Document:

Agreement of Purchase and Sale

    
      

    

    

    

    

     

    

     

    

     

    AGREEMENT
      OF PURCHASE AND SALE

     

    

     

    THE
      SELLER PARTIES

     

    Identified
      herein

     

    

     

    “SELLERS”

     

    

     

    PYRAMID
      HOTEL OPPORTUNITY VENTURE LLC, a Delaware limited liability company

     

    

     

    “BUYER”

     

    

     

    

     

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

                              AGREEMENT
        OF PURCHASE
        AND SALE

       

                                          INDEX

       

      
        	
                ARTICLE
                  I ASSETS PURCHASED AND SOLD

              	
                12

              
	 	 	 
	
                Section
                  1.01

              	
                Purchase
                  and Sale

              	
                12

              
	
                Section
                  1.02

              	
                Personal
                  Property

              	
                12

              
	
                Section
                  1.03

              	
                Operating
                  Agreements

              	
                12

              
	
                Section
                  1.04

              	
                Intangible
                  Property

              	
                13

              
	
                Section
                  1.05

              	
                Franchise
                  Agreements

              	
                14

              
	
                Section
                  1.06

              	
                Management
                  Agreements

              	
                14

              
	
                Section
                  1.07

              	
                Land
                  and Hotels

              	
                15

              
	
                Section
                  1.08

              	
                Operating
                  Leases

              	
                15

              
	 	 	 
	
                ARTICLE
                  II PURCHASE PRICE

              	
                15

              
	 	 	 
	
                Section
                  2.01

              	
                Price

              	
                15

              
	
                Section
                  2.02

              	
                Deposit

              	
                16

              
	
                Section
                  2.03

              	
                Balance
                  of Purchase Price

              	
                16

              
	
                Section
                  2.04

              	
                Escrow
                  Agent

              	
                16

              
	
                Section
                  2.05

              	
                Reserve
                  Accounts

              	
                17

              
	
                Section
                  2.06

              	
                Capital
                  Expenditure Plans

              	
                17

              
	 	 	 
	
                ARTICLE
                  III OPERATION OF THE PROPERTY 

              	
                17

              
	 	 	 
	
                Section
                  3.01

              	
                Operation
                  in the Ordinary Course of Business

              	
                17

              
	
                Section
                  3.02

              	
                Liquor
                  License

              	
                18

              
	
                Section
                  3.03

              	
                Cooperation

              	
                18

              
	 	 	 
	
                ARTICLE
                  IV PRORATIONS AND ADJUSTMENTS

              	
                18

              
	 	 	 
	
                Section
                  4.01

              	
                Closing
                  Statement/Operations Settlement

              	
                18

              
	
                Section
                  4.02

              	
                Taxes
                  and Rents

              	
                19

              
	
                Section
                  4.03

              	
                Utilities
                  

              	
                19

              
	
                Section
                  4.04

              	
                Assigned
                  Operating Agreements and Management

                Agreements

              	
                 

                20

              
	
                Section
                  4.05

              	
                Room
                  Revenues; Reservations; Tray Ledger; Accounts

                Receivable
                  and House Funds

              	
                 

                20

              
	
                Section
                  4.06

              	
                Accounts
                  Payable and Expenses

              	
                21

              
	
                Section
                  4.07

              	
                Guests’
                  Property

              	
                22

              
	 	 	 
	
                ARTICLE
                  V EMPLOYEES

              	
                22

              
	 	 	 
	
                Section
                  5.01

              	
                Salaries,
                  Etc.

              	
                22

              
	
                Section
                  5.02

              	
                Employee
                  Claims

              	
                22

              

      

      

      
        	
                ARTICLE
                  VI REPESENTATIONS AND WARRANTIES OF SELLERS

              	
                23

              
	 	 	 
	
                Section
                  6.01

              	
                Existence
                  and Good Standing 

              	
                23

              
	
                Section
                  6.02

              	
                Authority

              	
                23

              
	
                Section
                  6.03

              	
                Litigation

              	
                23

              
	
                Section
                  6.04

              	
                Condemnation

              	
                23

              
	
                Section
                  6.05

              	
                Title
                  to Personal Property

              	
                23

              
	
                Section
                  6.06

              	
                Compliance
                  with Applicable Law

              	
                24

              
	
                Section
                  6.07

              	
                Taxes

              	
                24

              
	
                Section
                  6.08

              	
                Financial
                  Statements

              	
                24

              
	
                Section
                  6.10

              	
                Insolvency
                  

              	
                24

              
	
                Section
                  6.11

              	
                FIRPTA

              	
                24

              
	
                Section
                  6.12

              	
                Exclusivity
                  

              	
                24

              
	
                Section
                  6.13

              	
                Money
                  Laundering 

              	
                24

              
	 	 	 
	
                ARTICLE
                  VII REPRESENTATIONS AND WARRANTIES OF BUYER

              	
                26

              
	 	 	 
	
                Section
                  7.01

              	
                Existence
                  and Good Standing 

              	
                26

              
	
                Section
                  7.02

              	
                Authority

              	
                26

              
	
                Section
                  7.03

              	
                No
                  Conflict

              	
                26

              
	
                Section
                  7.04

              	
                Money
                  Laundering

              	
                26

              
	
                Section
                  7.05

              	
                AS
                  IS

              	
                27

              
	 	 	 
	
                ARTICLE
                  VIII REMEDIES

              	
                29

              
	 	 	 
	
                Section
                  8.01

              	
                Seller’s
                  Remedies

              	
                29

              
	
                Section
                  8.02

              	
                Buyer’s
                  Remedies

              	
                29

              
	
                Section
                  8.03

              	
                Post-Closing
                  Matters

              	
                30

              
	 	 	 
	
                ARTICLE
                  IX CONDITIONS

              	
                30

              
	 	 	 
	
                Section
                  9.01

              	
                Seller’s
                  Obligation

              	
                30

              
	
                Section
                  9.02

              	
                Buyer’s
                  Obligation

              	
                30

              
	 	 	 
	
                ARTICLE
                  X CLOSING DELIVERIES

              	
                31

              
	 	 	 
	
                Section
                  10.01

              	
                Documents
                  and Instruments to Be Delivered At or Before 

                Closing 

              	
                 

                31

              
	 	 	 
	
                ARTICLE
                  XI TITLE TO REAL PROPERTY

              	
                33

              
	 	 	 
	
                Section
                  11.01

              	
                Title
                  Insurance Commitments

              	
                33

              
	
                Section
                  11.03

              	
                Survey

              	
                33

              
	
                Section
                  11.04

              	
                Access
                  to Property; Due Diligence 

              	
                34

              
	 	 	 
	
                ARTICLE
                  XII THE CLOSING

              	
                34

              
	
                Section
                  12.01

              	
                Time
                  and Place

              	
                34

              
	
                Section
                  12.02

              	
                Payment
                  of Purchase Price

              	
                34

              
	
                Section
                  12.03

              	
                Closing
                  Costs

              	
                34

              
	
                Section
                  12.04

              	
                Revenue
                  and Expense Prorations

              	
                36

              
	
                Section
                  12.05

              	
                Closing
                  Documents

              	
                36

              
	 	 	 
	
                ARTICLE
                  XIII INSURANCE, CONDEMNATION AND CASUALTY 

              	
                36

              
	 	 	 
	
                Section
                  13.01

              	
                Insurance

              	
                36

              
	
                Section
                  13.02

              	
                Condemnation
                  and Casualty 

              	
                36

              
	 	 	 
	
                ARTICLE
                  XIV MISCELLANEOUS COVENANTS AND PROVISIONS

              	
                37

              
	 	 	 
	
                Section
                  14.01

              	
                Assignment;
                  Successors and Assigns

              	
                38

              
	
                Section
                  14.02

              	
                Counterparts

              	
                38

              
	
                Section
                  14.03

              	
                Waiver

              	
                38

              
	
                Section
                  14.04

              	
                Amendments

              	
                38

              
	
                Section
                  14.05

              	
                Further
                  Agreements

              	
                38

              
	
                Section
                  14.06

              	
                Attorney’s
                  Fees

              	
                38

              
	
                Section
                  14.07

              	
                Entire
                  Agreement

              	
                38

              
	
                Section
                  14.08

              	
                Brokers
                  and Finders

              	
                38

              
	
                Section
                  14.09

              	
                Notices

              	
                38

              
	
                Section
                  14.10

              	
                Section
                  Headings; Interpretation

              	
                40

              
	
                Section
                  14.11

              	
                Governing
                  Law

              	
                40

              
	
                Section
                  14.12

              	
                Disclosure
                  of Confidential Information/Public Announcements/

                Communication
                  with Governmental Authorities/Communication

                with
                  Employees

              	
                 

                 

                 

                 

                40

              
	
                Section
                  14.13

              	
                Non-Solicitation

              	
                42

              
	
                Section
                  14.14

              	
                Time
                  of Essence

              	
                42

              
	 	 	 
	
                EXHIBIT
                  “A”

              	
                Legal
                  Description of Land

              	 
	
                EXHIBIT
                  “B”

              	
                Assignment
                  and Assumption of Intangible Property

              	 
	
                EXHIBIT
                  “C”

              	
                Assignment
                  and Assumption of Hotel Rex Management Agreement 

              	 
	
                EXHIBIT
                  “D”

              	
                Assignment
                  and Assumption of Operating Agreements

              	 
	
                EXHIBIT
                  “E”

              	
                Schedule
                  of Franchise Agreements and Guarantees of Franchise

              	 
	 	
                Agreements

              	 
	
                EXHIBIT
                  “F”

              	
                Bill
                  of Sale (Personal Property)

              	 
	
                EXHIBIT
                  “G”

              	
                Schedule
                  of Management Agreements 

              	 
	
                EXHIBIT
                  “H”

              	
                Schedule
                  of Operating Agreements 

              	 
	
                EXHIBIT
                  “I”

              	
                Schedule
                  of Operating Leases

              	 
	
                EXHIBIT
                  “J”

              	
                Purchase
                  Price Allocation Schedule 

              	 
	
                EXHIBIT
                  “K”

              	
                Schedule
                  of Sellers

              	 
	
                EXHIBIT
                  “L”

              	
                Litigation
                  Schedule

              	 
	
                EXHIBIT
                  “M”

              	
                Title
                  and Survey Defects

              	 
	
                EXHIBIT
                  “N”

              	
                Schedule
                  of Operating Agreements to be Terminated by Sellers

              	 
	
                EXHIBIT
                  “O”

              	
                Environmental
                  Reports

              	 

      

      

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    AGREEMENT
      OF PURCHASE AND SALE

    

    AGREEMENT
      OF PURCHASE AND SALE
      made and
      entered into as of July 5, 2005, by and between Sellers and Buyer.

     

    DEFINITIONS

     

    For
      the
      purposes of this Agreement, the parties agree that the following terms shall
      have the following meanings:

     

    
      	1.  	
              Accounts
                Receivable:
                All accounts receivable relating to the Hotels, other than the Tray
                Ledgers, accruing prior to the Transfer Time (including, without
                limitation, receivables and revenues for food, beverage and telephone
                use).

            

    

     

    
      	2.  	
              Agreement:
                This Agreement of Purchase and Sale by and between Buyer and Sellers
                providing for the sale and purchase of the
                Property.

            

    

     

    
      	3.  	
              Assignment
                and Assumption of Hotel Rex Management Agreement:
                Unless the Hotel Rex Management Agreement is terminated at Closing
                as
                provided in Section 1.06(d) hereof, an assignment and assumption
                of
                the Hotel Rex Management Agreement in the form attached hereto as
                Exhibit
                “C”
                and by this reference incorporated herein, pursuant to which (i)
                the
                Operating Tenant of the Hotel Rex San Francisco shall assign and
                transfer
                to Buyer all of such Operating Tenant’s right, title and interest in and
                to, and Buyer shall assume all of such Operating Tenant’s right, title and
                interest in and to, and obligations and liabilities under, the Hotel
                Rex
                Management Agreement first accruing from and after Closing, and (ii)
                Sellers and such Operating Tenant shall indemnify, hold harmless
                and
                defend Buyer from and against any loss, cost or damage arising under
                the
                Hotel Rex Management Agreement prior to the Transfer Time and (iii)
                Buyer
                shall indemnify, hold harmless and defend such Operating Tenant from
                and
                against any loss, cost or damage arising under the Hotel Rex Management
                Agreement from and after the Transfer
                Time.

            

    

     

    
      	4.  	
              Assignment
                and Assumption of Intangible Property:
                An assignment and assumption of the Intangible Property in the form
                attached hereto as Exhibit
                “B”
                and by this reference incorporated herein, pursuant to which (i)
                each
                Seller and/or Operating Tenant shall assign and transfer to Buyer
                all of
                such Seller’s and/or Operating Tenant’s right, title and interest in and
                to, and Buyer shall assume all of such Seller’s and/or Operating Tenant’s
                right, title and interest in and to, and obligations and liabilities
                under, the Intangible Property first accruing from and after Closing,
                to
                the extent that such assignments are legally and contractually permitted,
                (ii) Sellers and such Operating Tenant shall indemnify, hold harmless
                and
                defend Buyer from and against any loss, cost or damage arising under
                any
                Intangible Property prior to the Transfer Time and (iii) Buyer shall
                indemnify, hold harmless and defend such Seller from and against
                any loss,
                cost or damage arising under any Intangible Property from and after
                the
                Transfer Time.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	5.  	
              Assignment
                and Assumption of Operating Agreements:
                An assignment and assumption of the Operating Agreements in the form
                attached hereto as Exhibit “D”
                and by this reference incorporated herein, pursuant to which (i)
                each
                Seller and/or Operating Tenant shall assign and transfer to Buyer
                all of
                such Seller’s and/or Operating Tenant’s right, title and interest in and
                to, and Buyer shall assume all of such Seller’s and/or Operating Tenant’s
                right, title and interest in and to, and obligations and liabilities
                under, the Operating Agreements first accruing from and after Closing,
                and
                (ii) such Seller and/or Operating Tenant shall indemnify, hold harmless
                and defend Buyer from and against any loss, cost or damage arising
                under
                any Operating Agreements prior to the Transfer Time and (iii) Buyer
                shall
                indemnify, hold harmless and defend such Seller and/or Operating
                Tenant
                from and against any loss, cost or damage arising under any of the
                Operating Agreements from and after the Transfer
                Time.

            

    

     

    
      	6.  	
              Bill
                of Sale (Personal Property):
                A
                bill of sale in the form attached hereto as Exhibit
                “F”
                and by this reference incorporated herein, pursuant to which each
                Seller
                and/or Operating Tenant shall transfer and convey to Buyer the Personal
                Property owned by such Seller and/or Operating Tenant in an “AS IS, WHERE
                IS” condition and without recourse or express or implied warranty other
                than such Seller’s and/or Operating Tenant’s limited warranty of title and
                freedom from encumbrance (other than (i) any liens or mortgages assumed
                or
                entered into by Buyer, or (ii) any personal property sales tax or
                other
                tax arising from the transactions contemplated pursuant to this
                Agreement).

            

    

     

    
      	7.  	
              Broker:
                Banc of America Securities LLC. 

            

    

     

    
      	8.  	
              Buyer:
                Pyramid Hotel Opportunity Venture LLC, a Delaware limited liability
                company, or its Permitted
                Assignee(s).

            

    

     

    
      	9.  	
              Closing:
                The consummation of the transactions contemplated by this Agreement
                which
                shall occur on the Closing Date.

            

    

     

    
      	10.  	
              Closing
                Date:
                A
                date which is no later than forty-five (45) days following the Effective
                Date unless extended pursuant to Section 1.06 hereof, or such earlier
                date
                agreed to by Sellers and Buyer.

            

    

     

    
      	11.  	
              Closing
                Statement:
                As defined in Section 4.01.

            

    

     

    
      	12.  	
              Data
                Room Web Site:
                A
                secure web site established by Sellers in which various due diligence
                materials relating to the Property have been or will be made available
                to
                Buyer.

            

    

     

    
      	13.  	
              Deeds:
                The deeds pursuant to which each Seller shall convey to Buyer the
                Land and
                Hotel which such Seller owns free and clear of all encumbrances save
                and
                except for the Permitted Exceptions relating to such Land and Hotel.
                Such
                Deeds shall be by special warranty deed (in the case of the Land
                and Hotel
                located in South Carolina) and by grant deeds (in the case of the
                Land and
                Hotels located in California) having limited warranty-type covenants
                and
                in the forms as are customary for commercial transactions in the
                jurisdiction in which each Hotel is
                located.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	14.  	
              Deposit:
                The sum of Three Million Six Hundred Thousand and No/100 Dollars
                ($3,600,000.00) and any interest accrued
                thereon.

            

    

     

    
      	15.  	
              Effective
                Date:
                The date on which this Agreement is executed and accepted by the
                last of
                Buyer and all Sellers, such date to be entered into the first paragraph
                of
                this Agreement.

            

    

     

    
      	16.  	
              Employees:
                Those individuals employed by Managers at the
                Hotels.

            

    

     

    
      	17.  	
              Escrow
                Agent:
                The Talon Group, Orlando Commercial Services Division, a division
                of First
                American Title Insurance Company, whose address is 111 North Orange
                Avenue, Suite 1285, Orlando, Florida 32801, Attention: Michael
                Moore.

            

    

     

    
      	18.  	
              Franchise
                Agreements:
                The Franchise Agreements in effect with respect to certain Hotels
                as
                identified on the attached Exhibit
                “E”.

            

    

     

    
      	19.  	
              Franchisors:
                Each “Franchisor” or “Licensor” under the Franchise Agreements for the
                Hotels.

            

    

     

    
      	20.  	
              Guaranty
                of Franchise Agreements:
                Those certain guaranty agreements with respect to franchisee’s obligations
                under each Franchise Agreement as identified on the attached Exhibit
                “E”.

            

    

     

    
      	21.  	
              Hotels:
                The hotel buildings and all accessory buildings and structures, if
                any,
                and all fixtures placed on or attached thereto, owned by Sellers
                and
                located on the parcels comprising the Land. Each of the Hotels is
                at times
                herein referred to individually as a
                Hotel.

            

    

     

    
      	22.  	
              Hotel
                Rex Management Agreement:
                That certain Management Agreement with respect to the Hotel Rex San
                Francisco as identified on the attached Exhibit
                “G”.

            

    

     

    
      	23.  	
              House
                Funds:
                Cash on hand at the Hotels.

            

    

     

    
      	24.  	
              Intangible
                Property:
                All of Sellers’ and Operating Tenants’ respective right, title and
                interest in and to all intangible property in the possession of Sellers
                and Operating Tenants and used in connection with the Land, Hotels
                or
                Personal Property, including without limitation, all licenses and
                permits
                (but specifically excluding any and all licenses and permits to sell
                alcohol, unless and until the same are permitted to be transferred
                under
                applicable law, as provided in Section 3.03 hereof), approvals,
                authorizations and other entitlements, all guaranties and warranties
                related to the Hotels and the Personal Property or the construction,
                fabrication or maintenance thereof, all plans and specifications
                relating
                to the Improvements and any landscaping, all tradenames, logos, telephone
                numbers, websites and domains (including access to FTP file content)
                and
                signage rights used by Sellers and Operating Tenants in connection
                with
                the operation of the Hotels, and all books, records, reports, test
                results, environmental assessments, surveys and other documents,
                materials, promotional material, tenant data, marketing and leasing
                material and forms, and keys related to Sellers’ and Operating Tenants’
                operation of the Hotels and Sellers’ and Operating Tenants’ maintenance
                and repair of the Property.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	25.  	
              Inventory:
                All inventory located at the Hotels, including without limitation,
                all
                mattresses, pillows, bed linens, towels and Operating
                Supplies.

            

    

     

    
      	26.  	
              Knowledge:
                As to Sellers, the actual knowledge, after due inquiry of the current
                general managers of the respective Hotels, of (A) (i) Marcel Verbaas
                and
                (ii) Travis Snyder and (B) as to the representation of Sellers set
                forth
                in Section 6.08, Mark Patten; and as to Buyer, the actual
                knowledge
                of Kevin M. Luebbers and Warren Q. Fields; without any duty of inquiry
                or
                investigation (excepting, in the case of Sellers, due inquiry of
                the
                current general managers of the Hotels), and expressly excluding
                the
                knowledge of any other shareholder, partner, member, trustee, beneficiary,
                director, officer, manager, employee, agent or representative of
                the
                Sellers or Buyer or any of their affiliates. For the purposes of
                this
                definition, the term “actual
                knowledge”
                means, with respect to any person, the conscious awareness of such
                person
                at the time in question, and expressly excludes any constructive
                or
                implied knowledge of such person.

            

    

     

    
      	27.  	
              Land:
                Those certain parcels of land more particularly described in Exhibit
                “A”
                attached hereto and incorporated herein by reference, and all rights
                and
                appurtenances thereto.

            

    

     

    
      	28.  	
              Management
                Agreements:
                The Management Agreements in effect with respect to each Hotel as
                identified on Exhibit
                “G”
                attached hereto.

            

    

     

    
      	29.  	
              Management
                Termination Fees:
                As defined in Section 1.06 hereof.

            

    

     

    
      	30.  	
              Managers:
                Each “Manager” of a Hotel under and pursuant to the Management Agreements.
                

            

    

     

    
      	31.  	
              Material
                Operating Agreements:
                Those Operating Agreements that (A)(i) require more than thirty (30)
                days
                notice to terminate, or (ii) are terminable upon notice of thirty
                (30)
                days or less and require payment of a termination fee, or (iii) are
                not
                terminable by Sellers for convenience or upon sale of the affected
                Property, and (B) either (i) require aggregate annual payments (including
                any termination fee) in excess of Twenty Thousand and No/100 Dollars
                ($20,000.00) per Operating Agreement during the remaining term of
                such
                Operating Agreement after the Closing, or (ii) have an unexpired
                term
                following the Closing (including any mandatory renewal terms that
                are
                exercisable by the counterparty thereto) of more than one (1)
                year.

            

    

     

    
      	32.  	
              Operating
                Agreements:
                The contracts, agreements, leases (including, but not limited to,
                commercial space leases and equipment leases, and those certain room
                agreements in which third parties have been given certain rights
                to rooms
                or services at each Hotel from and/or after the Closing Date), maintenance
                agreements and service contracts in effect with respect to each Hotel
                including, but not limited to, those listed in Exhibit
                “H”
                attached hereto and incorporated herein by this
                reference.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	33.  	
              Operating
                Leases:
                Those certain lease agreements by and between each Seller, as “Landlord,”
                and each Operating Tenant, as amended, and more particularly described
                on
                Exhibit
                “I”
                attached hereto and incorporated herein by this reference, pursuant
                to
                which each Operating Tenant leases its respective Hotel.
                

            

    

     

    
      	34.  	
              Operations
                Settlement:
                A
                final accounting prepared by Sellers’ and Buyer’s accountants in the
                period between eight o’clock p.m. on the day prior to the Closing Date and
                eight o’clock a.m. (local time) on the Closing Date, the results of which
                shall be incorporated into the closing
                statement.

            

    

     

    
      	35.  	
              Operating
                Supplies:
                Any and all operating supplies, whether consumables or non-consumables,
                used or consumed in the ordinary course of business at the Hotels
                and
                owned by Sellers or Operating Tenants, including without limitation,
                paper
                products, soap, cleaning supplies, food, and non-alcoholic and alcoholic
                beverages, provided that to the extent that any applicable law prohibits
                the transfer of alcoholic beverages from Sellers to Buyer, such beverages
                shall not be considered a part of Operating Supplies until such time
                as
                the same may lawfully be transferred after Closing, at which point
                the
                same shall be transferred (pending any post-Closing transfer, such
                alcoholic beverages shall be subject to the terms of any post-Closing
                liquor license operating agreement entered into pursuant to the terms
                hereof).

            

    

     

    
      	36.  	
              Operating
                Tenants:
                The entities identified as the Operating Tenants of each Operating
                Lease,
                which are affiliates of Sellers. Each such entity is at times herein
                referred to as an “Operating
                Tenant.”

            

    

     

    
      	37.  	
              Other
                Revenues:
                All revenues earned by Sellers from the operation of the Hotels other
                than
                Room Revenues, including, without limitation, revenues from the sale
                of
                food, the sale of alcoholic and nonalcoholic beverages, rental of
                meeting
                and banquet rooms, telephone sales, pay television sales, valet and
                parking services, and other similar revenues, together with any sales
                tax
                or other taxes thereon.

            

    

     

    
      	38.  	
              Permitted
                Assignee:
                Any entity or entities wholly owned by Buyer or controlled by Buyer
                which
                shall be formed by Buyer prior to the Closing Date for purposes of
                acquiring all or any portion of or interest in the
                Property.

            

    

     

    
      	39.  	
              Permitted
                Exceptions:
                Any and all (i) restrictions, easements, reservations, covenants
                and other
                matters of record (including, without limitation, all instruments,
                matters
                and items set forth as exceptions to title in the Title Commitments)
                and
                zoning and land use ordinances and laws of any governmental authority
                (except for monetary liens, mortgages and encumbrances which shall
                be paid
                by Sellers prior to Closing and other matters to be cured by Sellers
                pursuant to this Agreement, and subject to Sellers’ obligations under
                Section 3.01 hereof); (ii) general taxes and assessments for the
                year of
                the Closing and thereafter and special taxes and assessments, in
                each case
                to the extent not then due and payable as of the Closing Date; (iii)
                encroachments, overlaps, boundary line disputes, unrecorded easements
                or
                other matters disclosed or indicated by or shown on the Surveys or
                their
                updates or which would be disclosed or indicated by or shown on a
                current,
                accurate survey or a personal inspection of the Property; (iv) leases
                and
                tenancies in writing for any areas of the Land or Hotels which are
                listed
                on the attached Exhibit “H”
                and are to be assumed by Buyer; (v) disputed liens or encumbrances
                for
                which Sellers shall have provided bond or security satisfactory to
                the
                Title Company in order to remove same as exceptions from the Title
                Policies; and (vi) liens, mortgages and encumbrances created by
                Buyer.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	40.  	
              Personal
                Property:
                All furniture, furnishings, fixtures, equipment, vehicles, machinery,
                appliances, dishes, utensils, cookware, materials, linen, china,
                glassware, tableware, uniforms and similar items, whether in use
                or held
                in stock for future use, in connection with the operation of each
                Hotel,
                subject to such depletion and including such re-supplies prior to
                the
                Closing Date as shall occur in the ordinary course of business, and
                Inventory, located at the Hotels, owned and used by any Seller or
                any
                Operating Tenant, and used by any Seller or any Operating Tenant
                solely in
                connection with the operation of the Hotels, including but not limited
                to
                all items included within the definition of “Property and Equipment” under
                the Uniform System of Accounts for the Lodging Industry, Ninth Revised
                Edition, 1996, as published by the Hotel Association of New York
                City,
                Inc., but (subject to the provisions of Section 1.02) specifically
                excluding any Personal Property that is leased by any Seller from
                a
                third-party pursuant to any lease listed on the attached Exhibit “H”
                and therein specifically identified, and all Rooms
                Agreements.

            

    

     

    
      	41.  	
              Property:
                A
                collective term which shall mean all of the Land, Hotels, Intangible
                Property and Personal Property.

            

    

     

    
      	42.  	
              Purchase
                Price:
                The amount specified in Section 2.01 as the purchase price for the
                Property.

            

    

     

    
      	43.  	
              Purchase
                Price Allocation Schedule:
                The schedule attached hereto as Exhibit
                “J”
                pursuant to which the Purchase Price is allocated among each Property
                for
                the purposes of calculating title insurance premiums and other closing
                costs.

            

    

     

    
      	44.  	
              Room
                Revenues:
                All revenues from the rental of guest rooms of the Hotels (but excluding
                any items included in the definition of Other Revenues), together
                with any
                and all sales or other taxes
                thereon.

            

    

     

    
      	45.  	
              Sellers:
                Shall mean those entities more particularly described on Exhibit
                “K”
                attached hereto and by this reference incorporated herein. Each such
                entity is at times herein referred to as a “Seller.”

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	46.  	
              Surveys:
                The surveys of each parcel comprising the Land and the Hotel located
                on
                such parcel obtained by Buyer prior to execution of this Agreement.
                Each
                of the Surveys is at times herein referred to as a “Survey.”

            

    

     

    
      	47.  	
              Title
                Company:
                First American Title Insurance Company through the Talon Group, Orlando
                Commercial Services Division, a division of First American Title
                Insurance
                Company, whose address is 111 North Orange Avenue, Suite 1285, Orlando,
                Florida 32801, Attention: Michael
                Moore.

            

    

     

    
      	48.  	
              Title
                Insurance Commitments:
                The commitments of title insurance issued by Title Company and provided
                by
                Sellers to Buyer with respect to each parcel comprising the Land
                prior to
                the execution of this Agreement. Each of the Title Commitments is
                at times
                herein referred to as a “Title
                Commitment.”

            

    

     

    
      	49.  	
              Title
                Policies:
                The owner’s policies of title insurance to be issued to Buyer pursuant to
                the terms of the Title Insurance Commitments and this Agreement.
                Each of
                the Title Policies is at times herein referred to as a “Title
                Policy.”

            

    

     

    
      	50.  	
              Transfer
                Time:
                12:01 a.m. (local time) on the Closing
                Date.

            

    

     

    
      	51.  	
              Tray
                Ledgers:
                Any accounts receivable of registered guests who have not checked
                out and
                who are occupying rooms on the evening prior to, and the morning
                of, the
                Closing Date.

            

    

     

    AGREEMENT

     

    ARTICLE
      I

     

    ASSETS
      PURCHASED AND SOLD

     

    Section
      1.01 Purchase
      and Sale.»

     

    Subject
      to the terms and conditions of this Agreement and in consideration of the
      performance of the covenants contained herein, Buyer agrees to purchase from
      Sellers and Sellers agree to sell to Buyer, all of Sellers’ right, title and
      interest in and to the Property. 

     

    Section
      1.02 Personal
      Property.»

     

    Subject
      to the terms and conditions of this Agreement, at Closing Sellers agree to
      assign, transfer and convey the Personal Property to Buyer pursuant to the
      Bill
      of Sale (Personal Property). In the event that any Personal Property is owned
      by
      any Operating Tenant, Sellers agree to cause such Operating Tenant to assign,
      transfer and convey any such Personal Property to Buyer at Closing, pursuant
      to
      a bill of sale in the same form as the Bill of Sale (Personal Property).

     

    Section
      1.03 Operating
      Agreements.»

     

    At
      Closing, each Seller shall assign and transfer to Buyer all of such Seller’s
      right, title and interest in and to, and Buyer shall assume all of such Seller’s
      obligations and liabilities first arising from and after Closing under, the
      Operating Agreements pursuant to the Assignment and Assumption of Operating
      Agreements; provided, however, that Sellers shall terminate or cause to be
      terminated as of the Closing Date, at Buyer’s cost and expense, all Operating
      Agreements listed on Exhibit “N”
      attached
      hereto, provided that the same can be terminated pursuant to their terms. Buyer
      shall pay all out of pocket fees and expenses of third parties under the
      Operating Agreements in regard to such assignments, transfers and terminations,
      including any transfer charges reasonably necessary to obtain the consent of
      any
      such third party. Sellers shall promptly provide Buyer with complete copies
      of
      any new contracts, agreements, leases (including, but not limited to, commercial
      space leases and equipment leases), maintenance agreements and service contracts
      in effect with respect to each Hotel entered into subsequent to the Effective
      Date and prior to the Closing Date (“New
      Operating Agreements”).
      Notwithstanding the foregoing, Sellers reserve the right to provide Buyer with
      access to all Operating Agreements and New Operating Agreements via the Data
      Room Web Site in lieu of delivering hard copies of such Operating Agreements
      and
      New Operating Agreements to Buyer; provided, Sellers shall give prior notice
      to
      Buyer of any New Operating Agreements entered into subsequent to the Effective
      Date, including but not limited to any that are provided in the Data Room Web
      Site. Sellers shall not enter into any material New Operating Agreement(s)
      which
      will obligate Buyer following Closing, except those which (i) are terminable
      without payment or penalty on thirty (30) or fewer days notice or (ii) have
      otherwise been reasonably approved by Buyer. Buyer
      shall have five (5) business days to approve or disapprove any material New
      Operating Agreement to be entered into prior to Closing following a written
      request therefor by any Seller, which approval may be granted or withheld in
      Buyer’s reasonable discretion. Buyer’s failure to provide a written response to
      such Seller within five (5) business days following a written request from
      such
      Seller shall be deemed an approval of such New Operating Agreement by Buyer.
      After such approval or deemed approval of any New Operating Agreement, such
      approved or deemed approved New Operating Agreement shall be and be deemed
      to be
      an Operating Agreement to be assigned by Seller and assumed by Buyer hereunder.
      Buyer understands and agrees that it is solely Buyer’s responsibility to obtain
      any and all contracts, agreements, leases (including, but not limited to,
      commercial space leases and equipment leases), maintenance agreements and
      service contracts necessary to conduct business at the Hotels from and after
      the
      Closing Date. Buyer’s failure to obtain any of the same which are necessary or
      convenient to the operation of the Hotels shall not affect or delay the
      performance of Buyer’s obligations under this Agreement. In the event that any
      Operating Tenant is a party to and holder of rights under any Operating
      Agreement, Sellers agree to cause such Operating Tenant to assign and transfer
      such rights to Buyer at Closing, pursuant to an assignment and assumption
      agreement in the same form as the Assignment and Assumption of Operating
      Agreements, or if such Operating Agreement is listed on Exhibit “N”
      attached
      hereto and can be terminated pursuant to its terms, to terminate the same as
      herein required.

    
       

      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      1.04 Intangible
      Property.»

     

    At
      Closing, each Seller shall assign and transfer to Buyer all of such Seller’s
      right, title and interest in and to, and Buyer shall assume all of each Seller’s
      obligations and liabilities first arising from and after Closing under, the
      Intangible Property, pursuant to the Assignment and Assumption of Intangible
      Property. Sellers have, to Sellers’ Knowledge, provided Buyer with copies of all
      documents comprising the Intangible Property which were in Sellers’ possession
      and in effect as of the Effective Date. Sellers shall promptly provide Buyer
      with copies of any documents comprising Intangible Property issued to Sellers
      or
      entered into by any Seller subsequent to the Effective Date and prior to the
      Closing Date. Notwithstanding the foregoing, Sellers reserve the right to
      provide Buyer with access to all such documents comprising Intangible Property
      via the Data Room Web Site in lieu of delivering hard copies of such documents
      comprising Intangible Property to Buyer; provided, Sellers shall give prior
      notice to Buyer of any new Intangible Property received subsequent to the
      Effective Date, including but not limited to any that are provided in the Data
      Room Web Site. Buyer understands and agrees that it is solely Buyer’s
      responsibility to obtain any and all Intangible Property necessary to conduct
      business at the Hotels from and after the Closing Date. Buyer’s failure to
      obtain any Intangible Property which are necessary or convenient to the
      operation of the Hotels shall not affect or delay the performance of Buyer’s
      obligations under this Agreement. In the event that any Operating Tenant is
      the
      holder of rights under any Intangible Property, Sellers agree to cause such
      Operating Tenant to assign and transfer such rights to Buyer at Closing,
      pursuant to an assignment and assumption agreement in the same form as the
      Assignment and Assumption of Intangible Property.

    
       

      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      1.05 Franchise
      Agreements.»

     

    Buyer
      and
      Sellers acknowledge that in connection with, and as a condition to Sellers’
      obligations hereunder, the Franchise Agreements and the Guaranty of Franchise
      Agreements shall be terminated at Buyer’s expense, all as of the Closing Date.
      Buyer acknowledges that as a condition to the termination of the Franchise
      Agreements and Guaranty of Franchise Agreements, each Franchisor shall require
      that Buyer satisfy such Franchisor’s requirements for issuance of new Franchise
      Agreement and shall require that the applicable Operating Tenant execute and
      deliver to such Franchisor before Closing its standard form of termination
      of
      Franchise Agreement. Buyer agrees that Buyer will timely submit its applications
      for a new franchise agreement to replace each of the Franchise Agreements to
      be
      terminated at Closing, together with the appropriate application fee, and will
      proceed with all due diligence and good faith to satisfy each Franchisor’s
      requirements for issuance of a new franchise agreement prior to the Closing
      Date. Buyer hereby acknowledges and agrees that Buyer shall be responsible
      for
      the termination fee (or in the event such Franchisor does not approve Buyer
      as a
      new franchisee, the applicable liquidated damages, if any, set forth in the
      applicable Franchise Agreement), if any, due to any Franchisor pursuant to
      the
      applicable Franchise Agreement. Buyer further agrees that in no event shall
      issuance of a new franchise agreement that is required to terminate an existing
      Franchise Agreement or Guaranty of Franchise Agreement be a condition to Buyer’s
      obligation to close hereunder and Buyer’s failure to obtain any such new
      franchise agreement prior to the Closing Date shall under no circumstances
      excuse Buyer from any of its obligations hereunder. If Buyer has not satisfied
      all requirements of each Franchisor for issuance of a new franchise agreement
      as
      of the Closing Date, and as a result any such Franchisor does not issue a new
      franchise agreement to Buyer as of the Closing Date, then Buyer shall pay and
      indemnify and hold Sellers and the Operating Tenants harmless from and against
      any and all loss, costs, liability, damages and expenses (including, without
      limitation, reasonable attorneys’ fees and any liquidated damages payable to
      such Franchisor) incurred by any Seller or Operating Tenant as a result of
      the
      failure of Buyer to obtain a replacement franchise agreement for each Franchise
      Agreement terminated at Closing. 

     

    Section
      1.06 Management
      Agreements.»

     

    (a) Prior
      to
      the execution of this Agreement, Sellers have furnished Buyer with copies of
      all
      Management Agreements in Sellers’ possession or control (or made such Management
      Agreements available to Buyer via the Data Room Web Site in lieu of delivering
      hard copies of the Management Agreements to Buyer).

     

    (b) Sellers
      shall cause the applicable Operating Tenant under each of the Management
      Agreements other than the Hotel Rex Management Agreement to terminate such
      Management Agreements as of or prior to Closing. Sellers shall provide written
      notice of termination to the Managers of the Management Agreements within three
      (3) business days of the Effective Date in the form and manner required pursuant
      to each such Management Agreement. In the event any Management Agreement other
      than the Hotel Rex Management Agreement requires a minimum notice period prior
      to termination that extends beyond the outside Closing Date hereunder and the
      applicable Manager thereunder does not agree to an earlier termination of such
      Management Agreement, Buyer and Sellers shall each have the right to postpone
      the Closing Date until the earliest date on which all such Management Agreements
      other than the Hotel Rex Management Agreement can be terminated.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)
      At
      Closing, Seller shall pay all applicable termination fees with respect to the
      termination of the Management Agreements (the “Management
      Termination Fees”).

     

    (d)
      The
      Sellers shall cause the Operating Tenant of the Hotel Rex to provide written
      notice of termination of the Hotel Rex Management Agreement to the Manager
      within three (3) business days of the Effective Date in the form and manner
      required pursuant to the Hotel Rex Management Agreement. Buyer acknowledges
      and
      agrees that the termination of the Hotel Rex Management Agreement shall not
      be a
      condition to close the transactions contemplated pursuant to this Agreement,
      that the minimum notice period to terminate the Hotel Rex Management Agreement
      is ninety (90) days. Buyer and Sellers hereby agree to use good faith efforts
      to
      obtain the Hotel Rex Manager’s agreement to terminate the Hotel Rex Management
      Agreement at Closing at no additional cost to Sellers; provided, however, in
      the
      event that the Hotel Rex Manager does not so agree, Buyer acknowledges and
      agrees that Buyer shall assume all of the applicable Operating Tenant’s
      obligations under the Hotel Rex Management Agreement accruing from and after
      the
      Transfer Time, which assignment and assumption shall be accomplished through
      the
      execution by such parties of the Assignment and Assumption of Hotel Rex
      Management Agreement at Closing. Sellers shall use good faith efforts to obtain
      the applicable Manager’s consent to the assumption of the Hotel Rex Management
      Agreement by Buyer, provided however Buyer hereby agrees that Buyer shall
      indemnify and hold Sellers and the Operating Tenants harmless from and against
      any and all loss, costs, liability, damages and expenses (including, without
      limitation, reasonable attorneys’ fees) incurred by any Seller or Operating
      Tenant as a result of the failure to obtain the Hotel Rex Manager’s consent to
      the Assignment and Assumption of Hotel Rex Management Agreement. 

     

    Section
      1.07 Land
      and Hotels.»

     

    At
      Closing, each Seller shall convey title to the Land and Hotels owned by such
      Seller to Buyer pursuant to the Deeds.

     

    Section
      1.08 Operating
      Leases.»

     

    At
      or
      prior to Closing, Sellers, at Sellers’ sole cost and expense, shall terminate
      the Operating Leases.

     

    ARTICLE
      II

     

    PURCHASE
      PRICE

     

    Section
      2.01Price.»

     

    The
      Purchase Price for the Property shall be One Hundred Nine Million and No/100
      Dollars ($109,000,000.00), all cash, subject to closing adjustments as provided
      in this Agreement. Sellers and Buyer agree that the Purchase Price shall be
      allocated among each Hotel as set forth on the attached Exhibit
      “J”.
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      2.02 Deposit.»

     

    Provided
      that the Deposit has not already been lodged with Escrow Agent prior to
      execution of this Agreement, upon execution of this Agreement by Buyer, the
      Deposit, in the form of a cashier’s or certified check or wire transfer, shall
      be immediately deposited with the Escrow Agent by Buyer. Such Deposit shall
      be
      deposited by the Escrow Agent into an interest-bearing,
      fully-insured account.
      In the event that the Deposit has not been lodged with Escrow Agent within
      one
      (1) business day following the Effective Date, this Agreement shall immediately
      terminate. The Deposit shall be applied to payment of the Purchase Price at
      Closing or shall otherwise be paid as herein provided. Buyer acknowledges and
      agrees the Deposit is “At Risk” and is not refundable to Buyer except as
      expressly provided in this Agreement. All interest earned in said account of
      the
      Escrow Agent shall be reported by the Escrow Agent to the Internal Revenue
      Service as income to Buyer (and Buyer agrees to execute a W-9 form and any
      other
      federal tax documents necessary in connection therewith). 

     

    Section
      2.03  Balance
      of Purchase Price.»

     

    

     

    The
      balance of the Purchase Price for the Property (subject to the adjustments
      and/or prorations provided in this Agreement) shall be paid by Buyer by wire
      transfer of good funds to Escrow Agent at Closing as set forth in Section
      12.02.

     

    Section
      2.04 Escrow
      Agent.»

     

    

     

    (a) The
      Escrow Agent, in its capacity as holder of the Deposit in escrow, joins in
      the
      execution of this Agreement for the limited purpose of acknowledging and
      agreeing to the provisions of this Section 2.04.

     

    (b) The
      duties of the Escrow Agent shall be as follows:

     

    (1) The
      Escrow Agent shall hold and disburse the Deposit in accordance with the terms
      and provisions of this Agreement.

     

    (2) If
      this
      Agreement shall be terminated by the mutual written agreement of Sellers and
      Buyer, or if the Escrow Agent shall be unable to determine at any time to whom
      the Deposit should be paid, or if a dispute shall develop between Sellers and
      Buyer concerning to whom the Deposit should be paid and delivered, then and
      in
      any such event, the Escrow Agent shall pay and deliver such in accordance with
      the joint written instructions of Sellers and Buyer. In the event that such
      written instructions shall not be received by the Escrow Agent within ten (10)
      days after the Escrow Agent has served a written request for instructions upon
      Sellers and Buyer, then the Escrow Agent shall have the right to pay and deliver
      the Deposit into an appropriate court of proper jurisdiction in the state of
      Florida, and interplead Sellers and Buyer in respect thereof, and thereupon
      the
      Escrow Agent shall be discharged of any obligations in connection with this
      Agreement.

     

    (3) If
      costs
      or expenses are incurred by the Escrow Agent in its capacity as holder of the
      Deposit in escrow because of litigation or a dispute between Sellers and Buyer
      arising out of the holding of the Deposit in escrow, Sellers and Buyer shall
      each pay the Escrow Agent one-half of such reasonable costs and expenses not
      to
      exceed a total of $2,000.00. Except for such costs or expenses, no fee or charge
      shall be due and payable to the Escrow Agent for its services as escrow holder
      only.

     

    (4) By
      joining herein, the Escrow Agent undertakes only to perform the duties and
      obligations imposed upon the Escrow Agent under the terms of this Agreement
      and
      expressly does not undertake to perform any of the other covenants, terms and
      provisions incumbent upon Sellers and Buyer hereunder.

     

    (5) Buyer
      and
      Sellers hereby agree and acknowledge that the Escrow Agent assumes no liability
      in connection herewith except for its negligence or willful misconduct; that
      the
      Escrow Agent shall never be responsible for the validity, correctness or
      genuineness of any document or notice referred to under this Agreement; and
      that
      in the event of any dispute under this Agreement, the Escrow Agent may seek
      advice from its own legal counsel and shall be fully protected in any action
      taken by it in good faith in accordance with the good faith opinion of its
      legal
      counsel.

     

    Section
      2.05 Reserve
      Accounts.»

     

    All
      funds
      held in bank accounts, cash accounts and all funds held in reserve accounts
      for
      furniture, fixtures and equipment, for capital expenditures, or for other
      matters relating to the operation of the Hotels, whether such accounts are
      held
      in the name of the Sellers, Operating Tenants or Managers on behalf of Sellers
      or Operating Tenants, shall be retained by Sellers. In the event that any such
      funds are held by a Manager, Buyer may elect to have Manager retain such funds
      on behalf of Buyer and reimburse Sellers at Closing for the amount so retained
      by such Manager in lieu of such amount being delivered by Manager to the
      applicable Seller.

     

    Section
      2.06 Capital
      Expenditure Plans.»

     

    Sellers
      have heretofore incurred in the calendar year 2005, and will continue to incur,
      expenditures with respect to the Hotels pursuant to existing capital expenditure
      plans and/or property improvement plans (if any) prior to Closing. Prior to
      the
      execution of this Agreement, the Sellers have delivered and Buyer hereby
      acknowledges receipt of the current budget for the expenditures contemplated
      by
      this Section 2.06, and all renovation, property improvement plans or capital
      improvement contracts entered into by Sellers with respect to such expenditures.
      Sellers agree to not change the scope of the work contemplated by such budgets
      prior to Closing; provided, however, with respect to that certain Hotel known
      as
      the Holiday Inn located in Columbia, South Carolina, the applicable Seller
      shall
      not be required to incur any expenditures required by any capital expenditure
      plan in effect with respect to such Hotel unless the same, in Sellers’ good
      faith, reasonable judgment, are immediately necessary to protect the physical
      integrity or lawful operation of the Hotel or the health or safety of its
      occupants.

     

    ARTICLE
      III

     

    OPERATION
      OF THE PROPERTY

     

    Section
      3.0 1   Operation
      in the Ordinary Course of Business.»

     

    Sellers
      shall not (and Sellers shall cause Operating Tenants and Manager to not),
      without the prior written consent of Buyer, (i) enter into any material leases
      or tenancies with respect to the Property, (ii) enter into any material service
      or maintenance agreements which are not terminable upon thirty (30) days notice
      without penalty, (iii) except in the ordinary course of business, engage or
      retain any new or additional employees, entities or independent contractors
      whose compensation may be assumable by Buyer (or reimbursable by Buyer to
      Manager), (iv) modify or release any material warranties or guaranties with
      respect to the Property, (v) grant or permit any encumbrances on the Property
      or
      contract for any construction or service for the Property which may impose
      any
      mechanics or materialmen’s lien on the Property beyond Closing, or (vi) execute,
      record in the public records and/or deliver to the other party any document
      affecting title to the Property, all except as otherwise specifically
      contemplated in this Agreement. Buyer shall have five (5) business days to
      approve or disapprove any of the foregoing proposed actions following a written
      request therefore by any Seller, which approval may be granted or withheld
      in
      Buyer’s reasonable discretion. Buyer’s failure to provide a written response to
      such Seller within five (5) business days following a written request from
      such
      Seller shall be deemed an approval of such proposed action by Buyer. Sellers
      shall and shall cause Operating Tenants to, subject to the terms of the
      Management Agreements, use reasonable efforts to cause the Managers to maintain
      inventory levels consistent with Managers’ prior practices and continue to
      operate and maintain each Hotel in the ordinary course of business pursuant
      to
      the terms of the Management Agreements during the period between the Effective
      Date and the Closing Date. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      3.02Liquor
      Licenses.»

     

    Buyer
      shall make an application to the appropriate governmental authorities to have
      a
      new liquor license at each Property issued in, or any existing liquor license
      transferred to, the name of Buyer or an entity designated by Buyer in compliance
      with local law, and Sellers shall cooperate with Buyer in this regard, at
      Buyer’s sole cost and expense, provided, however, Buyer acknowledges that the
      Holiday Inn Columbia, SC Hotel is the only Property where Seller holds a liquor
      license. Buyer shall use commercially reasonable efforts, at its sole cost
      and
      expense, to obtain the approval of applicable authorities for the issuance
      of a
      new liquor license for each of the Hotels or transfer of the existing liquor
      license prior to, or contemporaneously with, the Closing. Seller shall cause
      the
      Managers at the other Hotels to reasonably cooperate with Buyer with respect
      to
      transferring the existing liquor licenses to Buyer at such Hotels, to the extent
      Seller has the right to do so under the applicable Management Agreements and
      as
      permitted by law. In such event, Buyer shall maintain liquor liability insurance
      in amounts currently maintained by Sellers naming Sellers as additional insured
      parties, and further agrees to indemnify, defend and hold Sellers harmless
      from
      and against any liability, cost or expense arising out of Sellers’ cooperation
      with Buyer during such interim period. The provisions of this Section 3.03
      shall survive the Closing.

     

    Section
      3.03Cooperation.»

     

    Sellers
      shall cooperate reasonably, at no cost to Sellers, with Buyer in securing the
      transfer or issuance of any permits or licenses, including, without limitation,
      a liquor license, necessary to permit the lawful, continuous operation of any
      Property by Buyer immediately following the Closing Date.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    ARTICLE
      IV

     

    PRORATIONS
      AND ADJUSTMENTS

     

    Section
      4.01 Closing
      Statement/Operations Settlement.»

     

    (a) Closing
      Statement.
      Taxes,
      rents (including but not limited to any rents paid more than one month in
      advance), revenues and expenses pertaining to assigned Operating Agreements,
      any
      security deposits held by Sellers under any leases affecting the Property (other
      than the Operating Leases), prepaid utility charges, and material deviations,
      if
      any, in the amount of the Personal Property at the Hotels occurring in the
      period between the first and second inventories provided for in Section 10.02
      shall be allocated and prorated between Buyer and Sellers pursuant to a written
      Closing Statement to be prepared by Sellers and executed by Buyer and Sellers
      at
      the Closing. Any additional amounts owed by Buyer or credits due to Buyer shall
      be reflected in such statement and the Purchase Price shall be adjusted
      accordingly.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Operations
      Settlement.
      Room
      Revenues for the night of the Closing Date, prepaid deposits for confirmed
      reservations, hotel facilities and services for periods after the Transfer
      Time,
      and the purchase price for the Tray Ledgers, House Funds and Accounts Receivable
      shall be determined by the Operations Settlement. With respect to the Closing
      Date, Buyer agrees to the Hotel’s employees’ completion of posting of financial
      activity, all schedules, credit card billings, and all other activities normally
      associated with the daily activity of the Hotels. Any amounts determined to
      be
      due and owing to Sellers by Buyer or to Buyer by Sellers pursuant to the
      Operations Settlement shall be incorporated into the Closing Statements but
      to
      the extent that any of the foregoing information is unavailable or is found
      to
      be inaccurate, the same shall be handled as a post-closing adjustment, the
      obligations of which shall survive the Closing.

     

    Section
      4.02 Taxes
      and Rents.»

     

    At
      Closing, all general real estate and personal property taxes for the year of
      the
      Closing and special taxes and assessments shall be prorated as of the Closing
      Date (with Buyer to pay taxes attributed to the Closing Date and all periods
      thereafter) using the latest available tax rates and assessments and taking
      advantage of any discounts or rebates available for early payment and/or payment
      before delinquency. The parties shall have no obligation to readjust such
      prorations after the Closing; provided, however, if the proration is based
      upon
      the previous tax year’s bills, the parties shall make an appropriate adjustment
      upon receipt of the current tax year’s bills; Sellers shall pay general real
      estate and personal property taxes for all years prior to the year of the
      Closing and all special taxes or assessments then due and payable as of the
      Closing Date, except that, if any assessment against the Property, or any
      portion thereof, is payable in installments, Buyer shall pay any and all of
      such
      installments which may be paid after the Closing Date, and any installment
      relating to the year of Closing shall be prorated as of the Closing Date (with
      Buyer to pay all portions of such installment attributed to the Closing Date
      and
      all periods thereafter). Any tax refunds or rebates occurring or accruing with
      respect to any and all time periods before the Closing Date shall remain the
      property of Sellers, and, if Buyer collects or receives same, Buyer shall
      promptly remit same to Sellers. The provisions of the immediately preceding
      sentence shall survive the Closing. All taxes or assessments which become due
      and payable on or after the Closing Date shall be paid by Buyer. 

     

    Section
      4.03 Utilities.»

     

    Prior
      to
      the Closing, Sellers shall notify all utility companies servicing their
      respective portions of the Property of the anticipated change in ownership
      of
      the Property and request that all billings after the Transfer Time be made
      to
      Buyer at the addresses of the Hotel located on their portion of the Property.
      Utility meters will be read, to the extent that the utility company will do
      so,
      during the daylight hours on the Closing Date, with charges to that time paid
      by
      Sellers and charges thereafter paid by Buyer. Prepaid utility charges shall
      be
      adjusted on the Closing Statement and paid for at Closing. Charges for utilities
      which are unmetered, or the meters for which have not been read on the Closing
      Date, will be prorated between Buyer and Sellers as of the Transfer Time based
      upon utility billings received after Closing. Sellers or Buyer, as appropriate,
      shall, upon receipt, submit a copy of the utility billings for any such charges
      to the other party and such party shall pay its pro rata share of such charges
      to the party requesting payment within ten (10) business days from the date
      of
      any such request. This obligation shall survive Closing.

     

    Buyer
      shall be responsible for paying, before the Closing, all deposits required
      by
      utility companies in order to continue service at the Hotels for periods after
      the Transfer Time and shall take any other action and make any other payments
      required to assure uninterrupted availability of utilities at the Hotels and
      the
      Land for all periods after Closing. Following Closing, all utility deposits
      made
      by any Sellers shall be refunded directly to Sellers by the utility company
      holding same. This right to receive any such refund shall survive
      Closing.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      4.04 Assigned
      Operating Agreements and Management Agreements.»

     

    

     

    (a) All
      income and expenses with respect to the assigned Operating Agreements will
      be
      prorated as of the Closing Date (with income and expenses for the Closing Date
      and thereafter to be allocated to Buyer). There shall be added to the amount
      due
      to Buyer at Closing, on the Closing Statement, the amount of any prepaid rents
      applicable to periods following Closing, security deposits, or other deposits
      previously paid to Sellers under any assigned Operating Agreements, and there
      shall be deducted from the amount due Sellers at Closing, on the Closing
      Statement, any such amounts paid to and collected by Sellers under any Operating
      Agreements attributable to periods including and after the Closing Date.

     

    (b) Sellers
      shall be responsible for all management fees and other amounts payable or
      reimbursable under the Management Agreements that accrue to the period prior
      to
      the Closing Date, including, without limitation, any accrued incentive fees
      under the Management Agreements, subject to the provisions of Section 1.06(c)
      hereof. In the event the Hotel Rex Management Agreement is not terminated as
      of
      the Closing Date, Buyer shall be responsible for all management fees and other
      amounts payable or reimbursable under the Hotel Rex Management Agreement that
      accrue to the period from and after the Closing Date. 

     

    Section
      4.05 Room
      Revenues; Reservations; Tray Ledger; Accounts Receivable and House
      Funds.»

     

    

     

    (a) Room
      Revenues for the night of the Closing Date (the “night
      of the Closing Date”
      being
      defined for the purposes of this Section 4.05(a) to mean the night ending
      concurrent with the expiration of the Operations Settlement) shall be divided
      equally between Buyer and Sellers pursuant to the Operations Settlement. Other
      Revenues for the night of the Closing Date shall belong solely to
      Sellers.

     

    (b) Buyer
      will honor, for its account, the terms and rates of all pre-closing reservations
      confirmed by Sellers or Managers for dates after the Closing Date. Buyer
      authorizes Sellers and Managers to continue to accept reservations for periods
      after the Closing in the ordinary course of Sellers’ or Managers’ business.
      Buyer recognizes that such reservations may include discounts or other benefits
      provided in the ordinary course of business, including, without limitation,
      benefits under any awards programs, sports team, corporate, government or group
      discounts, weekend discounts or requirements that ancillary food, beverage
      or
      other benefits be delivered by Buyer to the guest(s) holding such reservations.
      Buyer agrees to honor all such reservations in accordance with their terms.
      Any
      pre-closing deposits made to Sellers with respect to confirmed reservations
      for
      dates after the Closing Date will be credited to Buyer at the Operations
      Settlement. Any post-closing deposits received by Sellers with respect to
      confirmed reservations for dates after the Closing Date will be forwarded to
      Buyer upon receipt.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Buyer
      will honor, for its account, all of Sellers’ room allocation agreements and
      banquet facility and service agreements entered into in the ordinary course
      of
      business consistent with past practices which have been granted to groups,
      persons or other customers for periods after the Closing Date at the rates
      and
      terms provided in such agreements.

     

    Buyer
      agrees that Sellers cannot make and have made no representation or warranty
      that
      any party holding a room reservation or agreement for Hotel facilities or
      services will utilize such reservation or honor such agreement. Buyer, by the
      execution hereof, assumes the risk of non-utilization of reservations and
      nonperformance of such agreements.

     

    Buyer
      agrees to indemnify, defend and hold Sellers harmless from and against any
      claim
      which may be asserted against any Seller alleging that Buyer has failed to
      honor
      any such pre-closing reservation or agreement in accordance with its terms.
      The
      provisions of this Section 4.05(b), including, without limitation, the
      assumptions of risk and indemnities by Buyer set forth above, shall survive
      the
      Closing.

     

    (c) Buyer
      shall purchase the Tray Ledgers from Sellers pursuant to the Operations
      Settlement.

     

    (d) Buyer
      shall purchase the House Funds, exclusive of any non-cash items, from Sellers
      pursuant to the Operations Settlement.

     

    (e) At
      Closing, Sellers shall receive a credit for all Accounts Receivable in an amount
      equal to: (i) one hundred percent (100%) of all such Accounts Receivable which
      are unpaid for not more than sixty (60) days; plus
      (ii)
      seventy five percent (75%) of all such Accounts Receivable which are unpaid
      for
      more than sixty (60) days, but not more than ninety (90) days. Seller shall
      not
      receive any credit for any Accounts Receivable which are unpaid for more than
      ninety (90) days (the “Aged Accounts Receivable”). All Aged Accounts Receivable
      which are unpaid as of the Closing Date shall remain the property of Seller
      following Closing and Buyer shall promptly remit to Seller all such Aged
      Accounts Receivable to the extent received by Buyer, as and when received by
      Buyer, it being agreed that Buyer shall not be deemed to have collected any
      such
      Aged Accounts Receivable until such time as the payor is current in the payment
      to Buyer of all amounts accruing in the month of, and all months after, the
      Closing. Nothing herein shall limit Seller’s right to pursue collection of Aged
      Accounts Receivable that are to remain the property of Seller following the
      Closing Date, and following the Closing Date Buyer shall reasonably cooperate
      with Seller with respect thereto, but Buyer will not be obligated to institute
      any lawsuit or other collection procedures to collect Aged Accounts Receivable
      or expend any out-of-pocket sums in connection with the collection of Aged
      Accounts Receivable.

     

    Section
      4.06 Accounts
      Payable and Expenses.»

     

    All
      accounts payable and expenses related to operations of the Property which have
      accrued before the Transfer Time shall be paid by Sellers. Buyer understands
      and
      agrees that Sellers may postpone and/or contest payment of any account payable
      or expense which is the subject of a bona fide dispute, or for which a bill
      is
      not rendered until after Closing. All accounts payable and expenses accruing
      after the Transfer Time will be Buyer’s responsibility.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      4.07 Apportionments/Adjustments
      Generally.
      Except
      as
      otherwise expressly provided herein, all apportionments and adjustments shall
      be
      made on an accrual basis in accordance with generally accepted accounting
      principles, consistently applied. The computation of the adjustments shall
      be
      jointly prepared by Sellers and Buyer. To the extent the exact amount of any
      adjustment item provided for in this Article IV cannot be precisely
      determined on the Closing Date, the parties shall estimate the amount thereof,
      for purposes of computing the net amount due Sellers or Buyer pursuant to this
      Article IV and shall determine the exact amount thereof not later than
      sixty (60) days after the Closing Date. 

     

    Section
      4.08 Guests’
      Property.»

     

    All
      baggage or other property of patrons of a Property checked or left in care
      of
      any Seller and/or Operating Tenant or Manager shall be listed in an inventory
      to
      be prepared in duplicate and signed by Sellers’ and Buyer’s representatives on
      the Closing Date. Buyer shall be responsible from and after the Closing Date
      and
      will indemnify and hold Sellers harmless from and against all claims for all
      baggage and property listed in such inventory. Sellers shall indemnify and
      hold
      harmless Buyer from and against claims for baggage and property not listed
      in
      such inventory but shown to have been left in custody at a Property prior to
      the
      Closing Date. All baggage or other property of guests retained by Sellers as
      security for unpaid accounts receivable may be left on such Property without
      any
      responsibility or liability therefor on the part of Buyer, for a period not
      to
      exceed one (1) month from Closing Date, within which time such baggage or other
      property shall be removed or otherwise disposed of by Sellers. 

     

    ARTICLE
      V

     

    EMPLOYEES

     

    Section
      5.01 Salaries,
      Etc. »

     

    Sellers
      shall be responsible for the payment of the salaries, wages, accrued vacation
      pay, sick leave, bonuses, pension benefits, and other benefits earned by and
      due
      to or accrued to employees at any of the Hotels prior to the Closing Date,
      together with F.I.C.A., unemployment and other taxes and benefits due from
      any
      employer of such employees accruing prior to the Closing Date. Sellers shall
      indemnify and hold Purchaser harmless from and against any and all liability,
      loss, cost, damage or expense related to any of the foregoing items. Such
      indemnity shall survive Closing. Sellers shall not be responsible for the
      payment of any such items accruing after the Transfer Time.

     

    Section
      5.02 Employee
      Claims.»

     

    (a) Buyer
      shall indemnify, defend and hold harmless Sellers from and against any and
      all
      loss, costs, liability, damages and expenses (including, without limitation,
      reasonable attorneys’ fees) incurred by any Seller arising out of, based upon or
      in anyway relating or incidental to or connected with (i) any violation, actual
      or alleged, by any Seller, Manager or Buyer of the Worker Adjustment Retraining
      and Notification Act (“WARN
      Act”)
      or any
      similar local, state or federal statute or law relating to the transactions
      contemplated by this Agreement (a “WARN
      Act Violation”)
      and
      (ii) any other labor-and/or employee-related claims and demands occurring as
      of
      and/or after the Closing Date or in connection with the transactions
      contemplated by this Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Sellers
      shall indemnify, defend and hold harmless Buyer from and against any and all
      loss, costs, liability, damages and expenses (including, without limitation,
      reasonable attorneys’ fees) incurred by Buyer arising out of, based upon or in
      anyway relating or incidental to or connected with any labor-and/or
      employee-related claims and demands occurring prior to the Closing Date or
      in
      connection with the transactions contemplated by this Agreement, other than
      any
      WARN Act Violation.

     

    (c) The
      provisions of this Article V shall survive the Closing.

     

    ARTICLE
      VI

     

    REPRESENTATIONS
      AND WARRANTIES OF SELLERS

     

    Sellers
      represent and warrant to Buyer as follows:

     

    Section
      6.01 Existence
      and Good Standing.»

     

    Sellers
      are duly organized, validly existing and in good standing under the laws of
      the
      state of their respective organization.

     

    Section
      6.02 Authority.»

     

    Seller
      has, and on the Closing Date will have, all requisite power and authority to
      execute and deliver this Agreement and to consummate the transactions
      contemplated herein pursuant to the terms and conditions of this Agreement.
      All
      persons or entities required to approve this Agreement pursuant to Seller’s
      governance documents have approved this Agreement and certified resolutions
      evidencing such approval will be delivered to Buyer at Closing.

     

    Section
      6.03 No
      Conflict.»

     

    The
      execution and delivery of this Agreement and the consummation of the
      transactions contemplated herein will not conflict with, breach, result in
      a
      default under, or violate any commitment, document or instrument to which any
      of
      the Sellers is a party or by which any of the Sellers is bound. 

     

    Section
      6.04 Litigation.»

     

    Except
      as
      set forth on the schedule attached as Exhibit
      “L”
      hereto,
      there is no pending and Sellers have no Knowledge of any threatened litigation,
      arbitration or governmental investigations with respect to the Property in
      which
      any Seller or any Operating Tenant is named a party which has not been resolved,
      settled or dismissed. 

     

    Section
      6.04 Condemnation.»

     

    Sellers
      have not received any written notice of any pending condemnation proceeding
      or
      other proceeding in eminent domain, and to the Sellers’ Knowledge, no such
      condemnation proceeding or eminent domain proceeding is threatened affecting
      the
      Property or any portion thereof. 

     

    Section
      6.05 Title
      to Personal Property.»

     

    Sellers
      have good and valid title to all tangible Personal Property, which shall be
      free
      and clear of all liens and encumbrances as of the Closing Date. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      6.06 Compliance
      with Applicable Law.»

     

    Sellers
      have not received any written notice of a violation of any applicable law with
      respect to the Property which have not been cured or dismissed.

     

    Section
      6.07 Taxes.»

     

    All
      property, sales use and occupancy taxes which accrue prior to the Closing Date
      will be paid in full or prorated at Closing.

     

    Section
      6.08 Financial
      Statements.»

     

    To
      Sellers’ Knowledge, the financial statements delivered by Sellers to Buyer are
      complete, accurate and fairly represent the historical results of the operations
      and financial condition of the Hotels.

     

    Section
      6.09 Contracts.
      Sellers
      have no Knowledge of any material non-compliance with any Material Operating
      Agreement. To Sellers’ Knowledge, the schedule of Operating Agreements attached
      hereto as Exhibit
      “H”
      includes
      all Material Operating Agreements.

     

    Section
      6.10 Insolvency.»

     

    No
      Seller
      has made a general assignment for the benefit of creditors, become insolvent
      or
      filed a petition for voluntary bankruptcy or filed a petition or answer seeking
      reorganization or an arrangement or composition, extension or readjustment
      of
      its indebtedness.

     

    Section
      6.11 FIRPTA.»

     

    No
      Seller
      is a foreign entity, foreign corporation, foreign partnership, foreign trust
      or
      foreign estate (as those terms are defined in the U.S. Bankruptcy Code and
      the
      regulations promulgated thereunder).

     

    Section
      6.12 Exclusivity.»

     

    No
      Seller
      has entered into any other agreement providing for a sale of all or any of
      the
      Property or any interest therein that is still in effect, and while this
      Agreement remains in force and effect, Sellers agree that they shall not enter
      into any such agreement.

     

    Section
      6.13 Hotel
      Rex Management Agreement. The
      copy
      of the Hotel Rex Management Agreement delivered by Sellers to Buyer (or posted
      by Sellers to the Data Room Web Site) is a full and complete copy of the Hotel
      Rex Management Agreement in all material respects.

     

    Section
      6.14 Franchise
      Agreements.
      The
      requirements to terminate the Franchise Agreements, including the calculation
      of
      the termination fees, if any, are set forth in the copies of the Franchise
      Agreements delivered by Sellers to Buyer (or posted by Sellers to the Data
      Room
      Web Site).

     

    Section
      6.15 Employee
      Matters.
      To
      Seller’s Knowledge, Sellers have not received any notice of violation of any
      employment laws or regulations with respect to the Hotels, and to Seller’s
      Knowledge there are no collective bargaining agreements in place at the Hotels
      other than with respect to the Hilton Fisherman’s Wharf Hotel in San Francisco,
      CA.

     

    Section
      6.16 Hazardous
      or Toxic Substances
      To
      Sellers’ Knowledge, all of the environmental reports in Seller’s possession
      concerning environmental conditions, Hazardous Substances or Toxic Substances
      in, on, under or affecting the Property have been delivered to Buyer by Sellers
      or posted to the Data Room Web Site (the “Environmental
      Reports”)
      and
      are listed on Exhibit
      “O”
      attached
      hereto. Sellers make no representations or warranties whatsoever as to the
      accuracy of the information in the Environmental Reports (including, without
      limitation, whether the Environmental Reports are complete with regard to
      identifying, characterizing the extent of or remediation of Hazardous Substances
      or Toxic Substances at any Property) or as to the environmental condition of
      any
      Property or the compliance thereof with Environmental Laws. Buyer acknowledges
      that it has hired environmental consultants and counsel to make an independent
      analysis of information in the Environmental Reports and to make an independent
      inspection of the Property with respect to environmental conditions. Sellers
      make no representation or warranty whatsoever with respect to the presence
      or
      absence of Hazardous Substances or Toxic Substances located on or under,
      emanating from or affecting any of the Property or its compliance with, or
      violation of, any Environmental Laws. As used herein, the terms “Hazardous
      Substances”, “Toxic Substances” and “Environmental Laws” shall have the meanings
      given to such terms in Section 7.05 hereof.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      6.16 Money
      Laundering.»

     

    

     

    Neither
      any of the Sellers nor, to Sellers’ Knowledge, any of their respective partners,
      investors or shareholders or any of their respective affiliates, is in violation
      of any laws relating to terrorism, money laundering or the Uniting and
      Strengthening America by Providing Appropriate Tools Required to Intercept
      and
      Obstruct Terrorism Action of 2001, Public Law 107-56 and Executive Order No.
      13224 (Blocking Property and Prohibiting Transactions with Persons Who Commit,
      Threaten to Commit, or Support Terrorism) (the “Executive
      Order”)
      (collectively, the “Anti-Money Laundering and Anti-Terrorism
      Laws”).

     

    Neither
      any of the Sellers nor, to Sellers’ Knowledge, any of their respective partners,
      investors or shareholders or any of their respective affiliates, is acting,
      directly or indirectly, on behalf of terrorists, terrorist organizations or
      narcotics traffickers, including, without limitation, those persons or entities
      that appear on the Annex to the Executive Order, or are included on any relevant
      lists maintained by the Office of Foreign Assets Control of U.S. Department
      of
      Treasury, U.S. Department of State, or other U.S. government agencies, all
      as
      may be amended from time to time.

     

    Neither
      any of the Sellers nor, to Sellers’ Knowledge, any of their respective partners,
      investors or shareholders or any of their respective affiliates, in any capacity
      in connection with the sale of the Property (i) conducts any business or engages
      in making or receiving any contribution of funds, goods or services to or for
      the benefit of any person included in the lists set forth in the preceding
      paragraph; (ii) deals in, or otherwise engages in any transaction relating
      to,
      any property or interests in property blocked pursuant to the Executive Order;
      or (iii) engages in or conspires to engage in any transaction that evades or
      avoids, or has the purpose of evading or avoiding, or attempts to violate,
      any
      of the prohibitions set forth in any Anti-Money Laundering and Anti-Terrorism
      Laws.

     

    Sellers
      understand and acknowledge that Buyer may become subject to further anti-money
      laundering regulations, and agree to execute instruments, provide information,
      or perform any other acts as may reasonably be requested by Buyer, for the
      purpose of: (i) carrying out due diligence as may be required by applicable
      law
      to establish any Seller’s identity and source of funds; (ii) maintaining records
      of such identities and sources of funds, or verifications or certifications
      as
      to the same; and (iii) taking any other actions as may be required to comply
      with and remain in compliance with anti-money laundering regulations applicable
      to any Seller.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Neither
      Sellers, nor, to Sellers’ Knowledge, any person controlling or controlled by any
      of the Sellers, is a country, territory, individual or entity named on a
      Government List, and, to Sellers’ Knowledge, the monies used in connection with
      this Agreement and amounts committed with respect thereto were not and are
      not
      derived from any activities that contravene any applicable anti-money laundering
      or anti bribery laws and regulations (including, without limitation, funds
      being
      derived from any person, entity, country or territory on a Government List
      or
      engaged in any unlawful activity defined under 18 USC §1956(c)(7)). For purposes
      of this Agreement, “Government List” means of any of (a) the two lists
      maintained by the United States Department of Commerce (Denied Persons and
      Entities), (b) the list maintained by the United States Department of Treasury
      (Specially Designated Nationals and Blocked Persons) and (c) the two lists
      maintained by the United States Department of State (Terrorist Organizations
      and
      Debarred Parties).

     

    The
      representations and warranties in this Article 6 shall survive the Closing
      for a
      period of one (1) year following the Closing Date.

     

    ARTICLE
      VII

     

    REPRESENTATIONS
      AND WARRANTIES OF BUYER

     

    Buyer
      represents and warrants to Sellers as follows:

     

    Section
      7.01 Existence
      and Good Standing.»

     

    Buyer
      is
      a limited liability company, and is duly organized, validly existing and in
      good
      standing under the laws of the state of its organization.

     

    Section
      7.02 Authority.»

     

    Buyer
      has, and on the Closing Date will have, all requisite power and authority to
      execute and deliver this Agreement and to consummate the transactions
      contemplated herein pursuant to the terms and conditions of this Agreement.
      All
      persons or entities required to approve this Agreement pursuant to Buyer’s
      governance documents have approved this Agreement and certified resolutions
      evidencing such approval will be delivered to Sellers at Closing.

     

    Section
      7.03 No
      Conflict.»

     

    The
      execution and delivery of this Agreement and the consummation of the
      transactions contemplated herein will not conflict with, breach, result in
      a
      default under, or violate any commitment, document or instrument to which Buyer
      is a party or by which it is bound. 

     

    Section
      7.04 Money
      Laundering.»

     

    

     

    Neither
      Buyer nor, to Buyer’s Knowledge, any of its partners, investors or shareholders
      or any of their respective affiliates, is in violation of any Anti-Money
      Laundering and Anti-Terrorism Laws.

     

    Neither
      Buyer nor, to Buyer’s Knowledge, any of its partners, investors or shareholders
      or any of their respective affiliates, is acting, directly or indirectly, on
      behalf of terrorists, terrorist organizations or narcotics traffickers,
      including, without limitation, those persons or entities that appear on the
      Annex to the Executive Order, or are included on any relevant lists maintained
      by the Office of Foreign Assets Control of U.S. Department of Treasury, U.S.
      Department of State, or other U.S. government agencies, all as may be amended
      from time to time.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Neither
      Buyer nor, to Buyer’s Knowledge, any of its partners, investors or shareholders
      or any of their respective affiliates, in any capacity in connection with the
      purchase of the Property (i) conducts any business or engages in making or
      receiving any contribution of funds, goods or services to or for the benefit
      of
      any person included in the lists set forth in the preceding paragraph; (ii)
      deals in, or otherwise engages in any transaction relating to, any property
      or
      interests in property blocked pursuant to the Executive Order; or (iii) engages
      in or conspires to engage in any transaction that evades or avoids, or has
      the
      purpose of evading or avoiding, or attempts to violate, any of the prohibitions
      set forth in any Anti-Money Laundering and Anti-Terrorism Laws.

     

    Buyer
      understands and acknowledges that Sellers may become subject to further
      anti-money laundering regulations, and agrees to execute instruments, provide
      information, or perform any other acts as may reasonably be requested by
      Sellers, for the purpose of: (i) carrying out due diligence as may be required
      by applicable law to establish Buyer’s identity and source of funds; (ii)
      maintaining records of such identities and sources of funds, or verifications
      or
      certifications as to the same; and (iii) taking any other actions as may be
      required to comply with and remain in compliance with anti-money laundering
      regulations applicable to Buyer.

     

    Neither
      Buyer, nor, to Buyer’s Knowledge, any person controlling or controlled by Buyer,
      is a country, territory, individual or entity named on a Government List, and,
      to Buyer’s Knowledge, the monies used in connection with this Agreement and
      amounts committed with respect thereto were not and are not derived from any
      activities that contravene any applicable anti-money laundering or anti bribery
      laws and regulations (including, without limitation, funds being derived from
      any person, entity, country or territory on a Government List or engaged in
      any
      unlawful activity defined under 18 USC §1956(c)(7)).

     

    Section
      7.05 AS
      IS.»

     

     BUYER
      EXPRESSLY ACKNOWLEDGES AND AGREES THAT THE PROPERTY IS BEING SOLD TO BUYER
      AND
      THAT BUYER AGREES TO PURCHASE AND ACCEPT THE PROPERTY, AND EACH AND EVERY PART
      AND COMPONENT THEREOF, IN AN “AS IS, WHERE IS” CONDITION AS OF THE CLOSING WITH
      NO REPRESENTATIONS OR WARRANTIES FROM SELLERS, EITHER EXPRESS OR IMPLIED, EXCEPT
      AS EXPRESSLY SET FORTH IN THIS AGREEMENT. BUYER AGREES THAT BUYER IS NOT RELYING
      UPON, AND HAS NOT RECEIVED OR BEEN GIVEN, ANY REPRESENTATIONS (EXCEPT AS
      EXPRESSLY SET FORTH IN THIS AGREEMENT), STATEMENTS OR WARRANTIES (ORAL OR
      WRITTEN, IMPLIED OR EXPRESS) OF OR BY ANY OFFICER, EMPLOYEE, AGENT OR
      REPRESENTATIVE OF SELLERS, OR ANY SALESPERSON OR BROKER (IF ANY) INVOLVED IN
      THIS TRANSACTION, AS TO THE PROPERTY OR ANY PART OR COMPONENT THEREOF IN ANY
      RESPECT, INCLUDING, BUT NOT LIMITED TO, ANY REPRESENTATIONS, STATEMENTS OR
      WARRANTIES AS TO THE PHYSICAL OR ENVIRONMENTAL CONDITION OF THE PROPERTY, THE
      FITNESS OF THE PROPERTY FOR USE AS A HOTEL, THE FINANCIAL PERFORMANCE OR
      POTENTIAL OF THE PROPERTY, THE COMPLIANCE OF THE PROPERTY WITH APPLICABLE
      BUILDING, ZONING, SUBDIVISION, ENVIRONMENTAL, LIFE SAFETY OR LAND USE LAWS,
      CODES, ORDINANCES, RULES, ORDERS, OR REGULATIONS, OR THE STATE OF REPAIR OF
      THE
      PROPERTY, AND BUYER, FOR ITSELF AND ITS HEIRS, LEGAL REPRESENTATIVES, SUCCESSORS
      AND ASSIGNS, WAIVES ANY RIGHT TO ASSERT ANY CLAIM OR DEMAND AGAINST SELLERS
      AT
      LAW OR IN EQUITY RELATING TO ANY SUCH MATTER, WHETHER LATENT OR PATENT,
      DISCLOSED OR UNDISCLOSED, KNOWN OR UNKNOWN, NOW EXISTING OR HEREAFTER ARISING.
      EXCEPT TO THE EXTENT SELLERS BREACH THIS AGREEMENT, BUYER AGREES THAT IT SHALL
      HAVE NO RECOURSE WHATSOEVER AGAINST SELLERS, AT LAW OR IN EQUITY, SHOULD THE
      SURVEY OR THE TITLE INSURANCE COMMITMENTS OR THE TITLE POLICIES FAIL TO DISCLOSE
      ANY MATTER AFFECTING THE PROPERTY OR REVEAL ANY SUCH MATTER IN AN INACCURATE,
      MISLEADING OR INCOMPLETE FASHION OR OTHERWISE BE IN ERROR. BUYER ACKNOWLEDGES
      THAT IT SHALL REVIEW THE SURVEY AND THE TITLE INSURANCE COMMITMENTS (AS SAME
      MAY
      BE MARKED AT CLOSING) AND TO DISCUSS THEIR CONTENTS WITH THE INDEPENDENT
      CONTRACTORS WHO PREPARED OR ISSUED EACH OF THEM. BUYER ACCORDINGLY AGREES TO
      LOOK SOLELY TO THE PREPARER OF THE SURVEY AND THE ISSUER OF THE TITLE INSURANCE
      COMMITMENTS AND TITLE POLICIES FOR ANY CLAIM ARISING OUT OF OR IN CONNECTION
      WITH SUCH INSTRUMENTS AND HEREBY RELEASES SELLERS FROM ANY SUCH CLAIM (EXCEPT
      FOR ANY CLAIM THAT SELLERS AGREE TO CURE AS SET FORTH IN THIS
      AGREEMENT).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Buyer
      recognizes that the Hotels and Personal Property are not new and that there
      exists a possibility that the Property is not in compliance with the
      requirements which would be imposed on a newly constructed hotel by presently
      effective federal, state and local building, plumbing, electrical, fire, health,
      handicap, environmental and life safety laws, codes, ordinances, rules, orders
      and/or regulations (collectively, the “building
      codes”).
      The
      Hotels and other improvements on the Land may contain substances or materials
      no
      longer permitted to be used in newly constructed buildings including, without
      limitation, asbestos or other insulation materials, lead or other paints,
      wiring, electrical, or plumbing materials and may not contain other materials
      or
      equipment required to be installed in a newly constructed building. Buyer has
      had the opportunity, as set forth in Section 11.04, to conduct such
      investigations and inspections of the Property as Buyer deemed necessary with
      respect to all such matters. Buyer agrees to accept and shall accept the
      Property in an “AS-IS, WHERE IS” condition and at Closing to accept and assume
      the risk of noncompliance of the Property with all such building codes. Buyer
      waives any right to excuse or delay performance of its obligations under this
      Agreement or to assert any claim against Sellers (before or after Closing)
      arising out of any failure of the Property to comply with any such building
      codes.

     

    It
      is
      specifically understood and agreed by Sellers and Buyer that Sellers do not
      make, and shall not be deemed to have made, any representation, warranty or
      covenant with respect to (i) any Environmental Laws that may affect any of
      the
      Property or (ii) the presence or absence of any Hazardous or Toxic Substances
      in, on, above, under or about any of the Property. As used in this Section
      7.05,
      (A) the term “Environmental
      Laws”
      means
      all federal, State and local laws, codes, ordinances, rules, orders and
      regulations now or hereafter in effect relating to pollution or the protection
      of the environment, including without limitation, all laws, codes, ordinances,
      rules, orders and regulations governing the generation, use, collection,
      treatment, storage, transportation, recovery, removal, discharge, spill or
      disposal of any or all Hazardous or Toxic Substances, and (B) the term
“Hazardous Substances” or “Toxic Substances” means materials and substances
      defined as “hazardous substances”, “hazardous wastes”, “toxic substances” or
“toxic wastes” in (I) the Comprehensive Environmental Response, Compensation and
      Liability Act of 1980, 42 U.S.C. Sections 9601-9675, as amended by the Superfund
      Amendments and Reauthorization Act of 1988, and any further amendments thereto
      and rules, orders and regulations thereunder; (II) the Resource Conservation
      and
      Recovery Act of 1976, 42 U.S.C. Sections 6901-6992, as amended by the Hazardous
      and Solid Waste Amendments of 1984, and any further amendments thereto and
      rules, orders and regulations thereunder; or (III) any other Environmental
      Laws.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    It
      is
      understood and agreed by Sellers and Buyer that in the event of any conflict
      between the terms and provisions of this Section 7.05 and any other term or
      provision of this Agreement, the relevant term or provision of this Section
      7.05
      shall control and govern. The provisions of this Section 7.04 shall survive
      Closing.

     

    ARTICLE
      VIII

     

    REMEDIES»

     

    Section
      8.01 Sellers’
      Remedies.»

     

    If
      Buyer
      defaults under any provision of this Agreement before the Closing, Buyer and
      Sellers agree that the damages that Sellers will sustain as a result thereof
      will be substantial, but the actual damages will be difficult or impossible
      to
      ascertain. Accordingly, Buyer and Sellers agree that, in the event of Buyer’s
      default, Sellers may, as their sole and exclusive remedies, terminate this
      Agreement by written notice to Buyer in which event Sellers shall receive the
      Deposit as liquidated damages for such default, the amount of which Deposit
      Buyer and Sellers agree is not punitive or a penalty but is just, fair and
      reasonable, and the Escrow Agent shall immediately pay the Deposit to
      Sellers.

     

    Section
      8.02 Buyer’s
      Remedies.»

     

    In
      the
      event of a default hereunder on the part of any Seller before Closing, or if
      there shall be an inaccuracy or breach of any representation or warranty
      contained (or deemed contained) in Article VI of this Agreement made as of
      the
      Effective Date or as of the Closing Date as if then made, Buyer’s sole and
      exclusive remedies hereunder shall be either: (1) the right to terminate this
      Agreement and receive a return of the full amount of the Deposit, plus interest
      thereon, or (2) the right to seek specific performance hereof, provided that
      Buyer must file a suit for specific performance in the appropriate jurisdiction
      within ninety (90) days from the date of such default by such
      Seller.

     

    The
      parties waive all damages and remedies for defaults prior to Closing except
      as
      provided in this Agreement. Following Closing, RFS Partnership, L.P., shall
      be
      liable for obligations of Wharf Associates that survive Closing pursuant to
      the
      terms of this Agreement; provided, however, that, following Closing, Wharf
      Associates shall only be liable for its own obligations that survive Closing
      pursuant to the terms of this Agreement and shall not be liable for the
      obligations of RFS Partnership, L.P., or any other Seller. All Sellers shall
      be
      jointly and severally liable for any and all obligations of any Seller or all
      Sellers under this Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      8.03 Post-Closing
      Matters.»

     

    Notwithstanding
      the terms and provisions of Sections 8.01 and 8.02 or any other term or
      provision of this Agreement, Sellers and Buyer shall each retain the right
      to
      seek and obtain relief for events occurring, or the breach of any representation
      and warranty discovered, after the Closing Date provided that: (a) this
      transaction in fact closes; (b) the obligations for which relief is sought
      are
      obligations which by their express terms are to survive Closing or which by
      their express terms are to performed following Closing (including any
      indemnities hereunder, if any); and (c) such relief shall be limited to a suit
      for monetary damages, unless expressly otherwise provided in this Agreement.
      Except for obligations which by their express terms are to survive Closing
      or
      which by their express terms are to be performed following Closing, the terms
      and provisions of this Agreement shall not survive the Closing and shall merge
      into the Deeds from Sellers to Buyer. The provisions of this Section 8.03 shall
      survive Closing.

     

    ARTICLE
      IX

     

    CONDITIONS

     

    Section
      9.01 Sellers’
      Obligation.»

     

    In
      addition to any other conditions precedent for the benefit of Sellers expressly
      set forth in this Agreement, the obligation of Sellers to perform this Agreement
      is subject to the following conditions unless waived in writing by
      Sellers:

     

    (a) The
      representations and warranties of Buyer in this Agreement shall be true and
      correct in all material respects as of the Closing Date as if made on and as
      of
      the Closing Date.

     

    (b) Each
      of
      the documents referred to in Article X hereof to be executed and delivered
      by
      Buyer shall have been fully executed and delivered as contemplated
      hereby.

     

    (c) Buyer
      shall have performed all obligations required to be performed by it under this
      Agreement on or prior to the Closing Date.

     

    Section
      9.02 Buyer’s
      Obligation.»

     

    In
      addition to any other conditions precedent for the benefit of Buyer expressly
      set forth in this Agreement, the obligation of Buyer to perform this Agreement
      is subject to the following conditions unless waived in writing by
      Buyer:

     

    (a) The
      representations and warranties of Sellers in this Agreement shall be true and
      correct in all material respects as of the Closing Date as if made on and as
      of
      the Closing Date, subject to matters or circumstances of which Buyer becomes
      aware prior to Closing and does not provide written notice thereof to Seller
      on
      or prior to the Closing Date; it being understood and agreed by Buyer and Seller
      that upon closing of the transactions contemplated herein, Buyer shall be deemed
      to have waived any violation by Seller of any representations or warranties
      hereunder of which Buyer had knowledge prior to the Closing. 

     

    (b) Buyer
      shall have received written waiver of any right of first refusal or right of
      first offer in a form reasonably acceptable to the Title Company (if such right
      of first refusal or right of first offer would otherwise be an exception to
      the
      Title Policies) and in recordable form, (if the document containing such right
      of first refusal or right of first offer was itself recorded) to purchase any
      Land and Hotel held by any Franchisor or Manager and of any other Purchase
      Rights held by or for the benefit of any other party.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) Each
      of
      the documents referred to in Article X hereof to be executed and delivered
      by
      any of the Sellers and/or Operating Tenants shall have been fully executed
      and
      delivered as contemplated hereby.

     

    (d) The
      Title
      Company shall be in a position to “mark up” the Title Commitments or deliver the
      Title Policies to Buyer
      for
      the Land and Hotels, in either case in conformance with the provisions of
      Article XI hereof.

     

    (e) Sellers
      shall have performed all obligations required to be performed by them under
      this
      Agreement on or prior to the Closing Date.

     

    (f) No
      Material Change in Condition shall have occurred with respect to the Property
      during the period from the Effective Date through and including the Closing
      Date. As used herein, the term “Material Change in Condition” means any change
      in the condition of any of the Hotels and the Land on which the same are
      located, or any of the Personal Property, from the condition the same was in
      on
      the Effective Date, reasonable wear and tear, to the extent permitted by this
      Agreement, casualty and taking excepted, that would require the expenditure
      of
      (i) $1,000,000 or more with respect to any individual Hotel or parcel of the
      Land on which such Hotel is located, or any of the Personal Property, or (ii)
      $2,000,000 or more with respect to all of the Hotels and the Land on which
      the
      same are located and all of the Personal Property in the aggregate, to restore,
      repair, replace, remediate or otherwise cure (the “Material Change Threshold”),
unless
      Sellers
      credit Buyer at Closing an amount equal to the amount by which the cost to
      repair, replace, remediate or otherwise cure the Material Change in Condition
      exceeds the Material Change Threshold.

     

    

     

    ARTICLE
      X

     

    CLOSING
      DELIVERIES

     

    Section
      10.01 Documents
      and Instruments To Be Delivered At or Before Closing.»

     

    At
      Closing, Sellers (and/or Operating Tenant) and Buyer shall execute and deliver
      to each other or the Escrow Agent, as the parties may agree, the following
      documents and instruments:

     

    (a) Sellers
      shall execute and deliver to Buyer the Deeds.

     

    (b) Each
      Seller and/or Operating Tenant and Buyer shall execute and deliver to each
      other
      a Bill of Sale (Personal Property).

     

    (c) Each
      Seller and/or Operating Tenant and Buyer shall execute and deliver to each
      other
      counterparts of an Assignment and Assumption of Intangible
      Property.

     

    (d) Each
      Seller and/or Operating Tenant and Buyer shall execute and deliver to each
      other
      counterparts of an Assignment and Assumption of Operating
      Agreements.

     

    (e) The
      Hotel
      Rex Operating Tenant and Buyer shall execute and deliver to each other
      counterparts of an Assignment and Assumption of Hotel Rex Management Agreement,
      if permitted pursuant to Section 1.06(d) hereof.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (f) Sellers
      shall deliver written evidence of termination of the Management Agreements,
      subject, however, to the Sellers’ right to assign the Hotel Rex Management
      Agreement pursuant to Section 1.06(d) hereof.

     

    (g) Subject
      to the provisions of Section 1.05, Sellers shall deliver written evidence of
      termination of the Franchise Agreements.

     

    (h) Each
      of
      Sellers and Buyer shall deliver a certificate reaffirming the truth and accuracy
      of its representations and warranties as if made on and as of the Closing Date
      and such representations and warranties shall be deemed remade as of the Closing
      Date, subject to the provisions of Section 9.02(a) hereof.

     

    (i) Sellers
      shall deliver possession of the Property to Buyer, together with all keys,
      including, without limitation, keys for all security systems, rooms and
      offices.

     

    (j) Sellers
      shall deliver an estoppel certificate from those tenants under space leases
      listed in Exhibit “H”
      attached
      hereto, who are obligated to provide such estoppels pursuant to the terms of
      each such applicable space lease, and/or as otherwise required under
Exhibit “M”
      attached
      hereto, containing such information as is required thereunder, dated no earlier
      than thirty (30) days prior to the Closing Date.

     

    (k)
      Sellers shall deliver, or shall have delivered prior to the Closing Date, any
      instruments required under Exhibit “M”
      attached
      hereto to cure any of the title and survey defects therein specified, all of
      which shall be in form and substance reasonably satisfactory to the title
      Company.

     

    (l) Sellers
      and Buyer shall execute a closing statement.

     

    (m) Each
      Seller shall execute and deliver, at Closing, a so-called “Non-Foreign
      Affidavit” (pursuant to Section 1445 of the Internal Revenue Code).

     

    (n) If
      applicable and customary, each Seller of any Land and Hotel located in
      California shall execute and deliver to Escrow Agent a Real Estate Withholding
      Certificates (Form 593-C) and such other documents as are required by local
      custom and practice in the states, counties and municipalities of California
      and
      South Carolina wherein any of the Property is located.

     

    (o) Sellers
      shall deliver written evidence of termination of the Operating Agreements listed
      on Exhibit
      “N”
      attached
      hereto.

     

    

     

    (p)
       Buyer
      shall complete and deliver at Closing a Form 1099 as required by the Internal
      Revenue Code.

     

    (q) Buyer
      and
      Sellers shall execute such other affidavits, authorizing resolutions, and
      documents as may be reasonably required by the Title Company to effectuate
      the
      transactions contemplated by this Agreement and to induce the Title Company
      to
      insure title to the Hotels and the Land on which the same are located as
      described herein, including authorizing consent or resolutions and, in the
      case
      of Sellers, mechanics’ liens and parties in possession affidavits and a “gap
      indemnity” to the extent customary in each applicable jurisdiction.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    ARTICLE
      XI

     

    TITLE
      TO REAL PROPERTY

     

    Section
      11.01 Title
      Insurance Commitments.»

     

    Prior
      to
      the execution of this Agreement, Sellers obtained the Title Insurance
      Commitments and delivered the same to Buyer. Buyer hereby acknowledges that
      Buyer has approved the Title Insurance Commitments and has accepted the Title
      Insurance Commitments as so delivered to Buyer as evidence of the status of
      Sellers’ title to the Hotels and Land. It is understood and agreed by Buyer and
      Sellers that, notwithstanding any other term or provision of this Agreement
      to
      the contrary, Sellers shall have no obligation to pay for any endorsements
      to
      the Title Policies and, if desired or required by Buyer, the premiums and costs
      of such endorsements shall be at Buyer’s sole cost and expense. If Buyer
      defaults under this Agreement or terminates this Agreement for any reason
      hereunder (other than a default by any of the Sellers), then Buyer shall pay
      any
      and all search and examination fees, cancellation fees and other costs or
      charges assessed in connection with the services of the title insurer, the
      cancellation of the Title Insurance Commitments or the non-issuance of the
      Title
      Policies. The foregoing sentence shall survive any termination of this Agreement
      by Buyer (other than by reason of a default by any of the Sellers). Upon Buyer’s
      selection of a lender, Buyer shall notify Seller whether such lender requires
      co-title insurance with respect to the transactions contemplated herein, and
      what such requirements are, if any. Buyer acknowledges and agrees that (i)
      Buyer
      shall be responsible for all additional costs, fees and premiums resulting
      from
      its election to have the Title Policies co-insured, (ii) such co-insurer shall
      be a nationally-recognized title insurance company, and (iii) Buyer shall not
      have the right to extend the Closing Date in order to accommodate the lender’s
      co-insurance requirements.

     

    Section
      11.02 Title
      Defects.»

     

    Prior
      to
      the execution of this Agreement, Buyer has objected to, and Sellers have agreed
      to cure, those title matters, if any, set forth on Exhibit
      “M”
      attached
      hereto and by this reference incorporated herein (the “Title
      Defects”).
      Sellers shall have thirty (30) days from the Effective Date to cure any such
      Title Defects except for monetary liens and encumbrances which may be paid
      at
      Closing. If Sellers fail to cure any of the Title Defects (other than monetary
      liens and encumbrances, which Sellers shall be obligated to cure at Closing),
      Buyer’s sole and exclusive remedy shall be to either (i) terminate this
      Agreement by written notice to Sellers given on or before the Closing Date
      without recourse against Sellers and to obtain a refund of the Deposit from
      the
      Escrow Agent, or (ii) to accept title to the Land and Hotels in their then
      condition without reduction of the Purchase Price or reservation of any claim
      against Sellers.

     

    Section
      11.03 Survey.»

     

    Prior
      to
      the execution of this Agreement, Sellers have provided Buyer with copies of
      any
      surveys of the Land which Sellers have in their possession or control. Prior
      to
      the execution of this Agreement, Buyer has obtained and provided Sellers and
      Title Company with a copy of, Surveys of the Hotels and Land prepared by a
      licensed surveyor in the state in which the Hotel which is the subject of the
      Survey is located and otherwise meeting the ALTA requirements and standards.
      Prior to the execution of this Agreement, Buyer has objected to, and Sellers
      have agreed to cure, those survey matters, if any, set forth on Exhibit
      “M”
      attached
      hereto and by this reference incorporated herein (the “Survey
      Defects”).
      Sellers shall have thirty (30) days from the Effective Date to cure any such
      Survey Defects. If Sellers fail to cure any of the Survey Defects, Buyer’s sole
      and exclusive remedy shall be to either (i) terminate this Agreement by written
      notice to Sellers given on or before the Closing Date without recourse against
      Sellers and to obtain a refund of the Deposit from the Escrow Agent, or (ii)
      to
      accept the condition of the Land and Hotels in their then condition without
      reduction of the Purchase Price or reservation of any claim against
      Sellers.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      11.04 Access
      to Property; Due Diligence.»

     

    Buyer
      acknowledges that prior to the Effective Date, Buyer has had the opportunity
      to
      inspect and conduct a full inspection and investigation of the Property and,
      subject to the provisions of Section 9.02(f) hereof, accepts the condition
      of
      the Property in its “AS IS”“WHERE IS” condition and acknowledges that Buyer has
      no right to terminate this Agreement except as otherwise expressly provided
      in
      this Agreement.

     

    ARTICLE
      XII

     

    THE
      CLOSING

     

    Section
      12.01 Time
      and Place.»

     

    Subject
      to the conditions in Article IX, and the casualty and condemnation provisions
      in
      Article XIII, the Closing shall take place on the Closing Date at 10:00 a.m.
      (local time) at the office of the Escrow Agent, or at such other date, place
      and
      time as Buyer and Sellers may mutually agree upon in writing. At the request
      of
      either party, Buyer and Sellers shall reasonably cooperate to accomplish this
      Closing “by mail.” Buyer shall take possession of the Property effective as of
      the Closing Date.

     

    Section
      12.02 Payment
      of Purchase Price.»

     

    At
      the
      Closing, Buyer shall deliver by wire transfer of good funds the balance of
      the
      Purchase Price (subject to adjustments and/or prorations provided in this
      Agreement) to the Escrow Agent no later that 12:00 p.m. (Eastern Time) on the
      Closing Date (or such later time as the final Closing Statement has been agreed
      upon by the parties). The Deposit and the balance of the Purchase Price (as
      adjusted) shall be paid to each of the Sellers, in such amounts as directed
      by
      the Sellers, by the Escrow Agent by wire transfer of good funds to such bank
      accounts specified by Sellers after delivery of the closing documents by Sellers
      to the Title Company but before recordation of the Deeds or any other instrument
      all as more particularly set forth in the escrow closing instructions of Sellers
      and Buyer. With respect to the transfer of the Land and Hotels located in
      California, the Escrow Agent shall be responsible for withholding any taxes
      due
      from the applicable Sellers on account of such transfers, based on the Real
      Estate Withholding Certificates (Form 593-C) delivered by such Sellers at
      Closing if applicable, and remitting same to the California Franchise Tax Board.
      Funds representing the Deposit and funds representing the balance of the
      Purchase Price shall be wired to Sellers’ bank accounts no later than 5:00 P.M.
      (Eastern Time) on the Closing Date (or such later time as the final Closing
      Statement has been agreed upon by the parties). 

     

    Section
      12.03 Closing
      Costs.»

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    (a)
       Sellers
      shall pay the following costs and expenses at Closing:

     

    (1)
      Sellers’ prorated share of real estate and tangible personal property taxes,
      rents or assessments as set forth in this Agreement.

     

    (2)
      The
      cost of issuing the Title Insurance Commitments and the premium for issuance
      of
      the Title Policies for the Doubletree Del Mar Hotel and the Beverly Heritage
      Hotel.

     

    (3) Sellers’
      own legal expenses.

     

    (4) One-half
      of the closing fee and/or settlement fee charged by the Escrow Agent with
      respect to the Doubletree Del Mar Hotel and the Holiday Inn, Columbia, SC Hotel,
      and all of the closing fee and/or settlement fee charged by the Escrow Agent
      with respect to the Beverly Heritage Hotel.

     

    (5) Any
      transfer taxes or stamp taxes pertaining to the transfer of the Property from
      Sellers to Buyer.

     

    (6) All
      costs
      of satisfying in full any existing debt secured by the Property and removing
      any
      monetary encumbrances from the Title Policies.

     

    (7)
      Sellers shall pay the Broker fees.

     

    (8) All
      Management Termination Fees.

     

    (9) Any
      and
      all other costs and expenses expressly allocated to Sellers under this Agreement
      or customarily payable by sellers in the jurisdictions where the Property is
      located.

     

    (b) Buyer
      shall pay the following costs and expenses at Closing:

     

    (1) Costs
      of
      transferring, terminating or canceling any Operating Agreements.

     

    (2) Costs
      of
      recording the Deeds and any other transfer documents requiring
      recordation.

     

    (3)
      The
      cost of issuing the Title Insurance Commitments and the premium for issuance
      of
      the Title Policies for the Holiday Inn Columbia, SC Hotel, the Hotel Rex and
      the
      Fisherman’s Wharf Hotel, and any fees or additional premiums charged with
      respect to any of the Hotels in connection with any co-insurance requested
      by
      Buyer pursuant to Article 11.

     

    (4) All
      premiums and costs for issuing any endorsements or additional coverage to the
      Title Policy and any title insurance premium or cost (including endorsements
      and
      additional coverage with respect thereto) related to Buyer’s
      financing.

     

    (5)
      Any
      indebtedness or mortgage related taxes and recording or other fees relating
      to
      any mortgage, deed of trust or other security instrument executed by
      Buyer.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (6)
      Costs
      of supplying tax certificates to the Title Company, if and to the extent
      applicable.

     

    (7)
      All
      fees, costs and expenses incurred with respect to any purchase money
      financing.

     

    (8) Buyer’s
      prorated share of all real estate and tangible personal property taxes, rents,
      or assessments as set forth in this Agreement.

     

    (9) Buyer’s
      own legal expenses.

     

    (10)
      One-half of the closing fee and/or settlement fee charged by the Escrow Agent
      with respect to the Doubletree Del Mar Hotel and the Holiday Inn, Columbia,
      SC
      Hotel, and all of the closing fee and/or settlement fee charged by the Escrow
      Agent with respect to the Hotel Rex and the Fisherman’s Wharf
      Hotel.

     

    (11)
      The
      cost of preparing the Surveys.

     

    (12)
      Any
      UCC searches.

     

    (13)
      Any
      costs or expenses incurred by Buyer in connection with its inspections and
      due
      diligence preformed on the Property.

     

    (14)
      All
      Franchise Agreement termination fees or liquidated damages, as applicable,
      pursuant to Section 1.05 hereof.

     

    (15)
      Any
      and all other costs and expenses expressly allocated to Buyer under this
      Agreement or customarily payable by buyers in the jurisdictions where the
      Property is located.

     

    Section
      12.04 Revenue
      and Expense Prorations.»

     

    Pursuant
      to Article IV, Sellers and Buyer will make appropriate apportionments and
      prorations of expenses, rents, taxes and revenues and settle them by appropriate
      credits on the Closing Statement or pursuant to the Operations Settlement,
      as
      the case may be.

     

    Section
      12.05 Closing
      Documents.»

     

    At
      the
      Closing, Buyer and Sellers shall also execute and deliver such documents as
      are
      specified or contemplated by this Agreement, including, but not limited to,
      those required by Sections 4.01 and 10.01.

     

    ARTICLE
      XIII

     

    INSURANCE,
      CONDEMNATION AND CASUALTY

     

    Section
      13.01 Insurance.»

     

    All
      Sellers’ insurance policies, including, without limitation, fire and any
      additional hazard insurance, shall be cancelled by Sellers as of the Transfer
      Time, and any refunded premiums shall be retained by Sellers. Buyer will be
      responsible for acquiring and placing its own insurance in force from and after
      the Transfer Time.

     

    Section
      13.02 Condemnation
      and Casualty. 

     

    (a) If,
      before the Closing, any Seller receives notice that any Hotel or Hotels and
      any
      parcel or parcels comprising the Land are to be wholly condemned, or to be
      condemned in such substantial part that the value of the portion of the Hotels
      and Land so condemned exceeds Twelve Million and No/100 Dollars
      ($12,000,000.00), or if one or more of the Hotels is wholly or partially
      destroyed by fire or other casualty, or if so much of the Hotels is damaged
      by
      fire or other casualty to the extent that the cost of repairing such damage
      shall exceed Twelve Million and No/100 Dollars ($12,000,000.00) as determined
      by
      the casualty insurer(s) insuring the Hotels, then, in any such event, Buyer
      and
      each of the Sellers shall each have the right to terminate this Agreement by
      delivering notice of termination in writing to the other party within thirty
      (30) days after the receipt of notice of such condemnation or casualty (but
      not
      later than the Closing Date) (which notice will, to the extent then known,
      contain the amount of compensation offered for such condemnation or the amount
      of insurance proceeds offered to be paid on account of such casualty, as the
      case may be) and upon giving such notice of termination the Deposit shall be
      returned by the Escrow Agent to Buyer, and Sellers and Buyer shall each be
      released and discharged from any further obligation to each other hereunder
      except for those which expressly survive the termination of this Agreement;
      provided, however, that if neither Buyer nor Sellers elects to terminate this
      Agreement, the purchase contemplated herein shall be consummated without
      reduction of the Purchase Price, within the later of (i) fifteen (15) days
      after
      the expiration of such thirty (30) day period or (ii) the Closing Date, but
      Buyer shall be entitled to all proceeds of fire or other casualty insurance
      or
      condemnation (other than proceeds relating to business interruption or loss
      for
      periods prior to the Transfer Time), Buyer shall receive a credit to the
      Purchase Price for any deductibles with respect to any insurance proceeds and
      Sellers shall have no responsibility for the restoration and repair of the
      Property.»

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    (b) If,
      before the Closing, any one or more Hotel is damaged by fire or other casualty
      to the extent that the cost of repairing or restoring the same shall be less
      than an amount equal to Twelve Million and No/100 Dollars ($12,000,000.00),
      or
      if any Seller receives notice that any Hotel and/or Land is to be partially
      condemned but that the value of the Land and Hotels to be condemned does not
      exceed Twelve Million and No/100 Dollars ($12,000,000.00), then, and in any
      such
      event, the Closing shall proceed as scheduled and Sellers shall assign to Buyer
      the proceeds (excluding proceeds for business interruption or loss for periods
      prior to the Transfer Time) of any casualty insurance or any condemnation award,
      as the case may be, Buyer shall receive a credit to the Purchase Price for
      any
      deductibles with respect to any insurance proceeds and Sellers shall have no
      responsibility for restoration or repair of the Property.

     

    ARTICLE
      XIV

     

    MISCELLANEOUS
      COVENANTS AND PROVISIONS

     

    Section
      14.01 Assignment;
      Successors and Assigns.»

     

    Except
      as
      otherwise provided in this Section 14.01, neither this Agreement nor any right
      or interest herein may be assigned by Buyer without the prior written approval
      of Sellers. Notwithstanding anything to the contrary, (i) Buyer shall have
      the
      right to designate one or more of the Permitted Assignees to take title to
      any
      of the Property without obtaining Sellers’ consent, provided that Buyer gives
      written notice of such designation to Sellers so that all applicable transfer
      documents may be properly prepared prior to the Closing, and (ii) Buyer may
      assign all or any portions of this Agreement to one or more Permitted Assignees
      without obtaining Sellers’ consent; provided that (1) such Permitted Assignee(s)
      assumes in writing all of Buyer’s applicable obligations and liabilities
      hereunder, (2) a copy of the assignment and assumption of this Agreement is
      provided to Sellers promptly following execution thereof and (3) Buyer shall
      not
      be released from any of its obligations to Sellers hereunder. Subject to the
      foregoing, this Agreement shall be binding upon and inure to the benefit of
      the
      parties hereto and their respective heirs, legal representatives, successors
      and
      assigns.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      14.02 Counterparts.»

     

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

     

    Section
      14.03 Waiver.»

     

    No
      failure or delay in acting by any party to this Agreement shall be deemed a
      waiver of such party’s rights. Any waiver of rights or remedies shall be
      required to be signed by the party charged with the waiver in order for such
      waiver to be effective.

     

    Section
      14.04 Amendments.»

     

    This
      Agreement may be modified or amended only by the written consent of Sellers
      and
      Buyer.

     

    Section
      14.05 Further
      Agreements.»

     

    Each
      party agrees that it will execute and deliver to the other party any additional
      documents, agreements or instruments necessary or reasonable to give effect
      to
      this Agreement or any provision hereof.

     

    Section
      14.06 Attorneys’
      Fees.»

     

    In
      the
      event that any party is required to retain the services of an attorney to
      enforce or otherwise litigate or defend any matter or claim arising out of
      or in
      connection with this Agreement, then the prevailing party shall be entitled
      to
      its reasonable attorneys’ fees from the non-prevailing party.

     

    Section
      14.07 Entire
      Agreement.»

     

    This
      Agreement sets forth all the promises, representations, agreements, conditions
      and understandings relative to the transactions set forth herein, and neither
      Sellers nor Buyer are relying upon any promises, representations, agreements,
      conditions or understandings, either oral or written, (which are hereby
      superseded in their entirety) other than those expressed in this
      Agreement.

     

    Section
      14.08 Brokers
      and Finders.»

     

    Sellers
      and Buyer each represent and warrant to the other that it has not employed,
      retained or consulted any broker, agent or other finder with respect to the
      Property or in carrying on negotiations relative to this Agreement, except
      as
      provided for in this Section 14.08, and Sellers and Buyer shall indemnify and
      hold the other harmless from and against any and all claims, demands, causes
      of
      action, debts, liabilities, judgments and damages (including costs and
      reasonable attorneys’ fees incurred in connection with the enforcement of this
      indemnity) which may be asserted or recovered against the other on account
      of
      any brokerage fee, commission, or other compensation arising in breach of this
      representation and warranty. Sellers and Buyer hereby acknowledge that Broker,
      a
      licensed real estate broker involved in the negotiation of the transactions
      contemplated herein, shall be paid a sales commission by Sellers at Closing
      if,
      and only if, the transactions contemplated by this Agreement are closed and
      consummated. 

     

    Section
      14.09 Notices.»

     

    All
      notices, demands and requests required, permitted or given pursuant to the
      provisions of this Agreement shall be in writing, and either hand delivered
      in
      person or delivered by certified mail, postage prepaid, return receipt
      requested, or by Federal Express or other similar overnight courier service,
      addressed as follows: 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	
              If
                to Buyer:

            	
              Pyramid
                Hotel Opportunity Venture LLC

            
	 	
              c/o
                Pyramid Advisors LLC

            
	 	
              c/o
                Pyramid/Contrarian Investment LLC

              1071
                Camelback Street, Suite 111

              Newport
                Beach, California 92660

              Attention:
                William D. Booth, Jr.

              Fax:
                949-720-9123

              wdbooth@aol.com

            
	 	 
	 	
              with
                a copy to:

            
	 	 
	 	
              One
                Post Office Square, Suite 3100

              Boston,
                MA 02109

              Attention:
                Mr. Warren Q. Fields

              Fax:
                617-946-2040

              wfields@pyramidadvisors.com

            
	 	 
	 	
              and:

            
	 	 
	 	
              Goulston
                & Storrs, P.C.400 Atlantic Avenue

              Boston,
                MA 02110

              Attention:
                Harold Stahler, Esq.

              Fax:
                617-574-7642

              hstahler@goulstonstorrs.com

            
	 	 
	 	
              and:

            
	 	 
	 	
              Michael
                Quinn - Executive Director

              Morgan
                Stanley, US RE Investing Division

              1585
                Broadway, Floor 37

              New
                York, NY 10036

              Fax:
                212-507-4175

              Michael.Quinn@morganstanley.com

            
	 	 
	
              If
                to Sellers

            	
              CNL
                Hotels & Resorts, Inc.

              CNL
                Center at City Commons

              450
                South Orange Avenue

              Orlando,
                Florida 32801-3336

              Attention:
                Marcel Verbaas, Senior Vice President and Chief Investment
                Officer

              Fax:
                (407) 650-1085

              Mverbaas@cnl.com

            
	 	 
	 	
              with
                a copy to:

            
	 	 
	 	
              Lowndes,
                Drosdick, Doster, Kantor

              &
                Reed, P.A.

              215
                N. Eola Drive

              Orlando,
                Florida 32802-2809

              Attention:
                Richard J. Fildes

              407-650-1085

              Rich.Fildes@lowndes-law.com

            

    

    
       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    Any
      notice, demand or request which shall be served upon any of the parties in
      the
      manner aforesaid shall be deemed sufficiently given (i) upon being hand
      delivered in person, or (ii) upon being transmitted by facsimile transmission
      provided a copy is sent pursuant to (iii) the following business day, or (iii)
      upon being deposited with Federal Express or other similar overnight courier
      service; provided, however, the time period in which any response to such
      notice, demand or request must be given shall commence on the date of actual
      delivery of the notice, demand or request to the address to which it is sent
      (rather than delivery to the specific addressee). Rejection or other refusal
      to
      accept or the inability to deliver because of changed address of which no notice
      was given as provided below shall be deemed delivery of the notice, demand
      or
      request sent. The addresses given above may be changed by any party by prior
      notice to all other parties given in the manner provided herein.

     

    Section
      14.10 Section
      Headings; Interpretation.»

     

    The
      section headings of this Agreement are for reference only and shall not be
      used
      to construe or interpret this Agreement. All terms and words used in this
      Agreement, regardless of the number or gender in which they are used, shall
      be
      deemed to include any other number and any other gender as the context may
      require. If any term or condition of this Agreement or the application thereof
      to any person or circumstance shall, to any extent, be held legally invalid
      or
      unenforceable, the remainder of this Agreement, and the application of such
      terms or conditions to persons or circumstances other than those as to which
      it
      is held legally invalid or unenforceable, shall not be affected thereby and
      each
      term and condition of this Agreement shall be valid to the fullest extent
      permitted by law.

     

    Section
      14.11 Governing
      Law.»

     

    This
      Agreement shall be governed by the laws of the state of Florida; provided,
      however, that with respect to matters that relate to a specific portion of
      the
      Property, then this Agreement shall be governed by the laws of the state where
      such Property is located.

     

    Section
      14.12 Disclosure
      of Confidential Information/ Public Announcements/ Communication with
      Governmental Authorities/ Communication with Employees. »

     

    

     

    (a) The
      parties hereto acknowledge and agree that the existence of this Agreement,
      the
      terms of this Agreement and any other information disclosed in the due diligence
      materials delivered to or produced by Buyer or any other documents, materials,
      data or other information with respect to the Property which is not generally
      known to the public (the "Confidential
      Information")
      shall
      in all respects remain confidential and shall not be disclosed by the Buyer
      except as provided herein. Buyer may disclose Confidential Information to
      officers, directors, employees, attorneys, accountants, consultants, lenders,
      financial advisors, partners, investors prospective tenants and purchasers
      (collectively, “Representatives”),
      who
      in the reasonable business judgment of such party, need to know the Confidential
      Information for the purpose of evaluating the transactions contemplated by
      this
      Agreement, or in connection with any litigation between Buyer and Sellers
      arising under the transactions contemplated by this Agreement. Buyer will inform
      its Representatives of its confidentiality obligations under this Agreement,
      and
      such Representatives shall agree to be bound by the terms and conditions of
      this
      Agreement, before Buyer may disclose any Confidential Information to its
      Representatives; provided, however, any such prospective tenants and purchasers
      shall not have a right or license to access or inspect the Property or to
      contact the Manager or any of the Hotel employees. The disclosure of any
      Confidential Information by any Representative in breach of this Agreement
      will
      constitute a breach of this Agreement by Buyer, for which Buyer will be liable.
      If Buyer or any of its Representatives is required by any subpoena,
      interrogatories, request for production, or other legal process or by any
      applicable law or regulation to disclose any Confidential Information, Buyer
      will give (to the extent not prohibited by law) Sellers prompt written notice
      of
      the requirement and will cooperate with the Sellers so that Sellers, at their
      expense, may seek an appropriate protective order. In the absence of a
      protective order, Buyer and its Representatives may disclose only such
      Confidential Information as may in Buyer's reasonable opinion, be necessary
      to
      avoid any penalty, sanction, or other material adverse consequence, and Buyer
      will use commercially reasonable efforts to secure confidential treatment of
      any
      Confidential Information so disclosed.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Notwithstanding
      the foregoing, any party hereto shall have the right to make a public
      announcement regarding the transaction described in this Agreement, provided,
      however, that, prior to and as a condition precedent to such public
      announcement, all other parties hereto shall approve the timing, form and
      substance of any such public announcement, except if a party hereto is required
      to make a public announcement under any securities law, the party making such
      public announcement may do so only after having provided the other party with
      a
      copy of such public announcement and only as long as such public announcement
      is
      made in strict accordance with the applicable law requiring such public
      announcement be made. Any public announcement made on the Effective Date (or
      the
      next business day) shall have been agreed to by the parties as to its form
      and
      content prior to the parties executing this Agreement.

     

    (c) Without
      limiting the generality of the provisions in subsection (a) above, Buyer shall
      not, through its officers, employees, managers, contractors, consultants,
      agents, representatives or any other person (including, without limitation,
      Buyer’s third party consultants), directly or indirectly, communicate with any
      governmental authority or any official, employee or representative thereof,
      involving any matter with respect to the Property without the Sellers’ prior
      written consent, which consent shall not be unreasonably withheld, unless such
      communication is arranged by the Sellers. Notwithstanding the foregoing, Buyer
      and its representatives and consultants shall have the right to review building
      department, health department and other local governmental authority records
      with respect to the Property and the operation of the Hotels and request written
      or verbal confirmation of zoning and any other compliance by the Land or Hotels
      with any applicable laws, without any requirement to obtain the consent of
      the
      Sellers. Notwithstanding the foregoing, Buyer shall have the right to
      communicate with the applicable governmental authority in connection with the
      issuance of any liquor licenses required for the sale of liquor at the Hotels,
      and any and all other permits or licenses required to be transferred or applied
      for in connection with the sale of the Hotels, all without the prior consent
      of
      the Sellers; provided, however, that (i) Buyer shall provide Sellers with
      regular updates regarding the progress of any and all such communications;
      and
      (ii) no inspections of the Hotels by the applicable governmental authorities
      shall occur unless a representative of the Sellers is present during such
      inspections.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) Communication
      with Employees. Without limiting the generality of the provisions in subsection
      (a) above, Buyer shall not, through its officers, employees, managers,
      contractors, consultants, agents, representatives or any other person
      (including, without limitation, Buyer’s third party consultants), directly or
      indirectly, communicate with any Employees or any person representing any
      Employees involving any matter with respect to the Property, the Employees
      or
      this Agreement, without the prior written consent of Sellers and Managers,
      which
      consent may be withheld in the sole discretion of Sellers and Managers, unless
      such communication is arranged by the Sellers and/or Managers. Buyer shall
      not,
      through its officers, employees, managers, contractors, consultants, agents,
      representatives or any other person (including, without limitation, Buyer’s
      third party consultants), cause Sellers to be in violation of any Management
      Agreement with respect to contact or communication with any Employees.
      Notwithstanding the foregoing, the Sellers shall reasonably cooperate with
      Buyer
      in order to arrange communications, pursuant to a schedule to be reasonably
      agreed upon by the parties in order to allow Buyer to interview the Employees
      for possible continued employment, and Buyer shall apprise the Sellers from
      time
      to time as to its plans for communicating with such Employees, and to complete
      such communications in advance of the Closing.

     

    Section
      14.13 Manager
      Deliverables. Sellers
      shall use commercially reasonable efforts to cause the Managers to deliver,
      on
      or prior to the Closing Date, a complete list of (i) all gift certificates
      issued with respect to the Property that are outstanding as of the Closing
      Date
      and (ii) all bookings and reservations for guest, conference, meeting and
      banquet rooms or other facilities at the Property that are outstanding as of
      the
      Closing Date. 

     

    Section
      14.14 Non-Solicitation.»

     

    After
      the
      Closing, Sellers and their affiliates shall not solicit for employment any
      employees of any of the Hotels to which Buyer (or its manager(s)) has offered
      employment contemporaneously with the Closing; provided, however, a general
      solicitation by Sellers or any of their affiliates of any such employees for
      employment with Sellers made in connection with a specific market or
      industry-wide solicitation for employment shall not be a violation of this
      Section 14.13.

     

    Section
      14.15 Mutual
      Indemnity for Third Party Personal Injury and Property Damage
      Claims.

     

    (a)  Sellers’
      Indemnity.
      Sellers
      agree to indemnify, defend and hold harmless Buyer of and from all liabilities,
      losses, damages, costs or expenses (including, without limitation, court costs
      and reasonable attorneys’ fees) which Buyer may suffer or incur by reason of any
      act occurring, or cause of action accruing, on or prior to the Closing Date
      and
      arising from any personal injury or property damage suffered by any third party
      at or on the Property on or prior to the Closing Date, including, without
      limitation, any claims by employees of any of the Sellers, Operating Tenants
      or
      Managers.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  Buyer’s
      Indemnity.
      Buyer
      agrees to indemnify, defend and hold harmless Sellers of and from all
      liabilities, losses, damages, costs or expenses (including, without limitation,
      court costs and reasonable attorneys’ fees) which Sellers may suffer or incur by
      reason of any act occurring, or cause of action accruing, after the Closing
      Date
      and arising from any personal injury or property damage suffered by any third
      party at or on the Property after the Closing Date, including, without
      limitation, any claims by employees of Buyer.

     

    Section
      14.16Time
      of Essence.»

     

    Time
      is
      of the essence of this Agreement and each term and provision hereof; provided,
      however (unless specifically provided to the contrary elsewhere in this
      Agreement), when the date by which any action, event or condition is to occur
      or
      any notice or other communication is to be given falls on a Saturday, Sunday
      or
      legal holiday, the date by which such action, event or condition is to occur
      or
      such notice or other communication is to be given shall be automatically
      extended to the business day immediately succeeding such Saturday, Sunday or
      legal holiday.

     

    SIGNATURES
      ON FOLLOWING PAGES

     

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, this Agreement has been duly executed and delivered as of
      the
      date first above written.

     

    
      	 	
              BUYER:

            
	 	 
	 	
              PYRAMID
                HOTEL OPPORTUNITY 

              VENTURE
                LLC, 

              a
                Delaware limited liability company

              By:
                Pyramid/Contrarian Managing Member LLC, its
                Managing Memeber LLC, its

            
	 	 
	 	
               

              By: /s/
                William Booth

            
	 	
              Name:
                William D. Booth, Jr.

            
	 	
              Its:
                Manager

            
	 	 
	 	
              Date
                Executed: July 1, 2005

            
	 	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    
      	 	
              SELLERS:

               

              RFS
                PARTNERSHIP, L.P.,

              a
                Tennessee limited partnership

               

              By: CNL
                ROSE GP CORP.,

              a
                Delaware corporation

              its
                sole general partner

               

              By:
                /s/ Marcel
                Verbaas____________________________________________________

              Name: Marcel
                Verbaas

              Title:
                Senior Vice President

            
	 	 
	 	
              Date
                Executed: July 5, 2005

            
	 	 
	 	
              ROSE
                SPE 1, LP,

              a
                Delaware limited partnership

               

              By: ROSE
                SPE 1 GP, LLC,

              a
                Delaware limited liability company,

              its
                sole general partner

               

              By:
                /s/ Marcel
                Verbaas____________________________________________________

              Name: Marcel
                Verbaas

              Title:
                Senior Vice President

               

              Date
                Executed: July 5, 2005

               

              WHARF
                ASSOCIATES,

              a
                California general partnership,

               

              By: RFS
                FINANCING 

              PARTNERSHIP
                II, L.P.,

              a
                Tennessee limited partnership,

              as
                managing partner 

               

              By: RFS
                WHARF

              PROPERTY
                CORPORATION,

              a
                Tennessee corporation, as general partner 

               

              By:
                /s/ Marcel
                Verbaas____________________________________________________

              Name:
                Marcel Verbaas

              Title:
                Senior Vice President

               

              Date
                Executed: July 5, 2005

            

    

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    
      	 	
              For
                Purposes of Acknowledging and Agreeing only to the provisions of
                Section
                2.04 of this Agreement:

               

               

              ESCROW
                AGENT:

            
	 	 
	 	
              THE
                TALON GROUP,
                a
                division of First American Title Insurance Company

            
	 	 
	 	 
	 	
               

              By:
                /s/ Keren Baki

            
	 	
              Name:
                Keren Baki  

            
	 	
              Title:
                Commercial Closing Operations Supervisor  

            
	 	 
	 	
              Date
                Executed: July 5, 2005 

            
	 	 
	 	 

    

    

     

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “A”

    

    Legal
      Descriptions of Land

    

    

    

    

    See
      A-1,
      A-2, A-3, A-4 and A-5 attached.

    

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A-1

     

    LEGAL
      DESCRIPTION

     

    

    
      	
              Beverly
                Heritage, Milpitas / San Jose

              1820
                Barber Lane

              Milpitas,
                CA 95035

              Santa
                Clara County

            

    

    

    Parcel
      One:

    

    Parcel
      A
      as shown on the Parcel Map filed for record July 17, 1979 in Book 445 of Maps,
      Pages 47 and 48, Santa Clara County Records.

    

     

    Parcel
      Two:

     

    An
      easement for ingress and egress as granted in the Deed recorded July 7, 1981
      in
      Book G196, Page 5 of Official Records, described as follows:

    

    Said
      easement being a portion of that certain 7.806 acre parcel of land labeled
      “Parcel B” on the above described Parcel Map and being described as
      follows:

    

    A
      strip
      of land of the uniform width of 15 feet measured at right angles lying
      contiguous to and Westerly of the Easterly boundary line of said “Parcel B” and
      extending Southerly along the Easterly Boundary line of Parcel B, 256.51 feet
      from the Southerly boundary line of Barber Lane (60 feet wide) to the terminus
      of common ingress/egress easement benefiting Parcels A, B and C as shown on
      the
      above mentioned Parcel Map, said point being the terminus of the herein
      described easement.

    

     

    APN:
      086-03-018

     

    

     

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A-2

     

    LEGAL
      DESCRIPTION

     

    San
      Diego
      Del Mar (Doubletree)

    11915
      El
      Camino Real

    San
      Diego, CA 92130

    San
      Diego
      County

    

    Real
      property in the City of San Diego, County of San Diego, State of California,
      described as follows:

     

    Parcel
      A:

     

    Parcel
      1
      of Parcel Map No. 18098, in the City of San Diego, County of San Diego, State
      of
      California, filed in the Office of the County Recorder of San Diego County,
      August 25, 1998 as File No. 1998-0541314 of Official Records.

     

    

     

    Parcel
      B:

     

    A
      non-exclusive easement for vehicular and pedestrian ingress, egress and
      circulation purposes over, along and across that portion of Parcel 4 of Parcel
      Map No. 15957, in the City of San Diego, County of San Diego, State of
      California, filed in the Office of the County Recorder of San Diego County,
      on
      January 17, 1990 as File No. 90-028024 of Official Records, delineated and
      designated thereon as “Water and Sewer Easement Granted Hereon”, and that
      portion of Parcel 3 of said Parcel Map No. 15957 delineated and designated
      thereon as “Water and Drainage Easement Granted Hereon”.

     

    

     

    Parcel
      C:

     

    A
      non-exclusive easement for (a) vehicular parking, in areas other than the area
      which may be improved with the office building(s) approximately 40 feet in
      height and containing approximately 55,000 square feet of aggregate floor area
      contemplated by North City West Planned District Development Plan Permit No.
      88-0941, in such number of parking spaces as may be required from time to time
      for Parcel 1 of said parcel Map No. 15957 to be in compliance with said Permit
      No. 88-0941 and any other applicable requirements, and (b) vehicular and
      pedestrian ingress, egress and circulation purposes on, over, along and across
      that portion of Parcel 4 of said Parcel Map No. 15957, other than such improved
      area and other than that portion of said Parcel 4 delineated and designated
      on
      said Parcel Map No. 15957 as “Water and Sewer Easement Granted
      Hereon”.

     

    

     

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A-2 - CONTINUED

     

    LEGAL
      DESCRIPTION

     

    San
      Diego
      Del Mar (Doubletree)

    11915
      El
      Camino Real

    San
      Diego, CA 92130

    San
      Diego
      County

    

     

    Parcel
      D:

     

    Non-exclusive
      easements over and across the common area, as conveyed, set forth and described
      in that certain “Agreement Between Landowners Including Easements with Covenants
      and Restrictions” dated September 26, 1994, executed by and between Tiger
      Development One, a California limited partnership; Kmart Corporation, a Michigan
      corporation and Carmel Valley Partners I, a California general partnership,
      recorded September 29, 1994 as instrument no. 1994-0579026 of Official Records,
      in the Office of the County Recorder of San Diego County,
      California.

     

    APN:
      307-410-13-00

     

    

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A-3

     

    LEGAL
      DESCRIPTION

     

    
      	
              Hotel
                Rex -- San Francisco

              562
                Sutter Street

              San
                Francisco, CA 94102

              San
                Francisco County

            

    

    

     

    All
      that
      certain tract, piece or parcel of land situate in the City of San Francisco,
      County of San Francisco, State of California, described as follows:

    

    BEGINNING
      AT A POINT ON THE NORTHERLY LINE OF SUTTER STREET DISTANT THEREON 87 FEET 9-1⁄4
      INCHES EASTERLY FROM THE EASTERLY LINE OF MASON STREET; THENCE EASTERLY ALONG
      SAID LINE OF SUTTER STREET 49 FEET 8-3⁄4 INCHES; THENCE AT A RIGHT ANGLE NORTHERLY
      137 FEET 6 INCHES; THENCE AT A RIGHT ANGLE WESTERLY 50 FEET; THENCE AT A RIGHT
      ANGLE SOUTHERLY 50 FEET; THENCE AT A RIGHT ANGLE EASTERLY 3-1⁄4 INCHES; THENCE AT
      A RIGHT ANGLE SOUTHERLY 87 FEET 6 INCHES TO THE POINT OF BEGINNING.

    BEING
      A
      PORTION OF 50 VARA LOT NO. 358 IN BLOCK NO. 166.

    

    

    Assessor’s
      Lot 010, Block 0284

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A-4

     

    LEGAL
      DESCRIPTION

     

    

    
      	
              Hilton
                Hotel - San Francisco - Fisherman’s Wharf 

               

              590
                Bay Street

               

              San
                Francisco, California 94133

               

              San
                Francisco County

               

            

    

    

     

    REAL
      PROPERTY IN THE CITY OF SAN FRANCISCO, COUNTY OF SAN FRANCISCO, STATE OF
      CALIFORNIA, DESCRIBED AS FOLLOWS:

     

    BEGINNING
      AT THE POINT OF INTERSECTION IF THE NORTHERLY LINE OF BAY STREET WITH THE
      EASTERLY LINE OF JONES STREET; RUNNING THENCE NORTHERLY ALONG SAID LINE OF
      JONES
      STREET 275 FEET TO THE SOUTHERLY LINE ON NORTH POINT STREET; THENCE AT A RIGHT
      ANGLE EASTERLY ALONG SAID LINE OF NORTH POINT STREET 77 FEET; THENCE AT A RIGHT
      ANGLE SOUTHERLY 137 FEET AND 6 INCHES; THENCE AT A RIGHT ANGLE EASTERLY 198
      FEET; THENCE AT A RIGHT ANGLE SOUTHERLY 137 FEET AND 6 INCHES TO THE NORTHERLY
      LINE OF BAY STREET; THENCE AT A RIGHT ANGLE WESTERLY ALONG SAID LINE OF BAY
      STREET 275 FEET TO THE POINT OF BEGINNING.

     

    BEING
      PART OF 50 VARA BLOCK NO. 213.

     

    

     

    APN:
      Lot:
      003 Blk: 0029

     

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A-5

     

    LEGAL
      DESCRIPTION

     

    

     

    
      	
              Holiday
                Inn Columbia - Coliseum USC

              630
                Assembly Street

              Columbia,
                SC 29201

            

    

    

    

    Parcel
      I

    

    All
      that
      tract, piece, parcel of land containing 43722.81 sq. ft. or 1.0037 acres as
      delineated and shown on plat prepared for Realty & Financial Services, Inc.,
      dated August 6, 1993; said plat having been prepared by Hussey, Gay, Bell &
      Young, Inc., Columbia, S.C.; said parcel being located in the City of Columbia,
      Richland County, S.C., to the North of Blossom Street and to the East of
      Assembly Street as shown on said plat and commencing at the intersection of
      the
      road right of way of Devine Street and Assembly Street; said intersection being
      the Southeastern corner of Assembly Street and Devine Street and designated
      as
      P.O.B. Parcel 1 on said plat, thence going from commencement or beginning point
      N 68°00’40” E for a distance of 208.68’ feet to an iron marker; thence turning
      and running S 22°01’12”E for a distance of 209.14 feet to an iron marker; thence
      turning and running S 67°55’44” W for a distance of 103.70 feet to an “X’ in the
      top of a concrete retaining wall, thence turning and running S 67°55’44”W for a
      distance of 105.41 feet to an. iron marker; thence turning and running N
      21°53’00” W for a distance of 209.35 feet to the point of beginning or
      commencement; said property being bounded generally on the North by Devine
      Street, on the East by lands of N/F John A. Scarborough and N/F Gillis Coleman
      et al, on the South by lands of N/F Realty & Financial Service, Inc. (Parcel
      II and lands of N/F Church of Jesus Christ of Latter Day Saints, and on the
      West
      by Assembly Street.

    

    TMS
      No.
      11303-13-01

    

    

    AND

    

    CONTINUED
      ON NEXT PAGE

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A-5

     

    LEGAL
      DESCRIPTION CONTINUED

     

    

     

    
      	
              Holiday
                Inn Columbia - Coliseum USC

              630
                Assembly Street

              Columbia,
                SC 29201

            

    

    

    

    Parcel
      II:

    All
      that
      tract, piece or parcel of land containing 22066.03 sq. ft. or .5066 acres as
      delineated and shown on a plat prepared for Realty & Financial Services,
      Inc., dated August 6, 1993; said plat having been prepared by Hussey, Gay,
      Bell
& Young, Inc., Columbia, S.C.; said parcel being located in the City of
      Columbia, Richland County, S.C. to the North of Blossom Street and to the East
      of Assembly Street as shown on said plat and commencing at the intersection
      of
      the road right of way of Devine Street and Assembly Street; said intersection
      being the Southwestern corner of Assembly Street and Devine Street and being
      designated as P.O.B. Parcel 1 on said plat, thence going from said point N
      68°00’40” E for a distance of 208.68’ feet to a point; thence S 22°01’12”E for a
      distance of 209.14 feet to an iron marker designated as P.O.B. Parcel II as
      shown on said plat; thence turning and running S 22°51’33”E for a distance of
      207.89 feet to an iron marker; thence turning and running S 67°28’47” W for a
      distance of 108.20 feet to an iron marker; thence turning and running N
      21°37’17”W for a distance of 208.70 feet to an “X” mark in the top of a concrete
      retaining wall; thence turning and running N 67°55’44”E for a distance of 103.70
      feet to a point of beginning or commencement; said property being bounded
      generally on the North by lands N/F Realty & Financial Services, Inc.
      (Parcel I) on the East by lands N/F J. Mac Pizza Hut, Inc., lands of N/F Bert
      and David Brantley, and lands of N/F Roy W. Arrington, on the South of Blossom
      Street, and on the West by lands of N/F Susan G. Robinson/Frank R. Ellerbe,
      III,
      and lands of N/F Church of Jesus Christ of Latter Day Saints.

    

    TMS
      No.
      11303-13-11

    

    

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “B”

    

    ASSIGNMENT
      AND ASSUMPTION OF INTANGIBLE PROPERTY

     

    THIS
      ASSIGNMENT AND ASSUMPTION OF INTANGIBLE PROPERTY (this “Assignment”)
      is
      made and entered into as of the ___day of ______, 2005, by and between
      _____________________________, a ____________________having a mailing address
      at
      c/o CNL Hotels & Resorts, Inc., CNL Center at City Commons, 450 South Orange
      Avenue, Orlando, Florida 32801 (“Assignor”),
      and
      ________________________________, a Delaware limited liability company having
      a
      mailing address at c/o Pyramid/Contrarian Investment LLC, 1071 Camelback Street,
      Suite 111, Newport Beach, California 92660 (“Assignee”).

     

     

    W
      I T
      N E S S E T H:

     

    WHEREAS,
      Assignor and Assignee are parties to that certain Agreement of Purchase and
      Sale
      dated _________ __, 2005 (the “Agreement”),
      pursuant to which Assignor has agreed, among other things, to sell, assign,
      transfer and convey to Assignee the hotel property known as “______________”
      (the “Hotel”);
      and

     

    WHEREAS,
      in connection with the sale and purchase of the Property, Assignor has agreed
      to
      assign to Assignee all of Assignor’s right, title and interest in and to, and
      Assignee has agreed to assume from Assignor all of Assignor’s obligations and
      liabilities under, the Intangible Property with respect to the Hotel (the
“Hotel
      Intangible Property”).
      Unless otherwise defined herein, all capitalized terms used in this Assignment
      shall have the meaning given to such term in the Agreement.

     

    NOW,
      THEREFORE, for good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, and intending to be legally bound, the parties
      agree as follows:

     

    1. Assignment.
      Assignor hereby assigns, transfers, and conveys to Assignee all of Assignor’s
      right, title and interest in and to the Hotel Intangible Property, to the extent
      that such assignments are legally and contractually permitted.

    

    2. Assumption.
      Assignee hereby assumes all of the Assignor’s right, title and interest in and
      to, and all liabilities and obligations of Assignor under the Hotel Intangible
      Property which arise on or after the Transfer Time and agrees to perform all
      obligations of Assignor under the Hotel Intangible Property which are to be
      performed or which become due on or after the Transfer Time.

    

    3. Indemnity
      by Assignee.
      Assignee shall indemnify, defend and hold Assignor harmless from any claim,
      liability, cost or expense (including without limitation reasonable attorneys’
      fees) arising out of any Hotel Intangible Property from and after the Transfer
      Time.

     

    4. Indemnity
      by Assignor.
      Assignor shall indemnify, defend and hold Assignee harmless from any claim,
      liability, cost or expense (including without limitation reasonable attorneys’
      fees) arising out of any Hotel Intangible Property prior to the Transfer
      Time.

    

    

    5. Further
      Assurances.
      Assignor covenants with Assignee and Assignee covenants with Assignor that
      each
      will execute or procure any additional documents necessary to establish the
      rights of the other hereunder.

    

    6. Counterparts.
      This
      Assignment may be executed by the parties in counterparts, in which event the
      signature pages thereof shall be combined in order to constitute a single
      original document.

    

    7. Binding
      Effect.
      This
      Assignment shall be binding upon and inure to the benefit of Assignor, Assignee
      and their respective successors and assigns.

    

    IN
      WITNESS WHEREOF, the parties have executed this Assignment as of the date set
      forth above.

     

    
      	 	
              ASSIGNOR:

            
	 	 
	 	
              a
                

            
	 	 
	 	
              By:
                

            
	 	
              Name:
                

            
	 	
              Title:
                

            
	 	 
	 	 
	 	 
	 	
              ASSIGNEE:

            
	 	 
	 	
              ____________________________________

            
	 	
              a
                ___________________________________

            
	 	 
	 	
              By:
                

            
	 	
              Name:
                

            
	 	
              Title:
                

            
	 	 
	 	 
	 	 
	 	 
	 	 

    

    

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “C”

    

    

    ASSIGNMENT
      AND ASSUMPTION OF MANAGEMENT AGREEMENT

     

    THIS
      ASSIGNMENT
      AND ASSUMPTION OF MANAGEMENT AGREEMENT (this
      “Assignment”)
      is
      made and entered into as of the ___day of ______, 2005, by and among
RFS
      PARTNERSHIP, L.P.,
      a
      Tennessee limited partnership having a mailing address at c/o CNL Hotels &
      Resorts, Inc., CNL Center at City Commons, 450 South Orange Avenue, Orlando,
      Florida 32801 (“Owner”),
      RFS
      LEASING VII, INC., a Tennessee corporation having a mailing address at c/o
      CNL
      Hotels & Resorts, Inc., CNL Center at City Commons, 450 South Orange Avenue,
      Orlando, Florida 32801 (“Tenant”
      and,
      collectively with Owner, “Assignor”),
      and
      [PYRAMID
      HOTEL OPPORTUNITY VENTURE LLC],
      a
      Delaware limited liability company having a mailing address at c/o
      Pyramid/Contrarian Investment LLC, 1071 Camelback Street, Suite 111, Newport
      Beach, California 92660 (“Assignee”),
      and
      consented to by JOIE
      DE VIVRE HOSPITALITY, INC.,
      a
      California corporation having a mailing address at 567 Sutter Street, San
      Francisco, California 94102 (“Manager”).

     

     

    W
      I T
      N E S S E T H:

     

    WHEREAS,
      Owner and Tenant entered into that certain Amended and Restated Master Lease
      Agreement dated January 1, 2001; as amended by that certain Letter Agreement,
      dated January 1, 2001; as amended by that certain Second Amendment to Amended
      and Restated Master Lease Agreement, dated May 1, 2001; as amended by that
      certain Third Amendment to Amended and Restated Master Lease Agreement, dated
      October 1, 2003; as amended by that certain Fourth Amendment to Amended and
      Restated Master Lease Agreement, dated October 10, 2003; as amended by that
      certain Fifth Amendment to Amended and Restated Master Lease Agreement, dated
      December 4, 2003 (collectively, the “Lease”),
      whereby Owner leased to Tenant and Tenant leased from Owner certain real
      property and improvements commonly known as the “Hotel Rex” located in San
      Francisco, California and as more particularly described on Exhibit
      A
      attached
      hereto (the “Hotel”);

     

    WHEREAS,
      the Hotel is managed by Manager pursuant to that certain Management Agreement
      between Assignor and Manager dated as of April 28, 2003 (the “Management
      Agreement”);

     

    WHEREAS,
      concurrently with the execution of this Assignment, Owner shall sell and convey
      to Assignee all of Owner’s right, title and interest in and to the Hotel (the
“Sale
      Transaction”),
      and
      Owner and Tenant shall terminate the Lease, so that upon consummation of such
      Sale Transaction, Owner and Tenant shall have no right, title and interest
      in or
      to the Hotel; and

     

    WHEREAS,
      in connection with the Sale Transaction, (i) Assignor has agreed to assign
      all
      of its rights, privileges, duties and obligations under the Management Agreement
      to Assignee and Assignee has agreed to assume all of Assignor’s rights,
      privileges, duties and obligations thereunder which arise on or after the
      Transfer Time, all of the foregoing pursuant to the terms and provisions of
      this
      Assignment.

     

    NOW,
      THEREFORE, for good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, and intending to be legally bound, the parties
      agree as follows:

     

    1. Assignment.
      Assignor hereby assigns all of its right, title and interest in and to the
      Management Agreement that arise on or after the Transfer Time to
      Assignee.

    

    2. Assumption.
      Assignee hereby assumes all of Assignor’s right, title and interest in and to,
      and all liabilities and obligations of Assignor under, the Management Agreement
      that arise on or after the Transfer Time.

    

    3.
       Indemnity
      by Assignee.
      Assignee shall indemnify, defend and hold Assignor harmless from any claim,
      liability, cost or expense (including, without limitation, reasonable attorneys’
      fees) arising out of the Management Agreement from and after the Transfer
      Time.

    

    4. Indemnity
      by Assignor.
      Assignor shall indemnify, defend and hold Assignee harmless from any claim,
      liability, cost or expense (including, without limitation, reasonable attorneys’
      fees) arising out of the Management Agreement prior to the Transfer
      Time.

    

    [ADD
      INDEMNITY FROM ASSIGNEE IN EVENT MANAGER DOES NOT JOIN IN AN CONSENT TO
      ASSIGNMENT]

    

    3. Further
      Assurances.
      Each of
      Assignor and Assignee agrees that each will execute or procure any additional
      documents necessary to establish the rights of the others
      hereunder.

    

    4. Counterparts.
      This
      Assignment may be executed by the parties in counterparts, in which event the
      signature pages thereof shall be combined in order to constitute a single
      original document.

     

    5. Binding
      Effect.
      This
      Assignment shall be binding upon and inure to the benefit of Assignor and
      Assignee, and their respective successors and assigns.IN
      WITNESS WHEREOF, the parties have executed this Assignment as of the date set
      forth above.

     

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    ASSIGNOR:

    

    RFS
      PARTNERSHIP, L.P.,

    a
      Tennessee limited partnership

    

    By: CNL
      ROSE GP CORP.,

    a
      Delaware corporation,

    its
      General Partner

    

    

    By:
      _______________________

    Name: Marcel
      Verbaas

    Title: Senior
      Vice President

    

    RFS
      LEASING VII, INC.,

    a
      Tennessee corporation

    

    By:
      _______________________

    Name: Marcel
      Verbaas

    Title: Senior
      Vice President

    

    

    

    ASSIGNEE:

    

    PYRAMID
      HOTEL OPPORTUNITY LLC,

    a
      Delaware limited liability company

    

    By:
      _______________________

    Name: 

    Title: 

     

    

    

    

    

     

    

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “D”

    

    ASSIGNMENT
      AND ASSUMPTION OF OPERATING AGREEMENTS

     

    THIS
      ASSIGNMENT AND ASSUMPTION OF OPERATING AGREEMENTS (this “Assignment”)
      is
      made and entered into as of the ___day of ______, 2005, by and between
      _____________________________, a ____________________having a mailing address
      c/o CNL Hotels & Resorts, Inc., CNL Center at City Commons, 450 South Orange
      Avenue, Orlando, Florida 32801 (“Assignor”),
      and
      _______________________, a Delaware limited liability company having a mailing
      address at c/o Pyramid/Contrarian Investment LLC, 1071 Camelback Street, Suite
      111, Newport Beach, California 92660 (“Assignee”).

     

     

    W
      I T
      N E S S E T H:

     

    WHEREAS,
      Assignor and Assignee are parties to that certain Agreement of Purchase and
      Sale
      dated _________ __, 2005 (the “Agreement”),
      pursuant to which Assignor has agreed, among other things, to sell, assign,
      transfer and convey to Assignee the hotel property known as “______________”
      (the “Hotel”);
      and

     

    WHEREAS,
      in connection with the sale and purchase of the Property, Assignor has agreed
      to
      assign to Assignee all of Assignor’s right, title and interest in and to, and
      Assignee has agreed to assume from Assignor all of Assignor’s obligations and
      liabilities under, the Operating Agreements with respect to the Hotel (the
      “Hotel
      Operating Agreements”).
      Unless otherwise defined herein, all capitalized terms used in this Assignment
      shall have the meaning given to such term in the Agreement.

     

    NOW,
      THEREFORE, for good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, and intending to be legally bound, the parties
      agree as follows:

     

    1. Assignment.
      Assignor hereby assigns, transfers, and conveys to Assignee all of Assignor’s
      right, title and interest in and to the Hotel Operating Agreements, to the
      extent that such assignments are legally and contractually
      permitted.

    

    2. Assumption.
      Assignee hereby assumes all of Assignor’s right, title and interest in and to,
      and all liabilities and obligations of Assignor under the Hotel Operating
      Agreements which arise on or after the Transfer Time and agrees to perform
      all
      obligations of Assignor under the Hotel Operating Agreements which are to be
      performed or which become due on or after the Transfer Time.

    

    3. Indemnity
      by Assignee.
      Assignee shall indemnify, defend and hold Assignor harmless from any claim,
      liability, cost or expense (including without limitation reasonable attorneys’
      fees) arising out of any Hotel Operating Agreement from and after the Transfer
      Time.

    

    4. Indemnity
      by Assignor.
      Assignor shall indemnify, defend and hold Assignee harmless from any claim,
      liability, cost or expense (including without limitation reasonable attorneys’
      fees and costs) arising out of any Hotel Operating Agreement for the period
      prior to the Transfer Time.

    

    5. Further
      Assurances.
      Assignor covenants with Assignee and Assignee covenants with Assignor that
      each
      will execute or procure any additional documents necessary to establish the
      rights of the other hereunder.

    

    6. Counterparts.
      This
      Assignment may be executed by the parties in counterparts, in which event the
      signature pages thereof shall be combined in order to constitute a single
      original document.

    

    7. Binding
      Effect.
      This
      Assignment shall be binding upon and inure to the benefit of Assignor, Assignee
      and their respective successors and assigns.

    

    IN
      WITNESS WHEREOF, the parties have executed this Assignment as of the date set
      forth above.

     

    
      	 	
              ASSIGNOR:

            
	 	 
	 	
              a
                

            
	 	 
	 	
              By:
                

            
	 	
              Name:
                

            
	 	
              Title:
                

            
	 	 
	 	 
	 	 
	 	 
	 	 
	 	
              ASSIGNEE:

            
	 	 
	 	 
	 	 
	 	
              a
                

            
	 	 
	 	
              By:
                

            
	 	
              Name:
                

            
	 	
              Title:
                

            
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 

    

    

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “E”

    

    Schedule
      of Franchise Agreements and Franchise Guaranty
      Agreements

    

    1. Beverly
      Heritage:
      none

     

    2. Hotel
      Rex:
      none

     

    3. Holiday
      Inn Columbia:

     

    (a) Holiday
      Inn Change of Ownership License Agreement, dated January 31, 2004, by and
      between RFS Leasing VII, Inc. and Holiday Hospitality Franchising,
      Inc.

     

    (b) Guaranty
      Agreement attached to License Agreement executed by RFS Partnership,
      L.P.

     

    (c) Master
      Technology Agreement, dated January 31, 2004, by and between Six Continents
      Hotels, Inc. and RFS Leasing, VII, Inc. 

     

    4. Doubletree
      Del Mar:

     

    (a) Franchise
      License Agreement, dated October 10, 2003, by and between Doubletree Hotel
      Systems, Inc. and CNL Rose SPE Tenant Corp. 

     

    (b) Guarantee
      of Franchise License Agreement, dated October 10, 2003, executed by RFS
      Partnership, L.P.

     

    5. San
      Francisco Wharf:

     

    (a) License
      Agreement, Supplemental Agreement and License Fee Rider, each dated April 20,
      1999, between Hilton Inns, Inc. and Embarcadero Hospitality
      Corporation.

     

    (b) Assignment
      and Assumption of and Amendment to License Agreement, dated December __, 2000,
      between Embarcadero Hospitality Corporation and RFS Leasing VII, Inc.

     

    (c) Amendment
      to License Agreement, dated July 10, 2003, between Embarcadero Hospitality
      Corporation and RFS Leasing VII, Inc.

     

    (d) License
      Agreement, dated March 10, 2000, between Hilton Hotels Corporation, as licensor,
      and Hilton San Francisco Fisherman’s Wharf, as licensee, with respect to the
      licensing of certain programs.

     

    (e) Guarantee
      of License Agreement, dated April 20, 1999, executed by Wharf
      Associates.

     

    (f) Guarantee
      of Franchise License Agreement executed by RFS Leasing VII, Inc. (undated)
      in
      connection with Franchise License Agreement.

     

    

     

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “F”

    

    LIMITED
      WARRANTY BILL OF SALE

     

    THIS
      LIMITED WARRANTY BILL OF SALE
      (the
“Bill
      of Sale”)
      is
      made and entered into as of the __ day of ____________, 2005, by and between
      ___________________________, a __________________ (“Seller”)
      and
______________________________,
      a
      ____________________ (“Buyer”).

     

    W
      I T
      N E S S E T H:

     

    WHEREAS,
      Seller and Buyer are parties to that certain Agreement of Purchase and Sale
      dated _________ __, 2005 (the “Agreement”),
      pursuant to which Seller has agreed, among other things, to sell, assign,
      transfer and convey to Buyer the portion of the Property (as defined in the
      Agreement) attributable to the hotel property known as the “Fisherman’s Wharf”
      located in San Francisco, California (the “Subject
      Property”);
      and

     

    WHEREAS,
      in connection with the sale and purchase of the Subject Property, Seller has
      agreed to sell, transfer and convey to Buyer all of Seller’s right, title and
      interest in and to the Personal Property with respect to the Subject Property
      (the “Subject
      Personal Property”).
      Unless otherwise defined herein, all capitalized terms used in this Assignment
      shall have the meaning given to such term in the Agreement.

     

    NOW,
      THEREFORE, in consideration of the foregoing and Ten Dollars ($10.00) and other
      good and valuable consideration in hand paid by Buyer to Seller, the receipt
      and
      sufficiency of which are hereby acknowledged, Seller and Buyer do hereby agree
      as follows:

     

    1. Seller
      does hereby sell, transfer and convey to Buyer the Subject Personal Property
      and
      Buyer hereby purchases and accepts all of the Subject Personal
      Property.

     

    2. EXCEPT
      AS
      OTHERWISE PROVIDED IN THIS PARAGRAPH 2 BELOW, ALL OF THE SUBJECT PERSONAL
      PROPERTY IS HEREBY SOLD, TRANSFERRED AND CONVEYED TO BUYER ON AN “AS IS”, “WHERE
      IS”, “WITHOUT ALL FAULTS” BASIS, WITHOUT RECOURSE, REPRESENTATION, IMPLIED OR
      EXPRESS WARRANTY, GUARANTY, PROMISE, PROJECTION OR PREDICTION WHATSOEVER WITH
      RESPECT TO THE SUBJECT PERSONAL PROPERTY, WHETHER WRITTEN OR ORAL, EXPRESS
      OR
      IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING WITHOUT LIMITATION ANY
      WARRANTY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Notwithstanding
      the foregoing to the contrary, Seller does hereby warrant to Buyer that the
      Subject Personal Property is owned by Seller free and clear of all encumbrances
      of whatsoever nature; EXCEPTING ONLY the liens or mortgages assumed or entered
      into by Buyer, if any, and any personal property sales tax or other tax arising
      from the transactions contemplated by the Agreement.

     

    3. This
      Bill
      of Sale may be executed in any number of counterparts, all of which taken
      together shall constitute one and the same instruments and any of the parties
      hereto may execute this Bill of Sale by signing any such
      counterpart.

     

    IN
      WITNESS WHEREOF, the undersigned has executed this Bill of Sale as of the date
      first above written.

     

    
      	 	
               

              SELLER:

            
	 	 
	 	
              a
                

            
	 	 
	 	 
	 	
              By:
                

            
	 	
              Name:
                

            
	 	
              Title:
                

            
	 	 
	 	 
	 	 
	 	 
	 	 
	 	
              BUYER:

            
	 	 
	 	
              a
                

            
	 	 
	 	 
	 	
              By:
                

            
	 	
              Name:
                

            
	 	
              Title:
                

            
	 	 
	 	 
	 	 
	 	 

    

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “G”

    

    Schedule
      of Management Agreements

    

    1. Beverly
      Heritage:
      Management Agreement, dated January 31, 2004, by and  between
      RFS Leasing VII, Inc. and Interstate Management Company, L.L.C.

     

    2. Hotel
      Rex:
      Management Agreement, dated April 28, 2003, by and between RFS  Partnership,
      L.P., RFS Leasing VII, Inc., and Joie De Vivre Hospitality, Inc.

     

    3. Holiday
      Inn Columbia:
      Management Agreement, dated October 1, 2003, by and  between
      RFS Leasing VII, Inc. and Interstate Management Company, L.L.C.; and 

    First
      Amendment to Management Agreement, dated January 31, 2004, by and  between
      RFS  Leasing
      VII, Inc. and Interstate Management Company, L.L.C.

     

    4. Doubletree
      Del Mar:
      Management Agreement, dated October 1, 2003, by and  between
      CNL Rose SPE Tenant Corp. and DT Management, Inc.

     

    5. San
      Francisco Wharf:
      Management Agreement, dated November 17, 2003 by and  between
      RFS Leasing VII, Inc. and Hilton Hotels Corporation.

     

    

     

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “H”

    

    Schedule
      of Operating Agreements

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “I”

    

    Schedule
      of Operating Leases 

    

    

    1
&
      2. Beverly
      Heritage
      and
Holiday
      Inn SC:
      Amended
      and Restated Master Lease  Agreement,
      dated October 13, 2004, between RFS Partnership, L.P. and RFS  Leasing
      VII, Inc., as amended by (i) Partial Termination of and Amendment to
 Amended
      and Restated Master Lease Agreement dated as of March 10, 2005. 

     

    
      	
              3.

            	
              Hotel
                Rex:
                Amended and Restated Master Lease Agreement, dated January 1, 2001,
                between RFS Partnership, L.P., as lessor, and RFS Leasing VII, Inc.,
                as
                lessee (as amended by that certain Letter Agreement, dated January
                1,
                2001; as amended by that certain Second Amendment to Amended and
                Restated
                Master Lease Agreement, dated May 1, 2001; as amended by that certain
                Third Amendment to Amended and Restated Master Lease Agreement, dated
                October 1, 2003; as amended by that certain Fourth Amendment to Amended
                and Restated Master Lease Agreement, dated October 10, 2003; as amended
                by
                that certain Fifth Amendment to Amended and Restated Master Lease
                Agreement, dated December 4, 2003).

            

    

     

    4. DoubleTree
      Del Mar:
      Consolidated, Amended and Restated Master Lease  Agreement,
      dated December 4, 2003, between Rose SPE 1, LP and CNL Rose SPE  Tenant
      Corp.

     

    

    5. SF
      Wharf:
      Amended
      and Restated Master Lease Agreement, dated January 1,2001, between Wharf
      Associates and RFS Leasing VII, Inc., as amended by Letter Agreement, dated
      January 1, 2001, and as further amended by a Second Amendment
      to Amended and Restated Master Lease Agreement dated July 10, 2003.

     

    

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “J”

    

    Purchase
      Price Allocation Schedule

    

    1. Hotel
      Rex: $14,000,000

    

    2. Fisherman's
      Wharf: $35,000,000
      

    

    3. Beverly
      Heritage:  $17,250,000

    

    4. Doubletree
      Del Mar  $34,500,000

    

    5. Columbia: 
      $8,250,000

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “K”

    

    Schedule
      of Sellers

    

    

    

    Brand  Property
      Name  City,
      State  Seller    

    

    --  Beverly
      Heritage  Milpitas
      CA  RFS
      Partnership, L.P.

    

    --  Hotel
      Rex-San Francisco San
      Francisco CA RFS
      Partnership, L.P.

    

    HOL  Columbia
      Coliseum  Columbia
      SC  RFS
      Partnership, L.P.

    

    DT  Doubletree
      Del Mar  San
      Diego
      CA  Rose
      SPE
      1, LP

    

    HH  Fisherman’s
      Wharf  San
      Francisco CA Wharf
      Associates

    

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “L”

    

    Litigation
      Schedule 

    

    

    

    
      	
              CLAIMANT

            	
              OWNER/DEFENDANT

            	
              DESCRIPTION

              OF
                CLAIM

            	
              AMOUNT
                OF CLAIM

            	
              INSURANCE

            	
              LITIGATION

            
	
              Carmel
                Valley, LLC

            	
              RFS
                Partnership, LP/RFS Hotel Investors

               

              current
                owner: Rose SPE 1, LP

               

              Doubletree
                Hotel

              San
                Diego / Del Mar

              San
                Diego, CA

            	
              Breach
                of lot transfer agreement

            	
              Unspecified

            	
              No

            	
              Yes

            
	
              Minarovich,
                R

            	
               

              current
                owner: Rose SPE 1, LP

               

              Doubletree
                Hotel 

              San
                Diego/Del Mar

              San
                Diego, CA

            	
              Personal
                injury 

            	
              Unspecified
                

            	
              Yes

            	
              No

            
	
              Re:
                Hilton
                Fisherman’s Wharf

              Outside
                of a possible EEOC charge filed by the previous Sales Administrator
                for
                discrimination (property was told that the information was filed,
                but it
                would be sent to the proper State/Federal Office for review and
                determination as to whether it would go any further), and the two
                grievances the property has with the Servers that were let go due
                to
                theft, there are no further legal matters.

            	 	 	 	
              NONE

            
	
              NONE

            	
              re:
                Holiday Inn Columbia

            	 	 	 	
              NONE

            
	
              NONE

            	
              re:
                Hotel Rex

            	 	 	 	
              NONE

            
	
              NONE

            	
              re:
                Beverly Heritage

            	 	 	 	
              NONE

            

    

    

     

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “M”

    

    Title
      and Survey Defects

    

    

    

    [NOTE:
      ITEM
      NOS. CORRESPOND TO ITEM NOS. IN

     

    SCHEDULE
      B, SECTION 2 OF THE RESPECTIVE TITLE COMMITMENTS]

     

    SAN
      DIEGO, CA

     

     

    
      	12.  	
              Sellers
                shall provide an estoppel certificate from the appropriate third
                party
                under that certain Covenants, Conditions, Restrictions and Easements
                recorded September 29, 1994 as instrument no. 1994-0579026 of Official
                Records, which such third-party is required to provide pursuant to
                the
                terms thereof. Such certificate will be in the form and content required
                under such instrument. Sellers shall use good faith efforts to obtain
                an
                estoppel certificate from such party with respect to other matters
                reasonably requested by Buyer. Seller will also give notice of sale
                to the
                appropriate third party as required under such
                instrument.

            

    

     

    

     

    
      	13.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, all of the following:

            

    

     

     

    An
      unrecorded lease dated November 21, 1996, executed by RFS Financing Partnership,
      L.P. as lessor and RFS Leasing, Inc. as lessee, as disclosed by a Memorandum
      of
      Lease recorded November 21, 1996 as instrument no. 1996-0591903 of Official
      Records. 

     

     

    An
      Amendment to said Lease was recorded November 16, 1999 as instrument no.
      1999-0760459 of Official Records.

     

     

    A
      document entitled "Assignment of Lease Agreement and Assumption Agreement,
      in
      favor of RFS Leasing II, Inc., a Tennessee corporation, recorded January 23,
      2001 as instrument no. 2001-0039012 of Official Records.

     

     

    
      	13.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, all of the following:

            

    

     

     

    A
      Deed of
      Trust to secure an original indebtedness of $(Not shown) recorded July
      17,
      2003 as instrument no. 2003-0851943 of Official
      Records.

     

     

    
      	
              Dated:

            	
              July
                10, 2003

            
	
              Trustor:

            	
              RFS
                Partnership, L.P. and RFS Financing Partnership, L.P.

            
	
              Trustee:

            	
              PRLAP,
                Inc.

            
	
               

              Beneficiary:

               

            	
              Mortgage
                Electronic Registration Systems,
                Inc.

            

    

     

     

    A
      document recorded February 12, 2004 as instrument no. 2004-0113344 of Official
      Records provides that the deed of trust or the obligation secured thereby has
      been modified. 

     

     

    
      	14.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, all of the following:

            

    

     

     

    

     

     

    A
      financing statement recorded July 17, 2003 as
      instrument no. 2003-0851944 of Official Records.

     

     

    
      	
              Debtor:

            	
              RFS
                Financing Partnership, L.P.

            
	
              Secured
                party: 

            	
              Mortgage
                Electronic Registration Systems,
                Inc.

            

    

     

     

    An
      amendment to the financing statement was recorded February 12, 2004 as
      instrument no. 2004-0113345 of Official Records. 

     

     

    
      	15.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, a financing statement recorded February 12, 2004 as
                instrument no. 2004-0113346 of Official
                Records.

            

    

     

     

    
      	
              Debtor:

            	
              Rose
                SPE I, LP

            
	
              Secured
                party: 

            	
              Mortgage
                Electronic Registration Systems,
                Inc.

            

    

     

     

    
      	16.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, a financing statement recorded February 12, 2004 as
                instrument no. 2004-0113347 of Official
                Records.

            

    

     

     

    
      	
              Debtor:

            	
              CNL
                Rose SPE Tenant Corp.

            
	
              Secured
                party: 

            	
              Mortgage
                Electronic Registration Systems,
                Inc.

            

    

    

     

    SAN
      FRANCISCO -- HOTEL REX

     

     

    
      	2.  	
              Supplemental
                taxes for the fiscal year 2000-2001 assessed pursuant
                to Chapter
                3.5 commencing with Section 75 of the California Revenue and Taxation
                Code. Sellers to pay outstanding
                assessments.

            

    

     

     

     

     

    
      	
              First
                Installment: 

            	
              $14,417.74,
                PAID

            
	
              Penalty:

            	
              $1,441.77

            
	
              Second
                Installment: 

            	
              $14,417.74,
                DELINQUENT

            
	
              Penalty:

            	
              $1,451.77

            
	
              Tax
                Rate Area: 

            	
              01-000

            
	
              Lot:

            	
              010

            
	
              Block:
                

            	
              0284

            

    

    

     

     

    
      	7.  	
              The
                terms and provisions contained in the document entitled "Notice-Seismic
                Building Hazard (Health & Safety Code 17980.1; Government Code Section
                8875.2)" recorded January 5, 1995 as Instrument No.
                F-738564 in
                Book G291, Page 625 of Official Records.  Seller shall provide
                evidence that the required seismic strengthening has occurred and
                remove
                this notice of record or provide documentation sufficient for the
                title
                company to remove this exception.

            

    

     

     

    
      	8.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, a deed of trust to secure the performance of an agreement
                or
                other obligation, recorded December
                28, 2000 as Instrument
                No. 2000-G883343-00 in Book H791, Page 159 of Official
                Records.

            

    

     

     

     

     

    
      	
              Dated:

            	
              August
                1, 2000

            
	
              Trustor:

            	
              Ridgelake
                General Partner, Inc., a Tennessee corporation

            
	
              Trustee:

            	
              Commonwealth
                Land Title Company

            
	
              Beneficiary:

            	
              Bank
                of America, N.A., a national banking
                association

            

    

     

     

    A
      document recorded August 16, 2001 as Document No. 2001-G998316-00 in Book H953,
      Page 401 of Official Records provides that the Deed of Trust or the obligation
      secured thereby has been modified.

     

     

    
      	9.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, a document entitled "Assignment of Leases, Rents and
                Profits" recorded February 18, 2001 as
                Instrument No. 2001-G904531-00 in Book H827, Page 508 of Official
                Records,
                as additional security for the payment of the indebtedness secured
                by the
                deed of trust recorded December 28, 2000 as
                Instrument No. 2000-883343-00 in Book H791, Page 159 of Official
                Records. 

            

    

     

     

    
      	11.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, a Deed of Trust to secure an original indebtedness
                of
                $353,475,000.00 recorded November 8, 2004 as Instrument
                No.
                2004-H846981-00 in Reel I760, Image 0047 of Official
                Records.

            

    

     

     

    
      	
              Dated:

            	
              October
                13, 2004

            
	
              Trustor:

            	
              RFS
                Partnership, L.P.

            
	
              Trustee:

            	
              Lawyers
                Title Company, a California corporation

            
	
               

              Beneficiary:

               

            	
              Deutsche
                Bank Trust Company Americas, as administrative
                agent

            

    

     

     

    
      	12.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, a document entitled "Subordination, Attornment, Security
                Agreement and Assignments of Leases and Rents" recorded November
                8,
                2004 as
                Instrument No. 2004-H846982-00 in Reel I760, Image 0048 of Official
                Records, as additional security for the payment of the indebtedness
                secured by the deed of trust recorded November 8, 2004 as
                Instrument No. 2004-H846981-00 in Reel I760, Image 0047 of Official
                Records. 

            

    

     

    SAN
      FRANCISCO -- FISHERMAN’S WHARF

     

     

    
      	4.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, the following:

            

    

     

     

    

     

     

    A
      Deed of
      Trust to secure an original indebtedness of $19,300,000.00 recorded October
      28, 1997 as Instrument No. 97-G251290-00 in Book G997, Page
      383 of Official Records.

     

     

    
      	
              Dated:

            	
              October
                23, 1997

            
	
              Trustor:

            	
              Wharf
                Associates, a General Partnership

            
	
              Trustee:

            	
              Old
                Republic Title Company

            
	
               

              Beneficiary:

               

            	
              Citicorp
                USA, Inc., a Corporation

            

    

     

     

    According
      to the public records, the beneficial interest under the deed of trust has
      been
      assigned to LaSalle National Bank/ABN AMRO Bank, N.V. (as Trustee for the
      registered holders of Mortgage Capital Funding, Inc., Multifamily/Commercial
      Mortgage Pass-Through Certificates, Series No. 1997-MC2) by various
      assignments. 

     

     

    A
      document entitled "Assignment of Leases and Rents" recorded October 28,
      1997 as
      Instrument No. 97-G251291-00 in Book G997, Page 384 of Official Records, as
      additional security for the payment of the indebtedness secured by the deed
      of
      trust.   

     

     

    By
      mesne
      assignments of record (last
      recorded Assignment: December 3, 1997, Instrument No. 97-G267668-00 in Book
      H21,
      Page 546), the interest under said assignment was assigned to:

     

     

    

     

     

    Assignee:
      LaSalle National Bank/ABN AMRO Bank, N.V. (as Trustee for the registered holders
      of Mortgage Capital Funding, Inc., Multifamily/Commercial Mortgage Pass-Through
      Certificates, Series No. 1997-MC21, its successors and assigns.

     

     

    

     

     

    A
      "Subordination and Non-Disturbance Notice" recorded October 28, 1997
      as Instrument No. 97-G251318-00 in Book G997, Page 403 of Official
      Records.

     

     

    A
      "Subordination and Non-Disturbance Notice" recorded October 28, 1997
      as Instrument No. 97-G251311-00 in Book G997, Page 404 of Official
      Records.

     

     

    
      	5.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, a financing statement recorded October 28, 1997 as
                Instrument No. 97-G251292-00 in Book G997, Page 385 of Official
                Records.

            

    

     

     

    
      	
              Debtor:

            	
              Wharf
                Associates

            
	
              Secured
                party: 

            	
              Citicorp
                USA, Inc.

            

    

     

     

    The
      secured party's interest under the foregoing Financing Statement has since
      passed to LaSalle National Bank, as Trustee by mesne assignments of record,
      the
      last of which was recorded December 1, 1997 as Instrument No. 97-G266179-00
      in
      Book H019, Page 208 of Official Records. 

     

     

    

     

     

    A
      Continuation Statement was recorded November 6, 2002 as Instrument No.
      2002-H285527-00 i Book I259, Page 574 of Official Records.

     

     

    
      	6.  	
              Sellers
                shall provide copy of an unrecorded lease dated (not set forth),
                executed
                by Wharf Associates, a California General Partnership as lessor and
                Grosvenor Bus Lines, Inc. as lessee, as disclosed by a Subordination
                and
                Non-Disturbance Notice recorded October 28, 1997 as Instrument No.
                97-G251310-00 in Book G997, Page 403 of Official Records.
                

            

    

     

     

    
      	7.  	
              Sellers
                shall provide copy of an unrecorded lease dated (not set forth),
                executed
                by Wharf Associates, a California General Partnership as lessor and
                California Parking Company as lessee, as disclosed by a Subordination
                and
                Non-Disturbance Notice recorded October 28, 1997 as Instrument No.
                97-G251311-00 in Book G997, Page 404 of Official Records.
                

            

    

     

     

    
      	9.  	
              Sellers
                shall discharge, or otherwise cause Title Company to remove as an
                exception, a financing statement recorded December 20, 2002 as
                Instrument No. 2002-H318612-00 in Book I288, Page 1388 of Official
                Records.

            

    

     

     

    
      	
              Debtor:

            	
              Wharf
                Associates

            
	
              Secured
                party: 

            	
              LaSalle
                Bank, NA, as Trustee

            

    

    

     

    MILPITAS,
      CA

     

     

    
      	9.  	
              Sellers
                shall provide a certificate of compliance from the appropriate third
                party
                under that certain Declaration of Covenants, Conditions, Restrictions
                and
                Easements recorded June 5, 1979 as Book E545, Page
                189 of
                Official Records, and document(s) declaring modifications thereof
                recorded
                June 15, 1979 as Book E571, Page 359 of Official Records, which such
                third-party is required to provide pursuant to the terms thereof.
                Such
                certificate will be in the form and content required under such
                instrument. Sellers shall use good faith efforts to obtain an estoppel
                certificate from such party with respect to other matters reasonably
                requested by Buyer.

            

    

     

    
      	13.  	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, the following:

            

    

     

     

    

     

     

    A
      Deed of
      Trust to secure an original indebtedness of $353,475,000.00
      recorded November 03, 2004 as Document No. 18078361 of
      Official Records.

     

     

    
      	
              Dated:

            	
              October
                13, 2004

            
	
              Trustor:

            	
              RFS
                Financing Partnership, L.P., a Tennessee limited
                partnership

            
	
              Trustee:

            	
              Lawyers
                Title Company, a California corporation

            
	
               

              Beneficiary:

               

            	
              Deutsche
                Bank Trust Company Americas, as Administrative
                Agent

            

    

     

     

    A
      "Subordination, Attornment, Security Agreement, and Assignment of Leases and
      Rents" recorded November 03, 2004 as Document No. 18078362 of
      Official
      Records.

     

    COLUMBIA,
      SC

     

    
      	 	
              7.

            	
              Sellers
                shall satisfy and release, or otherwise cause Title Company to remove
                as
                an exception, a Mortgage from RFS Partnership, L.P. to Deutsche Bank
                Trust
                Company Americas dated 10/13/2004, recorded 11/15/2004, in the Office
                of
                the Register of Deeds for Richland County in Record Book 996, Page
                3903 in
                the amount of $353,475.000.00.

            

    

     

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    UCC
      FILINGS GENERALLY

     

    

     

    
      	
              Debtor

               

            	
              Secured
                Party

               

            	
              Jurisdiction

               

            	
              File
                Date/No.

               

            	
              Description
                of Collateral

               

            	
              Comments

               

            
	
               

              TENNESSEE
                DEPT. OF STATE

               

            
	
              RFS
                Partnership, L.P.

            	
              Deutsche
                Bank Trust Company Americas as Administrative Agent 

            	
              Tennessee
                SOS

            	
              11/05/04

              #104060757

            	
              Fixture
                filing: Real property located in:

              Alabama

              Milpitas,
                CA

              Sutter
                St., San Francisco, CA

              Denver,
                CO

              Coral
                Gables, FL

              Orlando,
                FL

              W.
                Palm Beach, FL

              Lafayette,
                LA

              Billerica,
                MA

              Bloomington,
                MN

              Columbia,
                SC

            	
              Seller
                shall file termination or amendment to remove property in Milpitas
                and San
                Francisco, CA and in Columbia, SC.

            
	
              RFS
                Financing Partnership, L.P.

            	
              Mortgage
                Electronic Registration Systems, Inc.

            	
              Tennessee
                SOS

            	
              8/27/2002

              #103034412

            	
              Fixture
                filing: Real property located in:

              Orlando,
                FL

              Sacramento,
                CA

              San
                Diego, CA

              Lakewood,
                CO

              Marietta,
                GA

              Crystal
                Lake, IL

              Ann
                Arbor, MI

              Hattiesburg,
                MS

              Charlotte,
                NC

              Omaha,
                NE

              Oklahoma
                City, OK

              Warwick,
                RI

              Austin,
                TX

              Ft.
                Worth, TX

            	
              Seller
                shall file termination or amendment to remove property in San Diego,
                CA.

            
	
              RFS
                Leasing VII, Inc.

            	
              Deutsche
                Bank Trust Company Americas, as Administrative Agent

            	
              Tennessee

            	
              11/05/04

              #104060758

            	
              Fixture
                Filing: May affect the Land, subject to review of legal description,
                if
                any.

            	
              If
                property description includes any of the Land, Seller shall file
                termination or amendment to remove any such Land.

            
	
              Rose
                SPE 1, LP

            	
              Mortgage
                Electronic Registration Systems, Inc.

            	
              Tennessee

            	
              04/12/04,
                #304024983

            	
              Debtor’s
                name changed to Rose SPE 1, LP by Amendment 

            	
              See
                #103034412 @ RSF Financing Partnership LP, above.

            
	
               

              DELAWARE
                SECRETARY OF STATE

               

            
	
              Rose
                SPE I, LP

            	
              Mortgage
                Electronic Registration Systems, Inc.

            	
              Delaware

            	
              04/07/04

              #4113309
                1

            	
              To
                continue TN SOS filings #10334412 (see RFS Financing Partnership,
                LP,
                above), and #203037551.

            	
              Seller
                shall file termination or amendment to remove property in San Diego,
                CA.

            
	
              Rose
                SPE I, LP

            	
              Mortgage
                Electronic Registration Systems, Inc.

            	
              Delaware

            	
              04/07/04

              #4113312
                5

            	
              Fixture
                filing. Real property located in:

              Chandler,
                AZ

              Sedona,
                AZ

              Sacramento,
                CA

              San
                Diego, CA

              Lakewood,
                CO

              New
                Castle, DE

              Ft.
                Lauderdale, FL

              Miami,
                FL

              Miami
                Lakes, FL

              Orlando,
                FL

              Crystal
                Lake, IL

              Louisville,
                KY

              Ann
                Arbor, MI

              Flint,
                MI

              Minnetonka,
                MN

              Hattiesburg,
                MS

              Lincoln,
                NE

              Fishkill,
                NY

              Oklahoma
                City, OK

              Tulsa,
                OK

              Warwick,
                RI

              Ft.
                Worth, TX

              Laredo,
                TX

              Tyler,
                TX

            	
              Seller
                shall file termination or amendment to remove property in San Diego,
                CA.

            

    

    

    
      
        
          6

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    
      	
              Debtor

               

            	
              Secured
                Party

               

            	
              Jurisdiction

               

            	
              File
                Date/No.

               

            	
              Description
                of Collateral

               

            	
              Comments

               

            
	
              CNL
                Rose SPE Tenant Corp.

            	
              Mortgage
                Electronic Registration Systems, Inc.

            	
              Delaware

            	
              04/07/04

              #4113318
                2

            	
              Fixture
                file. Real property located in:

              Chandler,
                AZ

              Sedona,
                AZ

              Sacramento,
                CA

              San
                Diego, CA

              Lakewood,
                CO

              New
                Castle, DE

              Ft.
                Lauderdale, FL

              Orlando,
                FL

              Crystal
                Lake, IL

              Louisville,
                KY

              Ann
                Arbor, MI

              Flint,
                MI

              Minnetonka,
                MN

              Hattiesburg,
                MS

              Lincoln,
                NE

              Fishkill,
                NY

              Oklahoma
                City, OK

              Tulsa,
                OK

              Warwick,
                RI

              Ft.
                Worth, TX

              Laredo,
                TX

              Tyler,
                TX

            	
              Seller
                shall file termination or amendment to remove property in San Diego,
                CA.

            
	
              Rose
                SPE I, LP

            	
              Mortgage
                Electronic Registration Systems, Inc.

            	
              Delaware

            	
              6/22/05

              #51923235

            	
              To
                continue effectiveness of TN original filing #203-037550 (see also
                DE
                filing #4113309-1 referenced herein), and TN original filing #103-034412
                (see also TN filing #304024983, also referenced herein)

            	
              Seller
                shall file termination or amendment to remove property in San Diego,
                CA.

            

    

    

    
      
        
           

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    
      	
              Debtor

               

            	
              Secured
                Party

               

            	
              Jurisdiction

               

            	
              File
                Date/No.

               

            	
              Description
                of Collateral

               

            	
              Comments

               

            
	
              Rose
                SPE I, LP

            	
              Mortgage
                Electronic Registration Systems, Inc.

            	
              Delaware

            	
              6/22/05

              #51923243

            	
              Fixture
                file. Real property located in:

              Chandler,
                AZ

              Sedona,
                AZ

              Sacramento,
                CA

              San
                Diego, CA

              Lakewood,
                CO

              New
                Castle, DE

              Ft.
                Lauderdale, FL

              Orlando,
                FL

              Crystal
                Lake, IL

              Louisville,
                KY

              Ann
                Arbor, MI

              Flint,
                MI

              Minnetonka,
                MN

              Hattiesburg,
                MS

              Lincoln,
                NE

              Fishkill,
                NY

              Oklahoma
                City, OK

              Tulsa,
                OK

              Warwick,
                RI

              Ft.
                Worth, TX

              Laredo,
                TX

              Tyler,
                TX

            	
              Seller
                shall file termination or amendment to remove property in San Diego,
                CA.

            
	
               

              CALIFORNIA
                SECRETARY OF STATE

               

            
	
              RSF
                Leasing VII, Inc.

            	
              Safemark
                Systems, L.P.

            	
              California

            	
              06/24/02

              #0217660449

            	
              235
                Safes with Pedestals (Leased)

            	
              Termination
                or assignment should be filed.

            

    

    

    

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      “N”

    

    Schedule
      of Operating Agreements to be Terminated by Sellers

    

    

    NONE

    

    
      
        
          2

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      “O”

    

    ENVIRONMENTAL
      REPORTS

    

    

     

    
      	
              Property

            	
              Report

            	
              Date

            	
              Firm

            
	
              Beverly
                Heritage

            	 	 	 
	 	
              ESA
                Phase I

            	
              8/1/2003

            	
              Professional
                Service Industries, Inc

            
	 	 	 	 
	
              Doubletree
                Del Mar

            	 	 	 
	 	
              ESA
                Phase I

            	
              6/20/2003

            	
              Professional
                Service Industries, Inc

            
	 	 	 	 
	
              Hilton
                Fisherman's Wharf

            	 	 	 
	 	
              ESA
                Phase I

            	
              6/20/2003

            	
              Professional
                Service Industries, Inc

            
	 	 	 	 
	
              Holiday
                Inn Columbia

            	 	 	 
	 	
              ESA
                Phase I

            	
              8/1/2003

            	
              Professional
                Service Industries, Inc

            
	 	 	 	 
	
              Hotel
                Rex

            	 	 	 
	 	
              ESA
                Phase I

            	
              8/1/2003

            	
              Professional
                Service Industries, IncExhibit 10.1

 

This TRANSACTION AGREEMENT is made as of August
4, 2005, among GAIAM, INC., a Colorado corporation (“Gaiam”)
and REVOLUTION LIVING LLC, a
Delaware limited liability company (“Revolution Living”) and LIFE BALANCE MEDIA HOLDINGS LLC, a Delaware
limited liability company (“Wisdom”).

 

WHEREAS, Gaiam desires to issue and sell to
Revolution Living, and Revolution Living desires to purchase from Gaiam, shares
of Gaiam’s Class A common stock, par value $0.0001 per share (“Class A
Common Stock”), in such amounts, on such dates and otherwise on the terms
and subject to the conditions set forth in this Agreement;

 

WHEREAS, Wisdom desires to issue and sell to Gaiam,
and Gaiam desires to purchase from Wisdom, units of a newly created class of
series A preferred interests (the “Wisdom Preferred Units”) of Wisdom,
in such amounts, on such dates and otherwise on the terms and subject to the
conditions set forth this Agreement and in the Wisdom LLC Agreement (as defined
below);

 

WHEREAS, Gaiam, Jirka Rysavy (“Rysavy”),
Revolution Living and Stephen M. Case (“Case”) are entering into a
Shareholders Agreement dated as of the date of this Agreement pursuant to
which, among other things, such persons are agreeing to certain matters related
to the transactions contemplated by this Agreement and the operation of Gaiam
and Wisdom; and

 

WHEREAS, Gaiam and Wisdom desire to enter into a
Cooperation Agreement (as defined below) for the mutual benefit of Gaiam and
Wisdom, on the terms and subject to the conditions set forth in the Cooperation
Agreement.

 

NOW,
THEREFORE, in
consideration of the foregoing and the covenants, agreements, representations
and warranties contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, the parties hereto hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1                               Definitions.

 

Capitalized terms used and
not otherwise defined in this Agreement have the meaning ascribed to them below
or in the other locations of this Agreement specified below:

 

“Affiliate” means,
with respect to any specified Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such specified Person.  Any relative or spouse (including any partner
with whom such person resides on a permanent basis) of the specified Person,
any relative of such spouse, any spouse of any such relative or any other
Person who, directly or indirectly, is under common ownership or control with,
or is owned or controlled by such spouse or relative shall be considered an
Affiliate of such Person.  As used in
this definition, the term “control” means the possession, directly or
indirectly, of the power to direct the management and

 

S-1

 

policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.  As
used in this definition, the term “relative” means any former or current
spouse, parent, grandparent, great-grandparent, great-great-grandparent, child,
grandchild, great-grandchild, great-great-grandchild, sibling, first uncle,
first aunt or first cousin (in each case, whether natural or adoptive).  The parties agree that the term “Affiliate”
as used with respect to Case and Revolution Living does not include (i) Time
Warner Inc., (ii) any Affiliates of Time Warner Inc. or (iii) any member or
investor in any Affiliate of Revolution Living; provided that, absent such
relationship as a member or investor in any Affiliates of Revolution Living,
such member or investor is not an Affiliate of Case or Revolution Living.

 

“Agreement” means
this Agreement together with all schedules and exhibits hereto, as the same may
from time to time be amended, modified, supplemented or restated in accordance
with the terms hereof.

 

“Applicable Law”
means, with respect to any Person, all provisions of laws, statutes,
ordinances, rules, regulations, listing requirements, permits, certificates or
orders of any Governmental Authority or securities exchange applicable to such
Person or any of its assets or property or to which such Person or any of its
assets or property is subject, and all judgments, injunctions, orders and
decrees of all courts and arbitrators in proceedings or actions in which such
Person is a party or by which it or any of its assets or properties is or may
be bound or subject.

 

“Articles of
Incorporation” has the meaning given to it in Section 4.1(a).

 

“Business Day” means
each day except for Saturday, Sunday, Federal holidays and any other
state-recognized holidays in the State of Colorado.

 

“Breaching Party” has
the meaning given to it in Section 6.9.

 

“By-laws” has the
meaning given to it in Section 4.1(a).

 

“Case” has the
meaning given in the Recitals.

 

“Claim” means any
claim, demand, assessment, judgment, order, decree, action, cause of action,
litigation, suit, investigation or other Proceeding.

 

“Class A Common Stock”
has the meaning given to it in the Recitals.

 

“Class A Stock Purchase
Agreement” means Class A Stock Purchase Agreement, dated as of June 10,
2005 and restated as of June 16, 2005, among Gaiam and the purchasers therein.

 

“Class B Common Stock”
means Gaiam’s Class B Common Stock, par value $0.0001 per share.

 

“Closing” has the
meaning given to it in Section 3.1.

 

“Closing Date” has
the meaning given to it in Section 3.1.

 

S-2

 

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

 

“Commission” means
the United States Securities and Exchange Commission.

 

“Commission Filings”
means all reports, forms, registration statements, proxy statements, and other
filings filed by Gaiam with the Commission (and all notes, exhibits and
schedules thereto and documents incorporated by reference therein and all
certificates and statements required by the Commission pursuant to
Sarbanes-Oxley).

 

“Common Stock” means
the Class A Common Stock and the Class B Common Stock.

 

“Contract” means any
written or oral contract, agreement, credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order, instrument, permit, concession,
franchise or license.

 

“Cooperation Agreement”
means the Cooperation Agreement, substantially in the form attached hereto as Exhibit
B, as the same may from time to time be amended, modified, supplemented or
restated in accordance with the terms thereof.

 

“Documents” means,
individually or collectively, this Agreement, the Shareholders Agreement, the
Cooperation Agreement, the Wisdom LLC Agreement, the Rysavy Employment
Agreement, the Powers Employment Agreement and all other documents executed in
connection with the transactions contemplated by this Agreement.

 

“Equity Incentive Plan”
means Gaiam’s 1999 Long-Term Incentive Plan and Gaiam’s Employee Stock Purchase
Plan, each as amended from time to time.

 

“Exchange Act” means
the Securities and Exchange Act of 1934, as amended.

 

“Fully-Diluted Capital
Stock” means, as of any date, without duplication, (i) the total number of
shares of Common Stock outstanding on such date, plus (ii) the total number of
outstanding options, warrants and other equity-linked securities that are
exercisable into Common Stock on or after such date, plus (iii) the total
number of shares of Common Stock reserved for issuance pursuant to obligations
of Gaiam to issue shares of Common Stock, other than pursuant to obligations of
Gaiam to issue shares of Common Stock under this Agreement after such date.

 

“Fundamental Documents”
means the documents by which any Person (other than an individual) establishes
its legal existence or which govern its internal affairs.  The “Fundamental Documents” of Gaiam are the
Articles of Incorporation and the By-laws. 
The Fundamental Documents of Wisdom are the Certificate of Formation and
the Wisdom LLC Agreement.

 

“GAAP” means United
States generally accepted accounting principles, consistently applied.

 

“Gaiam” has the
meaning given to it in the Preamble.

 

S-3

 

“Gaiam Accountants”
has the meaning given to it in Section 6.8.

 

“Gaiam Board” means
the board of directors of Gaiam.  To the
extent any decision or other action in connection with this Agreement is taken
by the Gaiam Board, such decision or action shall be made or taken by directors
of Gaiam who not nominees of, or otherwise affiliated or associated with,
Revolution Living (unless the decision or other action relates solely to a
decision in which none of Revolution Living or its Affiliates has any interest,
other than indirectly through its ownership of Common Stock of Gaiam).

 

“Gaiam Financial
Statements” has the meaning given to it in Section 4.1(f)(ii).

 

“Governmental Authority”
means any domestic or foreign government or political subdivision thereof,
whether on a Federal, state or local level and whether executive, legislative
or judicial in nature, including any agency, authority, board, bureau,
commission, court, department or other instrumentality thereof.

 

“Guarantee” means any
obligation, contingent or otherwise, or any Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person in any manner, whether directly or indirectly, including any
obligation of such Person direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness or other obligation, (ii)
to purchase property, securities or services for the purpose of assuring the
owner of such Indebtedness or other obligation of payment thereof, (iii) to
purchase or otherwise pay for merchandise, materials supplies, services or
other property under an arrangement which provides that payment for such
merchandise, materials, supplies, services or other property will be made
regardless of whether delivery of such merchandise, materials, supplies,
services or other property is ever made or tendered, or (iv) to maintain the
working capital, equity capital or other financial statement condition of any
primary obligor; provided, however, that the term Guarantee will
not include endorsement of instruments for deposit and collection in the
ordinary course of business.

 

“Indebtedness” of a
Person means, without duplication, (i) all obligations of such Person for
borrowed money, (ii) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (iii) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (iv) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (v) all obligations of such Person incurred,
issued or assumed as the deferred purchase price of property or services other
than accounts payable incurred and paid on terms customary in the business of
such Person (it being understood that “deferred purchase price” in connection
with any purchase of property or assets will include only that portion of the
purchase price which will be deferred beyond the date on which the purchase is
actually consummated), (vi) all obligations secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vii) all obligations of
such Person under forward sales, futures, options and other similar hedging
arrangements (including interest rate hedging or protection

 

S-4

 

agreements), (viii) all Guarantees by such Person of obligations of
others, (ix) all capitalized lease obligations of such Person and (x) the
Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer, but only to the extent to which there is
recourse to such Person for payment of such Indebtedness.

 

“Intellectual Property
Rights” has the meaning given to it in Section 4.1(l).

 

 “Knowledge” or words of similar import
of any Person means (i) actual knowledge of such Person (including the actual
knowledge of the officers, key employees and directors of such Person) and (ii)
that knowledge which could have been acquired by such Person after making such
due inquiry and exercising such due diligence as a prudent businessperson would
have made or exercised in the management of his or her business affairs,
including due inquiry of those key employees and professionals of such Person
who could reasonably be expected to have actual knowledge of the matters in
question.

 

“Lead Investor” has
the meaning given to it in the Wisdom LLC Agreement.

 

“Liability” means any
Indebtedness, commitment, liability or obligation, of any kind, character or
nature whatsoever, whether known or unknown, asserted or unasserted, absolute
or contingent, accrued or unaccrued, liquidated or unliquidated and whether due
or to become due, regardless of when asserted.

 

“Lien” means any
security interest, pledge, lien, claim, proxy, bailment (in the nature of a
pledge or for purposes of security), mortgage, deed of trust, the grant of a
power to confess judgment, conditional sale or title retention agreement (including
any lease in the nature thereof), charge, encumbrance, easement, reservation,
restriction, cloud, right of first refusal or first offer, option, commitment
or other similar arrangement or interest in real or personal property, whether
oral or written.

 

 “Material Adverse Effect” means, with
respect to any Person, a material adverse effect on the business, operations,
assets, condition (financial or otherwise) or operating results, Liabilities of
such Person, taken as a whole.

 

“Material Agreements”
has the meaning given to it in Section 4.1(i)(x).

 

“NASD” means the
National Association of Securities Dealers, Inc..

 

“Nasdaq” has the
meaning given to it in Section 4.1(t).

 

“Nonbreaching Party”
has the meaning given to it in Section 6.9.

 

“Orders” means judgments,
writs, decrees, injunctions, orders, compliance agreements or settlement
agreements of or with any Governmental Authority or arbitrator.

 

“Party” means each of
Gaiam, Revolution Living and Wisdom.

 

“Permits” means
licenses, certificates and permits from Governmental Authorities.

 

S-5

 

“Permitted Liens”
means (i) liens on any Person’s furniture, fixtures and equipment granted to
any of such Person’s landlords as collateral for their office and factory leases,
(ii) Liens for Taxes not yet due and payable and for which an appropriate
reserve has been taken, (iii) rights of way, easements and other minor defects
in title which do not adversely affect in any material respect the use or value
of the real property subject to such, and (iv) other Liens not to exceed
$10,000 in the aggregate.

 

“Person” will be
construed in the broadest sense and will include an individual, a partnership,
a corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization, and any other entity,
including a Governmental Authority.

 

“Powers Employment
Agreement” means the Employment Agreement between Gaiam and Lynn Powers,
substantially in the form attached hereto as Exhibit E-2, as the same
may from time to time be amended, modified, supplemented or restated in
accordance with the terms thereof.

 

“Proceeding” means
any action, suit, proceeding, complaint, charge, hearing, inquiry or
investigation before or by a Governmental Authority or an arbitrator or
administrator.

 

“Revolution Living”
has the meaning given to it in the Preamble.

 

“Rysavy” has the
meaning given in the Recitals.

 

“Rysavy Employment
Agreement” means the Employment Agreement between Gaiam and Rysavy,
substantially in the form attached hereto as Exhibit E-1, as the same
may from time to time be amended, modified, supplemented or restated in
accordance with the terms thereof.

 

“Sarbanes-Oxley”
means the Sarbanes-Oxley Act of 2002, as amended.

 

“Securities” means,
with respect to any Person, such Person’s “securities” as defined in Section
2(1) of the Securities Act and includes such Person’s capital stock or other
equity interests or any options, warrants or other securities or rights that
are directly or indirectly convertible into, or exercisable or exchangeable
for, such Person’s capital stock or other equity interests.

 

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

 

“Shareholders Agreement”
means the Shareholders Agreement, in the form executed simultaneously herewith
and attached hereto as Exhibit A, as the same may from time to time be
amended, modified, supplemented or restated in accordance with the terms
thereof.

 

“Subject Gaiam Shares”
means shares of Class A Common Stock to be issued to or purchased by Revolution
Living pursuant to the terms of this Agreement.

 

“Subject Wisdom Units”
means Wisdom Preferred Units to be purchased by Gaiam pursuant to the terms of
this Agreement.

 

S-6

 

“Subject Person” has
the meaning given to it in the definition of “Subsidiary”.

 

“Subsidiary” means,
at any time, with respect to any Person (the “Subject Person”), any
Person of which either (x) more than 50% of the Securities entitled to vote in
the election of directors or comparable Persons performing similar functions
(excluding Securities entitled to vote only upon the failure to pay dividends
thereon or other contingencies) or (y) more than a 50% interest in the profits
or capital of such Person, are at the time owned or controlled directly or
indirectly by the Subject Person or through one or more Subsidiaries of the
Subject Person.

 

“Tax” means any Taxes
and the term “Taxes” means, with respect to any Person, (A) all income
taxes (including any tax on or based upon net income, or gross income, or
income as specially defined, or earnings, or profits, or selected items of
income, earnings or profits) and all gross receipts, sales, use, ad valorem,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such Person and (B) any Liability for the
payment of any amount of the type described in the immediately preceding clause
(A) as a result of (i) being a “transferee” (within the meaning of Section
6901 of the Code or any other Applicable Law) of another Person,
(ii) being a member of an affiliated, combined or consolidated group or
(iii) a contractual arrangement or otherwise.

 

“Treasury Regulations”
means pronouncements, as amended from time to time, or their successor
pronouncements, which clarify, interpret and apply the provisions of the Code,
and which are designated as “Treasury Regulations” by the United States
Department of the Treasury.

 

“Wisdom” has the
meaning given to it in the Preamble.

 

“Wisdom Board” means
the board of directors of Wisdom.

 

“Wisdom LLC Agreement”
means that certain Second Amended and Restated Limited Liability Company
Agreement of Life Balance Media Holdings LLC, as amended and restated as of the
date of this Agreement, by and among the members of Wisdom, as the same may
from time to time be amended, modified, supplemented or restated in accordance
with the terms thereof.

 

“Wisdom Material
Agreements” has the meaning given to it in Section 5.1(h)(x).

 

“Wisdom Preferred Units”
has the meaning given to it in the Recitals.

 

“Wisdom Units” means
the Preferred Units, Profits Units, Management Units and Common Units and any
other unit of membership interest in Life Balance Holdings LLC.

 

S-7

 

1.2                               Rules of Construction.

 

The use in this Agreement of
the term “including” means “including, without limitation.”  The words “herein,” “hereof,” “hereunder”
and other words of similar import refer to this Agreement as a whole, including
the schedules and exhibits, as the same may from time to time be amended,
modified, supplemented or restated, and not to any particular section,
subsection, paragraph, subparagraph or clause contained in this Agreement.  All references to sections, schedules and
exhibits mean the sections of this Agreement and the schedules and exhibits
attached to this Agreement, except where otherwise stated.  The title of and the section and paragraph
headings in this Agreement are for convenience of reference only and will not
govern or affect the interpretation of any of the terms or provisions of this
Agreement.  The use herein of the
masculine, feminine or neuter forms will also denote the other forms, as in
each case the context may require or permit. 
Where specific language is used to clarify by example a general
statement contained herein, such specific language will not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates.  The
language used in this Agreement has been chosen by the Parties to express their
mutual intent, and no rule of strict construction will be applied against any
Party.  Unless expressly provided
otherwise, the measure of a period of one month or year for purposes of this
Agreement will be that date of the following month or year corresponding to the
starting date, provided that if no corresponding date exists, the measure will
be that date of the following month or year corresponding to the next day
following the starting date.  For
example, one month following February 18 is March 18, and one month following
March 31 is May 1.

 

ARTICLE II

PURCHASE AND SALE OF SUBJECT GAIAM SHARES AND SUBJECT WISDOM UNITS

 

2.1                               Authorization of the Subject
Gaiam Shares.

 

Gaiam has authorized the
issuance to Revolution Living at the Closing of an aggregate of 2,500,000
shares of Class A Common Stock.

 

2.2                               Purchase and Sale of
Securities.

 

Subject to the terms and
conditions contained in this Agreement, at the Closing:

 

(a)           Gaiam will issue, sell and deliver to Revolution Living
that number of the shares of Class A Common Stock set forth on Schedule I
hereto at the price set forth on Schedule I. 
Revolution Living will pay, to an account designated by Gaiam prior to
the Closing, the amount set forth opposite Revolution Living’s name on Schedule
I hereto with respect to the Class A Common Stock being purchased at the
Closing by wire transfer of immediately available funds.

 

(b)           Wisdom will issue, sell and deliver to Gaiam’s wholly
owned subsidiary, Gaiam Media, Inc., that number of Wisdom Preferred Units set
forth on Schedule II hereto.  The
Wisdom Preferred Units will have rights set forth in the Wisdom LLC Agreement
set forth as Exhibit C to this Agreement.  Gaiam will cause Gaiam Media, Inc. to will
pay Wisdom, to an account of Wisdom designated by Wisdom prior to the Closing,
the amount set forth opposite

 

S-8

Gaiam’s name on Schedule
II hereto with respect to the Subject Wisdom Units being purchased at the
Closing by wire transfer of immediately available funds.

 

ARTICLE III

THE CLOSING; DELIVERY OF DOCUMENTS AT THE CLOSINGS

 

3.1                               The Closing.

 

The closing (the “Closing”)
hereunder and the consummation of the transactions contemplated to occur
simultaneously therewith shall take place at the offices of O’Melveny &
Myers LLP, 1625 Eye Street, N.W., Washington, D.C. 20006 on the second Business
Day after the satisfaction or, if permissible, waiver of the applicable conditions
(except those conditions which by their nature are to be satisfied as part of
the Closing) set forth in this Article III and in Article VII, or
at such other time and place as is otherwise agreed upon by the Parties hereto
(each such date, a “Closing Date”).

 

3.2                               Deliveries at the Closing.

 

(a)           Deliveries by Gaiam at the Closing.

 

The obligation of Revolution
Living to consummate the Closing is subject to the delivery by Gaiam of the
following items or the satisfaction of the following conditions precedent
(unless waived by Revolution Living):

 

(i)            Consents and Approvals.  All consents, approvals, authorizations,
filings and notices required to consummate the transactions contemplated hereby
with respect to the transactions to be consummated at the Closing will have
been obtained, made or given and will be in full force and effect, including,
without limitation, (A) the requisite consent of the Gaiam Board and (B) any
filings or consents required by any Governmental Authority.

 

(ii)           Opinion of Counsel.  Revolution Living will have received a legal
opinion of Bartlit Beck Herman Palenchar & Scott LLP, counsel to Gaiam,
addressed to Revolution Living and dated as of the Closing Date, in
substantially the form attached hereto as Exhibit D-1.

 

(iii)          Good Standing Certificates.  Gaiam will have delivered to Revolution
Living a certificate of the Secretary of State of the State of Colorado, dated
as of a recent date as to the due incorporation or organization of Gaiam and
its good standing in such jurisdiction.

 

(iv)          Secretary’s Certificate.  Gaiam will have delivered to Revolution
Living a certificate of the Secretary or an Assistant Secretary of Gaiam, dated
as of the Closing Date and certifying on behalf of Gaiam: (A) that attached
thereto is a true, correct and complete copy of each of the Fundamental
Documents of Gaiam as in effect on the date of such certification; (B) that
attached thereto is a true, correct and complete copy of all resolutions
adopted by the Gaiam Board authorizing the execution, delivery and

 

S-9

 

performance of the Documents
and the transactions contemplated thereby, which resolutions have been
unanimously approved by the Gaiam Board, and that all such resolutions are in
full force and effect; and (C) the incumbency and specimen signature of all
officers of Gaiam executing the Documents, and any certificate or instrument
furnished pursuant hereto.

 

(v)           Delivery of Purchase Price.  Gaiam will have delivered to Wisdom by wire
transfer of immediately available funds the amount specified in Schedule II
to such Wisdom bank account as Revolution Living will designate to Gaiam in
writing no less than two Business Days prior to Closing.

 

(vi)          Issuance of the Class A Common
Stock.  Gaiam will have delivered to
Revolution Living a stock certificate representing the number of shares of
Class A Common Stock being purchased by Revolution Living at the Closing as set
forth on Schedule I opposite Revolution Living’s name with respect to
the Closing against receipt by Gaiam of payment of the amount specified in Schedule
I with respect to the Closing by wire transfer of immediately available
funds to an account designated by Gaiam no less than two (2) Business Days
prior to the Closing.

 

(vii)         Officer’s Certificate as to
Conditions Precedent.  Gaiam will
have delivered to Revolution Living an officer’s certificate certifying that
the conditions precedent to Revolution Living’s obligations set forth in Sections
7.1(a), 7.1(b) and 7.1(f) have been satisfied.

 

(b)           Deliveries by Revolution Living at
the Closing.

 

The obligation of Gaiam to
consummate the Closing is subject to the delivery by Revolution Living of the
following items or the satisfaction of the following conditions precedent
(unless waived by Gaiam):

 

(i)            Consents and Approvals.  All consents, approvals, authorizations,
filings and notices required to consummate the transactions contemplated hereby
with respect to the transactions to be consummated at the Closing will have
been obtained, made or given and will be in full force and effect, including,
without limitation, (A) the requisite consent of Revolution Living’s board of
directors and (B) any filings or consents required by any Governmental
Authority.

 

(ii)           Opinion of Counsel.  Gaiam will have received a legal opinion of
O’Melveny & Myers LLP, counsel to Revolution Living, addressed to Gaiam and
dated as of the Closing Date, in substantially the form attached hereto as Exhibit D-2.

 

(iii)          Good Standing Certificates.  Revolution Living will have delivered to
Gaiam a certificate of the Secretary of State of the State of Delaware, dated
as of a recent date as to the due organization of Wisdom and Revolution Living
and their good standing in such jurisdiction.

 

(iv)          Secretary’s Certificate.  Revolution Living will have delivered to
Gaiam a certificate of the Secretary or an Assistant Secretary of Revolution
Living, dated as of the

 

S-10

 

Closing Date and certifying
on behalf of Revolution Living: (A) that attached thereto is a true, correct
and complete copy of each of the Fundamental Documents of Revolution Living as
in effect on the date of such certification; (B) that attached thereto is a
true, correct and complete copy of all resolutions adopted by the board of
directors (and any committees thereof) of Revolution Living authorizing the
execution, delivery and performance of the Documents and the transactions
contemplated thereby, and that all such resolutions are in full force and
effect; (C) the incumbency and specimen signature of all officers of Revolution
Living executing the Documents, and any certificate or instrument furnished
pursuant hereto; and (D) that the individuals to be designated by Gaiam to the
board of directors of Wisdom pursuant to the Shareholders Agreement as of the
time of the Closing Date have been duly elected and appointed to the board of
directors of Wisdom.

 

(v)           Delivery of Purchase Price.  Revolution Living will have delivered to
Gaiam by wire transfer of immediately available funds the amount specified in Schedule
I to such bank account as Gaiam will designate to Revolution Living in
writing no less than two Business Days prior to Closing.

 

(vi)          Delivery of Wisdom Preferred Units.  Wisdom will have delivered to Gaiam the
Wisdom Preferred Units being purchased by Gaiam at the Closing as set forth on Schedule
II hereto against receipt by Revolution Living of evidence of payment to
Wisdom of the amount specified in Schedule II with respect to the
Closing by wire transfer of immediately available funds to an account
designated by Revolution Living no less than two (2) Business Days prior to the
Closing.

 

(vii)         Officer’s Certificate as to
Conditions Precedent.  Revolution
Living and Wisdom, as applicable, will have delivered to Gaiam an officer’s
certificate certifying that the conditions precedent to Gaiam’s obligations set
forth in Sections 7.2(a), 7.2(b), 7.2(e) and 7.2(f)
have been satisfied.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF GAIAM

 

4.1          Representations and Warranties in
connection with Sales of Subject Gaiam Shares .

 

Gaiam hereby represents and
warrants to Revolution Living, as of the date hereof and as of the Closing
Date, as follows:  

 

(a)           Organization, Power, Authority and
Good Standing.

 

Each of Gaiam and its
Subsidiaries is duly organized, validly existing and in good standing under the
Applicable Laws of its respective jurisdiction of incorporation or formation
and has all requisite corporate or other power and authority to own, lease and
operate its properties and other assets and to carry on its business as
presently conducted and as proposed to be conducted.  Each of Gaiam and its Subsidiaries is duly
qualified, validly existing and/or in good standing to transact business as a
foreign Person in those respective jurisdictions which constitute the
jurisdictions in which the character of the property owned, leased or operated
by

 

S-11

 

Gaiam or such Subsidiary or the nature of the activities conducted by
Gaiam or such Subsidiary makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect.  A copy of the Amended and Restated Articles
of Incorporation of Gaiam in effect on the date hereof (the “Articles of
Incorporation”) and Restated By-laws of Gaiam in effect on the date hereof
(the “By-laws”) is filed as an exhibit to the Commission Filings.

 

(b)           Capitalization.

 

(i)            Immediately upon consummation of the
Closing, the authorized, issued and outstanding capital stock of Gaiam will
consist of:

 

50,000,000
shares of preferred stock, $0.0001 par value per share, none of which are
issued and outstanding; and

 

150,000,000
shares of Class A Common Stock, of which: 
(1) 12,304,295 shares were validly issued and outstanding, fully paid
and nonassessable as of August 1, 2005; (2) no shares are held as treasury
shares; (3) 1,876,272 shares are reserved for issuance in accordance with
Gaiam’s Equity Incentive Plan; and (4) 5,400,000 shares are reserved for
issuance upon conversion of the 5,400,000 outstanding shares of Class B Common
Stock.

 

50,000,000
shares of Class B Common Stock, of which (1) 5,400,000 shares are validly
issued and outstanding, fully paid and nonassessable; and (2) no shares are
held as treasury shares or reserved for issuance.

 

(ii)           Gaiam’s Commission Filings accurately
reflect the outstanding Indebtedness of Gaiam.

 

(iii)          Except as described in the Commission
Filings, the Articles of Incorporation or as contemplated by the Documents,
there are, and immediately after consummation of the Closing there will be, no
(i) outstanding warrants, options, agreements, convertible Securities or other
commitments or instruments pursuant to which Gaiam is obligated to issue, sell
or otherwise transfer any of its Securities, (ii) preemptive rights or similar
rights to purchase or otherwise acquire Securities of Gaiam pursuant to any
Applicable Law, Gaiam’s Fundamental Documents or any Contract to which Gaiam is
a party, or (iii) Liens (such as a right of first refusal, right of first
offer, irrevocable proxy, voting trust or voting agreement) created by Gaiam
with respect to the sale or voting of any Securities of Gaiam (whether
outstanding or issuable upon the conversion, exchange or exercise of
outstanding Securities).

 

(iv)          No outstanding Securities of Gaiam are
entitled to any anti-dilution or similar adjustments upon the issuance of
additional Securities of Gaiam or otherwise.

 

(v)           There are no obligations to redeem,
repurchase or otherwise acquire shares of capital stock or other Securities of
Gaiam pursuant to any Applicable Law, any Fundamental Document of Gaiam or any
Contract to which Gaiam is a party or may be bound.

 

S-12

 

(vi)          Except as contemplated by the
Documents and the Class A Stock Purchase Agreement, no Person has any right to
cause Gaiam to effect the registration under the Securities Act of any shares
of Common Stock or any other Securities of Gaiam.

 

(vii)         All Securities issued by Gaiam have
been either issued in transactions in accordance with, or exempt from
registration under, the Securities Act and the rules and regulations
promulgated thereunder and all applicable state securities or “blue sky” laws,
and Gaiam has not violated the Securities Act or any applicable state
securities or “blue sky” laws in connection with the issuance of any such
Securities.

 

(c)           Authorization of Agreement, Etc.

 

(i)            Gaiam has any and all requisite
corporate power and authority to execute and deliver the Documents and to
perform its obligations under and to consummate the transactions contemplated
by each such Document.  The execution,
delivery and performance by Gaiam of each Document to which it is a party and
the issuance, sale and delivery of the Subject Gaiam Shares has been duly
authorized by all requisite corporate action by Gaiam, including the unanimous
approval of the Gaiam Board, and this Agreement and each other Document has
been duly executed and delivered by Gaiam. 
No other corporate or shareholder action (including, without limitation,
approval of the Documents and the transactions contemplated hereby by the
shareholders of Gaiam) on the part of Gaiam is necessary for such
authorization, execution and delivery. 
Each of the Documents constitutes a legal, valid and binding obligation
of Gaiam enforceable against Gaiam in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar Applicable Laws affecting creditors’ rights and
remedies generally, and subject, in the case of enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
Proceeding at law or in equity).

 

(ii)           The authorization, reservation,
issuance, sale and delivery, as applicable, of the Subject Gaiam Shares have
been duly and validly authorized by all requisite corporate action on the part
of Gaiam.  The Subject Gaiam Shares
(assuming the issuance thereof in accordance with this Agreement), will be duly
and validly issued and outstanding, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof, free and clear of any
Liens (other than those created by the holder) and, except as otherwise set
forth in the Documents, with no restrictions on the voting rights thereof and
not subject to any preemptive rights, rights of first refusal or other similar
rights of the shareholders of Gaiam.

 

(d)           No Conflicts.

 

The execution, delivery and
performance by Gaiam of this Agreement and each of the other Documents and the
consummation of the transactions contemplated hereby and thereby, including
without limitation, the issuance, sale and delivery of the Subject Gaiam
Shares, and compliance with the provisions hereof and thereof by Gaiam, does
not or will not, as the case may be, (a) violate any provision of Applicable
Law or any Order applicable to Gaiam or any of its properties or assets or (b)
conflict with or result in any breach of any of the terms, conditions

 

S-13

 

or provisions of, or constitute (with notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any Lien upon any of the
properties or assets of Gaiam under any Material Agreement to which it is a
party or by which Gaiam or its assets or properties are or may be bound, except
that consent may be required under the 2005 Amended and Restated Credit
Agreement dated July 29, 2005 among Gaiam, certain of its Subsidiaries and
Wells Fargo Bank, National Association, or (c) conflict with or violate any
provision of the Fundamental Documents of Gaiam currently in effect.

 

(e)           Approvals.

 

Except for Commission
Filings and filings with Nasdaq, no Permit or Order, authorization, consent or
approval of or by, or any notification of or filing with, any Person is
required in connection with the (i) execution, delivery or performance by Gaiam
of each Document to which it is a party, or (ii) issuance of the Subject Gaiam
Shares at the Closing.

 

(f)            Commission Filings; Financial
Statements.

 

(i)            Gaiam is a company required to file
periodic reports with the Commission and has, since November 1999, filed in a
timely manner all Commission Filings required to have been filed with the
Commission under the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations of the Commission promulgated thereunder
applicable thereto.  As of the respective
dates of their filing with the Commission, or the date of any amendment thereto
filed on or prior to the date hereof, the Commission Filings complied as to
form in all material respects with the applicable provisions of the Securities
Act and the Exchange Act and the rules and regulations of the Commission
promulgated thereunder applicable thereto and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading.

 

(ii)           Each of the historical consolidated
financial statements of Gaiam (including any related notes or schedules)
included in Gaiam’s annual report for the year ended December 31, 2004 and any
annual report on Form 10-K or quarterly report on Form 10-Q filed thereafter
(the “Gaiam Financial Statements”) was prepared (i) in accordance with
the books and records of Gaiam and (ii) in accordance with GAAP (except as may
be disclosed therein).  Such financial
statements fairly present in all material respects the consolidated financial
position of Gaiam and its Subsidiaries as of the dates thereof and the
consolidated results of operations, cash flows and changes in shareholders’
equity for the periods indicated (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments).

 

(iii)          The Gaiam Financial Statements
complied, when filed, as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, including, but not limited to, the applicable
requirements of Regulation S-X promulgated under the Exchange Act and
Sarbanes-Oxley.

 

S-14

 

(iv)          The Chief Executive Officer and the
Chief Financial Officer of Gaiam have signed, and Gaiam has furnished to the
Commission, all certifications required by Section 906 of Sarbanes-Oxley;
such certifications contain no qualifications or exceptions to the matters certified
therein and have not been modified or withdrawn; and neither Gaiam nor any of
its officers has received notice from any Governmental Authority questioning or
challenging the accuracy, completeness, form or manner of filing or submission
of such certifications. Except as disclosed in the Commission Filings, to
Gaiam’s Knowledge, each director and executive officer of Gaiam has filed with
the Commission on a timely basis all statements required by Section 16(a)
of the Exchange Act and the rules and regulations thereunder since January 1,
2004.

 

(g)           Accounting.

 

Gaiam maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Gaiam maintains disclosure controls and procedures required by
Rule 13a-15 or 15d-15 under the Exchange Act, which controls and procedures are
effective to ensure that all material information concerning Gaiam and its
Subsidiaries is made known on a timely basis to the individuals responsible for
the preparation of Gaiam’s filings with the Commission and other public
disclosure documents.

 

(h)           Private Offering.

 

Assuming the accuracy of the
representations of Revolution Living in Section 5.2(b), the offering,
sale, issuance and delivery by Gaiam of the Subject Gaiam Shares are exempt
from the registration and prospectus delivery requirements of the Securities
Act and applicable state securities laws and the rules and regulations
promulgated thereunder.  Neither Gaiam or
its Subsidiaries, nor any Person acting on their behalf, has offered or sold or
will offer or sell any Securities, or has taken or will take any other action
(including, without limitation, any offering of any Securities of Gaiam under
circumstances that would require, under the Securities Act or any applicable
blue-sky laws, the integration of such offering with the transactions
contemplated by this Agreement), which would subject the transactions
contemplated by this Agreement to the registration provisions of the Securities
Act.

 

(i)            Material Agreements.

 

(x)            Gaiam has filed, as an exhibit to
the Commission Filings (i) any notes, bonds, mortgages, or indentures or (ii)
other material written or oral Contracts, agreements, instruments and other
understandings, in each case that is required to be filed as an exhibit to the
Commission Filings (collectively, the “Material Agreements”).

 

S-15

 

(y)           Each Material Agreement constitutes a
valid and binding obligation of Gaiam and/or Subsidiary party thereto.  Each of Gaiam and the Subsidiaries have in
all material respects performed all of the material obligations required to be
performed by each of them to date pursuant to the Material Agreements, and
there exists no default, or any event which upon the giving of notice or the passage
of time, or both, would give rise to a claim of a default in the performance by
Gaiam or any of the Subsidiaries, except where such default or event,
individually or in the aggregate, has not had nor could it reasonably be
expected to have a Material Adverse Effect.

 

(j)            Absence of Undisclosed Liabilities.

 

Neither Gaiam nor any of its
Subsidiaries has any Liability required to be disclosed in the consolidated
financial statements for Gaiam and its Subsidiaries for the fiscal year ended
December 31, 2004, other than Liabilities disclosed in the Commission Filings
or incurred in the ordinary course of business consistent with past practice
since December 31, 2004 (none of which results from, arises out of, relates to,
or was caused by, any breach of contract, breach of warranty, tort,
infringement or violation of Applicable Law where such breach or event,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect).

 

(k)           Compliance with Laws.

 

Neither Gaiam nor any
Subsidiary is in violation of and, to the Knowledge of Gaiam, none is under
investigation by a Governmental Authority with respect to or has been
threatened to be charged with or given notice of any violation of, any
Applicable Law (including Sarbanes-Oxley), except violations that have not had,
and could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Gaiam and the Subsidiaries taken as a whole.

 

(l)            Intellectual Property Rights.

 

Gaiam has sufficient title
or ownership of, or rights by license or other agreement to all of the patents,
patent applications, trademarks, service marks, trademark and service mark
applications and registrations, trade names, copyright applications and
registrations (the “Intellectual Property Rights”) necessary for, or
used in, the conduct of its business as presently conducted and as presently
proposed to be conducted.  Such
Intellectual Property Rights are not subject to any Lien or any rights of
others, however evidenced or created which could reasonably be expected to have
a Material Adverse Effect on Gaiam or its operations.

 

(m)          Taxes.

 

(i)            All Tax returns required to be filed
by Gaiam and each of its Subsidiaries has been accurately prepared and timely
filed in all material respects, and all Taxes for which Gaiam or any of its
Subsidiaries may be held liable (other than the Taxes referred to in the next
sentence), have been paid or accrued within the prescribed period or any
extension thereof.  All Taxes required to
be withheld by Gaiam or any of its Subsidiaries, including but not limited to,
Taxes arising as a result of payments or distributions (or amounts allocable)
to foreign Persons or to employees of Gaiam or any of its

 

S-16

 

Subsidiaries, have been
collected and withheld, and have been either paid to the respective
Governmental Authorities, set aside in accounts for such purpose, or accrued,
reserved against, and entered upon the books and records of the employer.

 

(ii)           Neither Gaiam nor any of its
Subsidiaries has been notified that either the Internal Revenue Service or any
other Taxing authority has raised any issues, or has an intent to raise such
issues, in connection with any Taxes or Tax return of Gaiam or any of its
Subsidiaries, which issues, if adversely determined, would be reasonably likely
to have a Material Adverse Effect.

 

(n)           Litigation Proceedings.

 

Except as set forth in the
Commission Filings, there are no Proceedings pending or, to the Knowledge of
Gaiam, threatened against or involving Gaiam or any of the Subsidiaries,
whether at law or in equity, whether civil or criminal in nature or by or
before any Governmental Authority, which if adversely determined could
individually or in the aggregate have a Material Adverse Effect on Gaiam and
its Subsidiaries taken as a whole, nor to the Knowledge of Gaiam does there
exist any reasonable basis therefore.

 

(o)           Insurance.

 

Each of Gaiam and the
Subsidiaries carries insurance in such amounts and covering such risks as is
adequate for the conduct of Gaiam’s business and the value of its properties.

 

(p)           Investment Company.

 

Neither Gaiam nor any
Subsidiary is an “investment company” within the meaning of such term under the
Investment Company Act of 1940 and the rules and regulations of the Commission
thereunder which is required to register as an investment company.

 

(q)           Brokers.

 

In connection with the
transactions contemplated by this Agreement, none of Gaiam, any of Gaiam’s
Subsidiaries or any of their respective officers, directors, shareholders or
employees (or any Affiliate of the foregoing) has employed any broker or finder
or incurred any actual or potential Liability or obligation, whether direct or
indirect, for any brokerage fees, commissions or finders’ fees in connection
with the transactions contemplated by this Agreement which would be payable by
Revolution Living.

 

S-17

 

(r)           Application of Takeover Protections.

 

(i)            As of the date of this Agreement,
Gaiam and the Gaiam Board have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or the laws of the
State of Colorado which is or could become applicable to Revolution Living as a
result of the transactions contemplated by this Agreement, including, without
limitation, Gaiam’s issuance of the Subject Gaiam Shares and Revolution
Living’s ownership of the Subject Gaiam Shares.

 

(ii)           As of the date of this Agreement,
Gaiam has not adopted a shareholder rights plan or similar arrangement relating
to accumulations of beneficial ownership on Common Stock or a change in control
of Gaiam.

 

(s)           Certificates of Officers.

 

Any certificate signed by
any officer or Gaiam and delivered to Revolution Living will be deemed a
representation and warranty by Gaiam to Revolution Living as to the matters
covered thereby.

 

(t)            Listed Securities.

 

As of the Closing, (i)
Gaiam’s Class A Common Stock is quoted on the Nasdaq National Market System (“Nasdaq”)
under the ticket symbol “GAIA” and (ii) no stop order suspending the trading of
the Class A Common Stock on Nasdaq exists.

 

4.2          Representations and Warranties of
Gaiam with Respect to Purchases of Subject Wisdom Units.  

 

Gaiam hereby represents and
warrants to Wisdom, as of the date hereof and as of the Closing Date, on behalf
of itself and any Subsidiary it designates to hold the Subject Wisdom Units, as
follows:

 

(a)           Investment Representations.

 

(i)            The Subject Wisdom Units are being
acquired for Gaiam’s own account, for investment and not with a view to the
distribution thereof in violation of the Securities Act or applicable foreign
or state securities laws.

 

(ii)           Gaiam understands that (i) the
Subject Wisdom Units have not been, and will not be, registered under the
Securities Act or applicable foreign or state securities laws, by reason of
their sale by Wisdom in a transaction exempt from the registration requirements
of the Securities Act and applicable foreign and state securities laws and (ii)
the Subject Wisdom Units must be held by Gaiam indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and applicable
foreign and state securities laws or is exempt from registration thereof.

 

S-18

 

(iii)          Gaiam is aware of the provisions of
Rule 144 promulgated under the Securities Act that permit limited resale of
shares purchased in a private placement subject to the satisfaction of certain
conditions.  The Subject Wisdom Units
will bear a legend reflecting these conditions on transferability thereof and
stop transfer instructions will be given to Wisdom’s transfer agent
accordingly.

 

(iv)          Gaiam is an “accredited investor” (as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act).

 

(v)           Revolution Living and/or Wisdom has
made available to Gaiam or its representatives information relating to Wisdom,
its ownership and management and other information about Wisdom and all
agreements, documents, records and books that Gaiam has requested relating to
an investment in the Subject Wisdom Units which may be acquired by Gaiam hereunder.  Gaiam has reviewed the information provided
by Revolution Living and/or Wisdom and understands and accepts the risks
associated with an investment in Wisdom, including the terms of this Agreement,
the rights of the Lead Investor to control the Board of Directors of Wisdom,
and the risk that matters described in the information provided may not
materialize.  Gaiam has had an
opportunity to ask questions of, and receive answers from a Person or Persons
acting on behalf of Revolution Living and Wisdom concerning the terms and
conditions of this investment, and answers have been provided to all of such
questions to the full satisfaction of Gaiam. 
Gaiam has such knowledge and experience in financial and business
matters that it is capable of evaluating the risks and merits of this
investment and to suffer a complete loss of its investment.

 

(vi)          Gaiam has no need for liquidity in its
investment in the Subject Wisdom Units and is able to bear the economic risk of
its investment in the Subject Wisdom Units and the complete loss of all of such
investment.

 

(vii)         Gaiam understands that there is no
public market for the Subject Wisdom Units and that the transferability of the
Subject Wisdom Units is restricted.

 

(viii)        Gaiam is able to fend for itself in the
transactions contemplated by this Agreement, can bear the economic risk of
investment in the Subject Wisdom Units and has such knowledge and experience in
financial or business matters to be capable of evaluating the merits and risks
of the investment in the Subject Wisdom Units. 
Gaiam is fully aware of:  (A) the
speculative nature of the investment in the Subject Wisdom Units, (B) the
financial risk involved, (C) the lack of liquidity for the Subject Wisdom
Units, and (D) the transfer restrictions and any repurchase rights applicable
to the Subject Wisdom Units.  Gaiam has
consulted with its professional, tax and legal advisors with respect to the
federal, state, local and foreign income tax consequences of the undersigned’s
participation as a member of Wisdom.

 

(ix)           Neither Wisdom nor any other Person,
including Revolution Living, will have or be subject to any liability or
indemnification obligation to Gaiam or any other Person resulting from the
distribution to Gaiam, or Gaiam’s use of, any information provided to Gaiam,
including without limitation, the information described in clause (v),

 

S-19

 

related to the business of
Wisdom and any information, projections, documents or material made available
to Gaiam, whether orally or in writing, or in any other form in expectation or
furtherance of the transactions contemplated by this Agreement, except Wisdom
to the extent that a representation or warranty in this Agreement made by
Wisdom specifically identifies and addresses such information.

 

(x)            Except for the representations and
warranties contained in this Agreement, Gaiam acknowledges that none of Wisdom,
any of its Affiliates and any other Person makes any other express or implied
representation or warranty with respect to (i) the Subject Wisdom Units,
including without limitation the probable success or profitability of ownership
of Subject Wisdom Units, (ii) Wisdom, including without limitation, the
operation of its business by its officers, directors, managers, employees, or
members, (iii) the business, assets, performance (whether historical, present
or future) of Wisdom, including without limitation the probable success or
profitability of Wisdom or (iv) otherwise with respect to any other information
provided to Gaiam or other Persons, whether on behalf of Revolution Living,
Wisdom or such other Persons.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF WISDOM

 

5.1          Representations and Warranties to
Gaiam in connection with Sales of Subject Wisdom Units.

 

Wisdom hereby represents and
warrants to Gaiam, as of the date hereof and as of the Closing Date, as
follows:

 

(a)           Organization, Power, Authority and
Good Standing.

 

Wisdom was formed on
December 30, 2004 and conducted no business prior to its acquisition of assets
on March 17, 2005.  Each of Wisdom and
its Subsidiaries is duly organized, validly existing and in good standing under
the Applicable Laws of its respective jurisdiction of incorporation or
formation and has all requisite corporate or other power and authority to own,
lease and operate its properties and other assets and to carry on its business
as presently conducted and as proposed to be conducted.  Except as set forth on Schedule 5.1(a),
each of Wisdom and its Subsidiaries is duly qualified, validly existing and/or
in good standing to transact business as a foreign Person in those respective
jurisdictions in which the character of the property owned, leased or operated
by Wisdom or such Subsidiary or the nature of the activities conducted by Wisdom
or such Subsidiary makes such qualification necessary, except where the failure
to be so qualified would not have a Material Adverse Effect.  A copy of the Wisdom LLC Agreement in effect
on the date hereof has been delivered to Gaiam.

 

(b)           Capitalization.

 

(i)            Schedule 5.1(b)(i) accurately
reflects the capitalization of Wisdom immediately upon consummation of the
Closing.

 

S-20

 

(ii)           Schedule
5.1(b)(ii) accurately reflects the capitalization of Wisdom after giving
effect to the transactions contemplated by this Agreement.

 

(iii)          Except as
contemplated by Wisdom’s Fundamental Documents or as otherwise set forth on

Schedule 5.1(b)(iii), there are, and immediately after consummation of
the Closing there will be, no (i) outstanding warrants, options, agreements,
convertible Securities or other commitments or instruments pursuant to which
Wisdom is obligated to issue, sell or otherwise transfer any Securities, (ii)
preemptive rights or similar rights to purchase or otherwise acquire Securities
of Wisdom pursuant to any Applicable Law, Wisdom’s Fundamental Documents or any
Contract to which Wisdom is a party, or (iii) Lien (such as a right of first
refusal, right of first offer, proxy, voting trust or voting agreement) created
by Wisdom or, to the Knowledge of Wisdom, any of its members with respect to
the sale or voting of any Securities of Wisdom (whether outstanding or issuable
upon the conversion, exchange or exercise of outstanding Securities).

 

(iv)          Except as set forth
in the Wisdom LLC Agreement, (x) no outstanding Securities of Wisdom are
entitled to any anti-dilution or similar adjustments upon the issuance of
additional Securities of Wisdom or otherwise and (y) there are no obligations
to redeem, repurchase or otherwise acquire shares of capital stock or other
Securities of Wisdom pursuant to any Applicable Law, any Fundamental Document
of Wisdom or any Contract to which Wisdom is a party or may be bound.

 

(v)           Except as
contemplated by the Wisdom Documents, no Person has any right to cause Wisdom
to effect the registration under the Securities Act of any shares of Common
Stock or any other Securities of Wisdom.

 

(vi)          Except for Life
Balance Media LLC, a Delaware limited liability company and wholly-owned by
Wisdom, Wisdom does not have any Subsidiaries, nor does it own any capital
stock, any other equity or long-term Indebtedness or any equity interest,
directly or indirectly, in any other Person.

 

(vii)         All Securities
issued by Wisdom have been either issued in transactions in accordance with, or
exempt from registration under, the Securities Act and the rules and
regulations promulgated thereunder and all applicable state securities or “blue
sky” laws, and Wisdom has not violated the Securities Act or any applicable
state securities or “blue sky” laws in connection with the issuance of any such
Securities.  To Wisdom’s Knowledge, there
are no restrictions upon the voting rights associated with, or the transfer of,
any of the Securities of Wisdom, except as provided by (i) United States
federal or state securities laws or (ii) the terms and provisions of the Wisdom
Documents.

 

(c)           Authorization of
Agreement, Etc.

 

The
authorization, reservation, issuance, sale and delivery, as applicable, of the
Subject Wisdom Units have been duly and validly authorized by all requisite
corporate or other action on the part of Wisdom.  Except as set forth in the Wisdom LLC
Agreement, the Subject Wisdom Units (assuming the issuance thereof in
accordance with this Agreement), will be duly and

 

S-21

 

validly issued and outstanding and fully
paid, with no personal liability attaching to the ownership thereof, free and
clear of any Liens whatsoever and with no restrictions on the voting rights
thereof, not subject to any preemptive rights, and not subject to any rights of
first refusal or other similar rights of the members of Wisdom.

 

(d)           No Conflicts.

 

The execution,
delivery and performance by Wisdom of this Agreement and each of the other
Documents and the consummation of the transactions contemplated hereby and
thereby, including without limitation, the issuance, sale and delivery of the
Subject Wisdom Units, and compliance with the provisions hereof and thereof by
Wisdom, does not or will not, as the case may be, (a) violate any provision of
Applicable Law or any Order applicable to Wisdom or any of its properties or
assets or (b) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any Lien upon any of the
properties or assets of Wisdom under any material Contract to which it is a
party or by which Wisdom or its assets or properties are or may be bound or (c)
conflict with or violate any provision of the Fundamental Documents of Wisdom
currently in effect.

 

(e)           Approvals.

 

No Permit or
Order, authorization, consent or approval of or by, or any notification of or
filing with, any Person is required in connection with the (i) execution,
delivery or performance by Wisdom of each Document to which it is a party or
(ii) sale of the Subject Wisdom Units.

 

(f)            Accounting.

 

Wisdom
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iii) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

 

(g)           Private Offering.

 

Assuming the
accuracy of the representations of Gaiam in Section 4.2, the offering,
sale, issuance and delivery by Wisdom of the Subject Wisdom Units are exempt
from the registration and prospectus delivery requirements of the Securities
Act and applicable state securities laws and the rules and regulations
promulgated thereunder.  Neither Wisdom
nor any Person acting on its behalf has offered or sold or will offer or sell
any Securities of Wisdom, or has taken or will take any other action
(including, without limitation, any offering of any Securities of Wisdom under
circumstances that would require, under the Securities Act or any applicable
blue-sky laws, the integration of such offering with the transactions
contemplated by this Agreement), which would subject the transactions
contemplated by this Agreement to the registration provisions of the Securities
Act.

 

S-22

 

(h)           Material Agreements.

 

(x)            Except as set forth
on Schedule 5.1(h), neither Wisdom nor any of its Subsidiaries is a
party to (i) any notes, bonds, mortgages, indentures or (ii) other material
written or oral Contracts, agreements, instruments and other understandings, in
each case that would have been required to be described in a prospectus
pursuant to the Securities Act (collectively, the “Wisdom Material
Agreements”).

 

(y)           Each Material
Agreement constitutes a valid and binding obligation of Wisdom and/or
Subsidiary party thereto and is enforceable against such other party in
accordance with its terms.  Each of
Wisdom and the Subsidiaries have in all material respects performed all of the
obligations required to be performed by each of them to date pursuant to the
Material Agreements, and there exists no default, or any event which upon the
giving of notice or the passage of time, or both, would give rise to a claim of
a default in the performance by Wisdom or any of the Subsidiaries or, to the
Knowledge of Wisdom, any other party to any of the Material Agreements, except
where such default or event, individually or in the aggregate, has not had nor
could it reasonably be expected to have a Material Adverse Effect.

 

(i)            Absence of Undisclosed Liabilities.

 

Except as set
forth on Schedule 5.1(i), neither Wisdom nor any of its Subsidiaries has
any Liability required to be disclosed in the consolidated financial statements
for Wisdom and its Subsidiaries as at June 30, 2005 that was not disclosed
therein, other than Liabilities incurred in the ordinary course of business
consistent with past practice since March 17, 2005 (none of which results from,
arises out of, relates to, or was caused by, any breach of contract, breach of
warranty, tort, infringement or violation of Applicable Law where such breach
or event, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect).

 

(j)            Compliance with Laws.

 

Neither Wisdom
nor any Subsidiary is in violation of, and to the Knowledge of Wisdom none is
under investigation by a Governmental Authority with respect to or has been
threatened to be charged with or given notice of any violation of, any
Applicable Law (including Sarbanes-Oxley), except violations that have not had,
and could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Wisdom and the Subsidiaries taken as a whole.

 

(k)           Taxes.

 

(i)            All Tax returns
required to be filed by Wisdom and each of its Subsidiaries has been accurately
prepared and timely filed in all material respects, and all Taxes for which
Wisdom or any of its Subsidiaries may be held liable (other than the Taxes
referred to in the next sentence), have been paid or accrued within the
prescribed period or any extension thereof. 
All Taxes required to be withheld by Wisdom or any of its Subsidiaries,
including but not limited to, Taxes arising as a result of payments or
distributions (or amounts allocable) to foreign Persons or to employees of
Wisdom or any

 

S-23

 

of its
Subsidiaries, have been collected and withheld, and have been either paid to
the respective Governmental Authorities, set aside in accounts for such
purpose, or accrued, reserved against, and entered upon the books and records
of the employer.

 

(ii)           Wisdom qualifies
(and has since the date of its formation qualified), and will qualify
immediately after the Closing Date, to be treated as a partnership for Federal
income Tax purposes, and neither Wisdom nor any member of Wisdom has taken a
position or filed any election inconsistent with such treatment, and no Taxing
authority has taken a position inconsistent with such treatment.

 

(iii)          Neither Wisdom nor
any of its Subsidiaries has been notified that either the Internal Revenue
Service or any other Taxing authority has raised any issues, or has an intent
to raise such issues, in connection with any Taxes or Tax return of Wisdom or
any of its Subsidiaries, which issues, if adversely determined, would be
reasonably likely to have a Material Adverse Effect.

 

(l)            Intellectual Property Rights.

 

Wisdom has
sufficient title or ownership of, or rights by license or other agreement to
all of the Intellectual Property Rights necessary for, or used in, the conduct
of its business as presently conducted and as presently proposed to be
conducted.  Such Intellectual Property
Rights are not subject to any Lien or any rights of others, however evidenced
or created which could reasonably be expected to have a Material Adverse Effect
on Wisdom or its operations.

 

(m)          Litigation Proceedings.

 

Except as set
forth on Schedule 5.1(m), there are no Proceedings pending or, to the
Knowledge of Wisdom, threatened against or involving Wisdom or any of the
Subsidiaries, whether at law or in equity, whether civil or criminal in nature
or by or before any Governmental Authority, which if adversely determined could
individually or in the aggregate have a Material Adverse Effect on Wisdom and
its Subsidiaries taken as a whole, nor to the Knowledge of Wisdom does there
exist any reasonable basis therefore.

 

(n)           Insurance.

 

Each of Wisdom
and the Subsidiaries carries insurance in such amounts and covering such risks
as is adequate for the conduct of Wisdom’s business and the value of its
properties.

 

(o)           Investment Company.

 

Neither Wisdom
nor any of its Subsidiaries is an “investment company” within the meaning of
such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder require to register as an investment
company.

 

(p)           Brokers.

 

In connection
with the transactions contemplated by this Agreement, none of Wisdom, any of
Wisdom’s Subsidiaries or any of their respective officers, directors,
stockholders or

 

S-24

employees (or any Affiliate of the foregoing)
has employed any broker or finder or incurred any actual or potential Liability
or obligation, whether direct or indirect, for any brokerage fees, commissions
or finders’ fees in connection with the transactions contemplated by this
Agreement which would be payable by Gaiam.

 

(q)           Certificates of Officers.

 

Any certificate
signed by any officer or Wisdom and delivered to Gaiam will be deemed a
representation and warranty by Wisdom to Gaiam as to the matters covered
thereby.

 

5.2          Representations and Warranties in
connection with Purchases of Subject Gaiam Shares.

 

Revolution
Living hereby represents and warrants to Gaiam, as of the date hereof and as of
the Closing Date, as follows:

 

(a)           Authorization of the Documents.

 

Revolution
Living has the requisite power and authority (corporate or otherwise) to
execute, deliver and perform the Documents to which it is a party and the
transactions contemplated thereby, and the execution, delivery and performance
by Revolution Living of the Documents to which it is a party have been duly
authorized by all requisite action by Revolution Living and each such Document,
when executed and delivered by Revolution Living, constitutes a legal, valid
and binding obligation of Revolution Living, enforceable against Revolution
Living in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
Applicable Laws affecting creditors’ rights and remedies generally, and
subject, in the case of enforceability, to general principles of equity
(regardless of whether enforcement is sought in a Proceeding at law or in
equity).

 

(b)           Investment Representations.

 

(i)            The Subject Gaiam
Shares are being acquired for Revolution Living’s own account, for investment
and not with a view to the distribution thereof in violation of the Securities
Act or applicable foreign or state securities laws.

 

(ii)           Revolution Living
understands that (i) the Subject Gaiam Shares have not been, and will not be,
registered under the Securities Act or applicable foreign or state securities
laws, by reason of their issuance by Gaiam in a transaction exempt from the
registration requirements of the Securities Act and applicable foreign and
state securities laws and (ii) the Subject Gaiam Shares must be held by
Revolution Living indefinitely unless a subsequent disposition thereof is
registered under the Securities Act and applicable foreign and state securities
laws or is exempt from registration thereof

 

(iii)          Revolution Living
is aware of the provisions of Rule 144 promulgated under the Securities Act that
permit limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions.  The
Subject Gaiam Securities will bear a legend reflecting these conditions on
transferability thereof and stop transfer instructions will be given to Gaiam’s
transfer agent accordingly.

 

S-25

 

(iv)          Revolution Living is
an “accredited investor” (as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act).

 

(v)           Gaiam has made
available to Revolution Living or its representatives information relating to
Gaiam, its ownership and management and other information about Gaiam and all
agreements, documents, records and books that Revolution Living has requested
relating to an investment in the Subject Gaiam Shares which may be acquired by
Revolution Living hereunder.  Revolution
Living has reviewed the information provided by Gaiam and understands and
accepts the risks associated with an investment in Gaiam, including the terms
of this Agreement, and the risk that matters described in the information
provided may not materialize.  Revolution
Living has had an opportunity to ask questions of, and receive answers from a
Person or Persons acting on behalf of Gaiam concerning the terms and conditions
of this investment, and answers have been provided to all of such questions to
the full satisfaction of Revolution Living. 
Revolution Living has such knowledge and experience in financial and
business matters that it is capable of evaluating the risks and merits of this
investment and to suffer a complete loss of its investment.

 

(vi)          Revolution Living is
able to bear the economic risk of its investment in the Subject Gaiam Shares
and the complete loss of all of such investment.

 

(vii)         Revolution Living is
able to fend for itself in the transactions contemplated by this Agreement, can
bear the economic risk of investment in the Subject Gaiam Shares and has such
knowledge and experience in financial or business matters to be capable of
evaluating the merits and risks of the investment in the Subject Gaiam
Shares.  Revolution Living is fully aware
of the speculative nature of the investment in the Subject Gaiam Shares and the
financial risk involved.  Revolution
Living has consulted with its professional, tax and legal advisors with respect
to the federal, state, local and foreign income tax consequences of the
undersigned’s investment in Gaiam. thereto.

 

(viii)        Revolution Living
has not employed or otherwise retained any broker or finder in connection with
the transactions contemplated by this Agreement

 

(ix)           Revolution Living
is not purchasing the Subject Gaiam Securities as a result of any
advertisement, article, notice or other communication regarding the Subject
Gaiam Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

(x)            Neither Gaiam nor
any other Person will have or be subject to any liability or indemnification
obligation to Revolution Living or any other Person resulting from the
distribution to Revolution Living, or Revolution Living’s use of, any
information provided to Gaiam, including without limitation, the information
described in clause (v), related to the business of Gaiam and any information,
projections, documents or material made available to Revolution Living, whether
orally or in writing, or in any other form in expectation or furtherance of the
transactions contemplated by this Agreement, except

 

S-26

 

Gaiam to the
extent that a representation or warranty in this Agreement made by Gaiam
specifically identifies and addresses such information.

 

(xi)           Except for the
representations and warranties contained in this Agreement, Revolution Living
acknowledges that none of Gaiam, its Affiliates and any other Person makes any
other express or implied representation or warranty with respect to (i) the
Subject Gaiam Shares, including without limitation the probable success or
profitability of ownership of Subject Gaiam Shares, (ii) Gaiam, including
without limitation, the operation of its business by its officers, directors,
managers, employees, or shareholder, (iii) the business, assets, performance
(whether historical, present or future) of Gaiam, including without limitation
the probable success or profitability of Gaiam or (iv) otherwise with respect
to any other information provided to Revolution Living or other Persons,
whether on behalf of Gaiam or such other Persons.

 

(c)           No Conflicts.

 

The execution,
delivery and performance by Revolution Living of this Agreement and each of the
other Documents and the consummation of the transactions contemplated hereby
and thereby, and compliance with the provisions hereof and thereof by
Revolution Living, does not or will not, as the case may be, (a) violate any
provision of Applicable Law or any Order applicable to Revolution Living or any
of its properties or assets or (b) conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute (with notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any Lien upon
any of the properties or assets of Revolution Living under any material
Contract to which it is a party or by which Revolution Living or its assets or
properties are or may be bound or (c) conflict with or violate any provision of
the Fundamental Documents of Revolution Living currently in effect.

 

(d)           Approvals.

 

No Permit or
Order, authorization, consent or approval of or by, or any notification of or
filing with, any Person is required in connection with the (i) execution,
delivery or performance by Revolution Living of each Document to which it is a
party or (ii) sale of the Subject Wisdom Units to Gaiam.

 

(e)           No Short Position.

 

Neither
Revolution nor any of its Affiliates has an open short position in the Class A
Common Stock, and Revolution agrees that it will not, and that it will cause
its Affiliates not to, engage in any short sales of, or hedging transactions
with respect to the Class A Common Stock.

 

S-27

ARTICLE VI

ADDITIONAL COVENANTS

 

6.1                               Advice
of Changes; Filings.

 

To the extent
requested by Revolution Living, Gaiam shall confer with Revolution Living on a
regular and frequent basis as reasonably requested by Revolution Living, report
on operational matters and promptly advise Revolution Living orally and, if
requested by Revolution Living, in writing of any material change with respect
to Gaiam or any Subsidiary.  Gaiam shall
promptly provide to Revolution Living (and its counsel) copies of all filings
made by Gaiam or any Subsidiary with any Governmental Authority (other than the
Commission Filings) in connection with this Agreement and the transactions
contemplated hereby.  This Section 6.1
shall terminate upon the earlier to occur of (i) the expiration of the Option
(as defined in the Shareholders Agreement), and (ii) expiration of Revolution
Living’s right to invoke the buy/sell procedures under Section 5.4 of the
Shareholders Agreement.

 

6.2                               Reasonable
Efforts; Notification.

 

Upon the terms
and subject to the conditions set forth in this Agreement, each of the Parties
agrees to use all commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other Party in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including (i) ensuring that
all conditions to the Closing set forth in this Agreement are satisfied as soon
as reasonably practical, including executing and delivering all documents
required to be delivered by such Party at any the Closing and taking any and
all actions which may be necessary on its part to cause each other Party to the
Documents to so execute and deliver each Document, (ii) the obtaining of all
necessary actions or non-actions, waivers, consents and approvals from
Governmental Authorities and the making of all necessary registrations and
filings (including filings with Governmental Authorities, if any) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental
Authority, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of any of the transactions contemplated by this
Agreement, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Authority vacated or reversed, and
(v) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement.  In
connection with and without limiting the foregoing, Gaiam and the Gaiam Board
shall (x) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to this
Agreement or any of other transactions contemplated by this Agreement and
(y) if any state takeover statute or similar statute or regulation becomes
applicable to any transaction contemplated by this Agreement, take all action
not prohibited by such statute or regulation to ensure that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect
of such statute or regulation on this Agreement and the transactions
contemplated by this

 

S-28

 

Agreement. 
Nothing in this Agreement shall be deemed to require Gaiam or Revolution
Living to dispose of or hold separate any asset or collection of assets.

 

6.3                               NASD.

 

As soon as
reasonably practical, Gaiam will file a listing application with the NASD with
respect to the shares of Class A Common Stock being sold to Revolution Living
pursuant to this Agreement.  Revolution
Living agrees to reasonably cooperate and assist Gaiam, to the extent
necessary, in the preparation of such listing application.

 

6.4                               Litigation
Cooperation.

 

Should any
third-party suit or Proceeding be instituted by or against Revolution Living in
any manner relating to Gaiam, Gaiam shall, without expense to Revolution
Living, make available Gaiam and its officers, employees and agents and Gaiam’s
books and records, to the extent that Revolution Living may deem them
reasonably necessary in order to prosecute or defend any such suit or
Proceeding.  Should any third-party suit
or Proceeding be instituted by or against Gaiam in any manner relating to
Revolution Living or Wisdom, Revolution Living shall, without expense to Gaiam,
make available Revolution Living and its officers, employees and agents and
Revolution Living’s books and records, to the extent that Gaiam may deem them
reasonably necessary in order to prosecute or defend any such suit or
Proceeding.

 

6.5                               Performance
of Documents; Inconsistent Agreements.

 

Each of the
Parties will perform and observe all of the terms and provisions of each Document
to be performed or observed by it, maintain each such Document in full force
and effect, and enforce such Document in accordance with its terms. Neither
Party will enter into any agreement containing any provision which could (a) be
violated or breached by the exercise or performance by such Party of any of its
respective rights or obligations under any Document, or (b) impair the ability
of such Party to comply with the terms of the Documents.

 

6.6                               Disclosure
of Transactions and Other Material Information.

 

Gaiam will
file a current report of Form 8-K with the Commission describing the terms of
the transactions contemplated by the Documents and including as exhibits to
such Form 8-K the form of this Agreement, the Subject Gaiam Shares and the
Shareholder Agreement, in the form required by the Exchange Act and within the
time periods required by the Exchange Act. 
Revolution Living shall file a Statement of Beneficial Ownership on
Schedule 13D and a Form 3 along with such other filings as may be required by
federal securities laws and the rules and regulations of the Commission, within
the time periods required by such laws.

 

6.7                               Public
Announcements.

 

(a)           Neither Party will make any written
or other public disclosure regarding the other Party without the prior written
consent of the other Party, except as may be required by Applicable Law or the
rules and regulations of Nasdaq (including pursuant to Section 6.3)
above) and, in such case, by first promptly notifying the other Party of such
obligation and allowing the other Party to provide comment to any such
disclosure prior thereto.

 

S-29

(b)           Except as otherwise required by
Applicable Law or by the rules of Nasdaq, so long as this Agreement is in
effect, none of Gaiam (or any of its Subsidiaries),or Revolution Living (or any
of its Subsidiaries), will issue or cause the publication of any press release
or make any other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent will not be unreasonably withheld. 
Gaiam and Revolution Living will cooperate with each other in the
development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such releases and
announcements as far in advance as practicable.

 

(c)            This
Section 6.7 shall terminate upon the earliest to occur of the expiration
or exercise of the Option.

 

6.8                               Revolution
Living Information Rights.

 

(a)           In the event Gaiam is no longer a
reporting company under, and is no longer required to file periodic reports
pursuant to, the Exchange Act, Gaiam will furnish Revolution Living with the
following:

 

(i)            Quarterly
Reports.  As soon as available, but
not later than 45 days after the end of each quarter in each fiscal year
(other than the last quarter in each fiscal year) of Gaiam, a consolidated
balance sheet of Gaiam and the related consolidated statements of income,
shareholders’ equity and cash flows, unaudited but prepared in accordance
with GAAP consistently applied and certified by the President or the Chief
Financial Officer of Gaiam, such consolidated balance sheet to be as of
the end of such quarter and such consolidated statements of income,
shareholders’ equity and cash flows to be for such quarter and for
the period from the beginning of the fiscal year to the end of such
quarter, in each case with comparative statements for the prior fiscal year.

 

(ii)           Annual Audit.  As soon as available, but not later than 90
days after the end of each fiscal year of Gaiam, audited consolidated financial
statements of Gaiam, which will include a consolidated statement of cash flows
and statement of operations for such fiscal year and a consolidated balance
sheet as at the last day thereof, each prepared in accordance with GAAP
consistently applied (except as set forth in the notes thereto), and
accompanied by the report of a firm of independent certified public accountants
selected by the Gaiam Board (the “Gaiam Accountants”).  Gaiam will maintain a system of accounting
sufficient to enable the Gaiam Accountants to render the report referred to in
this clause.

 

(iii)          Annual Operating
Plan.  Within 60 days after the
beginning of each fiscal year of Gaiam, an annual operating plan, including a
qualitative summary by the President of Gaiam and an updated consolidated
budget, projected income statements, balance sheets and cash flow statements
(setting forth in detail the assumptions therefor) on a monthly basis for Gaiam
and its Subsidiaries for such fiscal year of Gaiam.

 

(iv)          GAAP Reporting.  The financial statements and reports
delivered under this subsection will fairly present in all material respects
the financial position and results

 

S-30

of operations
of Gaiam at the dates thereof and for the periods then ended and will have been
prepared in accordance with GAAP, in the case of unaudited financial statements,
subject to normal year-end audit adjustments and the absence of footnotes.

 

(b)           Access to Records and Properties.  Gaiam will afford Revolution Living, during
normal business hours and with reasonable advance notice, reasonable access to
(i) visit and inspect the assets, properties and information (financial or
otherwise) of Gaiam, (ii) examine upon reasonable advance notice, the books of
accounts and records of Gaiam and (iii) make copies of such records and permit
Revolution Living to discuss all aspects of Gaiam and each Subsidiary with any
officers, employees of Gaiam and with the Gaiam Accountants, in each case
consistent with the highest level of access to information and inspection
rights granted by Gaiam to other shareholders; provided, however,
that such investigation will not unreasonably interfere with the operations of
Gaiam.  Gaiam will instruct the Gaiam
Accountants to discuss such aspects of the financial condition of Gaiam with
Revolution Living as Revolution Living may reasonably request, and to permit
Revolution Living to inspect, copy and make extracts from such financial
statements, analyses, work papers and other documents and information
(including electronically stored documents and information) prepared by the
Gaiam Accountants with respect to Gaiam as Revolution Living may reasonably
request.  Revolution Living acknowledges
that any information obtained from Gaiam or its officers and employees may be
material undisclosed information under federal and state securities laws, and
that Revolution Living agrees to hold all such information confidential and not
trade on the basis of any material undisclosed information obtained from Gaiam
or its officers and employees.

 

(c)           Termination.  This Section 6.8 shall terminate upon
Revolution Living and its permitted transferees beneficially owning in the
aggregate fewer than five percent (5%) of the Fully-Diluted Capital Stock.

 

6.9                               Nonsolicitation.

 

From and after
the Closing Date, neither Wisdom nor Gaiam will, and neither will permits its
controlled Subsidiaries to:  (i) except
as otherwise provided below, solicit any material business customers of the
other Party (directly or indirectly) for the express purpose of diverting
existing business of such customers; (ii) solicit any content providers or
licensors of the other Party (directly or indirectly) for the express purpose
of causing, inviting or encouraging any such content provider to alter or
terminate his, her or its business relationship with the other Party; or (iii)
hire or solicit any employees of the other Party (directly or indirectly) for
the purpose of causing, inviting or encouraging any such employee to alter or
terminate his, her or its employment relationship with the other Party; provided,
that it shall not be a violation of this provision to conduct general
solicitations of employment at a career fair or similar conference for
employers or in a journal, newspaper or other publication of general
circulation or in trade publications or other similar media.  Each Party shall notify the other, from time
to time, of the business customers, licensors and content providers it believes
to be covered by the terms of this Section.  Notwithstanding clause (i)
above, it shall not be a violation of this Section 6.9 to solicit
any cable television multi-system operator (MSO), internet portal or service,
wireless service or equipment provider, satellite service or consumer equipment
provider, or other aggregator or distributor of (x) video on demand (VOD), (y)
video over internet protocol (VoIP) or (z) similar mechanism or media to
distribute content produced, controlled, or licensed by a Party or to

 

S-31

 

engage in
activities contemplated by the Cooperation Agreement.  If, at any time, either Wisdom or Gaiam, as
the case may be (the “Breaching Party”), is in breach of its obligations
to the other party (the “Nonbreaching Party”) under the Cooperation
Agreement, the Nonbreaching Party shall be relieved of its obligations under
this Section 6.9 until such breach is cured by the Breaching Party and
the Breaching Party is no longer in default of its obligations under the
Cooperation Agreement.  This Section
6.9 shall terminate upon termination of the Cooperation Agreement.

 

ARTICLE VII

CONDITIONS TO CLOSING

 

7.1                               Conditions
to Revolution Living’s Obligations.

 

The obligation
of Revolution Living to consummate the applicable Closing is subject to the
satisfaction of the following conditions precedent (unless waived by Revolution
Living):

 

(a)           Gaiam shall have performed its
obligations under, and shall have complied with, all the covenants and
agreements set forth in this Agreement in all material respects, and all
representations and warranties contained in Article IV shall be true and
correct in all material respects (except those representations and warranties
that are qualified as to materiality, which shall be true and correct in all
respects) as of the Closing Date (except for those representations and
warranties which are made as of a specific date, which shall have been true and
correct as of such date).

 

(b)           Gaiam and Rysavy each shall have duly
executed and delivered to Revolution Living each of the Documents to which
Gaiam and/or Rysavy, as the case may be, is to be a party, and such Documents
shall be in full force and effect and be binding against Gaiam and/or Rysavy,
as the case may be, as of the Closing.

 

(c)           No Applicable Law shall have been
enacted after the date hereof and no Proceeding shall be pending which
prohibits or seeks to prohibit, or materially restricts or delays the
consummation of the transactions contemplated by the Documents or materially
restricts or impairs the ability of Revolution Living to own Securities of
Gaiam.

 

(d)           There shall be no Proceeding pending
or threatened by the NASD to terminate the NASD’s quotation of the Common Stock
on the Nasdaq.

 

(e)           Gaiam shall have made and/or obtained
all notices, consents, approvals, and authorizations necessary to consummate
the transactions contemplated hereby, including without limitation all
applicable filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.

 

(f)            Gaiam shall have in effect director
and officer liability insurance with coverage of at least $10,000,000 from a
nationally recognized insurance company rated “A” or above, and otherwise in
form and substance reasonably satisfactory to Revolution Living.

 

S-32

 

7.2                               Conditions
to Gaiam’s Obligations.

 

The obligation
of Gaiam to consummate the applicable Closing is subject to the satisfaction of
the following conditions precedent (unless waived by Gaiam):

 

(a)           Each of Revolution Living and Wisdom
shall have performed its obligations under, and shall have complied with, all
the covenants and agreements set forth in this Agreement in all material
respects, and all representations and warranties contained in Article V
shall be true and correct in all material respects (except those
representations and warranties that are qualified as to materiality, which shall
be true and correct in all respects) as of the Closing Date (except for those
representations and warranties which are made as of a specific date, which
shall have been true and correct as of such date).

 

(b)           Revolution Living and Case each shall
have duly executed and delivered to Gaiam each of the Documents to which
Revolution Living and/or Case, as the case may be, is to be a party, and such
Documents shall be in full force and effect and be binding against Revolution
Living and/or Case, as the case may be, as of the Closing.

 

(c)           No Applicable Law shall have been
enacted after the date hereof and no Proceeding shall be pending which
prohibits or seeks to prohibit, or materially restricts or delays the
consummation of the transactions contemplated by the Documents or materially
restricts or impairs the ability of Gaiam to own Securities of Wisdom.

 

(d)           Revolution Living shall have made
and/or obtained all notices, consents, approvals, and authorizations necessary
to consummate the transactions contemplated hereby, including without
limitation all applicable filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.

 

(e)           Any requisite consent of investors in
Wisdom (other than Revolution Living) to the terms of this Agreement and the
other Documents shall have been obtained.

 

(f)            The requisite members of Wisdom will
have executed and delivered the Wisdom LLC Agreement.

 

ARTICLE VIII

ISSUANCES AND TRANSFER OF SECURITIES

 

8.1                               Restrictive
Legends.

 

Each
certificate evidencing the Subject Gaiam Shares or the Subject Wisdom Units,
and each certificate for any such securities issued to subsequent transferees
of any such certificate, will (unless otherwise permitted by the Shareholders
Agreement) be stamped or otherwise imprinted with a legend in substantially the
following form:

 

“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS.  THESE

 

S-33

 

SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED OR PLEDGED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS, OR IF THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OR REGISTRATION OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS.  THESE
SECURITIES ARE SUBJECT TO THE TERMS AND PROVISIONS OF THE TRANSACTION
AGREEMENT, DATED AS OF AUGUST 4, 2005, AS AMENDED FROM TIME TO TIME, AND THE
HOLDER OF THIS CERTIFICATE IS ENTITLED TO THE BENEFITS THEREOF.  COPIES OF SUCH AGREEMENTS MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE ISSUER HEREOF.”

 

8.2                               Removal
of Legend.

 

Each
certificate or other instrument evidencing the securities issued upon the
transfer of any Subject Gaiam Shares or Subject Wisdom Units, as the case may
be (and each certificate or other instrument evidencing any untransferred
balance of such Securities) will bear the legend set forth in Section 8.1
hereof unless (i) in the opinion of counsel to the holder of such Securities
registration of future transfer is not required by the applicable provisions of
the Securities Act or (ii) Wisdom will have waived the requirement of such
legends with respect to Subject Wisdom Units; provided, however,
that such legend will not be required on any certificate or other instrument
evidencing the securities issued upon such transfer in the event such transfer
will be made in compliance with the requirements of Rule 144 (as amended from
time to time) promulgated under the Securities Act (or successor rule thereto).

 

ARTICLE IX

TERMINATION

 

9.1                               Termination.

 

This Agreement
may not be terminated (except by written agreement of all Parties hereto) after
the Closing.  This Agreement may be
terminated at any time prior to the Closing by:

 

(a)           the mutual written consent of each
Party hereto; or

 

(b)           Revolution Living, if there has been
a breach by Gaiam of any representation, warranty, covenant or agreement on the
part of Gaiam contained in this Agreement which breach is material and which
Gaiam fails to cure within five (5) Business Days after written notice thereof
is given by Revolution Living (except no cure period will be provided for a
breach which by its nature cannot be cured); or

 

(c)           Gaiam if there has been a breach by
Revolution Living or Wisdom of any representation, warranty, covenant or
agreement on the part of Revolution Living or Wisdom contained in this
Agreement which breach is material and which Revolution Living or Wisdom

 

S-34

 

fails to cure within five (5) Business Days
after written notice thereof is given by Gaiam (except no cure period will be
provided for a breach which by its nature cannot be cured); or

 

(d)           Revolution Living or Gaiam, if any
permanent injunction or other Order of a Governmental Authority preventing the
Closing will have become final and nonappealable; or

 

(e)           Revolution Living or Gaiam if the
Closing does not occur on or prior to August 31, 2005;

 

provided,
however, that neither Revolution Living or Gaiam will be entitled to
terminate this Agreement pursuant to Section 9.1(b), Section 9.1(c)
or Section 9.1(e) if such Party’s fraud or breach of this Agreement
(including Section 6.2) has prevented the satisfaction of a condition.

 

9.2                               Termination
Procedures.

 

Any
termination pursuant to Section 9.1(a) will be effected by a written
instrument signed by Revolution Living and Gaiam, and any other termination
pursuant to Section 9.1 will be effected by written notice from the
Party or Parties so terminating to the other Party hereto, which notice will
specify the Section of this Agreement pursuant to which this Agreement is being
terminated.

 

9.3                               Effect
of Termination.

 

In the event
of the termination of this Agreement as provided in Section 9.1, this
Agreement will be of no further force or effect and there will be no liability
or obligation on the part of Revolution Living or Gaiam or their respective
officers, directors or Affiliates, except for this Section 9.3, Sections
6.4 and 6.7 and Article X, each of which will survive the
termination of this Agreement; provided, however, that the
Liability of any Party for any breach by such party of the representations,
warranties, covenants or agreements of such Party set forth in this Agreement
occurring prior to the termination of this Agreement will survive the
termination of this Agreement.

 

ARTICLE X

MISCELLANEOUS

 

10.1               Parties In Interest;
Assignment.

 

This Agreement
will bind and inure to the benefit of the Parties and their respective
successors, assigns, heirs and personal representatives.  No Party may assign this Agreement or any of
its rights, interests or obligations hereunder or thereunder without the prior
written consent of the other Party; provided, however, that
Revolution Living may assign any of its rights under this Agreement, or any
other document or investment contemplated hereby to Case or any Affiliate,
member or limited partner of Revolution Living controlled by Case.  Upon any transfer of any Subject Gaiam
Shares, the transferee will be bound by, and entitled to the benefits of, this
Agreement with respect to such transferred Securities in the same manner as the
transferring Person.  Upon any transfer
of any Subject Wisdom Units, the transferee will be

 

S-35

 

bound by, and entitled to the benefits of,
this Agreement with respect to such transferred Securities in the same manner
as the transferring Person.

 

10.2               Entire Agreement.

 

This
Agreement, each other Document and the other writings and agreements referred
to herein or delivered pursuant hereto contain the entire agreement and understanding
of the Parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the Parties with respect thereto.

 

10.3               Notices.

 

All notices,
demands and requests of any kind to be delivered to any party in connection
with this Agreement (whether or not required to be delivered hereunder) will be
in writing and will be deemed to have been duly given if personally delivered,
if sent by facsimile or if sent by internationally-recognized overnight courier
or by registered or certified mail, return receipt requested and postage
prepaid, addressed as follows:

 

(a)           if to Gaiam, to:

 

	
  Gaiam, Inc.

  
	
  360
  Interlocken Blvd.

  
	
  Broomfield,
  Colorado  80021

  
	
  Attention:

  	
  Jirka Rysavy

  
	
  Telephone:

  	
  303-222-3645

  
	
  Telecopy:

  	
  303-222-3609

  

 

 

with a copy
to:

 

	
  Bartlit Beck
  Herman Palenchar & Scott LLP

  
	
  1899
  Wynkoop, Suite 800

  
	
  Denver,
  Colorado 80202

  
	
  Attention:

  	
  Thomas R.
  Stephens

  
	
  Telephone:

  	
  303-592-3100

  
	
  Telecopy:

  	
  303-592-3140

  

 

(b)           If to Revolution Living, to:

 

	
  Revolution
  Living LLC

  
	
  1717 Rhode
  Island Avenue, N.W.

  
	
  Washington,
  D.C. 20036

  
	
  Attention:

  	
  Ronald A.
  Klain

  
	
  Telephone:

  	
  202-776-1405

  
	
  Telecopy:

  	
  202-776-1499

  

 

S-36

 

with a copy
to:

 

	
  O’Melveny
  & Myers LLP

  
	
  1625 Eye
  Street, N.W.

  
	
  Washington,
  D.C. 20006

  
	
  Attention:

  	
  David G.
  Pommerening

  
	
  Telephone:

  	
  202-383-5110

  
	
  Telecopy:

  	
  202-383-5414

  

 

(c)           If to Wisdom, to:

 

	
  Life Balance
  Media Holdings LLC

  
	
  10 East 40th
  Street, 26th Floor

  
	
  New York, NY
  10016

  
	
  Attention:

  	
  C.J. Kettler

  
	
  Telephone:

  	
  212-497-8065

  
	
  Telecopy:

  	
  212-213-0540

  

 

with a copy
to:

 

	
  O’Melveny
  & Myers LLP

  
	
  1625 Eye
  Street, N.W.

  
	
  Washington,
  D.C. 20006

  
	
  Attention:

  	
  David G.
  Pommerening

  
	
  Telephone:

  	
  202-383-5110

  
	
  Telecopy:

  	
  202-383-5414

  

 

or to such
other address as the Party to who notice is to be given may have furnished to
the other Party hereto in writing in accordance with the provisions of this Section
10.3.  Any such notice or
communication will be deemed to have been received (i) in the case of personal
delivery or delivery by facsimile, on the date of such delivery, (ii) in the
case of internationally-recognized overnight courier, on the next Business Day
after the date when sent and (iii) in the case of mailing, on the third
Business Day following that on which the piece of mail containing such
communication is posted.

 

10.4               Amendments.

 

This Agreement
may not be modified or amended, or any of the provisions hereof waived, except
by written agreement of the Parties.

 

10.5               Extension; Waiver.

 

The Parties
may (a) extend the time for the performance of any of the obligations or other
acts of the other Party, (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant to
this Agreement and (c) waive compliance with any of the agreements or
conditions contained in this Agreement. 
Any agreement on the part of a party to any such extension or waiver
will be valid only if set forth in

 

S-37

 

an instrument in writing signed on behalf of
such party, and any such waiver will not operate or be construed as a waiver of
any subsequent breach by the other party.

 

10.6               Counterparts.

 

This Agreement
may be executed in any number of original or facsimile counterparts, and each
such counterpart hereof will be deemed to be an original instrument, but all
such counterparts together will constitute but one agreement.  Facsimile counterpart signatures to this
Agreement will be acceptable and binding.

 

10.7               Governing Law.

 

(a)           All questions concerning the
construction, interpretation and validity of this Agreement will be governed by
and construed and enforced in accordance with the domestic laws of the State of
Colorado without giving effect to any choice or conflict of law provision or
rule (whether in the State of Colorado or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Colorado.  In furtherance of the
foregoing, the internal law of the State of Colorado will control the
interpretation and construction of this Agreement, even if under such
jurisdiction’s choice of law or conflict of law analysis, the substantive law
of some other jurisdiction would ordinarily or necessarily apply.

 

(b)           BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE
THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF
THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS
RELATED HERETO.

 

10.8               No Third Party Reliance.

 

Anything
contained herein to the contrary notwithstanding, the representations and
warranties contained in this Agreement (a) are being given as an inducement to the
other Party to enter into this Agreement and the other Documents (and each
Party acknowledges that the other Party has expressly relied thereon) and (b)
are solely for the benefit of the other Party. 
Accordingly, no third party (including, without limitation, any holder
of Securities of Gaiam, Revolution Living or Wisdom) or anyone acting on behalf
of such third party (other than a Party) will be a beneficiary of such
representations and warranties and no such third party will have any rights of
contribution against any Party with respect to such representations or
warranties or any matter subject to or resulting in indemnification under this
Agreement or otherwise.

 

10.9               Submission to Jurisdiction.

 

Any Proceeding
with respect to this Agreement may be brought in the courts of the State of
Colorado and the United States of America for the District of Colorado and, by
execution and

 

S-38

 

delivery of this Agreement, each Party hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts.  Each Party hereby irrevocably waives, in
connection with any such action or Proceeding, any objection, including, without
limitation, any objection to the venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
action or Proceeding in such respective jurisdictions.  Each Party hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
Proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at its address as set forth herein.  Nothing herein will affect the right of any
Party to serve process in any other manner permitted by Applicable Law or to
commence Proceedings or otherwise proceed against any other Party in any other
jurisdiction.

 

10.10             Severability.

 

It is the
desire and intent of the Parties that the provisions of this Agreement and the
other Documents be enforced to the fullest extent permissible under the
Applicable Law and public policies applied in each jurisdiction in which
enforcement is sought.  Accordingly, in
the event that any provision of this Agreement or the other Documents would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, will be ineffective, without
invalidating the remaining provisions of this Agreement or such other Document
or affecting the validity or enforceability of such provision in any
jurisdiction.  Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not be invalid,
prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or such other Document or affecting the validity
or enforceability of such provision in any other jurisdiction.

 

10.11             Independence of Agreements.

 

All agreements
and covenants hereunder will be given independent effect so that if a certain
action or condition constitutes a default under a certain agreement or
covenant, the fact that such action or condition is permitted by another
agreement or covenant will not affect the occurrence of such default, unless
expressly permitted under an exception to such covenant.  In addition, all representations and
warranties hereunder will be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject
matter is correct or is not breached will not affect the incorrectness of or a
breach of the representation and warranty first referred to in this sentence.

 

10.12             Further Assurances.

 

Each Party
will duly execute and deliver, or cause to be duly executed and delivered, at
its own cost and expense, such further instruments and documents and to take
all such action, in each case as may be necessary or proper in the reasonable
judgment of any other Party to carry out the provisions and purposes of the
Agreement, the other Documents, and to comply with Applicable Law, including,
but not limited to, all information necessary to effect any securities,
governmental, bank regulatory or other governmental filings.

 

S-39

 

10.13             Remedies.

 

In case any
one or more of the representations, warranties, covenants and/or agreements set
forth in this Agreement will have been breached by a Party, the other Party may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including an action for damages as a result of any such breach
and/or an action for specific performance of any such covenant or agreement
contained in this Agreement.

 

 

*    *    *   
*    *

 

IN
WITNESS WHEREOF, each of the undersigned has duly
executed this Transaction Agreement as of the date first written above.

 

	
   

  	
  GAIAM:

  	 

	 
	
   

  	
   

  
	 
	
   

  	
  GAIAM, INC.

  
	 
	
   

  	
   

  
	 
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  Name:

  	 

	
   

  	
   

  	
  Title:

  	 

	
   

  	
   

  	 

	 
	
   

  	
   

  
	 
	
   

  	
  REVOLUTION LIVING:

  
	 
	
   

  	
   

  
	 
	
   

  	
  REVOLUTION LIVING LLC

  
	 
	
   

  	
   

  
	 
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  Name:

  	 

	
   

  	
   

  	
  Title:

  	 

	
   

  	
   

  	 

	 
	
   

  	
   

  
	 
	
   

  	
  WISDOM:

  
	 
	
   

  	
   

  
	 
	
   

  	
  LIFE BALANCE MEDIA HOLDINGS LLC

  
	 
	
   

  	
   

  
	 
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  Name:

  	 

	
   

  	
   

  	
  Title:

  	 

						

 

S-40

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