Document:

Strategic Alliance Agreement

 EXHIBIT 10.4 
  
 STRATEGIC ALLIANCE AGREEMENT 
  

THIS STRATEGIC ALLIANCE AGREEMENT (“Agreement”) is made and entered into as of the     th day of
                     2004 (the “Effective Date”) by and among (i) MHI Hospitality, L.P., a Delaware limited partnership (the
“Partnership”), (ii) MHI Hospitality Corporation, a Maryland corporation and the general partner of the Partnership (the “REIT”) (the REIT and the Partnership are sometimes collectively referred to herein as the
“Company”), and (iii) MHI Hotels Services LLC (“MHI Hotels Services”). 
  
 RECITALS 
  
 THE PARTIES
ENTER THIS AGREEMENT on the basis of the following facts, understandings and intentions: 
  
 A. The REIT proposes to undertake an underwritten initial public offering (the “Offering”) of shares of its common stock, par
value $0.01 per share (“Shares”). 
  
 B. The REIT will serve as general partner of the Partnership and initially will own a majority interest in the Partnership. 
  
 C. The Company has designated MHI Hotels Services as its preferred hotel management company. In conjunction with the execution of this
Agreement, MHI Hotels Services will amend and restructure its existing management agreements by entering into a master management agreement (the “Master Management Agreement”) with respect to certain of the initial hotel properties upon
contribution of those assets to the Partnership in exchange for a cash payment of $2.0 million. 
  
 D. MHI Hotels Services desires to provide the Company, on an exclusive basis, with information regarding hotel investment opportunities
that become known to MHI Hotels Services as set forth herein. 
  
 E. The parties have determined that, in connection with the Offering, it is desirable to set forth in this Agreement certain covenants and agreements among the parties. 
  
 AGREEMENTS 
  
 NOW THEREFORE, IN CONSIDERATION of the mutual covenants and promises of the
parties provided for in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
  
 ARTICLE I 
  
 1. Acquisition Opportunities. 
  
 (a) During the Term (as defined in Article V below), MHI Hotels Services agrees to promptly notify the Company, on an exclusive basis, of
any opportunity to invest in, acquire or develop a property, whether in fee or leasehold, and, whether in whole or in part, that 

 
is suitable for, the development or operation of a hotel (“Hotel Property”) which is presented to MHI Hotels Services or its subsidiaries and that
meets the Company’s acquisition criteria, as the Company may communicate such acquisition criteria to MHI Hotels Services from time to time. For purposes of this Agreement, a Hotel Property includes, but is not limited to, full-service upper
up-scale, up-scale and mid-scale hotels (as such terms are used by Smith Travel Research or similar industry source), whether or not such hotels are underperforming in their respective marketplace, or may be functionally obsolete. MHI Hotels
Services shall promptly provide to the Company all information, materials and documents reasonably available to MHI Hotels Services or its subsidiaries with respect to such Hotel Property or opportunity, subject to the requirements of any
confidentiality agreements with third parties, provided, however, that any confidentiality agreement must permit MHI Hotels Services to notify the Company of such hotel property investment, acquisition or development opportunity. Notwithstanding the
foregoing, MHI Hotels Services shall refer any such opportunity directly to the Company prior to execution of a confidentiality agreement but otherwise will use its best efforts, at no additional out-of-pocket expense to MHI Hotels Services, to
negotiate any confidentiality agreement so as to permit disclosure of the opportunity, and all information, materials and documents with respect thereto, to the Company. 
  
 (b) The Company shall notify MHI Hotels Services, within 10 business days following the Company’s
receipt from MHI Hotels Services of the information with respect to a Hotel Property investment, acquisition or development opportunity as described in Section 2(a), whether the Company intends to pursue such opportunity. During such 10 day period,
if the Company notifies MHI Hotels Services that the Company intends to pursue such opportunity, MHI Hotels Services shall not provide any information regarding such opportunity to any third party until otherwise notified by the Company, provided
that the Company is making commercially reasonable efforts to conduct due diligence or is otherwise actively pursuing the investment, acquisition or development opportunity. If the Company (i) notifies MHI Hotels Services that the Company does not
intend to pursue the opportunity, or (ii) fails to notify MHI Hotels Services by the end of the 10 business day period that the Company intends to pursue the opportunity, then, in either event, MHI Hotels Services may (A) pursue the opportunity on
its own behalf or (B) notify other capital sources of the opportunity; provided, however, that, if MHI Hotels Services subsequently becomes aware that the price or other terms with respect to the opportunity previously presented to the Company have
changed materially and MHI Hotels Services is pursuing the acquisition opportunity on its own behalf, rather than in conjunction with another capital source, MHI Hotels Services will notify the Company of any such change in terms with respect to
such opportunity in accordance with the provisions of this Article I, Section 2 and agrees to provide the Company with another chance to pursue the opportunity in accordance with the provisions set forth in this Article I(b). 
  
 ARTICLE II 
  
 2. Management Agreements. 
  
 (a) Subject to the provisions of this Article II, the Company
agrees to cause MHI Hospitality TRS, LLC (the “TRS Lessee”) to offer to MHI Hotels Services the opportunity to manage any Hotel Property acquired by the Company or one of its subsidiaries and leased to 

  

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TRS Lessee during the Term which meets any of the following criteria: 
  
 (i) the Hotel Property is not encumbered by a management contract that would continue beyond the date of the
Company’s acquisition of the Hotel Property; or 
  
 (ii) no termination fee is payable by the Company in connection with termination of any then existing management contract for the Hotel Property; or 
  
 (iii) if the then existing management agreement for the Hotel Property can be terminated at the time of the Company’s purchase of the
Hotel Property upon payment of a termination fee, MHI Hotels Services pays such termination fee. 
  
 (b) Not less than 30 days prior to the Company’s acquisition of a Hotel Property that meets the criteria described in Section 2(a)
above, the Company will notify MHI Hotels Services of the Company’s proposed acquisition of the Hotel Property and will make available to MHI Hotels Services all information reasonably available to the Company with respect to the Hotel
Property. MHI Hotels Services shall have 10 business days from receipt of such notice from the Company to notify the Company in writing that MHI Hotels Services elects to manage the Hotel Property pursuant to the master management agreement which is
substantially in the form of Annex A (the “Master Management Agreement”). If MHI Hotels Services (i) notifies the Company that MHI Hotels Services does not intend to manage the Hotel Property or (ii) fails by the end of the 10 business day
period to notify the Company of its election to manage the Hotel Property, then, in either event, the Company may offer management of the Hotel Property to other hotel management companies on such terms as the Company shall determine and MHI Hotels
Services shall have no further rights with respect thereto. 
  
 (c) With respect to Hotel Properties acquired by the Company in the future, the parties intend to utilize the Master Management Agreement between the TRS Lessee and MHI Hotels Services. Notwithstanding the foregoing,
any material change in the provisions of the Master Management Agreement, as they relate to the rights and obligations of the TRS Lessee, shall be subject to approval by a majority of the directors of the REIT who, at the time, are
“independent” in accordance with rules promulgated from time to time by the American Stock Exchange (“AMEX”) for companies listed on the AMEX (“Independent Directors”). 
  
 (d) Notwithstanding the provisions of this Article II, if a
majority of the Independent Directors in good faith conclude for valid business reasons that a management company other than MHI Hotels Services should manage one or more Hotel Properties, the Company shall so notify MHI Hotels Services and MHI
Hotels Services shall not have the right to manage such Hotel Properties. 
  
 ARTICLE III 
  
 3. Right
to Designate Director of the REIT. 
  
 (a)
During the Term, MHI Hotels Services shall have the right to designate one (1) person (the “Designee”) as nominee for election to the Board of Directors of the REIT at each 

  

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meeting of stockholders of the REIT at which directors are elected (the “Designation Right”), for so long as Andrew Sims, Christopher Sims, Kim
Sims, and their families and affiliates hold, in the aggregate, not less than 1.5 million units of operating partnership interest in the Partnership or shares of the Company’s common stock. MHI Hotels Services shall submit the name of the
Designee to the REIT’s Corporate Governance and Nominating Committee of the Board of Directors (the “Nominating Committee”) not less than 90 days prior to the anniversary date of the prior year’s annual stockholder meeting of the
REIT but no earlier than 120 days prior to the first anniversary of the date of the mailing notice for the preceding year’s annual meeting or, in the case of election of directors other than at the annual meeting of stockholders, not less than
60 days prior to the meeting date set by the Board of Directors of the REIT. The Designee shall satisfy the standards established by the Nominating Committee for membership on the Board of Directors of the REIT and shall provide to the REIT (i) a
written consent to being named as a nominee for director of the REIT and to serving as a director if elected, (ii) a questionnaire prepared by the REIT and completed by the Designee, and (iii) such other information regarding the Designee as the
REIT may reasonably request. A Designee shall not serve on the Nominating Committee and shall not automatically be deemed to be an Independent Director. 
  
 (b) The Nominating Committee shall respond to MHI Hotels Services as to whether the Nominating Committee approves the Designee for
nomination within 20 days following MHI Hotels Services submission of the Designee’s name and the information described in Section 2(a) above. In the event the Designee is not approved and nominated by the Nominating Committee for election as a
director of the REIT, MHI Hotels Services may submit to the Nominating Committee another Designee for approval and nomination by the Nominating Committee in accordance with Section 2(a) and the Nominating Committee will respond to any such new
submission within 10 days thereafter. When a Designee is approved by the Nominating Committee as a nominee for election as a director, the REIT shall include such Designee in the proxy materials delivered to stockholders in connection with the
meeting and shall recommend such Designee for election in the same manner as other nominees approved by the Nominating Committee. 
  
 (c) In the event that the Designee who is elected as a director resigns, refuses to stand for re-election, is removed, dies or becomes
disabled while serving as a director, MHI Hotels Services shall submit a new Designee to the Nominating Committee and, upon approval by the Nominating Committee, such Designee shall be appointed by the Board of Directors to fill the resulting
vacancy on the Board of Directors. Unless MHI Hotels Services otherwise submits a new Designee to the Nominating Committee in accordance with Section 2(a) above, such then current Designee shall be nominated by the Nominating Committee as a nominee
for election at the next succeeding meeting of stockholders at which directors are to be elected. 
  
 (d) Notwithstanding the foregoing, (i) if MHI Hotels Services fails to designate a Designee who is approved by the Nominating Committee
not less than 45 days prior to a meeting of stockholders at which directors are to be elected, the Designation Right with respect to directors to be elected at that meeting of stockholders shall terminate; provided, however, that if (A) the Designee
is then serving on the REIT’s Board of Directors, and (B) the Designee continues to satisfy the standards established by the Nominating Committee for membership on the Board of Directors of the REIT, and consents to being named as a nominee for
director of the 

  

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REIT, such Designee shall be the Designee for election at any such meeting of stockholders at which directors are to be elected notwithstanding that MHI
Hotels Services has not formally submitted such Designee as a nominee in accordance with the procedures set forth herein. 
  
 ARTICLE IV 
  
 4. Termination 
  
 This Agreement may be terminated: 
  
 (a) by the Company, if the Master Management Agreement is terminated by the TRS Lessee, provided that the TRS Lessee has paid all required
termination fees related to such termination; 
  
 (b) by MHI Hotels Services in the event that the Master Management Agreement is terminated by the TRS Lessee or by MHI Hotels Services as a result of a breach by the TRS Lessee or MHI Hotels Services or is otherwise terminated in accordance
with its terms. 
  
 In the event of the termination of this
Agreement pursuant to this Article 4, this Agreement shall become null and void. 
  
 ARTICLE V 
  
 5.
Miscellaneous. 
  
 (a) The term of this
Agreement shall commence on the date hereof and shall continue until the tenth anniversary of the date of closing of the Offering (the “Term”). 
  
 (b) This Agreement, and the other agreements and documents referred to herein, shall constitute the entire agreement among the parties
with respect to the subject matter thereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. 
  
 (c) This Agreement shall be governed by and construed in accordance with the laws of the jurisdiction of the State of Maryland without
regard to the principles of conflicts of laws thereof. 
  
 (d) All notices and other communications required or permitted hereunder shall be in writing, shall be deemed duly given upon actual receipt, and shall be delivered (i) in person, (ii) by registered or certified mail (air mail if addressed
to an address outside of the country in which mailed), postage prepaid, return receipt requested, or (iii) by facsimile or other generally accepted means of electronic transmission (provided that a copy of any notice delivered pursuant to this
clause (iii) shall also be sent pursuant to clause (ii), addressed as follows (or to such other addresses as may be specified by like notice to the other parties): 
  

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	 To MHI Hotels Services:
	  	 MHI Hotels Services LLC
 6411 Ivy Lane –
Suite 510
 Greenbelt, Maryland 20770
 Attention Kim E.
Sims

	 	  	 
	 To the Company:
	  	 MHI Hospitality Corporation
 814 Capitol
Landing Road
 Williamsburg, Virginia 23185
 Attention: Andrew M.
Sims
 President and Chief Executive Officer

  
 (e) No
amendment, modification or supplement to this Agreement shall be binding on any of the parties hereto unless it is in writing and signed by the parties in interest at the time of the modification, and further provided any such modification is
approved by a majority of the Independent Directors. No provision hereof may be waived except by a writing signed by the party against whom any such waiver is sought and further provided any such waiver by the Company is approved by a majority of
the Independent Directors. The waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent breach. 
  
 (f) Neither this Agreement nor any rights or obligations hereunder shall be assignable by a party to this
Agreement without the prior, express written consent of the other party and further provided any such assignment by MHI Hotels Services is approved by a majority of the Independent Directors. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. 
  
 (g) This Agreement is solely for the benefit of the parties to this Agreement and should not be deemed to confer upon third-parties any
remedy, claim, liability, reimbursement, claims or action or other right in excess of those existing without reference to this Agreement. 
  
 (h) Titles and headings to sections in this Agreement are inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. 
  
 (i) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to
any party to this Agreement, each party hereto acknowledges that damages would not be an adequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable.

  
 (j) The parties to this Agreement will execute
and deliver or cause the execution and delivery of such further instruments and documents and will take such other 

  

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actions as any other party to the Agreement may reasonably request in order to effectuate the purpose of this Agreement and to carry out the terms hereof.

  
 (k) This Agreement may be executed in
counterparts, each of which shall be deemed an original but together shall be deemed one and the same Agreement. 
  
 (l) If any provision of this Agreement is held unenforceable, this Agreement shall be construed without such provision. 
  
 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the Effective Date. 
  

			
	REIT:
	
	 MHI Hospitality Corporation
 a Maryland corporation

		
	 By:  
	 	 
	 	 	 Andrew M. Sims
 President and Chief Executive
Officer

	
	MANAGER:
	
	 MHI HOTELS SERVICES LLC,
 a Maryland limited liability company

		
	 By:  
	 	 
	 	 	Kim E. Sims
	
	OPERATING PARTNERSHIP
	
	 MHI Hospitality, L.P.
 a Delaware limited partnership

		
	 By:  
	 	 MHI Hospitality Corporation

	 	 	its General Partner

					
			
	 	 	 By:  
	 	 
	 	 	 	 	Andrew M. Sims
	 	 	 	 	President and Chief Executive Officer

  

 7Contribution Agreement

 Exhibit 10.6 
  
 Capitol Hotels Associates LP 
  
 CONTRIBUTION AGREEMENT 
  
 THIS CONTRIBUTION AGREEMENT (this “Agreement”) is made as of the 23rd day of August, 2004 (the “Effective Date”) by and
among the entities identified on Schedule 1 attached hereto (each a “Contributor” and collectively, the “Contributors”), and MHI Hospitality LP, a Delaware limited partnership (the “Acquiror”). 
  
 RECITALS 
  
 A. Capitol Hotel Associates L.P., L.L.P. (the “Partnership”) is the owner of certain real property consisting of
approximately 4.95 acres of land located in Williamsburg, Virginia (the “Virginia Property”) and the hotel improvements located thereon consisting of a 138 room hotel trading as Holiday Inn Downtown (the “Virginia Hotel”); as
well as real property consisting of approximately 4.69 acres of land located in Wilmington, North Carolina (the “North Carolina Property” and with the Virginia Property, the “Properties”), and the hotel improvements located
thereon consisting of a 274 room hotel trading as the Hilton Riverside (the “North Carolina Hotel” and, with the Virginia Hotel, the “Hotels”); 
  
 B. Contributors are the record and beneficial owners of 100% of the ownership interests of the Partnership (the
“Contributed Assets”). MHI Hotels Services, LLC, one of the Contributors, is the general partner of the Partnership. The Contributors desire to contribute the Contributed Assets to the Acquiror, and the Acquiror desires to acquire the
Contributed Assets from the Contributor, on the terms and conditions hereinafter set forth; 
  
 C. The Acquiror will be the operating partnership of a Maryland corporation to be formed which will seek to qualify as a real estate investment trust for Federal income tax purposes (the “REIT”) and will
seek to complete an underwritten public offering of shares of its common stock (the “IPO”). The Contributors intend to contribute the Contributed Assets to the Acquiror in connection with the closing of the IPO. 

 AGREEMENT 
  

NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 
  
 ARTICLE I 
  
 THE CONTRIBUTION 
  
 1.1 Contribution of Contributed Assets. The Contributors agree to
contribute and transfer the Contributed Assets to the Acquiror, and the Acquiror agrees to accept transfer of the Contributed Assets pursuant to the terms and conditions set forth in this Agreement. The Contributed Assets shall be transferred to the
Acquiror free and clear of all liens, encumbrances, security interests, prior assignments or conveyances, conditions, restrictions, claims, and other matters affecting title thereto. 
  
 1.2 Consideration. In exchange for the contribution and transfer by the Contributors of the Contributed Assets to the
Acquiror, the Acquiror agrees, subject to the terms of this Agreement, to issue to the Contributors 1,259,676 units in the aggregate of limited partnership interests in the Acquiror (the “Units”). The number of Units to be issued to each
Contributor is set forth in Schedule 1 attached hereto. 
  
 1.3
Issuance of Units. On the Closing Date (as defined below), the Acquiror shall issue to the Contributors certificates reflecting the Units in such amount as specified in Schedule 1. Such certificates shall bear appropriate legends indicating
(i) that the Units have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and (ii) that the Acquiror’s agreement of limited partnership (the “Partnership Agreement”) will restrict the
transfer of the Units. Immediately upon receipt of the Units, each Contributor shall accede to the Partnership Agreement as a limited partner of the Acquiror. The Contributor acknowledges and agrees that once Closing occurs, the Contributor shall no
longer be a partner of the Partnership, shall no longer be entitled to receive any distributions from the Partnership, and shall have no further right, title or interest in the Partnership. 
  
 1.4 Adjustment. The term “Purchased Working Capital” shall
mean the agreed upon sum of fifty thousand dollars ($50,000) which amount represents the Partnership’s good faith estimate of the Partnership’s current assets shown on the Hotels’ balance sheet (exclusive of any FF&E Reserves)
less the Partnership’s current liabilities shown on the Hotels’ balance sheet at the close of business on the Closing Date. The Contributors shall be permitted an opportunity to review the books and records of the Partnership prior to the
Closing Date (and for sixty (60) days thereafter) to verify the calculation of Purchased Working Capital and all other working capital as of the Closing Date. Within such sixty (60) day period, the parties hereto agree to calculate actual working
capital as of the Closing Date (including any amounts in any escrow or reserve accounts as of the Closing Date). In the event that actual working capital at Closing is more or less than the Purchased Working Capital, then the Contributors shall pay
to the Acquiror an amount equal to the amount by which actual working capital as of the Closing Date is less than the Purchased Working Capital, and the Acquiror will pay to the Contributors an amount equal to the amount by which actual working
capital as of the Closing 
  

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 Date exceeds the Purchased Working Capital. Any such amount payable by the Acquiror to the Contributors shall be
allocated among the Contributors in proportion to the number of Units issuable to each Contributor pursuant to Schedule 1 hereof. Each Contributor shall bear its pro rata portion of any amount payable by the Contributors to the Acquiror on the basis
of the number of Units issuable to each Contributor hereunder. Each Contributor (by its execution hereof) hereby acknowledges and agrees any such adjustments shall be paid in cash to the party entitled thereto, and such adjustments shall be deemed
final. Payment, if any, shall be made within 15 days of calculating working capital as of the Closing Date. 
  
 1.5 Deposit. Within five (5) business days after the full execution of this Agreement, the Acquiror shall pay to each Contributor the sum of Ten
Dollars ($10.00) (the “Deposit”) as consideration for such Contributor entering into this Agreement. The Deposit shall be deemed earned and non-refundable immediately upon payment of the Deposit (except if the Contributor defaults
hereunder, in which event the Deposit shall be promptly refunded to the Acquiror). 
  
 1.6 Redemption Rights for Units. The Units shall be redeemable at the option of the holders of such Units and in accordance with, but subject to the restrictions contained in, the Partnership Agreement;
provided, however, that such redemption option may not be exercised prior to the first anniversary of the Closing Date. 
  
 1.7 Tax Consequences to Contributors. Notwithstanding anything to the contrary contained in this Agreement, including without limitation the use of
words and phrases such as “sell,” “sale,” purchase,” and “pay,” the parties hereto acknowledge and agree that it is their intent that the contribution transaction contemplated hereby with respect to the Contributed
Assets shall be treated for federal income tax purposes pursuant to Section 721 of the Internal Revenue Code of 1986, as amended (the “Code”), as the contribution of the Contributed Assets by the Contributors to the Acquiror, in exchange
for the Units, the Deposit and any payments made by Acquiror pursuant to Section 1.2 or Section 4.4, and not as a transaction in which any Contributor is acting other than in its capacity as a prospective partner in the Acquiror. 
  
 1.8 Tax Indemnity. In conjunction with the contributions contemplated
by this Article I, each Contributor will execute and deliver the Tax Indemnity (as defined hereafter) in the form attached as Exhibit 1.8. 
  

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 ARTICLE II 
  
 REPRESENTATIONS AND COVENANTS 
  

2.1 Representations by Acquiror. The Acquiror hereby represents and warrants unto each Contributor that the following statements are true,
correct, and complete as of the date of this Agreement and will be true, correct, and complete as of the Closing Date: 
  
 (a) Organization and Power. The Acquiror is duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has
full right, power, and authority to enter into this Agreement and to assume and perform all of its obligations under this Agreement; and, the execution and delivery of this Agreement and the performance by the Acquiror of its obligations hereunder
have been duly authorized by all requisite action of the Acquiror and require no further action or approval of the Acquiror’s partners or of any other individuals or entities in order to constitute this Agreement as a binding and enforceable
obligation of the Acquiror. This Agreement constitutes the legal, valid and binding obligation of Acquiror and is enforceable in accordance with its terms. 
  
 (b) Noncontravention. Neither the entry into nor the performance of, or compliance with, this Agreement by the Acquiror has resulted, or will
result, in any violation of, or default under, or result in the acceleration of, any obligation under any existing certificate of limited partnership, partnership agreement, mortgage, indenture, lien agreement, note, contract, permit, judgment,
decree, order, restrictive covenant, statute, rule, or regulation applicable to the Acquiror. 
  
 (c) Litigation. There is no action, suit, or proceeding, pending or known to be threatened, against or affecting the Acquiror in any court or before any arbitrator or before any federal, state, municipal, or
other governmental department, commission, board, bureau, agency or instrumentality which (i) in any manner raises any question affecting the validity or enforceability of this Agreement, (ii) could materially and adversely affect the business,
financial position, or results of operations of the Acquiror or the Partnership, (iii) could materially and adversely affect the ability of the Acquiror to perform its obligations hereunder, or under any document to be delivered pursuant hereto.

  
 (d) Units Validly Issued. The Units, when issued, will
have been duly and validly authorized and issued, free of any preemptive or similar rights, and will be fully paid and nonassessable, without any obligation to restore capital except as required by the Delaware Revised Uniform Limited Partnership
Act (the “Limited Partnership Act”). Each Contributor shall be admitted as a limited partner of the Acquiror as of the Closing Date and shall be entitled to all of the rights and protections of a limited partner under the Limited
Partnership Act and the provisions of the Partnership Agreement, with the same rights, preferences, and privileges as all other limited partners on a pari passu basis. 
  
 (e) Consents. Except as may otherwise be set forth in Schedule 2.1(e) hereof, each consent, approval, authorization,
order, license, certificate, permit, registration, designation, or filing by or with any governmental agency or body necessary for the execution, delivery, and performance of this Agreement or the transactions contemplated hereby by the Acquiror has
been obtained or will be obtained on or before the Closing Date. 
  

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 (f) Brokerage Commission. The Acquiror has not engaged the services of any real estate agent,
broker, finder or any other person or entity for any brokerage or finder’s fee, commission or other amount with respect to the transactions described herein on account of any action by the Acquiror. The Acquiror hereby agrees to indemnify and
hold the Contributors and each of their employees, directors, members, partners, affiliates and agents harmless against any claims, liabilities, damages or expenses arising out of a breach of the foregoing. This indemnification shall survive Closing
or any termination of this Agreement. 
  
 2.2 Representations
by Contributors. Each Contributor (except as otherwise indicated herein), hereby represents and warrants unto the Acquiror, jointly and severally, that each and every one of the following statements is true, correct, and complete as of the date
of this Agreement and will be true, correct, and complete as of the Closing Date. 
  
 (a) Organization and Power. Each of the Contributor and the Partnership is duly organized, validly existing, and in good standing under the laws of the state of its organization. The Contributor has full right,
power, and authority to enter into this Agreement and to assume and perform all of its obligations under this Agreement; and the execution and delivery of this Agreement and the performance by the Contributor of its obligations hereunder have been
duly authorized by all requisite action of Contributor and require no further action or approval of Contributor’s members or managers or directors or shareholders or partners, as the case may be, or of any other individuals or entities in order
to constitute this Agreement as a binding and enforceable obligation of the Contributor. This Agreement constitutes the legal, valid and binding obligation of Contributors and is enforceable in accordance with its terms. 
  
 (b) Noncontravention. Neither the entry into nor the performance of,
or compliance with, this Agreement by the Contributor has resulted, or will result, in any violation of, or default under, or result in the acceleration of, any obligation under the Contributor’s organizational documents, or any regulations,
mortgage indenture, lien agreement, note, contract, permit, judgment, decree, order, restrictive covenant, statute, rule, or regulation applicable to Contributor or to the Contributed Assets. 
  
 (c) Litigation. There is no action, suit, or proceeding, pending or
known to be threatened, against or affecting the Contributor, the Partnership or the Hotels in any court or before any arbitrator or before any federal, state, municipal, or other governmental department, commission, board, bureau, agency or
instrumentality which (A) in any manner raises any question affecting the validity or enforceability of this Agreement, (B) could materially and adversely affect the business, financial position, or results of operations of the Hotels, or the
Partnership, (C) could materially and adversely affect the ability of the Contributor to perform its obligations hereunder, or under any document to be delivered pursuant hereto, (D) could create a lien on the Contributed Assets, any part thereof,
or any interest therein, or (E) could adversely affect the Contributed Assets, any part thereof, or any interest therein. 
  

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 (d) Good Title. (A) The Contributor is the sole owner of the ownership interests in the
Contributed Assets specified in Schedule 1 (the “Contributor’s Assets”), (B) the Contributor has good title to the Contributor’s Assets, (C) the Contributor’s Assets are free and clear of all liens, encumbrances, pledges,
voting agreements and security interests whatsoever, and (D) the Contributor has not granted any other person or entity an option to purchase or a right of first refusal upon the Contributor’s Assets nor are there any agreements or
understandings between Contributor and any other person or entity with respect to the disposition of the Contributor’s Assets, and Contributor has full power and authority to convey the Contributor’s Assets free and clear of any liens,
claims and encumbrances and upon delivery of the Assignment attached hereto in the form of Exhibit A to Acquiror and Acquiror will acquire good title thereto, free and clear of any liens, claims and encumbrances. The Partnership owns the Hotels and
the Properties beneficially and of record free and clear of any liens, claims, encumbrances, mortgages, security interests, deed of trust, easements, purchase rights or any other right of any nature of any third party except as set forth on Schedule
2.2(d). 
  
 (e) No Consents. Except as may otherwise be set
forth in Schedule 2.2(e) hereof, each consent, approval, authorization, order, license, certificate, permit, registration, designation, or filing by or with any third party, including, but not limited to, lenders and franchisors, or any governmental
agency or body necessary for the execution, delivery, and performance of this Agreement or the transactions contemplated hereby has been obtained or will be obtained on or before the Closing Date. 
  
 (f) Operation of Contributed Assets. Between the date hereof and the
Closing Date, the Contributor will take such action as may be necessary to cause the Partnership (A) operate its business only in the usual, regular, and ordinary manner consistent with such entity’s prior practice and (B) maintain its books of
account and records in the usual, regular, and ordinary manner, in accordance with sound accounting principles applied on a basis consistent with the basis used in keeping its books in prior years. Except as otherwise permitted hereby, from the date
hereof until the Closing Date, the Contributor shall not take any action or fail to take any action the result of which would (1) have a material adverse effect on the Contributed Assets, the Contributor’s Assets, the Properties, the Hotels, or
the Acquiror’s ability to continue the operation thereof after the Closing Date in substantially the same manner as presently conducted or (2) would cause any of the representations and warranties contained in this Section 2.2 to be untrue as
of the Closing Date. 
  
 (g) Partnership Agreement. The
Limited Partnership Agreement of the Partnership, (the “Capitol Hotel Partnership Agreement”) is in force and effect as of the date hereof, and has not been modified or amended and a true and accurate copy of such agreement as amended to
date has been provided to Acquiror. The Contributor has performed all of its obligations under the Capitol Hotel Partnership Agreement. 
  

 6 

 (h) Securities Law Matters. (A) In acquiring the Units and engaging in this transaction, neither
the Contributors nor any shareholder, partner or beneficiary of a Contributor is relying upon any representations made to it by the Acquiror, or any of its partners, officers, employees, or agents that are not contained herein. Contributor is aware
of the risks involved in investing in the Units and in the shares of common stock (“Common Stock”) of the REIT, issuable upon redemption of such Units. Contributor has had an opportunity to ask questions of, and to receive answers from,
the Acquiror or a person or persons authorized to act on its behalf, concerning the terms and conditions of this investment and the financial condition, affairs, and business of the Acquiror and the REIT. Contributor confirms that all documents,
records, and information pertaining to its investment in the Acquiror that have been requested by it, including a complete copy of the form of the Partnership Agreement, have been made available or delivered to it prior to the date hereof.
Contributor represents and warrants that it has reviewed and approved the form of the Partnership Agreement attached hereto as Exhibit B. 
  
 (B) Contributor and each shareholder, partner or beneficiary thereof understands that neither the Units nor the shares of Common Stock issuable upon
redemption of the Units have been registered under the Securities Act or any state securities acts and are instead being offered and sold in reliance on an exemption from such registration requirements. The Units issuable to Contributor are being
acquired solely for its own account, for investment, and are not being acquired with a view to, or for resale in connection with, any distribution, subdivision, or fractionalization thereof, in violation of such laws, and Contributor does not have
any present intention to enter into any contract, undertaking, agreement, or arrangement with respect to any such resale; provided, however, that, at or following Closing, Contributor may distribute the Units to its shareholders, partners or
members, as the case may be that (1) have represented and warranted to the Acquiror in writing that, as of the time of such distribution, such member, shareholder or partner, as the case may be, is an accredited investor as that term is defined in
Rule 501 of Regulation D under the Securities Act, and (2) have executed the Partnership Agreement as limited partners. Contributor understands that any certificates evidencing the Units will contain appropriate legends reflecting the requirement
that the Units not be resold by Contributor without registration under such laws or the availability of an exemption from such registration and that the Partnership Agreement will restrict transfer of the Units. 
  
 (i) Accredited Investor. Contributor is an accredited investor as that
term is defined in Rule 501 of Regulation D under the Securities Act. 
  
 (j) Tax Matters. (A) The Partnership has filed within the time and in the manner prescribed by law all federal, state, and local tax returns and reports, including but not 
  

 7 

 limited to income, gross receipts, intangible, real property, excise, withholding, franchise, sales, use, employment,
personal property, and other tax returns and reports, required to be filed by such entity under the laws of the United States and of each state or other jurisdiction in which such entity conducts business activities requiring the filing of tax
returns or reports except for such terms or reports where the failure to file would not have a material adverse effect on the Partnership or the Contributed Assets. All tax returns and reports filed by the Partnership are true and correct in all
material respects. The Partnership has paid in full all taxes of whatever kind or nature for the periods covered by such returns. The Partnership has not been delinquent in the payment of any tax, assessment, or governmental charge or deposit and
has no tax deficiency or claim outstanding, assessed, threatened, or proposed against it. The charges, accruals, and reserves for unpaid taxes on the books and records of the Partnership as of the Closing Date are sufficient in all respects for the
payment of all unpaid federal, state, and local taxes of the Partnership accrued for or applicable to all periods ended on or before the Closing Date. There are no tax liens, whether imposed by the United States, any state, local, or other taxing
authority, outstanding against the Partnership or any of its assets. The federal, state, and local tax returns of the Partnership have not been audited, nor has the Partnership received any notice of any federal, state, or local audit. 

 
 (B) Each Contributor represents and warrants that it has obtained from
its own counsel advice regarding the tax consequences of (i) the transfer of the Contributor’s Assets to the Acquiror and the receipt of Units as consideration therefor, (ii) Contributor’s admission as a limited partner of the Acquiror,
and (iii) any other transaction contemplated by this Agreement. Each Contributor further represents and warrants that it has not relied on the Acquiror or the Acquiror’s representatives or counsel for such tax advice. 
  
 (k) Bankruptcy with respect to Contributor. No Act of Bankruptcy has
occurred with respect to the Contributor or Partnership. As used herein, “Act of Bankruptcy” shall mean if a party hereto or any member, or manager, shareholder or director thereof, as the case may be, shall (A) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (B) admit in writing its inability to pay its debts as they become due, (C) make a general
assignment for the benefit of its creditors, (D) file a voluntary petition or commence a voluntary case or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect), (E) be adjudicated bankrupt or insolvent, (F) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, receivership, dissolution, winding-up or composition or adjustment of debts, (G) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect), or (H) take any entity action for the purpose of effecting any of the foregoing. 
  
 (l) Brokerage Commission. The Contributor has not engaged the services
of, any real estate agent, broker, finder or any other person or entity for any brokerage or 
  

 8 

 finder’s fee, commission or other amount with respect to the transactions described herein on account of any action
by the Contributor. The Contributor hereby agrees to indemnify and hold the Acquiror and its employees, directors, members, partners, affiliates and agents harmless against any claims, liabilities, damages or expenses arising out of a breach of the
foregoing. This indemnification shall survive Closing or any termination of this Agreement. 
  
 (m) Liabilities, Indebtedness. Except as set forth in Schedule 2.2(m), the Partnership has not incurred any indebtedness related to the Hotels or the Properties except in each instance for trade payables and
other customary and ordinary expenses in the normal course of business. 
  
 (n) Leases. Schedule 2.2(n) attached hereto is a true, correct and complete schedule of all ground leases, restaurant leases, subleases and other rights of occupancy in effect with respect to the Hotels and the Properties
(collectively, the “Leases”). Except as set forth on Schedule 2.2(n), there are no other leases, subleases, tenancies or other rights of occupancy in effect with respect to the Hotels or the Properties. True, correct and complete copies of
the Leases, together with all amendments and supplements thereto and all other documents and correspondence relating thereto, have been delivered or made available to Acquiror. Except as set forth on Schedule 2.2(n), all such Leases are valid and
enforceable and presently in full force and effect, and none of the Leases have been assigned and all brokerage commissions, if any, payable under any of the Leases have been paid or will be paid by the Partnership prior to the Closing. To the best
knowledge of Contributor, no party to any Lease is in default under such Lease, and Contributor does not know of any event which, but for the passage of time or the giving of notice, or both, would constitute a default under such Leases, except such
defaults that would not have a material adverse effect on the condition, financial or otherwise or on the earnings, business affairs or business prospects of the Partnership. No tenant under any of the Leases has an option or right of first refusal
to purchase the premises demised under such Lease. The consummation of the transactions contemplated by this Agreement will not give rise to any breach, default or event of default under any of the Leases. None of the Leases requires the consent or
approval of any party in connection with the transactions contemplated by this Agreement. 
  
 (o) Insurance. The Partnership currently maintains or causes to be maintained all of the public liability, casualty and other insurance coverage with respect to the Hotels as set forth on Schedule 2.2(o)
attached hereto. All such insurance coverage shall be maintained in full force and effect through the Closing and all premiums due and payable thereunder have been, and shall be, fully paid when due. 
  
 (p) Personal Property. All equipment, fixtures and personal property
located at the Hotels shall remain and not be removed prior to the Closing, except for equipment that becomes obsolete or unusable, which may be disposed of or replaced in the ordinary course of business. 
  

 9 

 (q) Environmental Conditions. 
  
 (A) As of the date of this Agreement and as of the Closing, and except as set forth in the environmental reports and
materials previously delivered to Acquiror which are listed on Schedule 2.2(q) attached hereto (collectively, “Environmental Reports”), to the best of Contributors’ knowledge, information, and belief, the Properties (which for
purposes of this Section 2.2(q) shall include all leased and vacant space, land surface water, groundwater and any and all improvements located on, in or under the Properties) are now and will be at the Closing free of all contamination which exists
as or has arisen from, directly or indirectly: 
  
 (1) any
“hazardous waste,” “underground storage tanks,” “petroleum,” “regulated substance,” or “used oil” as defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. §6901, et seq.), as
amended (“RCRA”), or by any regulations promulgated thereunder; 
  
 (2) any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601, et seq.), as amended (“CERCLA”), or by any
regulations promulgated thereunder (including without limitation asbestos, radon, mold and lead-based paint); 
  
 (3) any “oil” or other “hazardous substance” as defined by the Oil and Hazardous Substance Control Act of 1976, as amended, or by and
regulations promulgated thereunder; 
  
 (4) any substance the
presence of which on, in or under the Properties is prohibited or regulated by any federal, state or local environmental law (an “Environmental Law”); and 
  
 (5) any other hazardous materials as to which remedial action is required under applicable Environmental Laws (together
with substances described in subsections (a) – (d), “Hazardous Materials”). 
  
 (B) To the best of Contributors’ knowledge, information, and belief, as of the date of this Agreement and as of the Closing, and except as set forth in the Environmental Reports: 
  
 (1) the Properties are now and will be at the Closing free from asbestos
and any asbestos containing materials (including without limitation the presence of any asbestos in the insulation or other materials used comprising any part of the improvements), mold, radon and lead-based paint that would have a material adverse
effect on the Properties; 
  

 10 

 (2) to the knowledge of Contributor, the Partnership has not placed, located, sited or buried any
underground storage tanks at the Properties and to the knowledge of Contributor, no underground storage tanks are located on, at or under the Properties; 
  
 (3) to the knowledge of Contributor, the Properties do not appear on any state or federal CERCLA, RCRA, Superfund or other similar lists and, to the
knowledge of Contributor, the Properties are not proposed to be included on any such list; 
  
 (4) to the knowledge of Contributor, the Partnership has never used any part of the Properties as a sanitary landfill, waste dump site or for the treatment, storage or disposal of hazardous waste as defined in RCRA
and no part of the Properties have ever been used as a sanitary landfill, waste dump site or for the treatment, storage or disposal of hazardous waste as defined in RCRA; 
  
 (5) to the knowledge of Contributor, no notice of violation or other written communication has been received by the
Partnership or any predecessor in title from a governmental agency or other entity or person, alleging or suggesting any violation of any Environmental Law on or with respect to the Properties; 
  
 (6) to the knowledge of Contributor, neither the Partnership nor any of such
Partnership’s agents, licensees or invitees have placed or permitted the placement of any Hazardous Materials in, on, under or over the Properties in violation of any Environmental Law; 
  
 (7) to the knowledge of Contributor, no other party has placed any Hazardous
Material in, on, under or over any of the Properties in violation of any Environmental Law; and 
  
 (8) to the knowledge of Contributor, the Properties are not subject to any federal, state or local lien (including any “Superfund” lien),
proceedings, claim, liability, or action, or the threat or likelihood thereof, relating to the clean-up, removal or remediation of any Hazardous Material from the Properties and the Partnership has not received any request or information from the
United States Environmental Protection Agency or any other public, governmental or quasi-governmental agency or authority with jurisdiction over any Environmental Law. 
  
 (r) Compliance With Laws. To the best of Contributors’ knowledge, information, and belief, the Partnership
possesses such certificates, approvals, licenses, 
  

 11 

 authorities or permits issued by the appropriate local, state or federal agencies or bodies necessary to conduct the
business to be conducted by it, and, to the knowledge of Contributor, the Partnership has not received any written notice of proceedings relating to the revocation or modification of any such certificate, approval, license, authority or permit
which, singly or in the aggregate, if the subject of an unfavorable decision, ruling, or finding, would materially and adversely affect the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Properties
or the Hotels. To the best of Contributors’ knowledge, information, and belief, the Partnership has not received any written or other notice of any violation of any applicable zoning, building or safety code, rule, regulation or ordinance, or
of any employment, environmental, wetlands or other regulatory law, order, regulation or other requirement, including without limitation the Americans With Disabilities Act (“ADA”) or any restrictive covenants or other easements,
encumbrances or agreements, relating to the Properties or the Hotels, which remains uncured. The Properties and the Hotels have been constructed and is operated in accordance with all applicable laws, ordinances, rules and regulations. All approvals
regarding zoning, land use, subdivision, environmental and building and construction laws, ordinances, rules and regulations have been obtained, and such approvals will not be invalidated by the consummation of the transactions contemplated by this
Agreement; provided, however, the Properties and the Hotels (including, all improvements) are substantially in compliance with the ADA. 
  
 (s) Condemnation and Moratoria. Except as set forth on Schedule 2.2(s), to the best of Contributors’ knowledge, information and belief, there
are (i) no pending or threatened condemnation or eminent domain proceedings, or negotiations for purchase in lieu of condemnation, which affect or would affect any portion of the Properties; (ii) no pending or, to the knowledge of Contributor,
threatened moratoria on utility or public sewer hook-ups or the issuance of permits, licenses or other inspections or approvals necessary in connection with the construction or reconstruction of improvements, including without limitation tenant
improvements, which affect or would affect any portion of the Properties; and (iii) no pending or, to the knowledge of Contributor, threatened proceeding to change adversely the existing zoning classification as to any portion of the Properties. No
portion of the Properties are a designated historic property or located within a designated historic area or district and there are no graveyards or burial grounds located within the Properties. 
  
 (t) Condition of Improvements. To the best of Contributors’
knowledge, information and belief, there is no material defect in the condition of (i) the Properties or the Hotels, (ii) the improvements thereon, (iii) the roof, foundation, load-bearing walls or other structural elements thereof, or (iv) the
mechanical, electrical, plumbing and, safety systems therein, nor any material damage from casualty or other cause, nor any soil condition of any nature that will not support all of the improvements thereon without the need for unusual or new
subsurface excavations, fill, footings, caissons or other installations. 
  

 12 

 (u) Absence of Certain Changes. To the best of Contributors’ knowledge, information and
belief, since December 31, 2003, except as set forth or referred to on Schedule 2.2(u), there has not been with respect to the Partnership: 
  
 (A) any material adverse change in the financial condition of the Partnership, the Hotels or the Properties; 
  
 (B) any change in the condition of the Properties, the Hotels or the
business or liabilities of the Partnership except normal and usual changes in the ordinary course of business which have not been, individually or in the aggregate, materially adverse; 
  
 (C) any damage, destruction or loss, whether or not covered by insurance, individually or in the aggregate, materially and
adversely affecting the Properties or the Hotels; 
  
 (D) any
change in the accounting methods or practices with respect to the Hotels or the Properties or in depreciation or amortization policies theretofore used or adopted; 
  
 (E) any material liability with respect to the Hotels or the Properties, contingent or otherwise, other than for operating
expenses, obligations under any executory contracts disclosed on Schedule 2.2(u) hereof incurred for fair consideration and taxes accrued with respect to operations during such period, all incurred in the ordinary course of business; or 

 
 (F) any other material change in the business of the Partnership.

  
 (v) ERISA. The Partnership has no (i) labor agreement
to which it is a party, or by which it is bound, including “employee pension benefit plans” as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); (ii) employment, profit sharing,
deferred compensation, bonus, pension, retainer, consulting, retirement, welfare or incentive plan, fund, program or contract to which it is a party, or by which it is bound; (iii) written or other formal personnel policies; or (iv) plan or
agreement under which “fringe benefits” (including, but not limited to, vacation plans or programs, sick leave plans or programs, and related benefits) are afforded to its employees. 
  
 (w) No Contracts. No agreements, undertakings or contracts affecting
the Hotels or the Properties, written or oral, will be in existence as of the Closing, except as set forth on Schedule 2.2(w) attached hereto, and true and correct copies of such contracts have been delivered to Acquiror. With respect to any such
contracts set forth on Schedule 2.2(w), each such contract is valid and binding on the Partnership and is in full force and effect in all material respects. To the knowledge of Contributor, no party to any such contract has breached or defaulted
under the terms of such contract, except for such breaches or defaults that would not, individually or in the aggregate, have a material adverse effect on the business or operations of the Hotels or the Properties. 
  

 13 

 (x) Disclosure. The representations and warranties contained in this Agreement (including
Schedules and Exhibits) or in any information, statement, certificate or agreement furnished or to be furnished to Acquiror by Contributor in connection with the Closing pursuant to this Agreement, do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements and information contained herein or therein, in light of the circumstances in which they are made, not misleading. 
  
 2.3 Satisfaction of Conditions. The Acquiror hereby covenants that the Acquiror shall use commercially reasonable
efforts and diligence in order to satisfy all of the conditions set forth in Section 3.2 hereof; and the Contributors shall not have any obligation to consummate the Closing hereunder unless and until all such conditions have been satisfied or
waived by the Contributor in writing. Each Contributor hereby covenants that it shall: (A) use commercially reasonable efforts and diligence in order to satisfy all of the conditions set forth in subsections 3.1(a), (b) and (c) hereof, and (B)
cooperate and assist in the Acquiror’s efforts to satisfy the conditions set forth in subsection 3.1(g) hereof; and the Acquiror shall not have any obligation to consummate the Closing hereunder unless and until such conditions have been
satisfied or waived by the Acquiror in writing. 
  
 2.4
Contributor’s Indemnity. Each Contributor agrees to indemnify and hold the Acquiror, the REIT, and their respective employees, directors, members, partners, affiliates and agents harmless of and from all liabilities, losses, damages,
costs, and expenses (including reasonable attorneys’ fees) which the Acquiror or the REIT may suffer or incur by reason of any breach of its representations or warranties contained in this Agreement, and by reason of any act or cause of action
occurring or accruing prior to the Closing Date and arising from the ownership of the Contributed Assets and in the operation of the Hotels prior to the Closing Date. 
  
 2.5 Acquiror’s Indemnity. The Acquiror agrees to indemnify and hold the Contributors and their employees,
directors, members, partners, affiliates and agents harmless of and from all liabilities, losses, damages, costs, and expenses (including reasonable attorneys’ fees) which the Contributors may suffer or incur by reason of any breach of its
representations or warranties contained in this Agreement, and by reason of any act or cause of action occurring or accruing subsequent to the Closing Date and arising from the ownership or operation of the Contributed Assets or the operation of the
Hotels subsequent to the Closing Date. 
  

 14 

 ARTICLE III 
  
 CONDITIONS PRECEDENT TO THE CLOSING 
  
 3.1 Conditions to Acquiror’s Obligations. In addition to any other conditions set forth in this Agreement, the
Acquiror’s obligation to consummate the Closing is subject to the timely satisfaction of each and every one of the conditions and requirements set forth in this Section 3.1, all of which shall be conditions precedent to the Acquiror’s
obligations under this Agreement. 
  
 (a) Contributors’
Obligations. Each Contributor shall have performed all obligations of such Contributor hereunder which are to be performed prior to Closing, and shall have delivered or caused to be delivered to the Acquiror, all of the documents and other
information required of the Contributor pursuant to Section 4.2. 
  
 (b) Contributors’ Representations and Warranties. The representations and warranties of the Contributors set forth in Section 2.2 shall be true and correct as if made again on the Closing Date. 
  
 (c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or other order issued by a court of competent jurisdiction restraining or prohibiting the consummation of the transactions contemplated hereby. 
  
 (d) No Material Adverse Change. Since the Effective Date, there shall
have been no material adverse effect on, or a material adverse change in, the business, financial condition or operations of the Partnership or the Hotels as presently conducted. 
  
 (e) Completion of IPO. The IPO shall have been completed. 
  
 (f) Consent of Franchisor. The Franchisors of the Hotels shall have
consented to the transaction contemplated herein on terms and conditions that are acceptable to Acquiror in its sole discretion. 
  
 (g) Third Party Consents. All required third party consents will have been obtained or otherwise waived. 
  
 3.2 Conditions to Contributors’ Obligations. In addition to any
other conditions set forth in this Agreement, the obligations of the Contributors to consummate the Closing is subject to the timely satisfaction of each and every one of the conditions and requirements set forth in this Section 3.2, all of which
shall be conditions precedent to the Contributor’s obligations under this Agreement. 
  

 15 

 (a) Acquiror’s Obligations. The Acquiror shall have performed all obligations of the Acquiror
hereunder which are to be performed prior to Closing, and shall have delivered or caused to be delivered to the Contributor, all of the documents and other information required of the Acquiror pursuant to Section 4.3. 
  
 (b) Acquiror’s Representations and Warranties. The
Acquiror’s representations and warranties set forth in Section 2.1 shall be true and correct as if made again on the Closing Date. 
  
 (c) Completion of IPO. The IPO shall have been completed. 
  

3.3 Restructuring. Upon the written request of Acquiror not less than ten days prior to Closing, Contributors shall take such action as may be
reasonably requested by Acquiror to cause the Partnership to be converted into a limited liability company under the laws of such jurisdiction as may be identified by Acquiror. Following receipt of such notice and prior to the Closing Date,
Contributors shall convert the Partnership to a limited liability company provided such conversion does not create a material federal, state or local tax liability to the Contributors unless Acquiror agrees to indemnify the Contributors against such
tax liability. 
  
 ARTICLE IV 
  
 CLOSING AND CLOSING DOCUMENTS 
  
 4.1 Closing. The consummation and closing (the “Closing”) of
the transactions contemplated under this Agreement shall take place at the offices of the Acquiror in Greenbelt, Maryland, or such other place as is mutually agreeable to the parties, on the date of the closing of the IPO (the “Closing
Date”), or as otherwise set by agreement of the parties hereto. . If at any time the REIT determines in good faith to abandon or discontinue its efforts to engage in an IPO, Acquiror shall so advise each Contributor in writing and thereupon all
parties hereto will be relieved of all obligations under this Agreement. 
  
 4.2 Contributor’s Deliveries. At the Closing, each Contributor shall deliver the following to the Acquiror in addition to all other items required to be delivered to the Acquiror by the Contributor:

  
 (a) Assignment of Contributed Assets. Each Contributor
shall have executed and delivered an Assignment, in substantially the form of Exhibit A attached hereto, granting and conveying to the Acquiror good and indefeasible title to the Contributor’s Assets, free and clear of all liens, encumbrances,
security interests, prior assignments, conditions, restrictions, claims, and other matters affecting title thereto. 
  

 16 

 (b) Execution of Partnership Agreement. Signature pages of the Partnership Agreement (which
Partnership Agreement shall be in substantially the form attached hereto as Exhibit B) duly executed by each Contributor, as limited partner. 
  
 (c) FIRPTA Certificate. An affidavit from each Contributor certifying pursuant to Section 1445 of the Code that the Contributor is not a foreign
corporation, foreign partnership, foreign trust, foreign estate or foreign person (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder). 
  
 (d) Tax Indemnity. Each Contributor shall have executed a tax indemnity and debt maintenance agreement and related
guaranty (the “Tax Indemnity”) to reflect the allocation of indebtedness to each Contributor in the form attached hereto as Exhibit 1.8 in an amount not to exceed such Contributor’s negative balance in the capital account maintained
by the Partnership for such Contributor as of the Closing Date. 
  
 (e) Other Documents. Any other document or instrument reasonably requested by the Acquiror or required hereby. 
  
 4.3 Acquiror’s Deliveries. At the Closing, the Acquiror shall deliver the following to the Contributors: 
  
 (a) Certificates for Units. Certificates representing Units duly
issued by the Acquiror in the name of the Contributor as of the Closing Date representing the Units to which the Contributor is entitled pursuant to Section 1.2 of this Agreement. 
  
 (b) Executed Partnership Agreement. Signature pages of the Partnership Agreement (which Partnership Agreement shall
be in substantially the form attached hereto as Exhibit B) duly executed by its general partner. 
  
 (c) Tax Indemnity. Acquiror shall have executed a Tax Indemnity with each of the Contributors. 
  
 (d) Other Documents. Any other document or instrument reasonably
requested by a Contributor or required hereby. 
  
 4.4 Fees and
Expenses; Closing Costs. The Acquiror shall pay all fees, expenses and closing costs relating to the transactions contemplated by this Agreement; provided however, that each Contributor shall pay its own attorneys’ and consultants’
fees and expenses. In the event the Closing does not occur as a result of a failure to conclude an IPO, the Partnership agrees to pay to Acquiror 32.2% of the actual out-of-pocket costs incurred by Acquiror and its affiliates in connection
with the proposed IPO of the REIT, which the Partnership agrees represents the pro rata share of the expected transaction costs of the 
  

 17 

 Contributors. Each Contributor acknowledges and agrees, by executing this Agreement, that it will benefit from such an
IPO and, as a consequence, the Partnership will bear a portion of its costs if such transaction is not completed. 
  
 4.5 Default Remedies. If the Closing fails to occur due to a default by the Acquiror, the Contributors shall retain the Deposit as such
Contributor’s sole and exclusive remedy for such default, and the Contributor hereby waives any right it may have to damages (compensatory, consequential or otherwise) from the Acquiror as a result of such default. If a Contributor defaults in
performing any of the Contributor’s obligations under this Agreement, the Acquiror shall have all rights and remedies available to it at law or in equity resulting from the Contributor’s default, including without limitation, the right to
seek specific performance of this Agreement and the Contributor’s obligation to convey the Contributor’s Assets to the Acquiror hereunder. The parties acknowledge and agree that the failure of a condition precedent to occur,
notwithstanding the good faith and commercially reasonable efforts of the applicable party, shall not be a default hereunder. 
  
 ARTICLE V 
  
 MISCELLANEOUS 
  
 5.1 Notices. Any notice provided for by this Agreement and any other notice, demand, or communication required hereunder shall be in writing and either delivered in person (including by confirmed facsimile
transmission) or sent by hand delivered against receipt or sent by recognized overnight delivery service or by certified or registered mail, postage prepaid, with return receipt requested. All notices shall be addressed as follows: 
  
 Acquiror: 
  
 MHI Hospitality L.P. 
 814 Capitol Landing Road 
 Williamsburg, VA 23187 
 Attention: Mr. Andrew M. Sims 
 Fax No.: (757) 564-8801 
 Phone No.: (757) 229-5648 
 E-mail: drewsims@mhihotels.com 
  
 Notices to Contributors shall be sent to the addresses
specified on Schedule 1. 
  
 Any address or name specified above may be changed by
a notice given by the addressee to the other party. Any notice, demand or other communication shall be deemed given and effective as of the date of delivery in person or receipt set forth on the return receipt. The inability to 
  

 18 

 deliver because of changed address of which no notice was given, or rejection or other refusal to accept any notice,
demand or other communication, shall be deemed to be receipt of the notice, demand or other communication as of the date of such attempt to deliver or rejection or refusal to accept. 
  
 5.2 Entire Agreement; Modifications and Waivers; Cumulative Remedies. This Agreement supersedes any existing letter
of intent between the parties hereto, constitutes the entire agreement among the parties hereto and may not be modified or amended except by instrument in writing signed by the parties hereto, and no provisions or conditions may be waived other than
by a writing signed by the party waiving such provisions or conditions. No delay or omission in the exercise of any right or remedy accruing to the Contributor or the Acquiror upon any breach under this Agreement shall impair such right or remedy or
be construed as a waiver of any such breach theretofore or thereafter occurring. The waiver by the Contributor or the Acquiror of any breach of any term, covenant, or condition herein stated shall not be deemed to be a waiver of any other breach, or
of a subsequent breach of the same or any other term, covenant, or condition herein contained. All rights, powers, options, or remedies afforded to Contributor or the Acquiror either hereunder or by law shall be cumulative and not alternative, and
the exercise of one right, power, option, or remedy shall not bar other rights, powers, options, or remedies allowed herein or by law, unless expressly provided to the contrary herein. 
  
 5.3 Exhibits. All exhibits referred to in this Agreement and attached hereto are hereby incorporated in this
Agreement by reference. 
  
 5.4 Successors and Assigns.
Except as set forth in this Article, this Agreement may not be assigned by the Acquiror or the Contributors without the prior approval of the other party hereto; provided, however, that the Acquiror may assign this entire agreement or a right to
acquire all or any portion of the Contributed Assets to a direct or indirect subsidiary or affiliate of Acquiror and may assign the right to acquire the general partnership interest in the Partnership independent of any assignment of the right to
purchase the limited partnership interests of the Partnership without approval of the Contributors provided in each case Acquiror shall remain obligated to issue the units to the Contributors at the Closing. This Agreement shall be binding upon, and
inure to the benefit of, each Contributor, the Acquiror, and their respective legal representatives, successors, and permitted assigns. 
  
 5.5 Article Headings. Article headings and article and Section numbers are inserted herein only as a matter of convenience and in no way define,
limit, or prescribe the scope or intent of this Agreement or any part hereof and shall not be considered in interpreting or construing this Agreement. 
  

 19 

 5.6 Governing Law. This Agreement shall be construed and interpreted in accordance with the laws
of the Commonwealth of Virginia, without regard to conflicts of laws principles. 
  
 5.7 Counterparts. This Agreement may be executed in any number of counterparts and by any party hereto on a separate counterpart, each of which when so executed and delivered shall be deemed an original and all
of which taken together shall constitute but one and the same instrument. 
  
 5.8 Survival. All representations and warranties contained in this Agreement, and all covenants and agreements contained in the Agreement which contemplate performance after the Closing Date (including, without
limitation, those covenants and agreements contained in Section 1.2 hereof) shall survive the Closing. 
  
 5.9 Further Acts. In addition to the acts, instruments and agreements recited herein and contemplated to be performed, executed and delivered by
the Acquiror and the Contributors, each of the Acquiror and each Contributor shall perform, execute, and deliver or cause to be performed, executed, and delivered at the Closing or after the Closing, any and all further acts, instruments, and
agreements and provide such further assurances as the other party hereto may reasonably require to consummate the transaction contemplated hereunder. 
  
 5.10 Severability. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained
herein. 
  
 5.11 Confidentiality. The Contributor
acknowledges that the matters relating to the REIT, the initial underwritten public offering of the REIT, this Agreement, and the other documents, terms, conditions and information related thereto (collectively, the “Information”) are
confidential in nature. Therefore, each Contributor covenants and agrees to keep the Information confidential and will not (except as required by applicable law, regulation or legal process, and only after compliance with the provisions of this
Section 5.11), without the Acquiror’s prior written consent, disclose any Information in any manner whatsoever; provided, however, that the Information may be revealed only to a Contributor’s key employees, legal counsel and financial
advisors, each of whom shall be informed of the confidential nature of the Information and shall agree to act in accordance with the terms of this Section 5.11. In the event that a Contributor or its key employees, legal counsel or financial
advisors (collectively, the “Information Group”) are requested pursuant to, or required by, applicable law, regulation or legal process to disclose any of the Information, the applicable member of the Information Group will notify the
Acquiror promptly so that it may seek a protective order or other appropriate remedy or, in its sole discretion, waive compliance 
  

 20 

 with the terms of this Section 5.11. In the event that no such protective order or other remedy is obtained, or that the
Acquiror waives compliance with the terms of this Section 5.11, the applicable member of the Information Group may furnish only that portion of the Information which it is advised by counsel is legally required and will exercise all reasonable
efforts to obtain reliable assurance that confidential treatment will be accorded the Information. Each Contributor acknowledges that remedies at law may be inadequate to protect the Acquiror or the REIT against any actual or threatened breach of
this Section 5.11, and, without prejudice to any other rights and remedies otherwise available, each Contributor agrees to the granting of injunctive relief in favor of the REIT and/or the Acquiror without proof of actual damages. Notwithstanding
any other express or implied agreement to the contrary, the parties hereto agree and acknowledge that each of them and each of their employees, representatives, and other agents may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to any of them relating to such tax treatment and tax structure, except to the extent that
confidentiality is reasonably necessary to comply with U.S. federal or state securities laws. For purposes of this paragraph, the terms “tax treatment” and “tax structure” have the meanings specified in Treasury Regulation
section 1.6011-4(c). Receipt of confidential information of Acquiror or any of its affiliates by Contributors constitutes each of Contributor’s acknowledgement that it is aware that applicable securities laws may impose restrictions on each of
them from purchasing or selling securities of the REIT, and each Contributor agrees not to purchase or sell securities of the REIT, or any affiliate of the REIT, in violation of applicable securities laws. 
  
 [Signatures follow on next page] 
  

 21 

 The parties hereto have executed and delivered this Agreement as of the date indicated in the first
sentence of this Agreement. 
  

			
	CONTRIBUTORS:
	
	Wilmington Hotel Associates
		
	By:	 	 /s/    Andrew M. Sims

	Name:	 	Andrew M. Sims
	Its:	 	President
	
	MHI Hotels Services, LLC
		
	By:	 	 /s/    Andrew M. Sims

	Name:	 	Andrew M. Sims
	Its:	 	President
	
	Kim E. Sims Family Partnership
		
	By:	 	 /s/    Kim E. Sims

	Name:	 	Kim E. Sims
	Its:	 	Trustee
	
	Andrew M. Sims Family Partnership
		
	By:	 	 /s/    Andrew M. Sims

	Name:	 	Andrew M. Sims
	Its:	 	Trustee
	
	Christopher L. Sims Family Partnership
		
	By:	 	 /s/    Christopher L. Sims

	Name:	 	Christopher L. Sims
	Its:	 	Trustee

  

 22 

			
	 Edgar Sims Trust

		
	 By:
	 	 /s/    Andrew M. Sims

	 Name:
	 	Andrew M. Sims
	 Its:
	 	Trustee
	
	 ACQUIROR:

	
	 MHI Hospitality LP

		
	 By:
	 	 /s/    Andrew M. Sims

	 Name:
	 	Andrew M. Sims
	 Its:
	 	President

  

 23

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