless Escrow Agent has actual knowledge to the contrary. Escrow
Agent may assume that any person purporting to give any notice or instructions
in accordance with the provisions hereof has been duly authorized to do so.

                    5. A. Escrow Agent shall not be liable for any error of
judgment, or any action taken or omitted to be taken hereunder, except in the
case of Escrow Agent’s willful, bad faith misconduct or negligence, nor shall
Escrow Agent be liable for the conduct or misconduct of any employee, agent or
attorney thereof. Escrow Agent shall be entitled to consult with counsel of its
choosing and shall not be liable for any action suffered or omitted in
accordance with the advice of such counsel.

                              B. In addition to the indemnities provided below,
Escrow Agent shall not be liable for, and each of the Parties jointly and
severally hereby indemnify and agree to save harmless and reimburse Escrow Agent
from and against all loss, cost, liability, damage and expense, including
outside counsel fees in connection with its acceptance of, or the performance of
its duties and obligations under, this Agreement, including the costs and
expenses of defending against any claim arising hereunder unless the same are
caused by the willful, bad faith misconduct or negligence of Escrow Agent.

2

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                              C. Escrow Agent shall not be bound or in any way
affected by any notice of any modification or cancellation of this Agreement, or
of any fact or circumstance affecting or alleged to affect rights or liabilities
hereunder other than as is herein set forth, or affecting or alleged to affect
the rights and liabilities of any other person, unless notice of the same is
delivered to Escrow Agent in writing, signed by the proper parties to Escrow
Agent’s satisfaction and, in the case of modification, unless such modification
shall be approved by Escrow Agent in writing.

                    6. A. Escrow Agent and any successor escrow agent, as the
case may be, may resign his or its duties and be discharged from all obligations
hereunder at any time upon giving five (5) days’ prior written notice to each of
the Parties hereto. The Parties hereto will thereupon jointly designate a
successor escrow agent hereunder within said five (5) day period to whom the
Deposit shall be delivered. In default of such a joint designation of a
successor escrow agent, Escrow Agent shall retain the Deposit as custodian
thereof until otherwise directed by the Parties hereto, jointly, or until the
Deposit is released in accordance with clause (B) below, in each case, without
liability or responsibility.

                              B. Anything in this Agreement to the contrary
notwithstanding, (i) Escrow Agent, on notice to the Parties hereto, may take
such other steps as the Escrow Agent may elect in order to terminate its duties
as Escrow Agent hereunder, including, but not limited to, the deposit of the
Deposit with a court of competent jurisdiction in the Commonwealth of Virginia
and the commencement of an action of interpleaders, and (ii) in the event of
litigation between any of the Parties with respect to the Deposit, Escrow Agent
may deposit the Deposit with the court in which said litigation is pending and,
in any such event, Escrow Agent shall be relieved and discharged from any
liability or responsibility to the Parties hereto. Escrow Agent shall not be
under any obligation to take any legal action in connection with this Agreement
or its enforcement or to appear in, prosecute or defend any action or legal
proceeding which, in the opinion of Escrow Agent, would or might involve Escrow
Agent in any cost, expense, loss, damage or liability, unless and as often as
requested, Escrow Agent shall be furnished with security and indemnity
satisfactory to Escrow Agent against all such costs, expenses (including
attorney’s fees), losses, damages and liabilities.

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

3

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

 

 

 

 

(i)

If addressed to Seller to:

 

 

 

 

 

c/o Carol Ann Bowman

 

 

1000 East 80th Place

 

 

Suite 700 North

 

 

Merrillville, Indiana 46410

 

 

Attention: Ann Bowman

 

 

Fax No.: (219) 680-4226

 

 

 

 

(ii)

If addressed to Buyer, to:

 

 

 

 

 

Apple Ten Hospitality Ownership, Inc.

 

 

814 E. Main Street

 

 

Richmond, Virginia 23219

 

 

Attn: Justin Knight

 

 

Fax No.: (804) 344-8129

 

 

 

 

 

with a copy to:

 

 

 

 

 

Apple Ten Hospitality Ownership, Inc.

 

 

814 E. Main Street

 

 

Richmond, Virginia 23219

 

 

Attn: Legal Dept.

 

 

Fax No.: (804) 727-6349

 

 

 

 

(iii)

If addressed to Escrow Agent, to:

 

 

 

 

 

Chicago Title Company

 

 

5501 LBJ Freeway, Suite 200

 

 

Dallas, Texas 75240

 

 

Attn: Debby Moore

 

 

Fax No.: (214) 570-0210

or such other address or addresses as may be expressly designated by any party
by notice given in accordance with the foregoing provisions and actually
received by the party to whom addressed.

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

                    9. The covenants, conditions and agreements contained in
this Agreement shall bind and inure to the benefit of each of the Parties hereto
and their respective successors and assigns.

4

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          IN WITNESS WHEREOF the Parties have executed this Agreement as of the
day and year first above written.

 

 

 

 

 

 

 

 

SELLER:

 

 

 

 

 

 

KRG/WHITE LS HOTEL, LLC

 

 

By:

 

 

 

White Lodging Services Corporation, Manager

 

 

 

 

 

 

By:

 

 

 

 

 

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

 

 

 

Lawrence E. Burnell

 

 

 

Chief Operating Officer

 

 

 

 

 

 

 

 

BUYER:

 

 

 

 

 

APPLE TEN HOSPITALITY OWNERSHIP, INC.

 

 

 

 

 

By:

 

 

 

 

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

 

 

Name:

 

 

 

 

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

 

 

Title:

 

 

 

 

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

 

 

 

 

 

ESCROW AGENT:

 

 

 

 

 

CHICAGO TITLE COMPANY

 

 

 

 

 

By:

 

 

 

 

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

 

 

Name:

 

 

 

 

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

 

 

Title:

 

 

 

 

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

 

5

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EXHIBIT D

LIST OF FF&E

Description

Artwork

Artwork/Lamps/Chairs

Bed Bases

Bed Scarves/Skirts

Cabinets

Carpet

Carpet Extractor

Carpet Pad

Carts/Storage Compartment

Cash Drawers

Chairs

Check Reader

Coin Slide Kit

Computer

Computer Hardware

Computer Software

Computer/Printer

Corner Guards

Custom logo mat

Depository Safe

Desk Lamps

Drapery

Dust Skirts/Leaf Scarves

Easel Board

Exercise Equipment

Exterior Signage

File Cabinet/Office Chair

Fire Ext

Floor Lamps

Framed Artwork

Framed Posters Marriott

Freezers

Guest Room Phones

Guestroom Bench

Head Board

Headboards/Desks

Interior Signage

Iron Holders

Ironing Boards/Trash Can

Irons/Iron Boards

Kitchen Equipment

Lamps

Lamps/Tables

Laptop

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

 

Laundry Scale Cart

Laundry Table

Light Fixtures

Lighting

Lockers

Luggage Rack

Materials for Windows

Mats

Mattresses

Mattresses/Boxsprings

Microwave Ovens

Mirrors

Nightstands/Desks

Printer

Printer/Fax Scan

PTAC

Radio/Microphone

Refrigerators

Router

Scales

Shelves

Shower Doors

Stack Chairs

Stool/Step

Storage Shelving

Tables

Tables/Chairs

Tables/Shelving

Task Chairs

Televisions

Trash Receptacles

Tripod Screen

Vanity Mirrors

Vases

Vinyl Wall covering

Washer/Dryer

Window Treatments

2

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

EXHIBIT E

POST-CLOSING AGREEMENT

          THIS POST-CLOSING AGREEMENT (this “Agreement”) is executed effective
as of ___, 2011 (the “Effective Date”), by and among KRG/WHITE LS HOTEL, LLC
(“Seller”), APPLE TEN HOSPITALITY OWNERSHIP, INC. (“Buyer”), and CHICAGO TITLE
COMPANY (“Escrow Agent”).

R E C I T A L S

          WHEREAS, pursuant to the provisions of Section 8.9 of that certain
Purchase Contract dated as of February __, 2011 between Seller, Kite
Realty/White Hotel Operators, LLC, an Indiana limited liability company and
Buyer (as amended, the “Contract”), Buyer and Seller have requested that Escrow
Agent hold in escrow the Escrow Funds (as defined in the Contract) in the amount
of Two Hundred Thousand Dollars ($200,000.00) in accordance with the provisions,
upon the terms and subject to the conditions of this Agreement; and

          WHEREAS, the Escrow Funds are being delivered to Escrow Agent in
accordance with the terms of the Contract and this Agreement.

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

          1. Defined Terms. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Contract.

          2. Appointment of Escrow Agent. Seller and Buyer hereby appoint Escrow
Agent to serve as escrow agent hereunder, and Escrow Agent agrees to act as
escrow agent hereunder in accordance with the provisions, upon the terms and
subject to the conditions of this Agreement. The Escrow Agent hereby
acknowledges receipt of the Escrow Funds. Escrow Agent shall invest the Escrow
Funds as directed by Seller, provided such investments are reasonably acceptable
to Buyer, and interest earned thereon shall constitute part of the Escrow Funds.

          3. Escrow Funds. Subject to the rights and obligations to transfer,
deliver or otherwise dispose of the Escrow Funds, Escrow Agent shall keep the
Escrow Funds in Escrow Agent’s possession pursuant to this Agreement for a
period of one (1) year from and after the Closing Date (the “Escrow Term”) to
provide for timely payment of claims made after Closing by Buyer for
indemnification, reimbursement, damages or other amounts payable by Seller or
for the performance of any of Seller’s obligations (each, a “Claim”) pursuant to
the terms of the Contract or this Agreement, including without limitation all
indemnification obligations of Seller to Buyer pursuant to Section 8.8 of the
Contract. The forgoing provisions of this Section 3 and the Recitals
notwithstanding, Seller and Buyer agree that on the date that is six (6) months
after

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

the Closing Date, the Escrowed Funds shall be reduced to One Hundred Thousand
Dollars ($100,000.00), and Escrow Agent is hereby instructed to pay the amount
of Escrowed Funds in excess of One Hundred Thousand Dollars ($100,000.00) to
Seller on the date that is six (6) months after the Closing Date.

          4. Claims. Upon the determination by Buyer of the amount for which a
Claim will be made, Buyer shall send notice of such Claim (stating the amount
claimed) to the Escrow Agent and Seller. If Seller does not give written notice
to the Escrow Agent and Buyer of its intent to dispute the Claim or the amount
claimed within five (5) business days of the date Seller receives, pursuant to
Section 8 below, Buyer’s notice of Claim, Escrow Agent shall immediately pay to
Buyer from the Escrow Funds the amount specified in Buyer’s notice. If Seller
disputes the Claim within the five (5) business day period and Buyer and Seller
are unable to settle the dispute, Buyer and Seller shall petition a court of
competent jurisdiction for a resolution of the dispute. Seller and Buyer shall
each pay their respective costs incurred in any such court proceedings and shall
bear equally the expenses of the Escrow Agent in connection therewith. If Buyer
and Seller fail to bring such petition within thirty (30) days after the notice
of dispute of claim is received, Escrow Agent may, but is not required, to bring
such a petition. In any such action, all parties hereto agree to waive any right
to a trial by jury. After settlement or final determination of any dispute
relating to a Claim, the Escrow Agent shall immediately pay to Buyer from the
Escrow Funds the amount, if any, determined to be payable to Buyer. Payment of
any Escrow Funds to Buyer shall not discharge Seller’s obligations under the
Contract unless and until all of Buyer’s Claims are paid, discharged and
satisfied in full. Seller shall be and remain liable to Buyer for, and shall pay
to Buyer the full amount of, all such Claims notwithstanding that the Escrow
Funds may be insufficient to pay the same in full, and Seller shall immediately
pay to Buyer the amount of any deficiency to satisfy in full the amount of each
Claim. Unless otherwise provided herein, if (i) Buyer has not sent any notice of
a Claim during the Escrow Term or (ii) (x) all Claims of Buyer have been fully
paid, discharged and satisfied to Buyer’s satisfaction during the Escrow Term
and (y) a court of competent jurisdiction has resolved any disputes brought
before it by Buyer and Seller (or Escrow Agent on its own) and all orders of
such court have been complied with, the amount of Escrow Funds remaining with
Escrow Agent at the expiration of the Escrow Term, together with any interest
accrued thereon, shall (subject to the terms of this Agreement) be promptly
returned to Seller by Escrow Agent; provided, however, the return of any Escrow
Funds not shall terminate or relieve Seller of its unsatisfied post-closing
obligations, if any, to Buyer under the Contract.

          5. Reliance by Escrow Agent. In the performance of its duties
hereunder, Escrow Agent shall be entitled to rely upon any document, instrument
or signature purporting to be genuine and purporting to be signed by and of the
parties hereto or their successors unless Escrow Agent has actual knowledge to
the contrary. Escrow Agent may assume that any person purporting to give any
notice or instructions in accordance with the provisions hereof has been duly
authorized to do so.

          6. Liabilities of Escrow Agent.

                    a. Escrow Agent shall not be liable for any error of
judgment, or any action taken or omitted to be taken hereunder, except in the
case of Escrow Agent’s willful, bad faith misconduct or negligence. Escrow Agent
shall be entitled to consult with counsel of its choosing

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

and shall not be liable for any action suffered or omitted in accordance with
the advice of such counsel.

                    b. In addition to the indemnities provided below, Escrow
Agent shall not be liable for, and each of the parties hereto jointly and
severally hereby indemnify and agree to save harmless and reimburse Escrow Agent
from and against all loss, cost, liability, damage and expense, including
outside counsel fees in connection with its acceptance of, or the performance of
its duties and obligations under, this Agreement, including the costs and
expenses of defending against any claim arising hereunder unless the same are
caused by the willful, bad faith misconduct or negligence of Escrow Agent.

                    c. Escrow Agent shall not be bound or in any way affected by
any notice of any modification or cancellation of this Agreement, or of any fact
or circumstance affecting or alleged to affect rights or liabilities hereunder
other than as is herein set forth, or affecting or alleged to affect the rights
and liabilities of any other person, unless notice of the same is delivered to
Escrow Agent in writing, signed by the proper parties to Escrow Agent’s
satisfaction and, in the case of modification, unless such modification shall be
approved by Escrow Agent in writing.

          7. Resignation or Termination of Escrow Agent.

                    a. Escrow Agent and any successor escrow agent, as the case
may be, may resign his or its duties and be discharged from all obligations
hereunder at any time upon giving five (5) business days’ prior written notice
to each of the parties hereto. The parties hereto will thereupon jointly
designate a successor escrow agent hereunder within said five (5) business day
period to whom the Escrow Funds shall be delivered. In default of such a joint
designation of a successor escrow agent, Escrow Agent shall retain the Escrow
Funds as custodian thereof until otherwise directed by the parties hereto,
jointly, or until the Escrow Funds are released in accordance with subsection
7.b. below, in each case, without liability or responsibility.

                    b. Anything in this Agreement to the contrary
notwithstanding, (i) Escrow Agent, on notice to the parties hereto, may take
such other steps as the Escrow Agent may elect in order to terminate its duties
as Escrow Agent hereunder, including, but not limited to, the deposit of the
Escrow Funds with a court of competent jurisdiction in the Commonwealth of
Virginia and the commencement of an action of interpleaders, and (ii) in the
event of litigation between any of the parties with respect to the Escrow Funds,
Escrow Agent may deposit the Escrow Funds with the court in which said
litigation is pending and, in any such event, Escrow Agent shall be relieved and
discharged from any liability or responsibility to the parties hereto. Escrow
Agent shall not be under any obligation to take any legal action in connection
with this Agreement or its enforcement or to appear in, prosecute or defend any
action or legal proceeding which, in the opinion of Escrow Agent, would or might
involve Escrow Agent in any cost, expense, loss, damage or liability, unless and
as often as requested, Escrow Agent shall be furnished with security and
indemnity satisfactory to Escrow Agent against all such costs, expenses
(including attorney’s fees), losses, damages and liabilities.

          8. Notices. All notices required herein shall be deemed to have been
validly given, as applicable: (i) if given by telecopy, when the telecopy is
transmitted to the party’s telecopy

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

number specified below and confirmation of complete receipt is received by the
transmitting party during normal business hours or on the next business day if
not confirmed during normal business hours, (ii) if hand delivered to a party
against receipted copy, when the copy of the notice is receipted or rejected,
(iii) if given by certified mail, return receipt requested, postage prepaid, two
(2) business days after it is posted with the U.S. Postal Service at the address
of the party specified below or (iv) on the next delivery day after such notices
are sent by recognized and reputable commercial overnight delivery service
marked for next day delivery, return receipt requested or similarly
acknowledged:

 

 

If addressed to Seller, to:

 

 

 

 

c/o White Lodging Services Corporation

 

701 East 83rd Avenue

 

Merrillville, Indiana 46410

 

Attn: Lawrence E. Burnell

 

Chief Operating Officer

 

Fax No.: (219) 685-6114

 

 

 

With a copy to:

 

 

 

Carol Ann Bowman

 

1000 East 80th Place, Suite 700 North

 

Merrillville, Indiana 46410

 

Fax No.: (210) 680-4226

 

 

If addressed to Buyer, to:

 

Apple Ten Hospitality Ownership, Inc.

 

814 East Main Street

 

Richmond, Virginia 23219

 

Attn: Justin Knight

 

Fax No.: (804) 344-8129

 

 

 

with a copy to:

 

 

 

Apple Ten Hospitality Ownership, Inc.

 

814 East Main Street

 

Richmond, Virginia 23219

 

Attn: Legal Dept.

 

Fax No.: (804) 727-6349

 

 

If addressed to Escrow Agent, to:

 

 

 

Chicago Title Company

 

5501 LBJ Freeway, Suite 200

 

Dallas, Texas 75240

 

Attn: Debby Moore

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

 

 

 

Fax No.: (214) 570-0210

or such other address or addresses as may be expressly designated by any party
by notice given in accordance with the foregoing provisions and actually
received by the party to whom addressed.

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

          10. Binding Effect; Assignment; Amendments; Survival. The covenants,
conditions and agreements contained in this Agreement shall bind and inure to
the benefit of each of the parties hereto and their respective successors and
assigns. This Agreement may only be amended by a written modification executed
by Buyer and Seller. This Agreement shall survive Closing of the sale of the
Property and delivery of the Deed and shall not be in limitation or in lieu of,
the other rights and remedies available to Buyer under the Contract.

[Signatures on Next Page]

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          IN WITNESS WHEREOF the parties have executed this Agreement as of the
day and year first above written.

 

 

 

 

 

 

SELLER:

 

 

KRG/WHITE LS HOTEL, LLC

 

 

By: White Lodging Services Corporation, Manager

 

 

 

 

 

By:

 

 

 

 

 

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

 

 

 

 

Lawrence E. Burnell
Chief Operating Officer

 

 

 

 

 

 

BUYER:

 

 

 

 

 

 

APPLE TEN HOSPITALITY OWNERSHIP, INC.

 

 

By:

 

 

 

 

 

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

 

 

 

Name:

 

 

 

 

 

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

 

 

 

Title:

 

 

 

 

 

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

 

 

 

 

 

 

ESCROW AGENT:

 

 

 

 

 

 

CHICAGO TITLE COMPANY

 

 

 

 

 

 

 

By:

 

 

 

 

 

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

 

 

 

Name:

 

 

 

 

 

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

 

 

 

Title:

 

 

 

 

 

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

 

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EXHIBIT F

CONSENTS AND APPROVALS

A. Consents Under Hotel Contracts1

Marriott International, Inc. (with respect to rights under the Existing
Franchise Agreement)

University of Notre Dame, Du Lac (relating to the Corrective Limited Warranty
Deed dated December 20, 2008, but effective May 20, 2008)

World Cinema, Inc. (relating to the 4/30/2010 agreement shown on Exhibit G)

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

1 A number of the agreements identified on Exhibit H are in the name of the
Manager. Some of these agreements take the form of “Master Agreements” affecting
multiple properties, including the Hotel. Other agreements are specifically
applicable to the Hotel (together with the Master Agreements, ”Manager
Agreements”). Given that Manager will continue as manager of the
Hotel after Closing, and that the Hotel may remain subject to the Manager
Agreements, Seller and Manager will jointly determine (i) whether the Manager
Agreements will continue to be effective following Closing without further
action on behalf of the Manager, Seller or Buyer and (ii) to the extent consent
or approvals are necessary to ensure that the Manager Agreements remain
effective, the Seller or Manager, as necessary, will make a good faith effort to
obtain the necessary consent or approvals.

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

EXHIBIT G

PROPERTY AGREEMENTS

 

 

 

 

 

Name

 

Dated

 

Between

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

 

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

 

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

SESAC Hotel, Motel, and Resort Group Performance License

 

1/1/2009

 

White Lodging Services Corporation (master agreement) and SESAC, LLC

Newmarket International, Inc. Software License Agreement

 

5/30/2002

 

White Lodging Services Corporation (master agreement) and Newmarket
International, Inc.

Commercial Sales Proposal/Agreement

 

11/23/2009

 

White Lodging and ADT Security Services, Inc.

Satellite Programming License and Equipment Lease

 

4/30/2010

 

KRG/White LS Hotel, LLC and World Cinema, Inc.

Guest-Tek IP Systems and Services Ordering Agreement

 

4/28/2008

 

White Lodging Services Corporation and Guest-Tek Interactive Entertainment, LTD.

Digital Signage System License and Maintenance Agreement

 

7/7/2010

 

White Lodging and Four Winds Interactive, LLC.

Maintenance Agreement

 

4/23/2010

 

White Lodging Services - Notre Dame Fairfield Inn and Suites and OCE Imagistics

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

EXHIBIT H

PENDING CLAIMS OR LITIGATION

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EXHIBIT I

South Bend, Indiana – FFIS

MANAGEMENT AGREEMENT

by and between

WHITE LODGING SERVICES CORPORATION

as “MANAGER”

and

APPLE TEN HOSPITALITY MANAGEMENT, INC.

as “OWNER”

Dated as of _____________ __, 2011

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

TABLE OF CONTENTS

 

 

 

 

 

 

 

Page

 

ARTICLE I

APPOINTMENT OF MANAGER

1

 

1.01.

Appointment

1

 

1.02.

Management of the Hotel

1

 

1.03.

Employees

3

 

1.04.

Owner’s Right to Inspect

3

 

1.05.

Regular Meetings

4

 

1.06.

Franchise Agreement

4

 

1.07.

Limitations on Manager’s Authority

4

 

1.08.

Representations and Warranties of Manager

4

 

1.09.

Representations and Warranties of Owner

5

ARTICLE II

TERM

5

 

2.01.

Term

5

 

2.02.

 

5

 

2.03.

Performance Termination

6

ARTICLE III

COMPENSATION OF MANAGER

6

 

3.01.

Management Fees

6

 

3.02.

Operating Profit

7

ARTICLE IV

ACCOUNTING, BOOKKEEPING AND BANK ACCOUNTS

7

 

4.01.

Accounting, Distributions and Annual Reconciliation

7

 

4.02.

Books and Records

8

 

4.03.

Accounts, Expenditures

9

 

4.04.

Annual Operating Projection

9

 

4.05.

Working Capital

10

 

4.06.

Fixed Asset Supplies

10

 

4.07.

Real Estate and Personal Property Taxes

10

 

4.08.

Sarbanes-Oxley Certification

11

ARTICLE V

REPAIRS, MAINTENANCE AND REPLACEMENTS

12

 

5.01.

Repairs and Maintenance to be Paid from Gross Revenues

12

 

5.02.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve

13

ARTICLE VI

INSURANCE

14

 

6.01.

Property Insurance

14

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

TABLE OF CONTENTS (cont’d)

 

 

 

 

 

 

 

Page

 

 

6.02.

Operational Insurance

15

 

6.03.

Coverage

15

 

6.04.

Costs and Expenses

16

 

6.05.

Owner’s Right to Provide Insurance

16

ARTICLE VII

DAMAGE AND CONDEMNATION

16

 

7.01.

Damage and Repair

16

 

7.02.

Condemnation

17

ARTICLE VIII

MORTGAGES AND OTHER LIENS

17

 

8.01.

Subordination to Mortgage

17

 

8.02.

Amendments Requested by Mortgagee

18

 

8.03.

Liens; Credit

18

ARTICLE IX

EVENTS OF DEFAULTS

19

 

9.01.

Events of Default

19

 

9.02.

Remedies

20

 

9.03.

Additional Remedies

20

ARTICLE X

ASSIGNMENT AND SALE

20

 

10.01.

Assignment

20

 

10.02.

Sale of the Hotel

21

ARTICLE XI

MISCELLANEOUS

21

 

11.01.

Consents and Cooperation

21

 

11.02.

Relationship

22

 

11.03.

Applicable Law; Jurisdiction

22

 

11.04.

Recordation

23

 

11.05.

Headings

23

 

11.06.

Notices

23

 

11.07.

Environmental Matters

23

 

11.08.

Confidentiality; Projections

24

 

11.09.

Indemnification

25

 

11.10.

Actions to be Taken Upon Termination

25

 

11.11.

Waiver

27

 

11.12.

Partial Invalidity

27

 

11.13.

Survival

27

ii

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TABLE OF CONTENTS (cont’d)

 

 

 

 

 

 

 

 

 

Page

 

 

11.14.

Negotiation of Agreement

27

 

11.15.

Estoppel Certificates

27

 

11.16.

Affiliates

28

 

11.17.

Blocked Persons or Entities

28

 

11.18.

Restrictions on Operating the Hotel in Accordance with the Franchise Agreement

28

 

11.19.

Counterparts

28

 

11.20.

Entire Agreement

29

 

11.21.

Operation of Other Hotels

29

 

11.22.

Waiver of Jury Trial and Punitive Damages

29

ARTICLE XII

DEFINITION OF TERMS

29

 

12.01.

Definition of Terms

29

ARTICLE XIII

SUPPLEMENTAL PROVISIONS

38

Schedule 1

-

Hotel Specific Data

 

Schedule 2

-

Supplemental Provisions

 

 

Exhibit A

-

Legal Description of Site

 

iii

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

MANAGEMENT AGREEMENT

          THIS MANAGEMENT AGREEMENT (“Agreement”) is made as of ____________ __,
2011 (the “Agreement Date”) and effective as of the date identified as the
“Effective Date” in Schedule 1 (“Effective Date”), by APPLE TEN HOSPITALITY
MANAGEMENT, INC., a Virginia corporation (“Owner”), and WHITE LODGING SERVICES
CORPORATION, an Indiana corporation (“Manager”).

RECITALS:

          A. Owner is the holder of a leasehold interest in the parcel of real
property described on Exhibit A attached to this Agreement and incorporated
herein and as further identified and described in the “Description of the Hotel”
in Schedule 1 (the “Site”) by virtue of that certain TRS Lease Agreement
identified in Schedule 1. The Site is improved as indicated in the “Description
of the Hotel” in Schedule 1 (the “Improvements”). The Site and the Improvements,
in addition to certain other rights, improvements, and personal property as more
particularly described in the definition of “Hotel” in Section 12.01 hereof, are
collectively referred to as the “Hotel”.

          B. Owner desires to engage Manager to manage and operate the
hereinafter described hotel, and Manager desires to accept such engagement, upon
the terms and conditions set forth in this Agreement.

          C. All capitalized terms used in this Agreement shall have the meaning
set forth in Section 12.01 hereof.

          NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Owner and Manager agree as follows:

ARTICLE I
APPOINTMENT OF MANAGER

1.01. Appointment.

          Owner hereby appoints and employs Manager as an independent contractor
as provided in this Agreement to supervise, direct and control the management
and operation of the Hotel throughout the Term. Manager accepts such appointment
and agrees to manage the Hotel during the Term in accordance with the terms and
conditions of this Agreement.

1.02. Management of the Hotel.

          A. Manager shall manage the Hotel, including, without limitation,
performance of the following functions, at Owner’s expense as provided in this
Agreement and in all events subject to the availability of Owner funds, in
accordance with Prudent Industry Practices, the provisions of this Agreement and
all standards imposed by the Franchise Agreement:

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

               1. Recruit, employ, supervise, direct and discharge the employees
at the Hotel and maintain adequate staff, to carry out its duties under this
Agreement.

               2. Establish prices, rates and charges for services provided in
the Hotel, including Guest Room rates.

               3. Establish and revise, as necessary, administrative policies
and procedures, including policies and procedure for the control of revenue and
expenditures, for the purchasing of supplies and services, for the control of
credit and for the scheduling of maintenance, and verify that the foregoing
procedures are operating in a sound manner.

               4. Make payments on accounts payable and handle collection of
accounts receivable.

               5. Procure all Inventories and Fixed Asset Supplies.

               6. Prepare and deliver Accounting Period Statements, Annual
Operating Statements, estimates on building repairs and on equipment repairs and
replacements and such other information as is required by this Agreement.

               7. Plan, execute and supervise repairs and maintenance at the
Hotel.

               8. Obtain the insurance required to be obtained by Manager
pursuant to Article VI of this Agreement and obtain or cause to be obtained all
risk management services related thereto, subject to the provisions of Section
6.05.

               9. Obtain and keep in full force and effect, either in its own
name or in Owner’s or Owner’s Affiliate’s name, or in Manager and Owner’s or
Owner’s Affiliates name, as may be required by applicable law, any and all
licenses and permits to the extent same is within the control of Manager (or, if
same is not within the control of Manager, Manager shall use all due diligence
and best efforts to obtain and keep same in full force and effect).

               10. Subject to the terms of this Agreement, execute reasonable
subordination and non disturbance agreements, estoppel certificates and other
documentation required by any purchaser or mortgagee and reasonably cooperate
(provided that Manager shall not be obligated to enter into any amendments of
this Agreement and such purchaser or lender agrees to recognize the rights on
Manager under and as provided in this Agreement) with Owner or Landlord in any
attempt(s) by Owner or Landlord to effectuate a Sale of the Hotel or to obtain a
Mortgage. No financing for the Hotel will limit or impair the ability of Manager
to operate the Hotel and receive payments due Manager under this Agreement or
modify the terms and conditions or this Agreement without Manager’s prior
written approval.

               11. Arrange for and supervise public relations and advertising
with the concurrence of Owner and prepare marketing plans.

               12. Manage and operate the Hotel at all times in compliance with
the Franchise Agreement, including (without limitation) the Manual (as defined
in the Franchise Agreement) and Prudent Industry Practices.

2

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

          B. Subject to the terms of this Agreement and the Franchise Agreement,
the operation of the Hotel shall be under the exclusive supervision and control
of Manager, and subject to the availability of Owner funds, Manager shall be
responsible for the proper and efficient operation of the Hotel. In fulfilling
its obligations under this Agreement, Manager will act as a reasonable, prudent
operator of the Hotel, having regard for the status of the Hotel, operating the
Hotel in accordance with Prudent Industry Practices and at all times maintaining
and complying with all standards imposed by the Franchise Agreement, and subject
to the foregoing and all other terms and conditions of this Agreement, shall
have discretion free from interference, interruption or disturbance with respect
to the following: charges, terms and conditions for Guest Rooms and commercial
space; credit policies and services provided by the Hotel; food and beverage
services; employment policies; granting of leases, subleases, licenses and
concessions for shops and business within the Hotel, provided that the term of
any such lease, sublease, license or concession shall not exceed the lesser of
one (1) year or the Term without the prior written approval of Owner; receipt,
holding and disbursement of funds; maintenance of bank accounts; procurement of
Inventories, supplies and services; promotion and publicity; payment of costs
and expenses as are specifically provided for in this Agreement or are otherwise
reasonably necessary for the proper and efficient operation of the Hotel; and,
generally, all activities necessary for operation of the Hotel. With respect to
all Material Management Decisions, Manager shall consult with Owner in advance
of making any such decisions. The term “Material Management Decisions” means a
decision to be made in connection with any expenditure of more than $10,000 for
each item or $50,000 in the aggregate for all such items in any Fiscal Year if
such expenditure is not included in the approved Annual Operating Projection for
such Fiscal Year or if such expenditure would result in an increase in the
overall Annual Operating Projection.

          C. Subject to the Annual Operating Projections, Manager will use
reasonable efforts to comply with all applicable Legal Requirements (except for
certain Legal Requirements which are Owner’s responsibility under this Section
1.02 and Section 5.03 hereof). Manager shall exert reasonable efforts to comply
with and abide by all applicable Legal Requirements pertaining to its operation
of the Hotel at Owner’s expense as provided in this Agreement and subject to the
availability of Owner funds. Any of Landlord, Owner or Manager shall have the
right, but not the obligation, in its reasonable discretion, to contest or
oppose, by appropriate proceedings, any such Legal Requirements. The reasonable
expenses of any such contest of a Legal Requirement shall be paid from Gross
Revenues as Deductions. Owner will comply with all applicable Legal Requirements
in connection with Owner’s responsibilities under this Agreement and in
connection with Owner’s actions as Owner of the Hotel. In the event Manager is
made aware of a violation of a Legal Requirement of which Manager did not have
prior knowledge, Manager, upon becoming aware of such violation, shall take
appropriate actions to comply with the Legal Requirement in question, subject to
the availability of funds for such purpose in accordance with the Annual
Operating Projections. Absent the existence of funds for such purpose, as set
forth in the Annual Operating Projections, Owner shall advance funds for such
purpose within thirty (30) days after receipt of a request therefor from Manager
(or such shorter period of time as may be reasonably required, as set forth in
Manager’s notice to Owner).

          D. Except as otherwise expressly set forth in this Agreement, the
costs and expenses of managing and operating the Hotel in accordance with this
Section 1.02 shall be Deductions and shall be paid for from Hotel revenue and
funds provided by Owner as necessary.

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1.03. Employees.

          All personnel employed at the Hotel shall at all times be the
employees of Manager and not the employees of Owner. Manager shall have
discretion with respect to all personnel employed at the Hotel, including,
without limitation, decisions regarding hiring, promoting, transferring,
compensating, supervising, terminating, directing and training all employees at
the Hotel, and, generally, establishing and maintaining all policies relating to
employment; provided, however, that (i) Owner shall have the right to reasonably
approve the hiring or termination of the persons who occupy the position of
general manager for the Hotel (the “General Manager”) and (ii) Manager shall not
negotiate or enter into any collective bargaining or other labor agreement with
employees or with any organization representing or claiming to represent
employees without Owner’s prior consent. No person shall be given gratuitous
accommodations or services without prior joint approval of Owner and Manager
except in accordance with written policies agreed upon by Owner and Manager.
Manager shall reimburse Owner for the costs (including relocation costs) of
hiring and training General Managers who are employed at the Hotel for less than
one (1) year and are transferred or relocated, unless the transfer or relocation
is requested by Owner, without cause. Manager shall indemnify, defend and hold
Owner harmless from any and all claims, damages, liabilities, obligations and
costs (including reasonable attorneys’ fees) arising from any gross negligence,
theft, fraud or gross misconduct of the General Manager or an officer of Manager
at the vice president level or above.

1.04. Owner’s Right to Inspect.

          Owner, its representatives, employees and agents shall have access to
the Hotel at any and all reasonable times for the purpose of inspection,
exercising any of its rights under this Agreement or showing the Hotel to
prospective purchasers, tenants or Mortgagees and at any time in case of an
emergency.

1.05. Regular Meetings.

          At Owner’s request, Owner and Manager shall have meetings at the Hotel
and at mutually convenient times. Manager shall be represented at such meetings
by the General Manager of the Hotel and such other personnel as the Manager
and/or Owner may deem appropriate. The purpose of the meetings shall be, inter
alia, to discuss the performance of the Hotel and other related issues,
including any variations from the Annual Operating Projection.

1.06. Franchise Agreement.

          Subject to the availability of funds, Manager shall take such actions
consistent with this Agreement as are necessary for the Hotel to comply with the
Franchise Agreement and to operate the Hotel so that the Hotel will at all times
comply with the Franchise Agreement. Owner covenants and agrees not to take any
actions in violation of, which would result in the violation of, or which would
cause Manager to violate the terms of, the Franchise Agreement and shall perform
in particular the obligations related to the management or operation of the
Hotel imposed upon licensee under the Franchise Agreement. Manager shall send
promptly to Owner any and all notices that Manager receives from the Franchisor
with respect to the Hotel or the Franchise Agreement and shall keep Owner
informed with respect to all material matters that

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come to Manager’s attention under the Franchise Agreement. Notwithstanding the
foregoing, Manager shall not have the right to grant any consent or approval
reserved to the Owner as licensee under the Franchise Agreement or to make any
agreement on behalf of Owner as licensee under the Franchise Agreement. Owner
further covenants and agrees that it will not amend the Franchise Agreement in a
manner that would adversely impact Manager’s ability to manage the Hotel in
accordance with Prudent Industry Practices or adversely impact Manager’s rights
under this Agreement without the prior written consent of Manager. Owner shall
have the right to terminate the Franchise Agreement and enter into a different
Franchise Agreement, from time to time. Any costs, fees or expenses associated
with such termination shall be paid by Owner from its own funds and shall not be
paid out of Gross Revenues and shall not be Deductions.

1.07. Limitations on Manager’s Authority.

          Manager shall not, without Owner’s prior approval, except as provided
for in the Annual Operating Projection approved by Owner, enter into any FF&E
Lease if (i) the fair market value of the FF&E subject to such FF&E Lease at the
time of entering into such FF&E Lease exceeds Twenty-Five Thousand Dollars
($25,000); (ii) the fair market value of the FF&E subject to all FF&E Leases at
the time of entering into such FF&E Lease exceeds Fifty Thousand Dollars
($50,000) in the aggregate; (iii) the FF&E subject to such FF&E Lease is FF&E
that is not, consistent with Prudent Industry Practices, customarily leased;
(iv) such FF&E Lease is with an Affiliate of Manager or is on payment terms
(including the amounts and schedule of payments) that would be materially more
favorable to the lessor thereof than payment terms customary in an arm’s length
transaction for leases of similar FF&E; or (v) such FF&E Lease is not terminable
by Owner upon thirty (30) days’ notice.

1.08. Representations and Warranties of Manager.

          Manager hereby represents and warrants to Owner as follows:

          A. Authority. Manager is a corporation, duly formed and validly
existing under the laws of the State of Indiana and is duly authorized to
transact business and in good standing in the state in which the Hotel is
located. Manager has obtained all necessary consents to enter into and perform
this Agreement and is fully authorized to enter into and perform its obligations
under this Agreement. All known required consents or approvals of any person,
entity or governmental authority were obtained for the execution, delivery or
performance by Manager of this Agreement, and this Agreement is hereby binding
and enforceable against Manager.

          B. No Conflicts. Neither the execution nor the performance of, or
compliance with, this Agreement by Manager has resulted, or will result, in any
violation of, or default under, or acceleration of, any obligation under its
existing corporate charter, certificate of incorporation, bylaw, or other
organizational documents of Manager or under any, mortgage indenture, lien,
agreement, promissory note, contract, or permit or any judgment, decree, order,
restrictive covenant, statute, rule or regulation, to which Manager is a party.

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          C. Bankruptcy. Neither Manager nor any of its Affiliates is insolvent
or the subject of any bankruptcy proceeding, receivership proceeding or other
insolvency, dissolution, reorganization or similar proceeding.

1.09. Representations and Warranties of Owner.

          Owner hereby represents and warrants to Manager that Owner is a
corporation duly formed, validly existing and in good standing in the state of
Virginia and in the state in which the Hotel is located. Owner has obtained all
necessary consents to enter into and perform this Agreement and is fully
authorized to enter into and perform its obligations under this Agreement. No
consent or approval of any person, entity or governmental authority is required
for the execution, delivery or performance by Owner of this Agreement, and this
Agreement is hereby binding and enforceable against Owner. Neither the execution
nor the performance of, or compliance with, this Agreement by Owner has
resulted, or will result, in any violation of, or default under, or acceleration
of, any obligation under any existing corporate charter, certificate of
incorporation, bylaw, articles of organization, limited liability company
agreement or regulations, partnership agreement or other organizational
documents of Owner or under any, mortgage indenture, lien, agreement, promissory
note, contract, or permit or any judgment, decree, order, restrictive covenant,
statute, rule or regulation, applicable to Owner. Owner is not insolvent or the
subject of any bankruptcy proceeding, receivership proceeding or other
insolvency, dissolution, reorganization or similar proceeding.

ARTICLE II
TERM

2.01. Term.

          The “Initial Term” of this Agreement shall begin on the Effective Date
and shall continue until the expiration date identified in Schedule 1. The
Initial Term of this Agreement may be extended for the extension terms provided
in Schedule 1 (each an “Extension Term”) upon the following terms and
conditions: (i) Owner or Manager shall give written notice to the other of its
desire to extend (“Extension Notice”) not less than one hundred eighty (180)
days nor more than two hundred seventy (270) days prior to the end of the
Initial Term or first Extension Term, as applicable, (ii) Owner and Manager
shall, if at all, mutually agree to renew this Agreement on the same terms and
conditions, and (iii) at the end of the Initial Term or the immediately
preceding Extension Term, as applicable, no Event of Default by the extension
requesting party shall have occurred and be continuing beyond any applicable
cure period under this Agreement, and any then-existing event of Event of
Default shall have been cured within the applicable cure period.

2.02. Performance Termination.

          A. Subject to the provisions of Section 2.02.B and Section 2.02.C
below, Owner shall have the option to terminate this Agreement after any
Performance Termination Period, as defined in Schedule 1, with respect to which
both of the following occurs:

                    1. Gross Operating Profit determined in accordance with the
Uniform System of Accounts per available guest room at the Hotel is not
comparable to that obtained per

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available guest room by well managed hotels of similar size, services,
facilities and rate structure as determined by an Expert, which shall mean an
individual employed by an independent, nationally recognized hotel consulting
firm who is qualified to resolve the issue in question, having at least ten (10)
years experience in the subject matters in question, and the Expert shall be
appointed in each instance by agreement of Owner and Manager or, failing
agreement, Owner and Manager each shall select one (1) such individual and the
two (2) individuals so selected shall select another qualified individual to be
the Expert, and Owner and Manager each agrees that it shall not appoint an
individual as an Expert if the individual is, as of the date of appointment or
within three (3) years prior to such date, employed by such party, either
directly or as a consultant, in connection with any matter other than as an
Expert; and provided, however, that for the purposes of determining whether
Owner has the option to terminate this Agreement pursuant to this paragraph
2.02.A.1, to the extent Gross Operating Profit for the Hotel was materially and
quantifiably affected by Force Majeure affecting the Hotel, the Gross Operating
Profit shall be equitably adjusted to an amount reasonably projected absent such
Force Majeure, such adjustment to be substantiated by such evidence and
reasonably detailed calculations provided by Manager to Owner (“Test Prong 1”);
and

                    2. The Revenue Index of the Hotel during the Performance
Termination Period is less than the Revenue Index Threshold for such Performance
Termination Period (“Test Prong 2”).

          B. Owner shall exercise such option to terminate by serving written
notice thereof on Manager no later than sixty (60) days after Owner’s receipt of
the final Accounting Period Statement for the Performance Termination Period,
and this Agreement shall terminate as of the end of the second (2nd) full
Accounting Period following the date on which Manager receives the
above-described notice from Owner. Notwithstanding anything contained herein to
the contrary, Manager at its option may elect to void Termination pursuant to
Section 2.02.A. for the then-current Performance Termination Period (but not for
any future Performance Termination Period) by notifying Owner within ten (10)
days after Manager’s receipt of such notice from Owner; provided, however, that
the amount that was sufficient to have avoided the failure of the test in
Section 2.02.A.1 (the “Deficit Amount”) shall be made up to Owner by either (i)
Manager paying the Deficit Amount to Owner within such ten (10) day period or
(ii) offsetting the Deficit Amount against any Base Management Fees, Incentive
Management Fees and/or other amounts or reimbursements payable to Manager under
this Agreement, as Owner may direct. Owner’s exercise of its termination rights
hereunder shall not be effective if the failure of the test is due to Owner’s
default of its obligations under this Agreement.

          C. Notwithstanding the provisions of Section 2.02.A above, in the
event Manager assigns its interest in this Agreement as part of a Non-Affiliate
Sale contemplated in Section 10.01 hereof, the performance test shall no longer
be a two prong test, but rather, Owner shall have the right to terminate this
Agreement (subject to the continuing effect of Section 2.02.B) for a failure of
the test if Manager fails to meet either Test Prong 1 or Test Prong 2 during the
Performance Termination Period in question.

          D. Owner shall have the option to terminate this Agreement in the
event SALT or GSS service scores for the Hotel (each, the “Guest Satisfaction
Score”), as applicable (or any equivalent successor service scoring program
instituted by the franchise if SALT or GSS, as

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applicable is no longer used) is in the bottom fifteen (15%) of SALT or GSS
service scores for all hotels operating under the brand applicable to the Hotel,
regardless of ownership, for a twelve (12) consecutive month period, and the
Guest Satisfaction Scores for the Hotel are not related to the physical
condition of the Hotel, the result of inadequate funding provided by Owner or
Owner’s failure to comply with the terms of the Franchise Agreement. Such
termination right shall be exercisable by delivery of written notice by Owner to
Manager, which notice shall identify a date which is six (6) months after the
date of the notice, and which termination shall only be effective if Manager
fails to raise the average Guest Satisfaction Score for the Hotel above the 15%
threshold for such six month period and any continued failure to raise the score
above the 15% threshold is not the result of the physical condition of the
Hotel, the result of inadequate funding provided by Owner or Owner’s failure to
comply with the terms of the Franchise Agreement.

          E. Owner’s failure to exercise its right to terminate this Agreement
pursuant to this Section 2.03 shall not be deemed an estoppel or waiver of
Owner’s right to terminate this Agreement with respect to any subsequent event
or circumstance that could give Owner the right to terminate hereunder.

ARTICLE III
COMPENSATION OF MANAGER

3.01. Management Fees.

          In consideration of services to be performed during the Term, Manager
shall be paid the sum of the following as its management fees:

          A. the Base Management Fee, which shall be retained by Manager from
Gross Revenues except as otherwise provided in this Agreement; plus

          B. the Incentive Management Fee as provided in Section 3.02 below.

3.02. Operating Profit.

          A. Operating Profit, if any, shall be distributed to Owner and to
Manager in the following order of priority, except as otherwise provided in this
Agreement:

                    1. An amount up to the maximum amount of Owner’s Priority
shall be paid to Owner;

                    2. The Incentive Management Fee shall be paid to Manager;
and

                    3. Any remaining balance of Operating Profit shall be paid
to Owner.

          Owner’s Priority shall not be cumulative from one Fiscal Year to the
next. Notwithstanding anything in this Agreement to the contrary, Manager
acknowledges and agrees that Incentive Management Fees are only payable annually
within thirty (30) days after Owner’s receipt of the Annual Operating Statement;
provided however, that any Incentive Management Fee earned, but not then payable
to Manager pursuant to the preceding clause of this sentence,

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shall be held by Manager in the Hotel Operating Account and not distributed to
Owner pursuant to Section 3.02.A.3 above.

          B. To the extent of available Operating Profit with respect to each
Accounting Period, Manager shall distribute a prorated portion of the Owner’s
Priority (including any accrued and unpaid Owner’s Priority) to Owner for each
such Accounting Period in accordance with Section 4.01.

ARTICLE IV
ACCOUNTING, BOOKKEEPING AND BANK ACCOUNTS

4.01. Accounting, Distributions and Annual Reconciliation.

          A. Within twenty (20) days after the close of each Accounting Period,
Manager shall deliver an interim accounting (the “Accounting Period Statement”)
to Owner, prepared in accordance with the Uniform System of Accounts, showing
Gross Revenues, Deductions, Operating Profit and applications and distributions
thereof for the preceding Accounting Period and any other information reasonably
requested by Owner. Manager shall transfer to Owner, with each Accounting Period
Statement, any interim amounts due Owner, subject to Working Capital needs, and
shall retain any interim amounts payable to Manager pursuant to the terms of
this Agreement.

          B. Calculations and payments of the Incentive Management Fee, the Base
Management Fee and distributions of Operating Profit made with respect to each
Accounting Period shall be accounted for cumulatively within a Fiscal Year, but
shall not be cumulative from one Fiscal Year to the next, except as otherwise
provided herein. Within the earlier of either (i) sixty days after the end of
each Fiscal Year or (ii) the SEC Filing Period, Manager shall deliver to Owner a
statement (the “Annual Operating Statement”) in reasonable detail summarizing
the operations of the Hotel for the immediately preceding Fiscal Year and a
certificate of Manager’s chief accounting officer certifying that, to the best
of his or her knowledge, such Annual Operating Statement is true and correct.
Subject to Owner’s right to audit provided for in this Agreement and subject to
such Annual Operating Statement being in proper form and containing such
information as may be reasonably requested by Owner or otherwise agreed upon by
the parties, such Annual Operating Statement shall be deemed accepted by Owner
unless objected to within fifteen (15) Business Days after Owner’s receipt
thereof. In the event Owner objects to such Annual Operating Statement within
such fifteen (15) Business Day period, Manager shall have ten (10) days to
address Owner’s objections and provide Owner with a revised Annual Operating
Statement. The parties shall, within five (5) Business Days after Owner’s
receipt of the final Annual Operating Statement, make any adjustments, by cash
payment, in the amounts paid or retained for such Fiscal Year as are needed
because of the final figures set forth in such Annual Operating Statement. Such
Annual Operating Statement shall be controlling over the preceding Accounting
Period Statements.

          C. To the extent there is an Operating Loss for any Accounting Period,
additional funds in the amount of any such Operating Loss shall be provided by
Owner within thirty (30) days after Manager has delivered written notice thereof
to Owner. If Owner does not fund such Operating Loss within the thirty (30) day
time period, Manager shall have the right (without

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affecting Manager’s other remedies under this Agreement) to withdraw an amount
to cover such Operating Loss from future distributions of funds otherwise due to
Owner. Furthermore, if Owner fails to fund such deficiency upon request by
Manager, Manager may also withdraw interest upon such sum from the date payment
was due until repayment to Manager at a rate equal to the Prime Rate plus one
percent (1%) per annum.

4.02. Books and Records.

          Manager shall maintain books of control and account pertaining to
operations at the Hotel on the accrual basis and in all material respects in
accordance with the Uniform System of Accounts. Owner may at reasonable
intervals during Manager’s normal business hours examine such records. If Owner
desires to audit, examine or review the Annual Operating Statement, Owner shall
notify Manager in writing within sixty (60) days after receipt of such Annual
Operating Statement of its intention to audit. Owner shall use reasonable
efforts to complete such audit within one hundred twenty (120) days after
commencement thereof. If Owner does not make such an audit, then such Annual
Operating Statement shall be deemed to be conclusively accepted by Owner as
being correct, except in the event of manifest error or fraud by Manager. If any
audit by Owner discloses an understatement of any amounts due Owner, Manager
shall promptly pay Owner such amounts found to be due, plus interest thereon at
the Prime Rate plus one percent (1%) per annum from the date such amounts should
originally have been paid. If any audit discloses that Manager has not received
any amounts due it, Owner shall pay Manager such amounts, plus interest thereon
at the Prime Rate plus one percent (1%) per annum from the date such amounts
should originally have been paid. The cost of the audit shall be paid by Owner;
provided, however, Manager shall pay for such cost if such audit discloses an
underpayment to Owner for the Fiscal Year so audited of five percent (5%) or
more of the amount that should have been paid to Owner for such Fiscal Year. In
addition, if the Franchise Agreement requires Owner to pay interest and/or the
cost of an audit to the Franchisor on account of an understatement in reports
provided by Manager, Manager shall pay such interest and costs in accordance
with the Franchise Agreement without (either directly or indirectly) passing
such charges on to Owner, and also such amounts so paid by Manager shall be
Manager’s Liabilities.

4.03. Accounts, Expenditures.

          A. All funds derived from operation of the Hotel and Working Capital
shall be deposited by Manager in Owner’s bank accounts (the “Operating
Accounts”) established by Manager in a bank or banks designated by Manager with
the concurrence of Owner. Withdrawals by Manager from such Operating Accounts
shall be made solely by the General Manager or the Assistant General Manager of
the Hotel, a senior officer of Manager or such other representatives of Manager
whose signatures have been authorized by Manager with the concurrence of Owner.
Reasonable petty cash funds shall be maintained at the Hotel.

          B. All payments made by Manager hereunder shall be made from the
Operating Accounts, Working Capital, petty cash funds or from the Reserve (in
accordance with Section 5.02). Manager shall not be required to make any advance
or payment with respect to the Hotel except out of such funds, and Manager shall
not be obligated to incur any liability or obligation with respect to the Hotel,
unless resulting from the gross negligence or gross misconduct of the

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General Manager or an officer of Manager at the vice president level or above
(each, “Manager’s Liability” and, collectively, “Manager’s Liabilities”).

          C. Debts and liabilities (other than Manager’s Liabilities) incurred
by Manager as a result of its operation and management of the Hotel pursuant to
the terms hereof, whether asserted before or after Termination, will be paid by
Owner to the extent funds are not available for that purpose from Gross
Revenues, and Owner shall indemnify, defend and hold Manager harmless from and
against all loss, costs, liability, and damage (including, without limitation,
reasonable attorneys’ fees and expenses) arising from Owner’s failure to pay or
perform such debts and liabilities. Manager shall pay, indemnify, defend and
hold Owner harmless from and against all Manager’s Liabilities and all loss,
costs, liability and damage (including, without limitation, reasonable
attorneys’ fees and expenses) arising from Manager’s failure to pay or perform
Manager’s Liabilities. The provisions of this Section 4.03.C shall survive
Termination.

4.04. Annual Operating Projection.

          Manager shall deliver to Owner for its review, at least thirty (30)
days prior to the beginning of each Fiscal Year after the first Fiscal Year
following the Effective Date, a preliminary draft of the business plan
(including a proposed budget) and a projection of the estimated Gross Revenues,
departmental profits, Deductions, Operating Profit and FF&E Leases for the
forthcoming Fiscal Year for the Hotel (the “Annual Operating Projection”) for
approval by Owner. Manager will consider in good faith suggestions made by Owner
with respect to the Annual Operating Projection and make modifications thereto
that are agreed upon by Owner and Manager. In the case of the Fiscal Year
beginning on the Effective Date, Manager and Owner have already agreed upon the
Annual Operating Projection for such Fiscal Year. Upon approval of the Annual
Operating Projection by Owner and Manager, Manager in good faith shall use
commercially reasonable efforts to adhere to such Annual Operating Projection.
In the event Owner and Manager are unable to agree upon the Annual Operating
Projection by the commencement of the Fiscal Year to which it relates, Manager
shall continue to manage the Hotel pursuant to the previously approved Annual
Operating Projection (including the amount of Working Capital) increased by the
lesser of (i) three percent (3%) or (ii) the percentage increase in the CPI,
until such time as Owner and Manager agree on an Annual Operating Projection for
the Fiscal Year. If Owner objects to any portion of the Proposed Annual
Operating Projection, Owner shall be specific as to category and any category
not specifically disapproved by Owner shall be deemed approved. Owner will
provide Manager with the specific reasons for its disapproval with Owner’s
written objection, and the parties will attempt to resolve, in good faith, any
objections within the thirty (30) day period following Owner’s objection.

4.05. Working Capital.

          The parties recognize that, as of the Effective Date, the level of
Working Capital funds, which shall be held in the Operating Accounts, is
reasonably believed to be reasonably sufficient for the operations of the Hotel,
subject at all times to seasonal differences and reasonably foreseeable changes
in circumstances after the Effective Date. Manager may from time to time during
the Term request that Owner advance additional funds in excess of those set
forth on Schedule 1 necessary to maintain Working Capital at levels reasonably
determined by Manager (with the concurrence of Owner acting in its reasonable
discretion, not to be unreasonably

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withheld, conditioned or delayed) to be necessary to satisfy the needs of the
Hotel. In the event Owner and Manager are unable to agree upon the amount of
additional Working Capital within thirty (30) days after Owner’s receipt of such
written notice from Manager, Manager may elect to terminate this Agreement. If
Owner and Manager agree in writing upon the need for an amount of additional
Working Capital and Owner does not so fund the additional Working Capital within
ten (10) Business Days after Owner’s receipt of a written request from Manager
to fund such agreed upon additional Working Capital, Manager shall have the
right to withdraw an amount equal to the funds agreed upon and requested for
additional Working Capital from future distributions of funds otherwise due
Owner. All funds so advanced for Working Capital shall be utilized by Manager
for the purposes of this Agreement. Subject to the foregoing, to the extent that
there is insufficient Available Cash Flow to do so, Owner agrees to replenish
the Working Capital to the level of the Working Capital required under Schedule
1 as may have been increased by agreement of the Parties, within ten (10)
Business Days after Owner’s receipt of each Accounting Period Statement. Upon
Termination, Manager shall immediately return the outstanding balance of the
Working Capital to Owner.

4.06. Fixed Asset Supplies.

          The parties further recognize that, as of the Effective Date, the
level of Fixed Asset Supplies is reasonably believed to be reasonably sufficient
for the operations of the Hotel, subject at all times to seasonal differences
and reasonably foreseeable changes in circumstances after the Effective Date.
Any additional funds which are necessary to maintain Fixed Asset Supplies at
levels determined by Manager (with the concurrence of Owner) to be necessary to
satisfy the needs of the Hotel, shall be paid from Gross Revenues as Deductions.
Fixed Asset Supplies shall remain the property of Owner throughout the term of
this Agreement and upon Termination.

4.07. Real Estate and Personal Property Taxes.

          A. Subject to the availability of funds and except as specifically set
forth in Section 4.07.B below, all real estate and personal property taxes,
levies, assessments (including special assessments (regardless of when due or
whether they are paid as a lump sum or in installments over time) imposed
because of facilities that are constructed by or on behalf of the assessing
jurisdiction (for example, roads, sidewalks, sewers, culverts, etc.) which
directly benefit the Hotel (regardless of whether or not they also benefit other
buildings)), “Impact Fees” (regardless of when due or whether they are paid as a
lump sum or in installments over time) which are required of Owner as a
condition to the issuance of zoning variances or building permits, and similar
charges on or relating to the Hotel (collectively, “Impositions”) during the
Term shall be paid by Manager from Gross Revenues, before any fine, penalty, or
interest is added thereto or lien placed upon the Hotel, unless payment thereof
is in good faith being contested and enforcement thereof is stayed. Any such
payments shall be Deductions in determining Operating Profit. Owner shall,
within five (5) days after receipt, furnish Manager with copies of official tax
bills and assessments which it may receive with respect to the Hotel. Either
Landlord or Owner may, and at Owner’s request Manager shall, initiate
proceedings to contest any negotiations or proceedings with respect to any
Imposition, and all reasonable costs of any such contest shall be paid from
Gross Revenues and shall be a Deduction in determining Operating Profit. Manager
shall, as part of its contest or negotiation of any Imposition, be

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entitled, on Owner’s behalf, to waive any applicable statute of limitations in
order to avoid paying the Imposition during the pendency of any proceedings or
negotiations with applicable authorities. Notwithstanding anything contained
herein to the contrary, at Owner’s option (i) Manager shall establish an escrow
account in the name of Owner in a bank or banks designated by Manager with the
concurrence of Owner and shall deposit monthly into such account from Gross
Revenues an amount that Manager reasonably estimates shall be sufficient to pay
the Impositions, in which case Manager shall pay the Impositions from funds in
the escrow account as and when the Impositions become due (and Owner shall
promptly deposit into the escrow account any deficiency if the estimated monthly
payments are not sufficient to pay all of the Impositions if there is
insufficient Available Cash Flow to do so) or (ii) the amounts that would
otherwise be deposited into such escrow account shall be included in the
Operating Profit, not deducted from Gross Revenues and shall be distributed in
cash to Owner along with the remainder of the Owner’s Priority. If Owner elects
to retain such amounts pursuant to clause (ii) above, Manager shall accrue such
amounts as a reserve on the accounting records of the Hotel, and Owner shall
fund the same as and when the Impositions become due, but such accrued and
unfunded amounts shall be deducted from Gross Revenues for purposes of
calculating the Incentive Management Fee. In addition, if any Mortgagee requires
the establishment of an escrow account with respect to the Impositions, Manager
shall comply with such requirements, and the amounts so escrowed shall be
applied to Impositions in accordance with such Mortgagee’s requirements. Any
amounts paid with respect to Impositions shall be Deductions.

          B. The word “Impositions” as used in this Agreement shall not include
any franchise, corporate, estate, inheritance, succession, capital levy or
transfer tax or other assessment or payment in lieu thereof imposed on Owner or
Manager respectively, or any income tax imposed on any income of Owner or
Manager respectively (including distributions to Owner or Manager pursuant to
Article III hereof), all of which shall be paid solely by Owner or Manager, as
applicable, not from Gross Revenues nor from the Reserve.

4.08. Sarbanes-Oxley Certification.

          A. Owner may, in connection with its or any of its Affiliate’s annual
or quarterly Securities and Exchange Commission reporting requirements (and in
any event no more than four (4) times in any Fiscal Year), request that Manager
deliver to Owner or its Affiliate a certificate from an accounting officer of
Manager, in a form approved by Owner’s accounting firm, certifying that, to his
or her knowledge, the information contained in the Accounting Period Statements
for the Accounting Periods contained within the applicable Fiscal Year or
quarter are true and correct in all material respects, subject to final
adjustment based on the annual review conducted by Manager in preparing the
Annual Operating Statement. Owner shall submit such request in writing, along
with the date by which such certificate is to be delivered, not less than five
(5) business days prior to the requested delivery date, and Manager shall
deliver the certificate by the requested date or, if later, within five (5)
Business Days after Manager’s receipt of Owner’s request.

          B. In connection with Owner’s or its Affiliates’ certifications under
Section 404 (“Section 404”) of the Sarbanes-Oxley Act of 2002, Owner or such
Affiliate shall have the right, at its option:

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                    1. Either (i) to require Manager to document its processes
and related internal controls for Owner or such Affiliate to use in its required
documentation under Section 404 or (ii) to have access to Manager’s books and
records relating to the Hotel (including, without limitation, reasonable access
to Manager’s premises) to document Manager’s processes and related internal
controls; and

                    2. Either (i) to require testing by Manager of the controls
identified in clause 1 above or (ii) to have access to Manager’s books and
records relating to the Hotel (including, without limitation, reasonable access
to Manager’s premises) to permit Owner or such Affiliate to test the controls
identified in clause 1 above.

          Manager shall provide Owner’s or such Affiliates’ independent auditors
access to Manager’s books and records relating to the Hotel (including, without
limitation, access to Manager’s premises) to conduct their audit of the testing
performed pursuant to this Section 4.08. If Owner or such Affiliate determine
such controls have weaknesses which should be mentioned in Owner’s or such
Affiliates’ report on internal controls under Section 404 or other
certifications under the Sarbanes-Oxley Act of 2002, Manager shall use its best
efforts to remedy and/or correct identified weaknesses within thirty (30) days
after notice.

ARTICLE V
REPAIRS, MAINTENANCE AND REPLACEMENTS

5.01. Repairs and Maintenance to be Paid from Gross Revenues.

          Subject to the availability of adequate funds, Manager shall maintain
the Hotel in good repair and condition, comply with and abide by all applicable
Legal Requirements pertaining to its operation of the Hotel and shall make or
cause to be made such routine maintenance, repairs and minor alterations as it
determines are necessary for such purposes and as required pursuant to the terms
of the Franchise Agreement or by Owner. The phrase “routine maintenance, repairs
and minor alterations” as used in this Section 5.01 shall include only those
which are normally expensed under generally accepted accounting principles. The
cost of such maintenance, repairs and alterations shall be paid from Gross
Revenues (and not from the Reserve) and shall be treated as a Deduction.

5.02. Repairs, Maintenance and Equipment Replacements to be Paid from Reserve.

          A. Owner shall establish and maintain a reserve account in the name of
Owner (the “Reserve”), in a bank or similar institution reasonably acceptable to
both Manager and Owner, to cover the cost of:

                    1. Replacements, renewals and additions to the FF&E at the
Hotel; and

                    2. Routine Capital Expenditures.

          B. Manager shall transfer into the Reserve a percentage of the Gross
Revenues as provided in Schedule 1. Transfers into the Reserve shall be made at
the time of each Accounting Period Statement. All amounts transferred to the
Reserve shall be a Deduction and shall be deposited in the Reserve account
described in Section 5.02.A.

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          C. Subject to the availability of adequate funds, Manager shall from
time to time make such (1) replacements and renewals to the FF&E of the Hotel,
and (2) Routine Capital Expenditures, as may be agreed upon by Owner and Manager
or as may be required by the Franchise Agreement. Except as may be required by
the Franchise Agreement, no expenditures will be made in excess of the balance
of the Reserve without the approval of Owner. At the end of each Fiscal Year,
any amounts remaining in the Reserve shall be carried forward to the next Fiscal
Year. Proceeds from the sale of FF&E no longer necessary to the operation of the
Hotel shall be added to the Reserve. The Reserve will be kept in an
interest-bearing account, and any interest which accrues thereon shall be
retained in the Reserve. Neither (x) proceeds from the disposition of FF&E, nor
(y) interest which accrues on amounts held in the Reserve, shall (a) result in
any reduction in the required contributions to the Reserve set forth in Section
5.02.B above, nor (b) be included in Gross Revenues. Upon request by Manager,
within five (5) Business days after Manager’s request therefor, Owner shall
release funds from the Reserve to Manager based on Manager’s submission of
vendor invoices supporting such request.

                    1. All repairs, alterations, improvements, renewals or
replacements made pursuant to this Article V, and all amounts kept in the
Reserve, shall be the property of Owner, subject to Manager’s rights to apply
such funds as provided in this Agreement. In addition and notwithstanding
anything contained herein to the contrary, no funds shall be expended for
replacements, renewals and additions to the FF&E, for Routine Capital
Expenditures or for any other capital expenditures unless each such expenditure
is included in the Annual Operating Projection approved by Owner or is otherwise
approved by Owner. In the event that Owner requests that Manager perform capital
improvements that are not included in the Annual Operating Projection, Manager
will perform such improvements provided that Owner and Manager have theretofore
agreed upon a mutually satisfactory funding mechanism to pay for the cost of
such improvements. Notwithstanding the foregoing, in case of threatened damage
or destruction to the Hotel or persons or property thereon due to Force Majeure
or other comparable emergency, Manager may make such repairs, replacements or
improvements to the Hotel as Manager reasonably deems necessary to avoid and/or
minimize any such damage or destruction without Owner’s prior consent.

          D. Notwithstanding anything contained herein to the contrary, at all
times that Owner is owned or controlled by Apple REIT Ten, Inc., at Owner’s
option the amounts that would otherwise be deposited into the Reserve pursuant
to this Section 5.02 may be commingled with other funds of Owner or its
Affiliates and held in a reserve account in the name of Owner or its Affiliate.
Further, in such case, Manager shall accrue such amounts as a reserve on the
accounting records of the Hotel, and Owner shall release such funds to Manager
in accordance with the provisions of Section 5.02.C hereof. All amounts
transferred to the reserve under Section 5.02.D shall be a Deduction.

          E. Unless otherwise expressly covered by this Article V (including
without limitation in case of emergency as provided in Section 5.02.D.), Manager
shall not make any capital expenditure or improvement without first obtaining
Owner’s prior written consent and approval.

          5.03 Capital Expenditures

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          A. Manager shall prepare an annual estimate (the “Building Estimate”)
of the expenses necessary for non-routine or major repairs, alterations,
improvements, renewals, replacements, and additions to the Hotel including,
without limitation, the structure, the exterior facade and all of the
mechanical, electrical, heating, ventilating, air conditioning, plumbing or
vertical transportation elements of the Hotel building (the foregoing
expenditures, together with all other expenditures which are classified as
“capital expenditures” under generally accepted accounting principles, shall be
collectively referred to as “Capital Expenditures.” Manager shall submit the
Building Estimate to Owner for its review and approval at the same time the
Annual Operating Projection is submitted. Manager shall not make any Capital
Expenditures without the prior consent of Owner, unless otherwise permitted
herein. Owner shall have thirty (30) days after receipt to review and approve
such Building Estimate, it being agreed that Owner shall not withhold its
approval with respect to Capital Expenditures as are required, in Manager’s
reasonable judgment, to keep the Hotel in a first class, competitive, efficient
and economical operating condition and/or in accordance with the requirements of
the Franchise Agreement, or otherwise required for the continued safe and
orderly operation of the Hotel, including the removal of Hazardous Materials in
compliance with all Environmental Laws or in compliance with all Legal
Requirements. Owner’s right to review and approve the Building Estimate, shall
be governed by the terms and conditions of this Section 5.03 and Section 4.04,
with the Building Estimate being treated in the same manner as the Proposed
Annual Operating Projection under Section 4.04.

          B. Notwithstanding the provisions of Section 5.03.A, Manager shall be
authorized to take appropriate remedial action (including making any necessary
Capital Expenditures) without receiving Owner’s prior consent in the following
circumstances: (i) if there is an emergency threatening the Hotel, its guests,
invitees or employees; or (ii) if the continuation of the given condition will
subject Manager and/or Owner to civil or criminal liability, and, following
written notice from Manager, Owner has failed (x) to authorize Manager to remedy
the situation and (y) if appropriate under the circumstances, to take or
authorize Manager to take appropriate and immediate legal action to stay the
effectiveness of any law, ordinance, regulation or order creating such risk of
civil or criminal liability. In any such case, Owner shall hold harmless,
indemnify and defend Manager from any claims, actions, suit, liability or loss
resulting from Manager’s or Owner’s remedial action taken pursuant to this
Section 5.03.B. Manager shall cooperate with Owner in the pursuit of any such
action and shall have the right to participate therein. The provisions of this
Section 5.03.B shall survive Termination of this Agreement.

          C. The cost of all Capital Expenditures (including the expenses
incurred by either Owner or Manager in connection with any civil or criminal
proceeding described above) shall be borne solely by Owner, and shall not be
paid from Gross Revenues, nor from the FF&E Reserve, and shall not constitute a
Deduction, but shall increase Owner’s Priority as provided in the definition of
Owner’s Priority.

ARTICLE VI
INSURANCE

6.01. Property Insurance.

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          A. During the term of this Agreement, Owner shall procure from
insurance companies with recognized responsibility, and maintain, using funds
deducted from Gross Revenues as a Deduction,the following insurance and /or such
other additional insurance as may be approved or required by Owner or required
by the Franchise Agreement:

                    1. Insurance on the Hotel (including contents) against loss
or damage by all perils included in “all risk” (as such term is commonly used in
the insurance industry) coverage, in an amount not less than one hundred percent
(100%) of the replacement cost thereof, except that if such 100% replacement
cost coverage is not available on reasonable rates and terms, then such
insurance shall be in an amount not less than ninety percent (90%) of the
replacement cost thereof (less excavation and foundation costs), of the Hotel;

                    2. Insurance against loss or damage from explosion of
boilers, pressure vessels, pressure pipes and sprinklers, to the extent
applicable, installed in the Hotel;

                    3. If the Hotel is in an earthquake-prone area, earthquake
insurance in accordance with Prudent Industry Practices.

                    4. Business interruption insurance covering loss of profits
and necessary continuing expenses for interruptions caused by any occurrence
covered by the insurance referred to in Section 6.0l.A.1, 2 and 3, for a period
of not less than one (1) year after the occurrence, of a type and in amounts and
with such deductible limits as are agreed upon by Owner and Manager.

          B. All policies of insurance required under Section 6.01.A. 1, 2 and 3
shall insure Owner, Landlord, Manager, and any Mortgagee, and any losses
thereunder shall be payable to the parties as and to the extent their respective
interests, if any, may appear. Owner will promptly notify Manager of the
insurance requirements of any Mortgagee.

6.02. Operational Insurance.

          During the term of this Agreement, Owner shall, or shall require
Manager to procure and maintain, using funds deducted from Gross Revenues as a
Deduction, with insurance companies with recognized responsibility, the
following insurance and/or such other insurance as may be approved or required
by Owner:

          A. Workers, compensation and employer’s liability insurance as may be
required under applicable laws covering all of Manager’s employees at the Hotel,
with such deductible limits or self-insured retentions as are agreed upon by
Owner and Manager;

          B. Commercial general liability insurance against claims for all
injury, death or property damage occurring on, in, or about the Hotel, and
automobile insurance on vehicles owned or leased by owner and operated in
conjunction with the Hotel, with a combined single limit of not less than Twenty
Million Dollars ($20,000,000) for each occurrence for personal injury, death and
property damage, with such deductible limits as are agreed upon by Owner and
Manager;

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          C. Fidelity bonds or crime insurance with respect to the Hotel
employees handling funds of the Hotel, in an amount approved by Owner;

          D. Employment practices liability insurance covering all of Manager’s
employees at the Hotel, in an amount agreed approved by Owner; and

          E. Such other insurance in amounts as Manager in its reasonable
judgment deems advisable for protection against claims, liabilities and losses
arising out of or connected with the operation of the Hotel or as reasonably
required by a Mortgagee or the franchisor under the Franchise Agreement.

          All policies of insurance required under Section 6.02 (except for the
policies required under Section 6.02.A., C., and D) shall be issued in the name
of Owner, as the named insured, and shall have Manager, Franchisor and any
Mortgagee as additional insureds. The policy of insurance required under Section
6.02. A., C., and D shall be issued in the name of Manager, with Owner,
Franchisor and any Mortgagee as additional insureds. Such coverages shall be
provided on a primary and non-contributory basis. Any property losses thereunder
shall be payable to the respective parties as their interests may appear.

6.03. Coverage.

          Either Owner or Manager may require that insurance and/or additional
insurance and/or coverage be maintained in excess of that set forth in this
Article 6, to the extent customarily carried in accordance with Prudent Industry
Practice, provided that the cost of insurance beyond that customarily carried in
accordance with Prudent Industry Practice shall not be a Deduction and shall be
borne solely by the party requesting the same unless such insurance and coverage
is also a requirement of any Mortgage or the Franchise Agreement in which case
it shall be a Deduction. Subject to Owner’s prior approval, such approval not to
be unreasonably withheld, and the provisions of Section 6.05, all insurance
described in Sections 6.01 and 6.02 may be obtained by Manager by endorsement or
equivalent means under its blanket insurance policies, provided that such
blanket policies fulfill the requirements specified herein. Deductible limits
shall be as agreed upon by Owner and Manager. No coverage required hereunder
shall be self-insured by Manager without prior written approval of Owner. Owner
shall have the right to approve the insurance policies to be obtained by Manager
pursuant hereto and the insurance companies issuing such policies.

6.04. Costs and Expenses.

          Insurance premiums and any costs or expenses with respect to the
insurance described in this Article VI shall be Deductions in determining
Operating Profit. Premiums on policies for more than one year shall be charged
pro rata against Gross Revenues over the period of the policies. Any reserves,
losses, costs, damages or expenses which are uninsured, or fall within
deductible limits, shall be treated as a cost of insurance and shall be
Deductions in determining Operating Profit.

6.05. Owner’s Right to Provide Insurance.

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          Notwithstanding anything contained in this Agreement to the contrary,
Owner and/or its Affiliates (including, without limitation, Landlord) shall have
the right to procure and maintain any or all of the insurance for the Hotel
otherwise required to be maintained by Manager under this Article VI and in lieu
of Manager’s procuring the same, provided that Owner shall give Manager not less
than thirty (30) days notice of Owner’s intent to provide such insurance and
shall provide to Manager upon request certificates of insurance evidencing the
same and provided that such insurance procured by Owner shall not become
effective until the end of the then-current term of the applicable policy or
policies maintained by Manager. In such case, all of the terms and conditions of
this Article VI, to the extent applicable, shall govern the insurance procured
by Owner under this Section 6.05. Without limiting the generality of the
foregoing, all insurance premiums and any costs or expenses with respect to such
insurance shall be Deductions in determining Operating Profit. Owner confirms
its election to procure and maintain the insurance required under Section 6.01
as of the Effective Date, and Manager confirms its obligation to procure and
maintain all other insurance for the Hotel as of the Effective Date. Owner and
Manager acknowledge and agree that Owner may from time to time change any
election to maintain or require Manager to maintain the insurance for the Hotel
required pursuant to this Agreement by giving Manager at least thirty (30) days
notice.

ARTICLE VII
DAMAGE AND CONDEMNATION

7.01. Damage and Repair.

          A. If, during the Term, the Hotel is damaged or destroyed by fire,
casualty, or other cause, Owner shall, at its option, and at its sole cost and
expense, repair or replace the damaged or destroyed portion of the Hotel to
substantially the same condition as existed previously. Manager shall have the
right to discontinue operating the Hotel to the extent it deems necessary to
comply with applicable law, ordinance, regulation or order or as necessary for
the safe and orderly operation of the Hotel.

          B. In the event damage or destruction to the Hotel from any cause
materially and adversely affects the operation of the Hotel and Owner notifies
Manager that Owner will not repair or replace such damage or fails to timely
(taking into consideration the time taken to adjust the insurance claim)
commence and/or complete the repairing, rebuilding or replacement of the same so
that the Hotel shall be substantially the same as it was prior to such damage or
destruction, Manager or Owner may, at its option, elect to terminate this
Agreement upon sixty (60) days’ written notice. Additionally, if the Franchise
Agreement is terminated due to Owner’s failure to repair and restore the Hotel,
this Agreement shall terminate, effective upon the termination of the Franchise
Agreement. In either such event, upon such Termination under this Section
7.01.B, in addition to any of Manager’s other rights hereunder and under Section
11.10 hereof, Owner shall pay Manager a termination fee equal to the Termination
Fee set forth in Schedule 1. Notwithstanding the foregoing, if following a
casualty Owner terminates this Agreement and thereafter repairs the Hotel within
24 months following the date of casualty to substantially the same as it was
prior to such damage or destruction, Owner shall re-engage Manager to manage the
Hotel on the same terms and conditions as this Agreement except that the Term
shall be extended for a period equal to the time between the date of termination
and the date of re-engagement and no Termination Fee shall be payable under the
new management

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agreement. The provisions of this Section7.01 shall survive Termination of this
Agreement and shall be binding upon any purchaser of the Hotel if such purchase
occurs during the aforesaid 24-month period. To provide notice to subsequent
purchasers during such 24-month period, Owner shall execute and deliver to
Manager a memorandum in proper form for recording in the land records in which
the Hotel is located, which Manager may record to provide record notice of the
terms of this Section 7.01B.

7.02 Condemnation.

          A. In the event all or substantially all of the Hotel shall be taken
in any eminent domain, condemnation, compulsory acquisition, or similar
proceeding by any competent authority for any public or quasi-public use or
purpose, or in the event a portion of the Hotel shall be so taken, but the
result is that it is unreasonable to continue to operate the Hotel in accordance
with the standards required by this Agreement, this Agreement shall terminate
and Owner shall pay a termination fee to Manager equal to the Termination Fee
set forth on Schedule 1. The provisions of this Section 7.02 shall survive
Termination of this Agreement.

          B. In the event a portion of the Hotel shall be taken by the events
described in Section 6.02.A but the result is not to make it unreasonable to
continue to operate the Hotel, this Agreement shall not terminate. However, so
much of any award for any such partial or temporary taking or condemnation as
shall be necessary to render the Hotel equivalent to its condition prior to such
event shall be used by Owner for such purpose; and Manager shall have the right
to discontinue operating the Hotel to the extent it deems necessary for the safe
and orderly operation of the Hotel.

          C. In the event a portion or all of the Hotel shall be taken on a
temporary basis, without damage to the physical structure, but damage only to
business operations, any award for such taking shall be treated as Gross
Revenues and accounted for accordingly.

ARTICLE VIII
MORTGAGES AND OTHER LIENS

8.01. Subordination to Mortgage.

          Subject to the provisions of Section 1.02.A.10, Manager shall provide
to any Mortgagee an instrument (the “Subordination Agreement”), reasonably
satisfactory in all respects to Manager, Owner and such Mortgagee; provided,
however, such Subordination Agreement will not impair the ability of Manager to
operate the Hotel and receive payments due Manager under this Agreement, or
modify the terms and conditions of this Agreement without Manager’s approval in
its sole and absolute discretion, which shall be recordable in the jurisdiction
where the Hotel is located.

8.02. Amendments Requested by Mortgagee.

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          If requested by any Mortgagee or prospective Mortgagee and otherwise
consistent with this Agreement, Manager agrees to execute and deliver any
amendment of this Agreement that is reasonably required by such Mortgagee or
prospective Mortgagee, provided that Manager shall be under no obligation to
amend this Agreement if the result of such amendment would be: (i) to reduce,
defer or delay the amount of any payment to be made to Manager hereunder; (ii)
to materially and adversely increase Manager’s obligations or affect Manager’s
rights under this Agreement; (iii) to change the Term; or (iv) to cause the
Hotel to be operated other than pursuant to the Franchise Agreement or Prudent
Industry Practice and other provisions hereof unless otherwise agreed to by
Owner and Manager. Any such amendment shall be in effect only for the period of
time in which such Mortgage is outstanding.

8.03. Liens; Credit.

          Manager (subject to the availability of adequate funds for such
purpose) and Owner shall use commercially reasonable efforts to prevent any
liens from being filed against the Hotel which arise from any maintenance,
repairs, alterations, improvements, renewals or replacements in or to the Hotel
and shall cooperate fully in obtaining the release of any such liens. If the
lien was not occasioned by the fault of either party, the cost of releasing any
lien shall be treated the same as the cost of the matter to which it relates. If
the lien arises as a result of the fault of either party, then the party at
fault shall bear the cost of obtaining the lien release. In no event shall
either party borrow money in the name of or pledge the credit of the other.

8.04 Owner’s Agreement.

          Simultaneously with the execution of this Agreement, Owner shall
obtain from the Fee Owner and Landlord under the TRS Lease Agreement and deliver
to Manager, a duly executed “Owner’s Agreement” in favor of Manager,
substantially in the form attached hereto as Exhibit C.

ARTICLE IX
EVENTS OF DEFAULTS

9.01. Events of Default.

          Each of the following shall, to the extent permitted by applicable
law, constitute an “Event of Default” under this Agreement.

          A. The filing of a voluntary petition in bankruptcy or insolvency or a
petition for reorganization under any bankruptcy law by either party, or the
admission by either party that it is unable to pay its debts as they become due.

          B. The consent to an involuntary petition in bankruptcy or the failure
to vacate, within ninety (90) days from the date of entry thereof, any order
approving an involuntary petition by either party.

          C. The entering of an order, judgment or decree by any court of
competent jurisdiction, on the application of a creditor, adjudicating either
party as bankrupt or insolvent or approving a petition seeking reorganization or
appointing a receiver, trustee, or liquidator of all

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or a substantial part of such party’s assets, and such order, judgment or
decree’s continuing unstayed and in effect for an aggregate of sixty (60) days
(whether or not consecutive).

          D. The failure of either party to make any payment required to be made
in accordance with the terms of this Agreement, as of the due date as specified
by or provided in this Agreement and the failure to cure such default within ten
(10) days after receipt of written notice from the non-defaulting party
demanding such cure.

          E. The failure of Manager to pay Owner’s Priority or other
distributions of Operating Profit to Owner when due as set forth in this
Agreement and the failure to cure such default within two (2) Business Days
after receipt of written notice from Owner demanding such cure; provided,
however, Owner shall not be required to provide notice of such default more than
one time during any consecutive 12-month period.

          F. Owner or any of its Affiliates or Manager, any of its Affiliates or
any employee at the Hotel is or becomes a Specially Designated National or
Blocked Person, and such is not removed within ten (10) days after notice from
either Owner or Manager to the other.

          G. In carrying out its duties hereunder, an officer (at the vice
president level or higher) of Manager or its Affiliates or the General Manager
commits (i) any act involving fraud, moral turpitude or willful misconduct
relating to the business or affairs of the Hotel, or (ii) is formally charged
with or indicted for committing, or convicted of an act which constitutes a
felony, and in any case described in (i) or (ii), and such act materially
adversely impacts the Hotel.

          H. The failure of either party to perform, keep or fulfill any of the
other covenants, undertakings, obligations or conditions set forth in this
Agreement, and the continuance of such default for a period of thirty (30)
business days after the defaulting party’s receipt of written notice from the
non-defaulting party of said failure, or, if the default is such that it cannot
reasonably be cured within said thirty (30) business day period of time, if the
defaulting party fails to commence the cure of such default within said thirty
(30) business day period of time or thereafter fails to diligently pursue such
efforts to completion, provided that in the case of any default by Manager, such
default is cured not later than ninety (90) days after Manager’s receipt of such
initial notice; provided, further, that if Manager is diligently pursuing such
cure to completion and due to an uncooperative or unreasonably slow third party
or source such cure cannot be completed within the aforementioned 90 day period,
Manager shall have such additional time as is reasonably necessary to complete
such cure. In the event the defaulting party disputes the fact that a default
has occurred based on a reasonable interpretation of this Agreement, then such
party shall notify the other within ten (10) business days following the date of
the initial default notice of its reasons for denying the existence of a default
and the parties shall use good faith efforts to resolve the dispute within
twenty (20) business days. The period in which the defaulting party is required
to effect a cure hereunder shall be tolled while the parties are in discussions
to resolve their dispute provided such tolling period shall not exceed 30
business days. In the event the parties fail to resolve their differences as to
whether a default has occurred or is continuing, either party shall be entitled
to seek redress through litigation or alternative dispute resolution.

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          I. Any material misrepresentation or material breach of a material
warranty given in this Agreement which was false or misleading in any material
respect on or as of the date made or deemed made hereunder.

          J. Excluding the performance of any work required under any property
improvement plan under the Franchise Agreement which is outstanding on the
Effective Date hereof (if any) and which is, by agreement of the parties, the
obligation of the prior owner of the Hotel to complete, the failure of Owner to
complete the construction, furnishing and equipping of the Hotel in accordance
with any subsequent plans approved by Franchisor under the Franchise Agreement,
or alternatively, perform or complete any and all work required under any
subsequent property improvement plan under the Franchise Agreement and in
compliance with the terms and conditions of the Franchise Agreement and this
Agreement.

9.02. Remedies.

          Upon the occurrence of an Event of Default, the non-defaulting party
shall have the right to pursue any one or more of the following courses of
action: (i) to terminate this Agreement by written notice to the defaulting
party, which Termination shall be effective as of the effective date which is
set forth in said notice (provided that said effective date shall be at least
thirty (30) days after the date of said notice; or, if the defaulting party is
Manager, the foregoing thirty (30) days shall be extended to such period of time
as may be necessary under applicable law pertaining to termination of
employment); and (ii) to institute any and all proceedings permitted by law or
equity, including, without limitation, actions for specific performance and/or
damages. The rights granted hereunder shall not be in substitution for, but
shall be in addition to, any and all rights and remedies available to the
non-defaulting party by reason of applicable provisions of law or equity.

9.03. Additional Remedies.

          A. Upon the occurrence and during the continuance of an Event of
Default by either party under the provisions of Section 9.0l.D, the amount owed
to the non-defaulting party shall accrue interest, at an annual rate equal to
the Prime Rate plus three percent (3%), from and after the date on which the
Event of Default occurred.

          B. The remedies granted under Section 9.02 and Section 9.03 shall not
be in substitution for, but shall be in addition, to, any and all rights and
remedies available to the non-defaulting party (including, without limitation,
injunctive relief and damages) by reason of applicable provisions of law or in
equity and shall survive Termination.

ARTICLE X
ASSIGNMENT AND SALE

10.01. Assignment.

          A. Manager shall not assign or transfer its interest in this Agreement
without the prior written consent of Owner and the Franchisor; provided,
however, that (1) Manager may assign its interest in this Agreement at any time
without Owner’s consent to an Affiliate of Manager, subject to the consent of
Franchisor, to the extent such consent if required; and (2)

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following the expiration of the 8th full Fiscal Year, Manager may assign its
interest in this Agreement without Owner’s consent to any non-Affiliate
successor or purchaser in connection with a merger or consolidation or a sale or
assignment of the management rights to eighty percent (80%) or more of the hotel
properties managed by Manager, regardless of the ownership of those hotel
properties (a “Non-Affiliate Sale”), provided that in any case Manager shall
give notice thereof to Owner and to the extent required, the Franchisor has
consented thereto. Any assignee consented to by Owner and by the Franchisor
shall agree in writing to be bound by and comply with the terms of this
Agreement (such written agreement to be acceptable in form and substance to
Owner and the Franchisor). For purposes of the foregoing, a transfer of
Manager’s interest in this Agreement shall not include (i) an assignment or
pledge of Manager’s revenue stream under this Agreement as security for an
obligation or (ii) a transfer of Manager’s interest in this Agreement by
operation of law, including by merger or consolidation; provided however, that a
transfer of Manager’s interest in this Agreement shall include a transfer of a
controlling ownership interest, direct or indirect, in Manager if such transfer
is to a non-Affiliate of Manager.

          B. Owner shall have the right to assign or transfer its interest in
this Agreement without the prior written consent of the Manager (1) as security
for a Mortgage of the Hotel in accordance with this Agreement, (2) in connection
with a sale, assignment, transfer or other disposition of the Hotel by Owner or
Landlord and (3) in connection with a merger or consolidation or reorganization
of, or a sale of all or substantially all of the assets of, any Affiliate of
Owner. Any sale or transfer of the Hotel shall be subject to the continuing
operation and affect of this Agreement and such purchaser, assignee or
transferee shall agree in writing to be bound by and comply with the terms of
this Agreement and the Owner Agreement. Notwithstanding the foregoing,
commencing in the eleventh full Fiscal Year of this Agreement and thereafter,
upon a sale of the Hotel, if the purchaser or its lessee does not assume this
Agreement or otherwise retain Manager upon substantially the same terms as are
set forth herein, such failure to assume this Agreement or retain Manager shall
not be an Event of Default hereunder and Owner may terminate this Agreement
effective upon the closing of such sale, provided Owner pays Manager a sales
termination fee (“Sales Termination Fee”) equal to that dollar amount which is
the product of the average annual Base Management Fee and Incentive Management
Fee earned by Manager in the two Fiscal Years preceding the Fiscal Year in which
the Termination occurs, divided by twelve, and multiplied by the number of full
or partial calendar months remaining in the Initial Term. The provisions of this
Section 10.01 shall survive termination of this Agreement.

          C. In the event Owner and the Franchisor consent to an assignment of
this Agreement by Manager, any further assignment or transfer requiring consent
hereunder shall also require the express consent in writing of such parties. An
assignment by Manager of its interest in this Agreement shall not relieve
Manager from its obligations under this Agreement.

          D. Notwithstanding anything contained herein to the contrary, neither
Owner nor Manager shall assign its interest in this Agreement to a Specially
Designated National or Blocked Person.

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ARTICLE XI
MISCELLANEOUS

11.01. Consents and Cooperation.

          Wherever in this Agreement the consent or approval of Owner or Manager
is required, except as otherwise provided in this Agreement or agreed by the
parties, such consent or approval shall not be unreasonably withheld,
conditioned or delayed. Owner agrees to cooperate with Manager by executing and
using its commercially reasonable efforts in obtaining all such leases,
subleases, licenses, concessions, equipment leases, service contracts and other
agreements negotiated in good faith and at arm’s length by Manager and
pertaining to the Hotel that, in Manager’s reasonable judgment, and in
accordance with Prudent Industry Practices, should be made in the name of the
Owner, provided that all such agreements shall be subject to Owner’s prior
approval.

11.02. Relationship.

          A. In the performance of this Agreement, Manager shall act solely as
an independent contractor. Neither this Agreement nor any agreements,
instruments, documents, or transactions contemplated hereby shall in any respect
be interpreted deemed or construed as making Manager a partner, joint venturer
with, or agent of, Owner; provided, however, that the parties acknowledge that
the relationship created by this Agreement shall constitute an agency coupled
with an interest except as expressly provided herein. Owner and Manager agree
that neither party will make any contrary assertion, claim or counterclaim in
any action, suit, arbitration, or other legal proceedings involving Owner and
Manager.

          B. TO THE EXTENT ANY FIDUCIARY DUTIES ARE INCONSISTENT WITH, OR WOULD
HAVE THE EFFECT OF MODIFYING, LIMITING OR RESTRICTING, THE EXPRESS PROVISIONS OF
THIS AGREEMENT: (A) THE TERMS OF THIS AGREEMENT SHALL PREVAIL; (B) THIS
AGREEMENT SHALL BE INTERPRETED IN ACCORDANCE WITH GENERAL PRINCIPLES OF CONTRACT
INTERPRETATION WITHOUT REGARD TO THE COMMON LAW PRINCIPLES OF AGENCY (EXCEPT AS
EXPRESSLY PROVIDED FOR IN THIS AGREEMENT); AND (C) ANY LIABILITY BETWEEN THE
PARTIES SHALL BE BASED SOLELY ON PRINCIPLES OF CONTRACT LAW AND THE EXPRESS
FIDUCIARY DUTIES AND OBLIGATIONS UNDER THIS AGREEMENT. THE PARTIES ACKNOWLEDGE
THAT THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE DUTIES AND OBLIGATIONS
SET FORTH HEREIN ARE INTENDED TO SATISFY THE FIDUCIARY DUTIES WHICH MAY EXIST AS
A RESULT OF THE RELATIONSHIP BETWEEN THE PARTIES, INCLUDING WITHOUT LIMITATION
ALL DUTIES OF LOYALTY, GOOD FAITH, FAIR DEALING, FULL DISCLOSURE OR ANY OTHER
DUTY DEEMED TO EXIST UNDER THE COMMON LAW PRINCIPLES OF AGENCY OR OTHERWISE.

                    THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVE AND
RELEASE ANY RIGHT, POWER OR PRIVILEGE EITHER MAY HAVE TO

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CLAIM OR RECEIVE FROM THE OTHER PARTY ANY PUNITIVE, EXEMPLARY, STATUTORY OR
TREBLE DAMAGES OR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH RESPECT TO ANY
BREACH OF FIDUCIARY DUTIES.

          C. Any contract or agreement that Manager enters into with a third
party to provide goods or services to the Hotel shall be entered into in the
name of Manager and not Owner, and Owner have no liability with respect to any
such contract or agreement, except to the extent that any payments thereunder
constitute Deductions.

11.03. Applicable Law; Jurisdiction.

          This Agreement shall be construed under and shall be governed by the
laws of the State in which the Hotel is located, without regard to that state’s
conflict of laws provisions. Each of Owner and Manager hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the courts of such State and of the United States District Court
for such State, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such State court or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that Owner may
otherwise have to bring any action or proceeding relating to this Agreement
against Manager in the courts of any jurisdiction. Each of Owner and Manager
hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any court referred to above. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

11.04. Recordation.

          The terms and provisions of this Agreement shall not run with the
parcel of land designated as the Site. Neither this Agreement nor any memorandum
or short form hereof shall be recorded or registered without the prior written
consent of Owner and Manager.

11.05. Headings.

          Headings of articles and sections are inserted only for convenience
and are in no way to be construed as a limitation on the scope of the particular
articles or sections to which they refer.

11.06. Notices.

          Notices, statements and other communications to be given under the
terms of this Agreement shall be in writing and delivered by hand against
receipt or sent by certified or registered mail (with a copy by first class
mail) or Express Mail service, in each case postage prepaid, return receipt
requested or by nationally utilized overnight delivery service, addressed to

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the parties at the respective addresses set forth in Schedule 1 or at such other
address as is from time to time designated by the party receiving the notice.
Any such notice that is mailed in accordance herewith shall be deemed received
when delivery is received or refused, as the case may be. Additionally, notices
may be given by telephone facsimile transmission, provided that an original copy
of said transmission shall be delivered to the addressee by nationally utilized
overnight delivery service on the business day following such transmission.
Telephone facsimiles shall be deemed delivered on the date of such transmission.

11.07. Environmental Matters.

          A. Manager shall operate the Hotel in compliance with all applicable
Environmental Laws. Manager shall (i) not use, generate or store any Hazardous
Materials in or on the Hotel except as necessary for the operation and
maintenance of the Hotel and in compliance with the Environmental Laws, (ii) not
allow, permit or cause the release or threat of release of any Hazardous
Materials in, on, under or from the Hotel, except for the ordinary use of
cleaning and maintenance supplies in compliance with applicable Environmental
Laws, (iii) not allow the accumulation of tires, spent batteries, construction
and demolition debris or any other solid waste, except for solid waste generated
from the operation of the Hotel and stored in containers for normal scheduled
pickup and disposal off site in compliance with applicable Environmental Laws
and (iv)use commercially reasonable efforts and subject to the availability of
funds for such purpose, to operate and maintain the Hotel in a manner to prevent
mold, fungal or other microbial growth or conditions that are favorable for such
growth, including, without limitation, the proper operation and maintenance of
heating, ventilation and air conditioning systems and removal of any mold,
fungal or microbial growth.

          B. In the event of the discovery of a release or threat of release of
Hazardous Materials in, on, under or from any portion of the Hotel during the
Term, Manager shall promptly notify Owner and subject to the availability of
funds for such purpose, shall take all appropriate actions with regard to such
Hazardous Materials as required of an owner or operator under applicable
Environmental Laws. Manager shall keep Owner apprised of the status of
addressing the release or threat of release of Hazardous Materials, and Owner
shall have the right at any time to assume control of the matter from Manager.

          C. All costs and expenses incurred pursuant to the obligations set
forth in Section 11.07.A and B shall be borne by Owner except to the extent
resulting from the gross negligence of an officer of Manager its Affiliates at
the vice president level or above or the General Manager at the Hotel and that
results in an uninsured loss, cost, liability and/or damages in excess of
$50,000 which materially and adversely impacts the Hotel. In such case, Manager
shall indemnify, defend and hold Owner harmless from and against all losses,
costs, liabilities and damages (including, without limitation, engineers’ and
attorneys’ fees and expenses, and the cost of Litigation) to the extent arising
out of such party’s gross negligence. Owner shall indemnify, defend and hold
Manager harmless from and against all losses, costs, liabilities and damages
(including, without limitation, engineers’ and attorneys’ fees and expenses, and
the cost of Litigation) in connection with the actions taken by Manager under
this Section. Such indemnification obligation of Owner and Manager shall survive
Termination.

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          “Environmental Laws” shall mean all federal, state and local
environmental, health and safety laws, rules, regulations, ordinances, permits,
orders, common law or requirements of any governmental authority, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. §§ 9601, et. seq., as amended; Solid Waste
Disposal Act, 42 U.S.C. §§ 6901, et. seq., as amended; Toxic Substances Control
Act, 15 U.S.C. §§ 2601, et. seq., as amended; Hazardous Materials Transportation
Act, 49 U.S.C. §§ 5101, et. seq., as amended; Federal Water Pollution Control
Act, 33 U.S.C. §§ 1251, et. seq.

          “Hazardous Materials” shall mean any hazardous substances, hazardous
wastes, toxic substances, hazardous materials, petroleum or petroleum products,
pollutants or contaminants (as those terms are defined under Environmental
Laws), including, without limitation, polychlorinated biphenyls, lead or
lead-based paint, asbestos or mold in such concentrations or amounts as may
impose clean-up, removal, monitoring or other responsibility under the
Environmental Laws

11.08. Confidentiality; Projections.

          A. Owner and Manager agree that the terms of this Agreement are
strictly confidential and will use their reasonable efforts to ensure that the
terms of this Agreement are not disclosed to any outside person or entities
without the prior written consent of the other party, except (1) as Owner may
reasonably determine is required by any law, rule, regulation or judicial
process, or by any regulatory or supervisory authority having jurisdiction over
the parties or any of their Affiliates or (2) to the extent reasonably
necessary, (i) to obtain licenses, permits and other public approvals, (ii) in
connection with a financing of the Hotel, Owner, or any Affiliate thereof, (iii)
in connection with a Sale of the Hotel or other sale of Owner, or any Affiliate
thereof or its or their corporate assets, (iv) subject to the provisions of
Section 4.02, in connection with an audit or other investigation conducted
pursuant to this Agreement or (v) in connection with either party’s enforcement
of its rights and remedies under this Agreement. Notwithstanding the foregoing
or anything to the contrary set forth herein, the terms of this Agreement shall
not be deemed confidential to the extent: (a) such information becomes generally
available to the public other than as a result of unauthorized disclosure by the
recipient or persons to whom such recipient has made the information available;
or (b) the party seeking to disclose such confidential information can
demonstrate to the reasonable satisfaction of the other party that the
information sought to be disclosed is customarily disclosed by at least 80% of
all Persons directly or indirectly owning hotels in the United States.

          B. Owner acknowledges that any written or oral projections, pro
formas, or other similar information that has been (prior to execution of this
Agreement) or will (during the Term) be provided by Manager (or any Affiliate of
either) to Owner is for information purposes only, and that Manager, and any
such Affiliate do not guarantee that the Hotel will achieve the results set
forth in any such projections, pro formas, or other similar information. Owner
further acknowledges that any such projections, pro formas, or other similar
information are based on assumptions and estimates, unanticipated events may
occur subsequent to the date of preparation of such projections, pro formas and
other similar information, and the actual results achieved by the Hotel are
likely to vary from the estimates contained in any such projections, pro formas,
or other similar information and such variations might be material.

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11.09. Indemnification.

          A. Manager hereby agrees to indemnify, defend and hold harmless Owner,
its officers, directors, stockholders, employees, agents and their respective
successors and assigns from and against any and all claims, liabilities,
damages, losses, obligations and costs (including reasonable attorneys’ fees)
associated with the operation of the Hotel and arising from (i) the gross
negligence, theft, fraud or willful misconduct of an officer of Manager at the
vice president level or above or the General Manager at the Hotel (“Manager
Misconduct”) and (ii) any claim asserted by any employee or agent of Manager or
its Affiliates in respect of any Manager Misconduct, unless in each case the
loss or liability giving rise to such claim was caused by Owner’s breach of its
obligations under this Agreement.

          B. Owner hereby agrees to indemnify, defend and hold harmless Manager,
its officers, directors, stockholders, employees, agents and their respective
successors and assigns (collectively, “Manager Related Parties”) from and
against any and all claims, liabilities, damages, losses, obligations and costs
(including reasonable attorneys’ fees) arising from Owner’s failure to comply
with its obligations under this Agreement and under the Franchise Agreement
provided however, that Owner shall have no obligation to indemnify, defend or
hold harmless Manager Related Parties with respect to a failure by Manager to
obtain a required Owner consent to a Material Management Decision. The terms of
this Section 11.09 shall survive termination of this Agreement.

11.10. Actions to be Taken Upon Termination.

          Upon a Termination, the following shall be applicable:

          A. Manager shall, within ninety (90) days after Termination, prepare
and deliver to Owner a final accounting statement with respect to the Hotel, in
compliance with Section 4.01 hereof, along with a statement of any sums due from
Owner to Manager pursuant hereto, dated as of the date of Termination. Within
thirty (30) days of the receipt by Owner of such final accounting statement, the
parties will make whatever cash adjustments are necessary pursuant to such final
statement. The cost of preparing such final accounting statement shall be a
Deduction, unless the Termination occurs as a result of an Event of Default by
either party, in which case the defaulting party shall pay such cost. Manager
and Owner acknowledge that there may be certain adjustments for which the
information will not be available at the time of the final accounting and the
parties agree to readjust such amounts and make the necessary cash adjustments
when such information becomes available; provided, however, that all accounts
shall be deemed final one (1) year after Termination.

          B. Subject to the reimbursements to be made pursuant to Section
11.10.D and E., Manager shall immediately release and transfer to Owner any of
Owner’s funds which are held or controlled by Manager with respect to the Hotel.

          C. Manager shall make available to Owner such books and records
respecting the Hotel (including those from prior years) as will be needed by
Owner to prepare the accounting statements, in accordance with the Uniform
System of Accounts, for the Hotel for the year in which the Termination occurs
and for any subsequent year.

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          D. Manager shall (to the extent permitted by law without default,
penalty or premium) assign to Owner or to the new manager all operating licenses
and permits for the Hotel which have been issued in Manager’s name (including
liquor and restaurant licenses, if any); provided that if Manager has expended
any of its own funds in the acquisition of any of any of such licenses or
permits, Owner shall reimburse Manager therefor if it has not done so already
unless such expenditure is a Manager’s Liability.

          E. If this Agreement is terminated by reason of Owner’s Event of
Default, a reasonable reserve shall be established from Gross Revenues to
reimburse Manager for all costs and expenses incurred by Manager, as a result of
such Termination, in terminating its employees at the Hotel, such as severance
pay, unemployment compensation, employment relocation and other employee
liability costs arising out of the termination of employment of Manager’s
employees at the Hotel. If Gross Revenues are insufficient to meet the
requirements of such reserve, then Owner shall deposit in an escrow account with
an escrow agent reasonably acceptable to Owner and Manager, pursuant to an
escrow agreement on terms and conditions reasonably satisfactory to Owner and
Manager, as mutually agreed upon by the parties, within ten (10) Business Days
after receipt of Manager’s written request therefor, the sums necessary to
establish such reserve.

          F. Owner may, at its option, (i) provide Manager and/or the employees
at the Hotel (or require Manager to provide to the employees at the Hotel) at
least sixty (60) days’ notice of a Termination and/or (ii) cause the entity
which shall succeed Manager as the operator of the Hotel to offer employment to
a sufficient number of the employees at the Hotel to avoid the occurrence, in
connection with such Termination, of a “plant closing” or “mass layoff” within
the meaning of the WARN Act. If Owner elects to cause the entity which shall
succeed Manager as operator of the Hotel to offer employment to certain of
Manager’s employees, Manager shall not take any action that would cause such
employees not to continue as employees at the Hotel, except for reasons of cause
and as agreed by Owner.

          G. If this Agreement is terminated in accordance with its terms for
any reason other than (1) a material Event of Default by Manager, (2) a
Performance Termination pursuant to Section 2.02.A, or (3) expiration of the
Term, then Owner shall, within ten (10) days after Manager’s request therefor,
pay to Manager the Termination Fee set forth in Schedule 1. If Owner fails to
pay the Termination Fee within the time period set forth herein, then Manager
shall have the right (without affecting Manager’s other remedies under this
Agreement) to withhold the amount of such fee from the Operating Accounts, the
FF&E Reserve, the Working Capital funds or any other funds of Owner held by or
under the control of Manager. The Termination Fee is agreed to be fair and
equitable compensation for Manager’s lost revenue and not as a penalty.
Notwithstanding any provision of this Agreement to the contrary, in the event
Manager elects to terminate this Agreement as a result of an Event of Default by
Owner, Manager may, at its option and in its sole and absolute discretion, elect
to recover the Termination Fee as liquidated damages for that part of its damage
claim constituting lost revenue as a result of such Termination. In no event
shall the provisions of this Section 11.10.G be construed as granting Owner the
right to terminate this Agreement.

          H. Various other actions shall be taken, as described in this
Agreement, including, but not limited to, the actions described in Section 4.05.

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          I. Manager shall peacefully vacate and surrender the Hotel to Owner on
the date of Termination unless otherwise agreed to by the parties.

          The provisions of this Section 11.10 shall survive Termination.

11.11. Waiver.

          The failure of either party to insist upon a strict performance of any
of the terms or provisions of this Agreement, or to exercise any option, right
or remedy contained in this Agreement, shall not be construed as a waiver or as
a relinquishment for the future of such term, provision, option, right or
remedy, but the same shall continue and remain in full force and effect. No
waiver by either party of any term or provision hereof shall be deemed to have
been made unless expressed in writing and signed by such party.

11.12. Partial Invalidity.

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

11.13. Survival.

          Except as otherwise specifically provided in this Agreement, the
rights and obligations of the parties herein shall not survive any Termination.

11.14. Negotiation of Agreement.

          Owner and Manager are both business entities having substantial
experience with the subject matter of this Agreement, and each has fully
participated in the negotiation and drafting of this Agreement. Accordingly,
this Agreement shall be construed without regard to the rule that ambiguities in
a document are to be construed against the draftsman. No inferences shall be
drawn from the fact that the final, duly executed Agreement differs in any
respect from any previous draft hereof.

11.15. Estoppel Certificates.

          Each party to this Agreement shall at any time and from time to time,
upon not less than fifteen (15) days’ prior notice from the other party,
execute, acknowledge and deliver to such other party, or to any third party
specified by such other party, a statement in writing: (a) certifying that this
Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications); and (b) stating to the best knowledge of the
certifying party (i) whether or not there is a continuing Event of Default by
the non-certifying party (or any event that, with the giving of notice, the
lapse of time or both would constitute an Event of Default) in the performance
or observance of any covenant, agreement or condition contained in this

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Agreement, (ii) the amount, if any, of any past due fees or other past due
amounts owed to Manager or Owner; and (iii) whether or not there are any past
due and unpaid obligations with respect to the Hotel, other than in the ordinary
course of business. Such statement shall be binding upon the certifying party
and may be relied upon by the non-certifying party and/or such third party
specified by the non-certifying party as aforesaid. In addition, upon written
request after a Termination, each party agrees to execute and deliver to the
non-certifying party and to any such third party a statement certifying that
this Agreement has been terminated.

11.16. Affiliates.

          Manager shall not be entitled to contract with companies that are
Affiliates (or companies in which Manager has an ownership interest if such
interest is not sufficient to make such a company an Affiliate) to provide goods
and/or services to the Hotel without the prior written consent of Owner.

11.17. Blocked Persons or Entities.

          Manager and Owner each represents and warrants to the other and
covenants for the benefit of the other that (i) neither such representing party
nor any of its Affiliates or any of the officers, directors, partners or
executives of such representing party or its Affiliates, or, to its knowledge,
the funding sources for any of the foregoing, is or might be identified on the
list of the U. S. Treasury’s Office of Foreign Asset Control (“OFAC”); (ii)
neither such representing party nor any of its Affiliates is or might be
directly or indirectly owned or controlled by the government of any country that
is subject to an embargo imposed by the United States government; and (iii)
neither such representing party nor any of its Affiliates is acting or might act
on behalf of a government of, or is involved in business arrangements or other
transactions with, any country that is subject to such an embargo. Such
representing party will notify the other in writing immediately upon the
occurrence of any event which would render such representing party’s foregoing
representations and warranties incorrect.

11.18. Counterparts.

          This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which shall constitute one
and the same instrument. Such executed counterparts may be delivered by
facsimile which, upon transmission to the other party, shall have the same force
and effect as delivery of the original signed counterpart. The submission of an
unsigned copy of this Agreement or an electronic instrument with or without
electronic signature to either party shall not constitute an offer or
acceptance.

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11.19. Entire Agreement.

          This Agreement, together with any other writings signed by the parties
expressly stated to be supplemental hereto and together with any instruments to
be executed and delivered pursuant to this Agreement, constitutes the entire
agreement between the parties and supersedes all prior understandings and
writings, and may be amended only by a written instrument that has been duly
executed by the signature of an authorized representative of the parties hereto.

11.20. Competing Facilities.

          Except as the parties may otherwise agree by written amendment to this
Agreement, neither this Agreement nor anything implied by the relationship
between Manager and Owner shall prohibit Manager or its Affiliates from
constructing, operating, developing, owning, promoting, and/or authorizing
others to construct, operate, develop, own or market one or more hotels, lodging
concepts, time-share facilities, restaurants, or other business operations of
any type, at any location, including a location proximate to the Site. Owner
acknowledges, accepts and agrees further that Manager retains the right, from
time to time, to construct, operate, develop and/or own, or promote or acquire,
or authorize or otherwise license others to construct, operate, develop and/or
own, or promote or acquire any hotels, lodging concepts or products, restaurants
or other business operations of any type whatsoever, including, but not by way
of limitation, those listed above, at any location including one or more sites
which may be adjacent, adjoining or proximate to the Site, which business
operations may be in direct competition with the Hotel. If Manager or any of its
Affiliates shall acquire, lease, own, manage or operate, directly or indirectly,
any hotel, inn, motel or other type of lodging facility, regardless of whether
similar to the Hotel, or whether operated under the same or a different brand,
in the same geographic area or market as the Hotel, Manager shall not permit
unfair favoritism in the operation and management of such other hotel that would
disadvantage the operation or business of the Hotel.

11.21. Waiver of Jury Trial and Punitive Damages.

          Owner and Manager each hereby absolutely, irrevocably and
unconditionally waive trial by jury and the right to claim punitive damages in
any Litigation, arising out of or pertaining to this Agreement or any other
agreement, instrument or document entered into in connection herewith.

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ARTICLE XII
DEFINITION OF TERMS

 

 

12.01. Definition of Terms.

          The following terms when used in this Agreement shall have the
meanings indicated:

          “Accounting Period” shall mean a calendar month, except that the first
Accounting Period shall begin on the Effective Date and shall end on the last
day of the calendar month in which the Effective Date occurs.

          “Accounting Period Statement” shall have the meaning ascribed to it in
Section 4.0l.A.

          “Affiliate” shall mean, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For purposes of this definition, the term “control” (including
the terms “controlling,” “controlled by” and “under common control with”) of a
Person means the possession, directly or indirectly, of the power: (i) to vote
more than fifty percent (50%) of the voting stock or other beneficial interests
of such Person; or (ii) to direct or cause the direction of the management and
policies of such Person, whether through the Ownership of voting stock, by
contract or otherwise.

          “Agreement” shall mean this Management Agreement between Owner and
Manager, including the schedules and exhibits attached hereto.

          “Annual Operating Projection” shall have the meaning ascribed to it in
Section 4.04.

          “Annual Operating Statement” shall have the meaning set forth in
Section 4.0l.B.

          “Available Cash Flow” shall mean an amount, with respect to each
Fiscal Year or portion thereof during the Term, equal to the excess, if any, of
the Operating Profit over the Owner’s Priority.

          “Base Management Fee” shall mean an amount payable to Manager as a
Deduction from Gross Revenues for all services provided by Manager pursuant to
this Agreement, except as otherwise expressly provided herein. The Base
Management Fee shall be the percentage of Gross Revenues shown in Schedule 1 for
each Fiscal Year during the Term.

          “Buildings” shall mean the buildings and improvements constituting
that certain hotel more particularly described in Schedule 1 attached hereto and
made a part hereof which is located on the Site.

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

          “Competitive Set” shall mean the group of hotels which are closest in
geographical distance from the Hotel and which are generally within the same
hotel market segment as the Hotel. The initial Competitive Set is identified on
Schedule 1 attached hereto and made a part hereof. If any such hotels,
subsequent to the Effective Date, either changes its chain affiliation

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or ceases to operate or otherwise ceases to reflect the general criteria set
forth in the first sentence of this definition, the Competitive set shall be
changed at the request of either Owner or Manager and approval of both parties,
such approval not to be unreasonably withheld, conditioned or delayed so that it
continues to satisfy the criteria set forth in the first sentence of this
definition.

          “CPI”, shall mean the Consumer Price Index for All Urban Consumers
(CPI-U) for the U.S. City Average for All Items (1982-1984=100) published by the
Bureau of Labor Statistics, United States Department of Labor; provided,
however, that if such index ceases to be published or is converted to a
different standard or is otherwise revised, the index shall be adjusted by any
then applicable conversion factor, or failing that, by any published price or
cost indices or other published data which are as comparable as possible to the
Index prior to its termination or revision.

          “Deductions” shall mean the following deductions incurred by Manager,
on behalf of Owner, in operating the Hotel:

                    1. the cost of sales, including, without limitation,
compensation, fringe benefits, payroll taxes and other costs related to Hotel
employees (the foregoing shall include the applicable portion of the salary and
other employee costs of any personnel assigned to a “cluster” of hotels managed
by Manager which includes the Hotel, provided that such costs are included in
the Annual Operating Projection approved by Owner), provided that the foregoing
costs shall not include salaries and other employee costs of executive personnel
of Manager who do not work at the Hotel on a regular basis, which salaries and
costs shall be Manager’s Liability;

                    2. departmental expenses incurred at departments within the
Hotel; administrative and general expenses; the cost of marketing incurred by
the Hotel; advertising and business promotion incurred by the Hotel; heat,
light, and power; computer line charges; and routine maintenance, repairs and
minor alterations treated as Deductions under Section 5.01;

                    3. the cost of Inventories and Fixed Asset Supplies consumed
in the operation of the Hotel;

                    4. a reasonable reserve for uncollectible accounts
receivable as reasonably determined by Manager with the concurrence of Owner;

                    5. all costs and fees of independent professionals or other
third parties who are retained by Manager with the concurrence of Owner to
perform services required or permitted hereunder;

                    6. all costs and fees of technical consultants and
operational experts who are retained or employed by Manager with the concurrence
of Owner for specialized services (including, without limitation, quality
assurance inspectors) and the reasonable cost of attendance by employees of the
Hotel at training and manpower development programs sponsored by Manager,
provided Owner has approved attendance at programs and the cost thereof;

                    7. the Base Management Fee;

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                    8. all royalty, marketing fund, reservation, communication
support, property management system and other similar fees payable to the
Franchisor under the Franchise Agreement;

                    9. insurance costs and expenses as provided in Section 6.03
and 6.04;

                    10. taxes, if any, payable by or assessed against Manager
related to this Agreement or to Manager’s operation of the Hotel and Impositions
(exclusive of Manager’s income taxes or franchise taxes and any other or similar
taxes payable by Manager and all other taxes, assessments and payments excluded
from the definition of Impositions);

                    11. transfers to the Reserve required pursuant to Section
5.02;

                    12. any costs paid by Manager or Owner pursuant to the
Franchise Agreement;

                    13. the accounting fee identified in Schedule 1 to be paid
to Manager for each Accounting Period in connection with providing accounting
services pursuant to this Agreement, provided that such accounting fee shall be
waived as to any Accounting Period for which Manager fails to delivers an
Accounting Period Statement in a timely manner as required by Section 4.01.A;

                    14. system fees identified in Schedule 1 to be paid to
Manager, provided that such system fees are included in the Annual Operating
Projections approved by Owner;

                    15. payments pursuant to FF&E Leases or other forms of
financing obtained for the FF&E located in or connected with the Hotel; and

                    16. to the extent approved in advance by Owner, such other
costs and expenses incurred by Manager as are specifically provided for
elsewhere in this Agreement or are otherwise reasonably necessary for the proper
and efficient operation of the Hotel, including without limitation, travel
expenses or supervisory personnel of Manager incurred in connection with
managing the Hotel.

          The term “Deductions” shall not include (a) debt service payments
pursuant to a Mortgage or (b) rental payments under any Hotel Lease, all of
which shall be paid by Owner from its own funds.

          “Effective Date” shall have the meaning ascribed to it in Schedule 1.

          “Environmental Laws” shall have the meaning ascribed to it in Section
11.07.A.

          “Event of Default” shall have the meaning ascribed to it in Section
9.01.

          “Extension Notice” shall have the meaning ascribed to it in Section
2.01.

          “Extension Term” shall have the meaning ascribed to it in Section
2.01.

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          “Fee Owner” shall mean the party identified on Schedule 1, if any, to
the extent the landlord under the TRS Lease Agreement holds a fee simple
interest in the Hotel.

          “FF&E” shall mean furniture, furnishings, fixtures, soft goods, case
goods, signage, audio-visual equipment, kitchen appliances, vehicles, carpeting
and equipment, including front desk and back-of-the-house computer equipment,
but shall not include Fixed Asset Supplies or Software.

          “FF&E Lease” means a lease of any FF&E, which lease is properly
capitalized for financial accounting purposes.

          “Fiscal Year” shall mean the year which ends at midnight on December
31 in each calendar year; the new Fiscal Year begins on January 1 immediately
following. Any partial Fiscal Year between the Effective Date and the
commencement of the first Fiscal Year containing twelve (12) Accounting Periods
shall constitute a separate Fiscal Year but shall not be considered to be the
“first Fiscal Year” or a “full Fiscal Year” for purposes of this Agreement. A
partial Fiscal Year between the end of the last full Fiscal Year and the
Termination of this Agreement shall constitute a separate Fiscal Year.

          “Fixed Asset Supplies” shall mean items included within “Property and
Equipment” under the Uniform System of Accounts including, but not limited to,
linen, china, glassware, tableware, uniforms, and similar items, whether used in
connection with public space or Guest Rooms.

          “Force Majeure” shall mean acts of God, acts of war, civil
disturbance, governmental action (including the revocation or refusal to grant
licenses or permits, where such revocation or refusal is not due to the fault of
the party whose performance is to be excused for reasons of Force Majeure),
strikes, lockouts, fire, unavoidable casualties or any other causes beyond the
reasonable control of either party (excluding, however, (i) lack of financing,
or (ii) general economic and/or market factors not caused by any of the events
described above).

          “Foreclosure” shall mean any exercise of the remedies available to a
Mortgagee, upon a default under the Mortgage held by such Mortgagee, which
results in a transfer of title to or possession of the Hotel. The term
“foreclosure” shall include, without limitation, any one or more of the
following events, if they occur in connection with a default under a Mortgage:
(i) a transfer by judicial or non-judicial foreclosure; (ii) a transfer by deed
in lieu of foreclosure; (iii) the appointment by a court of a receiver to assume
possession of the Hotel; (iv) a transfer of either ownership or control of the
Owner, by exercise of a stock pledge or otherwise; (v) if title to the Hotel is
held by a tenant under a ground lease, an assignment of the tenant’s interest in
such ground lease or (vi) any similar judicial or non-judicial exercise of the
remedies held by the Mortgagee resulting in actual ownership or control of the
Hotel by such Mortgagee or its designee.

          “Franchise Agreement” shall mean the franchise agreement described in
Schedule 1 attached hereto and made a part hereof, as the same may be amended or
supplemented from time to time.

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

          “Gross Revenues” shall mean all revenues and receipts of every kind
derived from operating the Hotel and all departments and parts thereof (not
including gross receipts of licensees, lessees and concessionaires), including,
but not limited to: income (from both cash and credit transactions) from rental
of Guest Rooms, telephone charges, stores, cell phone sites, offices, exhibit or
sales space of every kind; license, lease and concession fees and rentals;
income from vending machines; income from parking; health club membership fees;
food and beverage sales; wholesale and retail sales of merchandise; service
charges; and proceeds, if any, from business interruption or other loss of
income insurance; provided, however, that Gross Revenues shall not include the
following: gratuities to employees of the Hotel; federal, state or municipal
excise, sales or use taxes or any other taxes collected directly from patrons or
guests or included as part of the sales price of any goods or services; proceeds
from the sale of FF&E; interest received or accrued with respect to the funds in
the Reserve or the other operating accounts of the Hotel; any refunds, rebates,
discounts and credits of a similar nature, given, paid or returned in the course
of obtaining Gross Revenues or components thereof; insurance proceeds (other
than proceeds from business interruption or other loss of income insurance);
condemnation proceeds (other than for a temporary taking); or any proceeds from
any Sale of the Hotel or from the financing or refinancing of any debt
encumbering the Hotel.

          “Guest Room” shall mean a separately-keyed lodging unit in the Hotel.

          “Guest Room Revenues” shall mean the portion of Gross Revenues of the
Hotel which is attributed to the rental of Guest Rooms.

          “Hazardous Materials” shall have the meaning ascribed to it in Section
11.07.A.

          “Hotel” shall mean the Site together with the Buildings and all other
improvements construed or to be constructed on the Site pursuant to this
Agreement, all FF&E and Fixed Asset Supplies installed or located on the Site or
in the Buildings, and all easements or other appurtenant rights thereto.

          “Hotel Lease” shall mean the hotel lease agreement dated as of the
Effective Date between the Landlord and the Owner, pursuant to which the
Landlord leases the Hotel to Owner.

          “Impact Fees” shall have the meaning ascribed to it in Section 4.07.A.

          “Impositions” shall have the meaning ascribed to it in Section 4.07.

          “Incentive Management Fee” shall mean an amount payable to Manager,
pursuant to Section 3.01 and Section 4.01, that is equal to the percentage set
forth in Schedule 1 of Available Cash Flow in any Fiscal Year (or portion
thereof) after payment to Owner of Owner’s Priority.

          “Initial Term” shall have the meaning ascribed to it in Section 2.01.

          “Inventories” shall mean “Inventories” as defined in the Uniform
System of Accounts, such as, but not limited to, provisions in storerooms,
refrigerators, pantries and kitchens;

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beverages in wine cellars and bars; other merchandise intended for sale; fuel;
mechanical supplies; stationery; and other expensed supplies and similar items.

          “Landlord” shall mean the party identified as “Landlord.”

          “Legal Requirement(s)” shall mean any federal, state or local law,
code, rule, ordinance, regulation or order of any governmental authority or
agency having jurisdiction over the business or operation of the Hotel or the
matters which are the subject of this Agreement, including, without limitation,
the following: (i) any building, zoning or use laws, ordinances, regulations or
orders; and (ii) Environmental Laws, and (iii) permits, approvals, and licenses,
including, without limitation, liquor licenses.

          “Litigation” shall mean: (i) any cause of action (including, without
limitation, bankruptcy or other debtor/creditor proceedings) commenced in a
federal, state or local court; or (ii) any claim brought before an
administrative agency or body (for example, without limitation, employment
discrimination claims).

          “Manager” shall mean the party identified as “Manager” in the Preamble
or shall mean any permitted successor or assign, as applicable.

          “Manager’s Liability” and “Manager’s Liabilities” shall have the
meanings ascribed to such terms in Section 4.03.B.

          “Material Management Decision” shall have the meaning ascribed to it
in Section 1.02.B.

          “Mortgage” shall mean any mortgage, deed of trust, deed to secure debt
or similar security instrument creating a lien on the Hotel or the Site.

          “Mortgagee” shall mean the holder or beneficiary of any Mortgage
encumbering the Hotel or the Site.

          “Operating Accounts” shall have the meaning ascribed to it in Section
4.03.A.

          “Operating Loss” shall mean a negative Operating Profit.

          “Operating Profit” shall mean the excess of Gross Revenues over
Deductions.

          “Owner” shall mean the party identified as “Owner” in the Preamble or
shall mean any successor or assign, as applicable.

          “Owner’s Priority” shall mean an amount up to, but not in excess of
the amount shown as Owner’s Priority in Schedule 1 attached hereto and made a
part hereof, per Fiscal Year (prorated for any partial Fiscal Year) on a
noncumulative basis. Owner’s Priority for each Fiscal Year shall be paid to the
extent of Operating Profit available in such Fiscal Year, as provided in Section
3.02 of this Agreement. In the event of any Capital Expenditures from funds
other than the Reserve, the Owner’s Priority shall be increased (but not
decreased) for the remaining portion of the Fiscal Year in which such capital
expenditures are made and all subsequent Fiscal

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Years so as to equal an eleven percent (11%) return on an amount equal to the
sum of (i) the purchase price paid by Owner for the Hotel plus (ii) any such
Capital Expenditures.

          “Person” means an individual (and the heirs, executors,
administrators, or other legal representatives of an individual), a partnership,
a corporation, limited liability company, a government or any department or
agency thereof, a trustee, a trust and any unincorporated organization.

          “Performance Termination Period” shall have the meaning ascribed to it
in Schedule 1.

          “Performance Termination Threshold” shall have the meaning ascribed to
it in Schedule 1.

          “Prime Rate” shall mean the “prime rate” of interest announced from
time to time in the “Money Rates” section of The Wall Street Journal.

          “Purchase Contract” shall have the meaning ascribed to it in Schedule
1.

          “Prudent Industry Practice” shall mean the customary practices of the
hotel industry in the United States for hotels comparable to the Hotel and
consistent with the Franchise Agreement. To the extent such industry practices
are inconsistent with the requirements of the Franchise Agreement, such
practices shall be conformed to the requirements of the Franchise Agreement for
purposes of this Agreement.

          “Reserve” shall have the meaning ascribed to it in Section 5.02A.

          “Revenue Data Publication” shall mean Smith’s STAR Report, a monthly
publication distributed by Smith Travel Research, Inc. of Gallatin, Tennessee,
or an alternative source, reasonably satisfactory to both parties, of data
regarding the Revenue Per Available Room of hotels in the general trade area of
the Hotel. If such Smith’s STAR Report is discontinued in the future, or ceases
(in the reasonable opinion of either Owner or Manager) to be a satisfactory
source of data regarding the Revenue Per Available Room of various hotels in the
general trade area of the Hotel, Owner and Manager shall select an alternative
source for such data.

          “Revenue Index” shall mean that fraction that is equal to (a) the
Revenue Per Available Room for the Hotel divided by (b) the average Revenue Per
Available Room for the hotels in the Competitive Set, as set forth in the
Revenue Data Publication. Appropriate adjustments to the Revenue Index
reasonably acceptable to Owner shall be made in the event of a major renovation
of the Hotel.

          “Revenue Index Threshold” shall mean the number shown in Schedule 1
attached hereto and made a part hereof. However, if the entry of a new hotel
into the Competitive Set (or the removal of a hotel from the Competitive Set or
a major renovation or re-positioning of a hotel in the Competitive Set) causes
significant variations in the Revenue Index that do not reflect the Hotel’s true
position in the relevant market, appropriate adjustments shall be made to the
Revenue Index Threshold by mutual consent of Owner and Manager, each acting in
good faith.

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          “Revenue Per Available Room” shall mean (i) the term “revenue per
available room” as defined by the Revenue Data Publication, or (ii) if the
Revenue Data Publication is no longer being used (as more particularly set forth
in the definition of “Revenue Data Publication”), the aggregate gross room
revenues of the hotel in question for a given period of time divided by the
total room nights for such period. If clause (ii) of the preceding sentence is
being used, a “room” shall be an available hotel guestroom that is keyed as a
single unit.

          “Routine Capital Expenditures” shall mean certain routine, non-major
expenditures which are classified as “capital expenditures” under
generally-accepted accounting principles, and which will be funded from the
Reserve (pursuant to Section 5.02). Routine Capital Expenditures consist of the
following types of expenditures: exterior and interior painting; resurfacing
building walls and floors; resurfacing parking areas; and miscellaneous similar
expenditures. Routine Capital Expenditures are not non-routine capital
expenditures or major repairs or major alterations or improvements.

          “Sale of the Hotel” shall mean any sale, assignment, transfer or other
disposition, for value or otherwise, voluntary or involuntary, of the Site
and/or the Hotel or any interest therein, in whole or part. For purposes of this
Agreement, a Sale of the Hotel shall also include a lease (or sublease) of all
or substantially all of the Hotel or Site or any interest therein.

          “SEC Filing Period” shall mean such period of time (not to exceed
thirty (30) days) after the close of each Fiscal Year within which Owner must
receive the Annual Operating Statement from Manager with respect to such Fiscal
Year in order for Owner or its Affiliates to have a reasonable period of time
within which to prepare and make all required filings with the Securities and
Exchange Commission and other applicable governmental agencies.

          “Site” shall mean the real property described on Exhibit A attached
hereto and made a part hereof.

          “Software” shall mean all computer software and accompanying
documentation (including all future upgrades, enhancements, additions,
substitutions and modifications thereof), other than computer software which is
generally commercially available, which are used by Manager in connection with
operating or otherwise providing services to the Hotel.

          “Specially Designated National or Blocked Person” shall mean (i) a
person designated by the U.S. Department of Treasury’s Office of Foreign Assets
Control from time to time as a “specially designated national or blocked person”
or similar status, (ii) a person described in Section 1 of U.S. Executive Order
13224 issued on September 23, 2001, or (iii) a person otherwise identified by
government or legal authority as a person with whom Manager or its Affiliates
are prohibited from transacting business. Currently, a listing of such
designations and the text of the Executive Order are published under the
internet website address www.ustreas.gov/offices/enforcement/ofac.

          “Subordination Agreement” shall have the meaning ascribed to it in
Section 8.01.

          “Subsequent Owners” and “Subsequent Owner” shall have the meanings
ascribed to such terms in Section 8.01.

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          “Term” shall mean the Initial Term and any duly exercised Extension
Term(s).

          “Termination” shall mean the expiration or sooner cessation of this
Agreement.

          “Termination Fee” shall have the meaning set forth in Schedule 1.

          “TRS Lease Agreement” shall have the meaning ascribed to it in
Schedule 1.

          “Uniform System of Accounts” shall mean the Uniform System of Accounts
for the Lodging Industry, Tenth Revised Edition, 2006, as published by the
Educational Institute of the American Hotel & Motel Association, as revised from
time to time.

          “WARN Act” shall mean the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. 2101 et seq.

          “Working Capital” shall mean funds that are used in the day-to-day
operation of the business of the Hotel, including, without limitation, amounts
sufficient for the maintenance of change and petty cash funds, amounts deposited
in operating bank accounts, receivables, amounts deposited in payroll accounts,
prepaid expenses and funds required to maintain Inventories, less accounts
payable and accrued current liabilities. The Initial Working Capital deposited
by Owner as of the Effective Date shall be the amount set forth in Schedule 1
and shall be replenished as provided in this Agreement to maintain the amount to
at least that shown as Initial Working Capital.

ARTICLE XIII
SUPPLEMENTAL PROVISIONS

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

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

 

 

 

 

 

 

 

 

OWNER:

 

 

 

 

 

APPLE TEN HOSPITALITY MANAGEMENT, INC.

 

 

 

By:

 

 

 

 

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

 

 

Name:

Justin G. Knight

 

Title:

President

 

 

 

 

 

 

 

 

 

MANAGER:

 

 

 

 

 

WHITE LODGING SERVICES CORPORATION,

 

an Indiana corporation

 

 

 

 

 

By:

 

 

 

 

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

 

 

 

Dave Sibley, President and CEO

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SCHEDULE 1

HOTEL SPECIFIC DATA

1. Description of Hotel: That certain hotel known as the Fairfield Inn & Suites
by Marriott, located at 1220 East Angela Boulevard, South Bend, Indiana,
containing one hundred nineteen (119) guest rooms, a lobby, meeting rooms,
administrative offices, parking and certain amenities and related facilities
located on the Site, including the following:

 

 

 

 

a.

Number of Guest Rooms: One hundred nineteen (119)

 

 

 

 

b.

Other Improvements/Amenities: Meeting room space; business center; indoor
swimming pool; fitness center; and wireless high speed internet access

 

 

 

 

c.

TRS Lease Agreement: That certain lease agreement of even date herewith between
Fee Owner as landlord, and Owner as lessee pursuant to which Owner leases the
Hotel.

2. Franchise Agreement: Franchise Agreement between Apple Ten Hospitality
Management, Inc. and Marriott International, Inc., dated ____________ __, 2011

3. Competitive Set: Residence Inn South Bend, Quality Inn & Suites South Bend,
Hilton Garden Inn South Bend, Holiday Inn Express & Suites, Hampton Inn & Suites
and Inn at St. Mary’s, all in South Bend

4. Fee Owner and Landlord: Apple Ten Hospitality Ownership, Inc.

5. Base Management Fee: Three and one-half percent (3.5%)

6. a. Incentive Management Fee: Twenty percent (20%) of Available Cash Flow
after payment of Owner’s Priority

    b. Owner’s Priority: One Million Nine Hundred Twenty Five Thousand and
No/100 ($1,925,000.00)

7. Performance Termination Period: Any two (2) consecutive Fiscal Years (not
including any portion of any Fiscal Year prior to the expiration of the second
full Fiscal Year after the Effective Date).

8. Revenue Index Threshold: Ninety five percent (95%)

9. Initial Working Capital: Fifty Nine Thousand Five Hundred and No/100 Dollars
($59,500.00)

10. Hotel Purchase Contract: Purchase Contract dated as of March 1, 2010,
between Apple Ten Hospitality Ownership, Inc. and KRG/WHITE LS HOTEL, LLC, an
Indiana limited liability

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company, and KITE REALTY/WHITE LS HOTEL OPERATORS, LLC, an Indiana limited
liability company, as seller

11. Expiration Date of Initial Term: Twenty (20) years after the Effective Date

12. Extension Terms: Two (2) Ten (10) year terms, subject to mutual agreement
per Section 2.01.

13. FF&E Reserve: An amount equal to five percent (5%) of Gross Revenues for
each Accounting Period, or Franchise Agreement requirement whichever is greater.

14. Accounting Fee: One Thousand Seven Hundred Seventy Two and no/100 Dollars
($1772.00) per month

15. Termination Fee: An amount equal to two and one half times the actual Base
Management Fees and Incentive Management Fees earned by Manager in the Fiscal
Year preceding the Fiscal Year in which the Termination occurred. In the event
the Termination which has given rise to the obligation to pay the Termination
Fee occurs prior to the expiration of the first full Fiscal Year, the Base
Management Fees and Incentive Management Fees used for such calculation will be
determined by using the Gross Revenue generated at the Hotel in the twelve
calendar months elapsing just prior to the Effective Date hereunder.

16. System Fee: Five Hundred Twenty Three and No/100 Dollars ($523.00) per month

17. “Effective Date” shall mean __________________, 2011 [the date of full
execution of the Agreement]

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