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      PURCHASE
AND SALE AGREEMENT

       

      PURCHASE
AND SALE AGREEMENT (“Agreement”) dated as
of February 26, 2008 (the “Effective Date”),
between ST. MARIN/KARRINGTON LIMITED PARTNERSHIP, a Delaware limited partnership
(“Seller”),
with an address of c/o Berkshire Property Advisors, L.L.C., One Beacon
Street, Suite 1550, Boston, Massachusetts 02108, Attention: David Olney,
Telecopier No. 617-646-2377, and WILLIAMS ASSET MANAGEMENT, LLC, a Georgia
limited liability company (“Buyer”), with an
address of One Overton Park, 3625 Cumberland Boulevard, Suite 430, Atlanta,
Georgia 30339, Attention: Andrew H. Day, Telephone No. 678-589-7770, Telecopier
No. 678-589-7771.

       

      In
consideration of the mutual undertakings and covenants herein contained, Seller
and Buyer hereby covenant and agree as follows:

       

      SECTION
1

       

      

       

      SALE OF PROPERTY AND
ACCEPTABLE TITLE

       

      1.01 Agreement to Buy and to
Sell; Property.  Seller shall sell to Buyer, and Buyer shall
purchase from Seller, at the price and upon the terms and conditions set forth
in this Agreement the following:

       

      (a) that
certain tract or parcel of land located at 1717 and 1721 E. Beltline Road,
Coppell, Texas, more particularly described in Schedule A
attached hereto (the “Land”);

       

      (b) the six
hundred (600) unit apartment complex commonly known as St. Marin/Karrington
Apartments, which contains related improvements, facilities, amenities,
structures, driveways and walkways, all of which have been constructed on the
Land (collectively, the “Improvements”);

       

      (c) all
right, title and interest of Seller in and to any alleys, strips or gores
adjoining the Land, and any easements, rights-of-way or other interests in, on,
under or to, any land, highway, street, road, right-of-way or avenue, open or
proposed, in, on, under, across, in front of, abutting or adjoining the Land,
and all right, title and interest of Seller in and to any awards for damage
thereto by reason of a change of grade thereof;

       

      (d) the
accessions, appurtenant rights, privileges, appurtenances and all the estate and
rights of Seller in and to the Land and the Improvements, as applicable, or
otherwise appertaining to any of the property described in the immediately
preceding clauses (a), (b) and/or (c);

       

      (e) the
personal property listed in Schedule B
attached hereto owned by Seller and located on or in or used solely in
connection with the Land and Improvements, excluding, however, any computer
equipment, computer software and computer hardware (but not the data pertaining
to the operation of the Property) (collectively, the “Personal
Property”);

       

      (f) all
Service Contracts (as hereinafter defined) that are being assumed by Buyer in
accordance with this Agreement; and

       

      (g) all of
the lessor’s interest in the Leases (as hereinafter defined) and any refundable
security or other refundable deposits thereunder and all of Seller’s interest in
any intangible property now or hereafter owned by Seller and used solely in
connection with the Land, Improvements and Personal Property, including all
warranties, guaranties, governmental permits, approvals and
licenses,

       

      
        
          
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      (h) the names
“St. Marin Apartments”, “Karrington Apartments” and variations thereof and any
other trade names and trade marks associated with the Land and Improvements, but
excluding (i) any rights to the name “Berkshire” and the Berkshire trademark,
and (ii) the right, title and interest of any website or domain names maintained
by Seller or Seller’s property manager with respect to the
Property.

       

      All of
the items described in subparagraphs (a) through (g) above are collectively
the “Property”.

       

      1.02 Title.  Seller
shall convey to Buyer by special warranty deed (the “Deed”), and Buyer
shall accept the fee simple title to the Property in accordance with the terms
of this Agreement, and Buyer’s obligation to accept said title shall be
conditioned upon Buyer then being conveyed good and clear record and marketable
fee simple title to the Property, subject only to the Permitted Exceptions (as
hereinafter defined).

       

      Seller
has furnished to Buyer a commitment for title insurance covering the Property
from Lawyers Title Insurance Corporation, 150 Federal Street, Suite 200, Boston,
Massachusetts 02110, Attention: Robert G. Soule, Esq.,
Telephone:  617-619-4800; Facsimile: 617-619-4848 (the “Title Insurer” or
“Escrow Agent”)
and legible copies of all instruments and plans mentioned therein as exceptions
to title (all of such items are hereinafter collectively referred to as the
“Commitment”)
for an Owner’s Title Insurance Policy (the “Title
Policy”).  The Commitment shall be in the amount of the
Purchase Price (as defined in Section 2.01 hereof).  Should such
Commitment contain any title exceptions which are not acceptable to Buyer, in
its reasonable discretion, Buyer shall, prior to the expiration of the
Inspection Period, notify Seller of any such exceptions.  If any
supplement or amendment to the Commitment is issued prior to Closing and it
shows any additional exceptions to title which, in Buyer’s sole discretion,
adversely affect title to the Real Property, the Buyer shall have ten (10) days
from the date of such supplement or amendment to the Commitment within which to
give to the Seller further written notice of disapproval of such additional
exceptions to title.  If Buyer fails to so notify Seller of any such
exceptions, any exceptions existing at the expiration of the Inspection Period
shall be deemed accepted by Buyer and included as the “Permitted
Exceptions”.  If Buyer timely notifies Seller in writing of any
such exceptions, Seller, in Seller’s sole discretion, shall have thirty (30)
days from the date Seller receives notice of such exceptions (and the Closing
Date shall be extended to the extent necessary, not to exceed thirty (30) days)
to remove or cure such exceptions, except with respect to the Monetary Liens (as
hereinafter defined), which Seller may remove or cure at Closing with the
proceeds from the Purchase Price.  Seller shall be deemed to have
given notice to Buyer that Seller refuses to cure any such exceptions, which
Seller may so do in its sole discretion, unless Seller, within ten (10) days
after receipt of notice from Buyer, shall notify Buyer in writing that Seller
will attempt to cure such exceptions.  If Seller fails or refuses to
cure said exceptions within the time period above provided, Buyer may
(a) terminate this Agreement within ten (10) days after Seller gives
notice, or is deemed to have given notice, that Seller refuses to cure such
exceptions and the Deposit shall be returned to Buyer, or (b) if Buyer
fails to so terminate, Buyer shall be deemed to have waived such exceptions and
accept title subject thereto, in which event there shall be no reduction in the
Purchase Price.  Notwithstanding the foregoing, Seller, at its cost,
shall be obligated to cure or remove by Closing the following (collectively, the
“Monetary
Liens”): all mortgages and deeds of trust against the Property, except
the Existing Deed of Trust (as defined below).

       

      1.03 Survey.  Seller
has furnished to Buyer a copy of: (i) ALTA/ACSM Land Title Survey of 1717 E.
Beltline Road, Coppell, Texas coordinated by International Land Services, Inc.
dated September 5, 2003, last revised November 25, 2003, and (ii) ALTA/ACSM Land
Title Survey of 1721 E. Beltline Road, Coppell, Texas coordinated by
International Land Services, Inc. dated September 30, 2003, last revised
November 25, 2003 (collectively, the “Prior Survey”), and
Buyer may obtain a current as-built survey (the “Survey”) of the Land
and the Improvements by a registered land surveyor.

       

      
        
          
             

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      1.04 Should
the Prior Survey contain any encumbrances, encroachments or other survey defects
which are not acceptable to Buyer in its reasonable discretion (collectively
“Prior Survey
Matters”), Buyer shall, prior to the expiration of the Inspection Period,
notify Seller of any such Prior Survey Matters are unacceptable.  In
addition, if Buyer obtains a New Survey, should the New Survey contain any
encumbrances, encroachments or other survey defects which do not appear on the
Prior Survey and which are not acceptable to Buyer in its reasonable discretion
(collectively, “New
Survey Matters”), Buyer shall, prior to the expiration of the Inspection
Period, notify Seller of any such New Survey Matters.  (The Prior
Survey Matters and the New Survey Matters are referred to collectively as “Survey
Matters”).  If Buyer does not obtain a New Survey or if Buyer
fails to so notify Seller of any Survey Matters during the time period as
described above, all Survey Matters shall be deemed accepted by
Buyer.  If Buyer timely notifies Seller in writing of such Survey
Matters, Seller, in Seller’s sole discretion, shall have thirty (30) days from
the date Seller receives notice of such Survey Matters to cure such Survey
Matters.  Seller shall be deemed to have given notice to Buyer that
Seller refuses to cure any such Survey Matters, which Seller may so do in its
sole discretion, unless Seller, within ten (10) days after receipt of notice
from Buyer, shall notify Buyer in writing that Seller will attempt to cure such
Survey Matters.  If Seller fails or refuses to cure said Survey
Matters within the time periods provided, Buyer may (a) terminate this
Agreement within ten (10) days after Seller gives notice, or is deemed to have
given notice, that Seller refuses to cure such Survey Matters and the Deposit
shall be returned to Buyer, or (b) if Buyer fails to so terminate, Buyer
shall be deemed to waive such Survey Matters and accept title subject thereto,
in which event there shall be no reduction in the Purchase Price.

       

      As to
title defects arising after the Effective Date of the Commitment and survey
defects arising after the date of the Survey, Buyer shall be entitled to object
thereto within three (3) business days after becoming aware of such defect, but
no later than the Closing Date, and Seller shall have three (3) business days to
elect the options set forth above regarding the cure of any such additional
title or survey defects (unless such defect was caused by the act or failure to
act of Seller, in which event  Seller is obligated to cure same), and
the Closing Date shall be extended to the extent necessary, not to exceed thirty
(30) days, to provide Seller an additional period of time to attempt to cure any
such defect.

       

      SECTION
2

       

      

       

      PURCHASE PRICE, ACCEPTABLE
FUNDS,

       

      DEPOSIT AND ESCROW OF
DEPOSIT

       

      2.01 Purchase
Price.  The purchase price (“Purchase Price”) to
be paid by Buyer to Seller for the Property is Sixty-One Million Seven Hundred
Fifty Thousand and
00/100 Dollars ($61,750,000.00) subject to the prorations and adjustments as
hereinafter provided in this Agreement.  Subject to receipt of the
Lender’s Consent (as defined below), the Purchase Price shall be comprised of
(i) the principal balance assumed by Buyer under the Existing Loan (as defined
below), and (ii) the balance in immediately available funds, after taking into
account the prorations and adjustments required herein (including, without
limitation, those set forth in Section 11) (the “Equity Portion of the
Purchase Price”).

       

      2.02 Payment of
Monies.  All monies payable under this Agreement, unless
otherwise specified in this Agreement, shall be paid by wire
transfer.

       

      2.03 Payment of Purchase
Price.  The Purchase Price, subject to prorations and
adjustments, shall be paid as follows:

       

      (a) Three
Hundred Thousand and 00/100 Dollars ($300,000.00) paid within two (2) business
days after the Effective Date (the “Initial
Deposit”);

       

      
        
          
             

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      (b) Three
Hundred Thousand and 00/100 Dollars ($300,000.00) shall be paid as an additional
deposit within one (1) day after the expiration of the Inspection Period if
Buyer does not elect to terminate this Agreement pursuant to Section 6.02 hereof
(the “Additional
Deposit” and, together with the Initial Deposit and any and all interest
accrued thereon, the “Deposit”);
and

       

      (c) Payment at
Closing.  At the consummation of the transaction contemplated
hereby (the “Closing”), Buyer
shall deliver to Escrow Agent cash in an amount equal to the Equity Portion of
the Purchase Price less the amount of the Deposit (as defined below) held by the
Escrow Agent and subject to adjustments and apportionments as set forth
herein.  The Purchase Price, as adjusted, shall be paid at Closing by
wire transfer of immediately available federal funds, transferred to the order
or account of Seller or such other person as Seller may designate in
writing.

       

      2.04 Escrow
Provisions.  By executing the Receipt as provided herein,
Escrow Agent hereby acknowledges receipt by Escrow Agent of the Initial Deposit
paid by Buyer to be applied on the Purchase Price of the Property under the
terms hereof.  Escrow Agent agrees to hold, keep and deliver said
Deposit and all other sums delivered to it pursuant hereto in accordance with
the terms and provisions of this Agreement.  Upon receipt from Buyer
of the Deposit, Escrow Agent shall invest the Deposit in an interest-bearing
account or money market fund acceptable to Buyer and Seller.  At the
Closing, Escrow Agent shall release the Deposit to Seller, which Deposit shall
be credited against the balance of the Purchase Price owed by Buyer to
Seller.  Escrow Agent shall not be entitled to any fees or
compensation for its services in holding the Deposit
hereunder.  Escrow Agent shall be liable only to hold said sums and
deliver the same to the parties named herein in accordance with the provisions
of this Agreement, it being expressly understood that by acceptance of this
Agreement Escrow Agent is acting in the capacity of a depository only and shall
not be liable or responsible to anyone for any damages, losses or expenses
unless same shall have been caused by the gross negligence or willful
malfeasance of Escrow Agent.  In the event of any disagreement between
Buyer and Seller resulting in any adverse claims and demands being made in
connection with or for the monies involved herein or affected hereby, Escrow
Agent shall be entitled to refuse to comply with any such claims or demands so
long as such disagreement may continue; and in so refusing Escrow Agent shall
make no delivery or other disposition of any of the monies then held by it under
the terms of this Agreement, and in so doing Escrow Agent shall not become
liable to anyone for such refusal; and Escrow Agent shall be entitled to
continue to refrain from acting until (a) the rights of the adverse
claimants shall have been finally adjudicated in a court of competent
jurisdiction of the monies involved herein or affected hereby, or (b) all
differences shall have been adjusted by agreement between Seller and Buyer, and
Escrow Agent shall have been notified in writing of such agreement signed by the
parties hereto.  Escrow Agent shall not be required to disburse any of
the monies held by it under this Agreement unless in accordance with either a
joint written instruction of Buyer and Seller or an Escrow Demand from either
Buyer or Seller in accordance with the provisions hereinafter.  Upon
receipt by Escrow Agent from either Buyer or Seller (the “Notifying Party”) of
any notice or request (the “Escrow Demand”) to
perform any act or disburse any portion of the monies held by Escrow Agent under
the terms of this Agreement, Escrow Agent shall give written notice to the other
party (the “Notified
Party”).  If within five (5) days after the giving of such
notice, Escrow Agent does not receive any written objection to the Escrow Demand
from the Notified Party, Escrow Agent shall comply with the Escrow
Demand.  If Escrow Agent does receive written objection from the
Notified Party in a timely manner, Escrow Agent shall take no further action
until the dispute between the parties has been resolved pursuant to either
clause (a) or (b) above.  Further Escrow Agent shall have the
right at all times to pay all sums held by it (i) to the appropriate party
under the terms hereof, or (ii) into any court of competent jurisdiction
after a dispute between or among the parties hereto has arisen, whereupon Escrow
Agent’s obligations hereunder shall terminate.

       

      Notwithstanding
the foregoing to the contrary, in the event Buyer timely exercises Buyer’s right
to terminate this Agreement pursuant to Section 6.02 hereof prior to the
expiration of the Inspection

       

      
        
          
             

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      Period
and Buyer delivers an Escrow Demand together with a copy of Buyer’s termination
notice pursuant to Section 6.02 prior to the expiration of the Inspection
Period, Escrow Agent shall give written notice thereof to Seller, disburse the
Deposit to Buyer and Seller shall not have any right to object
thereto.

       

      Seller
and Buyer jointly and severally agree to indemnify and hold harmless said Escrow
Agent from any and all costs, damages and expenses, including reasonable
attorneys’ fees, that said Escrow Agent may incur in its compliance of and in
good faith with the terms of this Agreement; provided, however, this indemnity
shall not extend to any act of gross negligence or willful malfeasance on the
part of the Escrow Agent.

       

      2.05 Assumption of Existing
Loan.  Seller entered into a loan in the original principal
amount of $32,500,000,00 (the "Existing Loan") with Federal Home Loan Mortgage
Corporation (“Existing
Lender”) secured by that certain Multifamily Deed of Trust, Assignment of
Rents and Security  Agreement and Fixture Filing from Seller to Mark
S. Shiembob, Trustee, to Johnson Capital Group, Inc. (“Original Lender”)
dated as of November 25, 2003, in the original principal amount of
$32,500,000.00 and filed for record in/under Volume 2003233, Page 13344 of the
Real Property Records of Dallas County, Texas, as assigned by Original Lender to
Existing Lender pursuant to that Assignment of Security Instrument dated as of
November 25, 2003 recorded in/under Volume 2003233, Page 13427 of the Land
Records of Dallas County, Texas (the “Existing Deed of
Trust”).  Seller shall pay all interest accruing on and other
fees and expenses under the Existing Loan through the date prior to Closing and
Buyer shall be responsible for interest on the Existing Loan from and after the
Closing Date.  All fees associated with the assumption of the Existing
Loan by Buyer (the “Assumption”) shall be
paid at or before the Closing by Buyer.  All loan documentation
related to the Existing Loan is hereinafter referred to as the “Existing Loan
Documents”.  Buyer shall receive a credit against the Purchase
Price equal to the outstanding principal balance and all accrued but unpaid
interest and other fees and expenses under the Existing Loan.

       

      (i) Within
seven (7) days after the Effective Date, Buyer shall submit to Existing Lender a
complete application for the Assumption of the Existing Loan.  Each of
Seller and Buyer shall pursue the Assumption with due diligence and in good
faith and shall make all commercially reasonable efforts to obtain Existing
Lender’s consent to the Assumption in accordance with the terms of this
Agreement, including providing all other cooperation the other party reasonably
requests toward that end. Seller agrees to cooperate with Buyer in connection
with Buyer’s preparation of all applications and submissions contemplated
hereunder and, without limiting the generality of the foregoing, shall furnish
such information and execute and deliver such documents on behalf of the Seller
as may be reasonably required in connection therewith.  Buyer and
Seller shall establish a mutual understanding for all communications between
Seller, its property manager, or other representative of the Seller and Existing
Lender or any tenant or tenants of the Property regarding the terms and
conditions of any
proposed or submitted application contemplated in connection
herewith.

       

      (ii) At
Closing, if Existing Lender consents to such assumption, Seller shall assign the
Existing Loan to Buyer, and Buyer shall assume the Existing Loan, with Existing
Lender’s written consent (the “Lender’s Consent”),
under an assignment and assumption agreement reasonably agreed to by Seller,
Buyer and Existing Lender that imposes no obligation or liability on Seller or
the Seller’s non-recourse guarantor under the Existing Loan Documents with
respect to any period after Closing, with the same effect as if Seller were
paying off the Existing Loan in full at Closing (the “Loan Assignment and
Assumption Agreement”).  The Loan Assignment and Assumption
Agreement, together with any other documents the Existing Lender requires Seller
and/or Buyer to execute and deliver as a condition to the assignment and
assumption of the Existing Loan to Buyer are, collectively, the “Lender Assumption
Documents”.

       

      
        
          
             

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      (iii) In the
event that the Lender Consent has not been obtained on or before expiration of
the Inspection Period, either party may terminate this Agreement by written
notice at any time thereafter so long as such condition remains unsatisfied and
Buyer shall receive a full refund of the Deposit.

       

      2.06 Independent
Consideration.  Notwithstanding anything to the contrary in
this Agreement, in the event Buyer exercises its right to terminate this
Agreement during the Inspection Period, Escrow Agent shall pay to Seller, out of
the Deposit, the sum of $100.00 (the “Independent
Consideration”), and Escrow Agent shall return the balance of the Deposit
to Buyer in accordance with the provisions hereof.  Seller
acknowledges and agrees that its right to the Independent Consideration is good
and sufficient consideration for its execution and delivery of this Agreement,
including provisions allowing Buyer to terminate this Agreement at its
discretion during the Inspection Period.

       

      SECTION
3

       

      

       

      THE
CLOSING

       

      Except as
otherwise provided in this Agreement, the delivery of all documents necessary
for the closing of this transaction pursuant to this Agreement (the “Closing”) shall take
place in the offices of Escrow Agent or such other place as Seller and Buyer
shall mutually agree, at 10:00 a.m. Boston time on April 28, 2008 (the
“Closing Date”)
or such earlier date or place as Buyer and Seller shall mutually agree in
writing.  The transactions described herein shall be closed by means
of concurrent delivery of the documents of title, delivery of Title Policy (as
hereinafter defined) and the Equity Portion of the Purchase Price, customarily
referred to as a “New York Style” or escrow closing.  It is agreed
that time is of the essence of this Agreement.  Buyer and Seller shall
execute supplemental escrow instructions as may be appropriate to enable Title
Company to comply with the terms of this Agreement, so long as such instructions
are not in conflict with this Agreement.

       

      SECTION
4

       

      

       

      SELLER’S PRE-CLOSING
DELIVERIES

       

      Seller
shall, in accordance with the provisions of Section 6.01 hereof, furnish to
Buyer, within three (3) business days after the date hereof, for inspection and
approval by Buyer the following, to the extent in the possession of Seller or
its management company (herein collectively referred to as the "Due Diligence
Materials"):

       

      4.01 Leases.  Seller
shall provide Buyer with access on-site to the originals of all leases and
related lease files.

       

      4.02 Taxes.  A
copy of 2005, 2006 and 2007 (if available) real estate and personal property tax
statements for the Property.

       

      4.03 Current Rent
Roll.  A list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit type, tenant name, commencement and termination dates, lease rent and
security deposits.

       

      4.04 Service
Contracts.  Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.

       

      
        
          
             

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      4.05 Utility
Bills.  A detailed report of all utility bills (gas, electric,
water and sewer) relating to the Property for the immediately prior twelve (12)
month period.

       

      4.06 Operating
Statements.  Copies of the Operating Statements (unaudited) for
the Property for 2005, 2006 and 2007 (if available) year to date in the form
customarily used by Seller in the operation of the Property.

       

      4.07 Permits.  Copies
of all certificates of occupancy (if any) and other permits and licenses (if
any) in the possession of Seller.

       

      4.08 Existing Loan
Documents.  Copies of the Existing Loan Documents.

       

      4.09 Plans and
Specifications.  To the extent in Seller’s possession, all
construction plans and specifications relating to the original development of
the Property and any major capital repairs or tenant improvements that have been
conducted at the Property.

       

      4.10 Environmental
Reports.  All environmental reports in Seller’s
possession.

       

      4.11 Insurance Loss
Runs.  Insurance loss runs for the prior three years to the
extent available to Seller from its insurance provider.

       

      SECTION
5

       

      

       

      REPRESENTATIONS AND
WARRANTIES OF SELLER

       

      Seller
represents and warrants to Buyer as follows:

       

      5.01 Leases.  Seller
has not entered into any leases, subleases, licenses or other rental agreements
or occupancy agreements (written or verbal) which grant any possessory interest
in and to any space situated on or in the Improvements or that otherwise give
rights with regard to use of the Improvements other than the leases (the “Leases”) described in
Schedule C
attached hereto (the “Rent
Roll”).  To the best of Seller’s knowledge, Seller has
complied, in all material respects, with the landlord’s obligations under the
Leases.  Except as shown on the Rent Roll or in the ordinary course of
business, (a) the Leases are in full force and effect and none of them has been
modified, amended or extended, except as stated thereon or as evidenced by
modifications, amendments or extensions thereto or as noted on the Rent Roll;
(b) no rent has been paid more than one (1) month in advance; and (c) there are
no concessions, bonuses, free months’ rental, or rebates with respect to the
Leases.

       

      5.02 Service and Management
Contracts.  To Seller’s knowledge, Schedule D
attached hereto lists all service, maintenance, supply and management contracts
(collectively, “Service Contracts”)
affecting the operation of the Property.  Seller will provide a notice
of termination upon the expiration of the Inspection Period for all Service
Contracts which can be terminated in accordance with their terms and without the
payment of a termination fee by Seller (the  “Terminable Service
Contracts”).  Buyer shall assume at Closing (i) the Terminable
Service Contracts until such time as the termination of such contracts by Seller
shall become effective, and (ii) all Service Contracts that cannot be terminated
by their terms or that cannot be terminated without payment of a termination fee
by Seller.  In any event, Seller will terminate all management and
leasing agreements at no cost to Buyer.

       

      5.03 Ability to
Perform.  Seller has full power to execute, deliver and carry
out the terms and provisions of this Agreement and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and this Agreement constitutes the legal, valid and binding obligation
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      5.04 Seller
enforceable in accordance with its terms.  Except as set forth in this
Agreement, no order, permission, consent, approval, license, authorization,
registration or validation of, or filing with, or exemption by, any governmental
agency, commission, board or public authority is required to authorize, or is
required in connection with, the execution, delivery and performance of this
Agreement by Seller or the taking by Seller of any action contemplated by this
Agreement.

       

      5.05 No
Actions.  To Seller’s knowledge, except as set forth on Schedule E attached
hereto, and except for tenant collection actions, if any, and tort claims, if
any, which are fully covered by insurance, there are no pending legal actions or
proceedings against or relating to Seller or the Property which could have a
material adverse effect on Seller or the Property.

       

      5.06 Existing
Loan.  To Seller’s knowledge, there is no uncured default which
has continued beyond applicable grace and/or cure periods by Seller or Existing
Lender under the Existing Loan Documents.  Seller will not (i) modify
or amend the Existing Loan Documents except as set forth in the Loan Assignment
and Assumption Agreement, and (ii) incur any additional indebtedness which would
be secured by the Existing Deed of Trust.

       

      5.07 Notice of Violations or
Defects.  Seller has received no written notice from applicable
governmental authorities that the Property or the use thereof violates any
governmental law or regulation or any covenants or restrictions encumbering the
Property which violation has not been cured and would have a material adverse
affect on the Property.

       

      5.08 FIRPTA.  Seller
is not a "foreign person", as that term is defined in Section 1445 of the
Internal Revenue Code of 1986, as amended.

       

      5.09 No
Condemnation.  There are no eminent domain, condemnation or
similar proceedings pending, or, to the best of Seller’s knowledge, threatened
with respect to the Property or any portion thereof.

       

      As used
in this Agreement, or in any other agreement, document, certificate or
instrument delivered by Seller to Buyer, the phrase “to the knowledge of
Seller”, “to Seller’s knowledge”, “to the best of Seller’s knowledge” or any
similar phrase shall mean the actual, not constructive or imputed, knowledge of
David Olney, Senior Vice President, without any obligation on his part to make
any independent investigation of the matters being represented and warranted, or
to make any inquiry of any other persons, or to search or examine any files,
records, books, correspondence and the like.

       

      Buyer
agrees to inform Seller promptly in writing if it discovers that any
representation or warranty of Seller is inaccurate in any material respect, or
if it believes that Seller has failed to deliver to Buyer any document or
material which it is obligated to deliver hereunder.

       

      If Buyer
notifies Seller prior to Closing that any representation or warranty made in
Section 5 is not true and correct in any material respect and Seller fails
to cure or remedy the same prior to Closing, Buyer may either (a) terminate this
Agreement and the Deposit shall be returned to Buyer, and neither party shall
have further rights or obligations pursuant to this Agreement, except for
Buyer’s obligation to repair any damage to the Property and to indemnify Seller
as set forth in Section 6.01; or (b) waive any such representation or warranty
and close the transaction without any reduction in the Purchase
Price.

       

      If
subsequent to Closing Buyer notifies Seller within six (6) months after Closing
that Buyer discovered post-closing that any representation or warranty made in
this Section 5 was not true and correct in any material respect and specifying
the breach with particularity, subject to the limitations set forth in Section
17.02, Buyer shall have available all remedies at law or in equity as a
consequence

       

      
        
          
             

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      thereof.  If
Buyer does not notify Seller of the breach of any of its representations and
warranties set forth in this Section 5 and institute a lawsuit therefore in a
court of competent jurisdiction within six (6) months after the Closing, Buyer
shall be deemed to have waived all of its rights to claim and sue for any breach
by Seller of any of its representations and warranties made in this Section
5.

       

      Buyer
agrees to use diligent efforts to notify Seller of any breach of any Seller’s
representations and warranties set forth in this Section 5.

       

      SECTION
6

       

      

       

      INSPECTION PERIOD; ACCESS;
PURCHASE “AS IS”

       

      6.01 During
the term of this Agreement, Buyer, its agents and representatives, shall be
entitled to enter upon the Property (as coordinated through Seller’s property
manager), including all leased areas, upon reasonable prior notice to Seller, to
perform inspections and tests of the Property, including surveys, environmental
studies, examinations and tests of all structural and mechanical systems within
the Improvements, and to examine the books and records of Seller and Seller’s
property manager relating to the Property.  Before entering upon the
Property, Buyer shall furnish to Seller evidence of general liability insurance
coverage in such amounts and insuring against such risks as Seller may
reasonably require.  Notwithstanding the foregoing, Buyer shall not be
permitted to interfere unreasonably with Seller’s operations at the Property or
unreasonably interfere with any tenant’s occupancy at the Property, and the
scheduling of any inspections shall take into account the timing and
availability of access to tenants’ premises, pursuant to tenants’ rights under
the Leases or otherwise.  If Buyer wishes to engage in any testing
which will damage or disturb any portion of the Property, Buyer shall obtain
Seller’s prior consent thereto, which may be refused or conditioned in Seller’s
sole discretion.  Without limiting the generality of the foregoing,
Seller’s written approval (which, notwithstanding the foregoing, may be granted,
withheld or conditioned in Seller’s sole discretion) shall be required prior to
any testing or sampling of surface or subsurface soils, surface water,
groundwater or any materials in or about the Improvements in connection with
Buyer’s environmental due diligence.  Buyer shall repair any damage to
the Property caused by any such tests or investigations or Buyer’s entry onto
the Property, and indemnify Seller from any and all liabilities, claims, costs
and expenses resulting therefrom.  The foregoing indemnification shall
survive Closing or the termination of this Agreement.

       

      6.02 The term
“Inspection Period,” as used herein, shall mean the period commencing on the
Effective Date and ending at 5:00 p.m. Boston time on March 27, 2008. Buyer shall have the
right to terminate this Agreement, in its sole discretion, by giving written
notice of such election to Seller on any day prior to and including the final
day of the Inspection Period, in which event the Deposit shall be returned
forthwith to Buyer and, except as expressly set forth herein, neither party
shall have any further liability or obligation to the other
hereunder.  In the absence of such written notice, the contingency
provided for in this Section 6.02 shall no longer be applicable, Buyer
shall be deemed to have waived its right to terminate hereunder and this
Agreement shall continue in full force and effect.  In the event Buyer
timely elects to terminate this Agreement during the Inspection Period as
permitted above, and as additional consideration for Seller granting Buyer the
foregoing condition precedent, in the event that Seller requests the same in
writing, Buyer shall deliver to Seller with Buyer’s notice of termination copies
of all final studies, surveys, plans, investigations and reports obtained by or
prepared by Buyer in connection with Buyer’s inspection of the Property, in
which event Seller shall reimburse Buyer for actual costs and expenses incurred
by Buyer in connection with the same.  Buyer makes no warranty or
representation as to the accuracy of any information contained in such
documents.

       

      6.03 EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, IT IS UNDERSTOOD AND AGREED THAT SELLER
IS NOT MAKING AND HAS NOT AT ANY TIME

       

      
        
          
             

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      6.04 MADE ANY
WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR
REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.

       

      BUYER
ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL AND CONVEY TO BUYER
AND BUYER SHALL ACCEPT THE PROPERTY “AS IS, WHERE IS, WITH ALL
FAULTS”.  EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN
THIS AGREEMENT OR IN THE DEED, BUYER HAS NOT RELIED AND WILL NOT RELY ON, AND
SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES,
GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE
PROPERTY OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, ANY
PROSPECTUS DISTRIBUTED WITH RESPECT TO THE PROPERTY) MADE OR FURNISHED BY
SELLER, THE MANAGERS OF THE PROPERTY, OR ANY REAL ESTATE BROKER OR AGENT
REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN,
DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN
THIS AGREEMENT.  BUYER ALSO ACKNOWLEDGES THAT THE PURCHASE PRICE
REFLECTS AND TAKES INTO ACCOUNT THAT THE PROPERTY IS BEING SOLD
“AS-IS.”

       

      BUYER
REPRESENTS TO SELLER THAT BUYER HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING,
SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL
AND ENVIRONMENTAL CONDITIONS THEREOF, AS BUYER DEEMS NECESSARY OR DESIRABLE TO
SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND THE EXISTENCE OR
NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR
TOXIC SUBSTANCES ON OR DISCHARGED FROM THE PROPERTY, AND WILL RELY SOLELY UPON
SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER OR ITS
AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN SUCH REPRESENTATIONS,
WARRANTIES AND COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH IN THIS
AGREEMENT.  UPON CLOSING, BUYER SHALL ASSUME THE RISK THAT ADVERSE
MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL
AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY BUYER’S
INVESTIGATIONS, AND BUYER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED,
RELINQUISHED AND RELEASED SELLER (AND SELLER’S AFFILIATED ENTITIES AND EACH OF
THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS
(COLLECTIVELY, “SELLER
AFFILIATES”)) FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF
ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS
AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES) OF ANY AND EVERY KIND OR
CHARACTER, KNOWN OR
UNKNOWN, WHICH BUYER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND
SELLER’S PROPERTY MANAGER AND SELLER’S OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF ANY LATENT OR
PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, VIOLATIONS OF ANY APPLICABLE
LAWS AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS
REGARDING THE PROPERTY, OTHER THAN PURSUANT TO SUCH REPRESENTATIONS, WARRANTIES
AND COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE
DEED.

       

      THE
PROVISIONS OF THIS SECTION SHALL SURVIVE CLOSING OR ANY TERMINATION OF THIS
AGREEMENT.

       

      
        
          
             

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      Buyer
waives any rights or claims it may have against Seller, Seller’s property
manager or any Seller Affiliates in connection with the presence of, or any
loss, cost or damage associated with, Hazardous Materials (as hereinafter
defined) in, on, above or beneath the Property or emanating
therefrom.  If at any time after the Closing, any third party or any
governmental agency seeks to hold Buyer responsible for any loss, cost or damage
arising from any Hazardous Materials in, on, above or beneath the Property or
for the violation of any Hazardous Materials Laws, Buyer agrees that it shall
not (a) implead Seller, (b) bring a contribution action or similar
action against Seller, or (c) attempt in any way to hold Seller responsible
with respect to any such matter.  The provisions of this
Section 6.04 shall survive the Closing.  As used herein, “Hazardous Materials”
shall mean and include, but shall not be limited to any petroleum product, all
hazardous or toxic substances, wastes or substances and any substances or
organisms (including any mold or fungi) which because of their quantitated
concentration, chemical, or active, flammable, explosive, infectious or other
characteristics, constitute or may reasonably be expected to constitute or
contribute to a danger or hazard to the health, safety or welfare of the general
public or of any occupants of the Building or to the environment, including,
without limitation, any hazardous or toxic waste or substances which are
included under or regulated by any applicable law or regulation (whether now
existing or hereafter enacted or promulgated, as they may be amended from time
to time) including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (“CERCLA”),
42 U.S.C. §9601 et seq.; the Toxic
Substance Control Act (“TSCAS”),
15 U.S.C. §2601 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. §1802; the Resource
Conservation and Recovery Act (“RCRA”),
42 U.S.C. §9601, et seq.; the Clean
Water Act (“CWA”), 33 U.S.C.
§1251 et seq.;
the Safe Drinking Water Act, 42 U.S.C. §300f et seq.; the Clean
Air Act (“CAA”), 42 U.S.C.
§7401 et seq.,
the Federal Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., similar state laws and regulations adopted thereunder
(collectively, “Hazardous Materials
Laws”).  The provisions of this Section shall survive Closing
or any termination of this Agreement.

       

      6.05 No Financial
Representation.  Seller has provided to Buyer certain unaudited
historical financial information regarding the Property relating to certain
periods of time in which Seller owned the Property.  Seller and Buyer
hereby acknowledge that such information has been provided to Buyer solely as
illustrative material.  Seller makes no representation or warranty
that such material is complete or accurate or that Buyer will achieve similar
financial or other results with respect to the operations of the Property, it
being acknowledged by Buyer that Seller’s operation of the Property and
allocations of revenues or expenses may be vastly different than Buyer may be
able to attain.  Buyer acknowledges that it is a sophisticated and
experienced purchaser of real estate and further that Buyer has relied upon its
own investigation and inquiry with respect to the operation of the Property and
releases Seller from any liability with respect to such historical financial
information.

       

      6.06 Lead
Warning.  Attached hereto as Schedule F as part of
this Agreement is the “Lead Warning Statement” (herein so called), required by
42 U.S.C. §4852d.  Buyer has the right to conduct a risk assessment or
inspection for the presence of lead-based paint hazards.  If such
inspection reveals a lead-based paint hazard that is not acceptable to Buyer,
Buyer has the right to terminate this Agreement by written notice to Seller
delivered on or prior to the expiration of the Inspection Period.  If
Buyer timely terminates this Agreement pursuant to the preceding sentence, the
Deposit shall be returned to Buyer, and Seller and Buyer have no further
obligations, one to the other, with respect to the subject matter of this
Agreement, except for matters expressly surviving termination.  If
Buyer fails to timely give such termination notice, Buyer is deemed to have
accepted any lead-based paint condition.  Buyer hereby acknowledges
that it has read the Lead Warning Statement and understands its contents, that
it has been given at least a ten (10) day period from the Effective Date to
conduct a risk assessment or inspection for the presence of lead-based paint
hazards, and that Buyer has received and read the Lead Hazard Information
Pamphlet.

       

      
        
          
             

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      6.07 

       

      

       

      INSURANCE

       

      6.08 Maintenance of
Insurance.  Until the Closing, Seller shall maintain its
present insurance on the Property, including, without limitation, casualty and
liability insurance, which insurance in respect of fire and casualty shall be
covered by a standard All-Risk Policy in the amounts as currently
insured.  Subject to the provisions of Section 7.02, the risk of
loss in and to the Property shall remain vested in Seller until the
Closing.  Buyer will obtain its own insurance on the Property at
Closing.

       

      6.09 Casualty or
Condemnation.  If prior to the Closing, the Improvements or any
material portion thereof (having a replacement cost equal to or in excess of
$2,000,000.00 are damaged or destroyed by fire or casualty, or any material part
of the Property (for which a condemnation award is in excess of $2,000,000.00)
is taken by eminent domain by any governmental entity, or such taking would
cause the property (i) no longer to comply with zoning requirements or the
Leases, or (ii) no longer to have access to a publicly-dedicated and maintained
right-of-way for vehicular and pedestrian access, then Buyer shall have the
option, exercisable by written notice given to Seller at or prior to the
Closing, to terminate this Agreement, whereupon all obligations of all parties
hereto shall cease, the Deposit shall be returned to Buyer and this Agreement
shall be void and without recourse to the parties hereto except for provisions
which are expressly stated to survive such termination.  If Buyer does
not elect to terminate this Agreement, or if such damage or destruction or
taking has a replacement cost or condemnation award  in an amount of
less than $2,000,000.00 and in the event of a taking would not cause the
Property to fail to comply with zoning requirements or the Leases
or  no longer to have access to a publicly-dedicated and maintained
right-of-way for vehicular and pedestrian access, Buyer shall proceed with the
purchase of the Property without reduction or offset of the Purchase Price, and
in such case, unless Seller shall have previously restored the Property to its
condition prior to the occurrence of any such damage or destruction, Seller
shall pay over or assign to Buyer all amounts received or due from, and all
claims against, any insurance company or governmental entity as a result of such
destruction or taking and Buyer shall be entitled to a credit against the
Purchase Price equal to the deductible amount, if applicable, under Seller’s
insurance policy.

       

      SECTION
7

       

      

       

      SELLER’S OBLIGATIONS PRIOR
TO CLOSING

       

      Seller
covenants that between the Effective Date (except as set forth in Section 8.01
below) and the Closing:

       

      7.01 Leasing.  From
and after the expiration of the Inspection Period, Seller shall not, without
Buyer’s prior written consent, enter into any (i) new lease for any part of the
Property, (ii) amendment, modification, or renewal of an existing Lease (except
renewals of existing Leases on terms provided under such Leases at rental rates
not less than the rent set forth for such unit on the Rent Roll, (iii) accept
the surrender of premises under any Lease, (iv) consent to sublease, or (v)
terminate any existing Lease or dispossess any tenant under an existing Lease
(except terminations of existing Leases in the event the tenants thereunder have
failed to pay rent or other charges for more than thirty (30) days past the due
date thereof) (each of (i), (ii), (iii), and (iv) being herein collectively
referred to as a “New
Lease”) which (x) is more than five percent (5%) below current market
rents for the Property as set forth on Schedule G attached
hereto, (y) provides for concessions in excess of one (1) month’s rent; or
(z) is for a term in excess of one (1) year or whose term will commence more
than thirty (30) days after the execution of the New Lease.  On or
prior to the Closing Date, Seller shall have performed all work necessary
(including, without limitation, supplying operable kitchen appliances,
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      7.02 carpeting,
and repainting) to make all apartment units within the Property that have been
vacated for more than seven (7) days prior to the Closing Date ready for
occupancy by incoming tenants, consistent with Seller’s past practices (the
“Ready
Work”).  In the event that all Ready Work has not been
completed prior to the Closing Date, Buyer shall receive a credit at Closing on
account of the incomplete Ready Work in an amount equal to $500.00 per
unit.

       

      7.03 Continuation of Service
Contracts.  Seller shall not modify or amend any Service
Contract or enter into any new service contract for the Property, without the
prior written consent of Buyer which consent shall not be unreasonably withheld
or delayed provided such contract is terminable without penalty by the then
owner of the Property upon not more than thirty (30) days’ notice.

       

      7.04 Replacement of Personal
Property.  No personal property included as part of the
Property shall be removed from the Property unless the same is replaced with
similar items of at least equal quality prior to the Closing.

       

      7.05 Tax
Procedure.  Seller shall not withdraw, settle or otherwise
compromise any protest or reduction proceeding affecting real estate taxes
assessed against the Property for any fiscal period in which the Closing is to
occur or any subsequent fiscal period without the prior written consent of
Buyer.  Real estate tax refunds and credits received after the Closing
which are attributable (a) to any fiscal period prior to the fiscal tax year
during which the Closing occurs shall be paid to Seller, and (b) to the fiscal
tax year during which the Closing occurs shall be apportioned between Seller and
Buyer, after deducting the expenses of collection thereof, based upon the
relative time periods each owns the Property, which obligation shall survive the
Closing.

       

      7.06 Access.  Seller
shall allow Buyer or Buyer’s representatives access to the Property, the Leases
and other documents required to be delivered under this Agreement upon
reasonable prior notice at reasonable times; provided Buyer agrees that the
original leases and all other original documents shall remain on-site at the
Property.

       

      SECTION
8

       

      

       

      SELLER’S CLOSING
OBLIGATIONS

       

      8.01 Closing, Deliveries and
Obligations.  At the Closing, Seller shall deliver the
following to the Escrow Agent (herein referred to as the "Seller Closing
Documents"):

       

      (a) Deed.  The
Deed, in the form attached hereto as Exhibit A, duly
executed and acknowledged by Seller, which conveys the Land and Improvements to
Buyer, subject only to Permitted Exceptions, and, if required by the Title
Company, a quitclaim deed, duly executed and acknowledged by Seller, which
conveys the Land and Improvements to Buyer according to the description thereof
contained in the Survey.

       

      (b) Bill of
Sale.  A bill of sale in the form attached hereto as Exhibit B, as
executed by Seller.

       

      (c) General
Assignment.  A general assignment in the form attached as Exhibit C (the “Assignment”), as
executed by Seller.

       

      (d) Seller’s Representation
Certificate.  A certificate certifying that all representations
and warranties of Seller in Section 5 of this Agreement remain true and correct
as of the Closing Date in all material respects.

       

      
        
          
             

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      (e) Lease
Records.  Original copies of all Leases, and related documents
in the possession or under the control of Seller.  Such records shall
include a schedule of all cash security deposits and other refundable deposits
and a credit against the Purchase Price in the amount of such security deposits
and other refundable deposits held by Seller at the Closing under the Leases
together with appropriate instruments of transfer or assignment with respect to
any lease securities which are other than cash and a schedule updating the Rent
Roll and setting forth all arrears in rents and all prepayments of
rents.

       

      (f) Permits.  Seller
shall deliver, to the extent in the possession of Seller:  original
copies of all certificates, licenses, permits, authorizations and approvals
issued for or with respect to the Property by governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.

       

      (g) Title
Affidavits.  Such affidavits as the Title Insurer may
reasonably require in order to omit from its title insurance policy all
exceptions, other than Permitted Exceptions, for (i) parties in possession
other than under the rights to possession granted under the Leases; and (ii)
mechanics’ liens, in the form attached hereto as Exhibit
H.

       

      (h) Files.  Seller
shall make all of its files and records relating to the Property available to
Buyer at the Property upon reasonable prior notice for copying, which obligation
shall survive the Closing.

       

      (i) Notices of
Sales.  A letter in the form attached as Exhibit D, executed
by Seller, advising the tenants under the Leases of the sale of the Property to
Buyer and directing that all rents and other payments thereafter becoming due
under the Leases be sent to Buyer or as Buyer may direct.

       

      (j) Non-Foreign
Affidavit.  A certification with respect to compliance by
Seller with the Foreign Investment and Real Property Tax Act, IRC
Section 1445(b)(2), as amended, in the form attached as Exhibit
E.

       

      (k) Rent
Roll.  An updated Rent Roll, re-certified to be true, complete
and accurate, in the form attached as Exhibit
F.

       

      (l) Management Agreement
Termination.  A termination of the existing management
agreement, executed by the property manager, in the form attached as Exhibit
G.

       

      (m) Transfer Tax
Declaration.  Any transfer tax declaration, if any, required to
be filed in connection with the recording of the Deed.

       

      (n) Assignment and Assumption
Documents.  If Lender’s Consent is obtained, the Assignment and
Assumption Agreement, in recordable form, duly executed by Seller before a
notary public, in the form of which has been previously approved by all parties
thereto.

       

      (o) Other
Documents.  Deliver any other documents required by this
Agreement to be delivered by Seller.

       

      8.02 Seller’s
Expenses.  Seller shall pay (i) its own counsel fees; (ii) the
cost of the base premium for the standard coverage owner’s policy of title
insurance; (iii) one-half of any escrow fees; and (iv) those fees, costs and
expenses customarily charged at closing to a seller in accordance with the
custom of the State of Texas.

       

      
        
          
             

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      8.03 

       

      

       

      BUYER’S
CLOSING OBLIGATIONS

       

      At the
Closing, Buyer shall:

       

      8.04 Payment of Purchase
Price.  Deliver to Seller the Purchase Price, as adjusted for
(a) apportionments under Section 2.05 and Section 11, and (b) any
adjustments thereto required pursuant to the express provisions this
Agreement.

       

      8.05 Assignment.  The
Assignment, as executed by Buyer.

       

      8.06 Recording
Deed.  Cause the Deed to be recorded.

       

      8.07 Assignment and Assumption
Agreement.  If Lender’s Consent is obtained, the Assignment and
Assumption Agreement, in recordable form, duly executed by Buyer before a notary
public, in the form of which has been previously approved by all parties
thereto, and such other documents as may be required by Existing
Lender.

       

      8.08 Other
Documents.  Deliver any other documents required by this
Agreement to be delivered by Buyer.

       

      8.09 Buyer’s
Expenses.  Buyer shall pay (i) its own counsel fees, (ii) the
cost of any additional premiums charged by the Title Insurer for the Title
Policy, including, without limitation, extended coverage in connection with the
issuance of the Title Policy and the cost of any endorsements to the Title
Policy requested by Buyer, (iii) the cost of the Survey; (iv) any costs and
expenses relating to the assumption of the Existing Loan (excluding Seller’s
attorneys fees), including, without limitation, any assumption fee charged by
Existing Lender, (v) one-half of any escrow fees, and (vi) those fees, costs and
expenses customarily charged at closing to a buyer in accordance with the custom
of the State of Texas.

       

      SECTION
9

       

      

       

      APPORTIONMENTS AND
ADJUSTMENTS TO PURCHASE PRICE

       

      The
following apportionments shall be made between the parties at the Closing as of
the close of the business day prior to the Closing:

       

      (a) Buyer
shall receive from Seller a credit for any rent and other income under Leases
collected by Seller before Closing that applies to any period after
Closing.  Uncollected rent and other uncollected income shall not be
prorated at Closing.  After Closing, Buyer shall apply all rent and
income collected by Buyer from a tenant, first to such tenant’s current monthly
rental, then to the month in which Closing occurred, and then to arrearages in
the reverse order in which they were due, remitting promptly to Seller, any
balance properly allocable to Seller’s period of ownership.  Buyer
shall bill and use commercially reasonable efforts to collect such rent
arrearages in the ordinary course of business, but shall not be obligated to
engage a collection agency or take legal action to collect any rent
arrearages.  Any rent or other income received by Seller after Closing
which are owed to Buyer shall be remitted to Buyer promptly after receipt for
allocation and disbursement as provided herein;

       

      (b) refundable
security deposits and other refundable deposits; it is the intent of the parties
that all refundable security deposits and other refundable deposits shown on the
Rent Roll shall be transferred by Seller to Buyer at Closing; provided, however,
all non-refundable tenant fees such as

       

      
        
          
             

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      (c) cleaning
fees, redecorating fees and pet fees shall be retained by Seller; on the
Closing, Buyer shall in writing acknowledge receipt of and expressly assume all
Seller’s financial and custodial obligations with respect to all such security
deposits, it being the intent and purpose of this provision that, at Closing,
Seller will be relieved of all fiduciary and custodial obligations, and that
Buyer will assume all such obligations and be directly accountable to the
residents of the Property with respect to all such security
deposits;

       

      (d) there
shall be no adjustment for wages, vacation pay, pension and welfare benefits and
other fringe benefits of all persons employed by Seller at the Property; it
being the intent of the parties that simultaneously with the Closing, Seller
shall terminate any existing management agreement and Buyer shall have no
liability or obligation with respect to any employee of Seller or its management
company prior to Closing;

       

      (e) real
estate taxes, personal property taxes, water charges and sewer charges, if any,
on the basis of the most recent billing period, as reflected on the actual
invoices/bills issued by the appropriate taxing authority;

       

      (f) Seller
shall receive a credit for utility deposits for any utility accounts which are
transferred to Buyer;

       

      (g) prepayments
paid by Seller under assigned Service Contracts, provided there shall be no
adjustment or proration for any initial inducement payments made to Seller by
providers of telephone, cable television, internet or similar service
providers;

       

      (h) Buyer
shall be responsible for all leasing or brokerage commissions for tenants who
have executed a lease prior to the Closing Date but do not move in until after
the Closing Date;

       

      (i) association
fees and charges from the Valley Ranch Master Association (the “Association”).  Upon
written request by Buyer , Seller shall deliver to the Association and request
that the Association execute an estoppel certificate (in a form to be provided
to Seller by Buyer) confirming the amount of such fees and charges and that the
same are not delinquent;

       

      (j) the
mortgage payment under the Existing Loan for the month during which the Closing
occurs; and

       

      (k) Seller
shall receive a credit at the Closing for all escrow amounts or reserves
deposited in connection with the Existing Loan, which are to remain in effect
after Closing for the benefit of Buyer.

       

      If the
Closing shall occur before a new tax rate or new assessed valuation is fixed for
the fiscal period in which Closing occurs, the apportionment of taxes at the
Closing shall be upon the basis of the tax rate or assessed valuation for the
preceding period, as applicable.  Promptly after the new tax rate or
new assessed valuation is fixed, the apportionment of taxes shall be recomputed.
Any discrepancy resulting from such recomputation and any errors or omissions in
computing apportionments at the Closing shall be promptly corrected, which
obligation shall survive the Closing.  If any operating expenses or
other prorations cannot conclusively be determined as of the date of Closing,
then the same shall be adjusted at Closing based upon the most recently issued
bills thus far and shall be re-adjusted within ninety (90) days after the
Closing occurs.  This obligation to re-adjust shall survive
Closing.

       

      
        
          
             

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      FAILURE
TO PERFORM

       

      9.02 Buyer’s
Election.  If Seller is unable to satisfy all of Seller’s
obligations as set forth in this Agreement, Buyer shall have the right to elect,
in its sole discretion, at the Closing, to accept such title as Seller can
deliver to the Property in its then condition and to pay therefor the Purchase
Price without reduction or offset, in which case Seller shall convey such title
for such price.

       

      9.03 Seller’s
Default.  If at the Closing, Seller is unable to satisfy all of
Seller’s obligations as set forth in this Agreement, and Buyer does not elect to
take title as provided in Section 12.01, Seller shall be in default under
this Agreement and the Deposit shall be forthwith returned to Buyer and Buyer
shall be entitled to reimbursement from Seller of (i) all non-refundable loan
assumption and origination costs paid to Existing Lender by Buyer, plus (ii)
Buyer’s other actual out-of-pocket expenses incurred in connection with the
transaction contemplated by this Agreement in an amount not to exceed One
Hundred Thousand and 00/100 Dollars ($100,000.00), and thereafter neither party
shall have any further obligations to the other.  In addition to the
foregoing, if Buyer desires to purchase the Property in accordance with the
terms of this Agreement and Seller intentionally refuses to perform Seller’s
obligations hereunder, Buyer, at its option, and as Buyer’s sole and exclusive
remedy, shall have the right to compel specific performance by Seller hereunder
in which event the Deposit shall be delivered to Seller at Closing and credited
against the Purchase Price; provided, however, that (i) Buyer shall only be
entitled to such remedy if (A) any such suit for specific performance is filed
within forty-five (45) days after Buyer becomes aware of the default by Seller
and notifies Seller of such default, and (B) Buyer is not in default under this
Agreement.  Notwithstanding the foregoing, if the remedy of specific
performance is not available to Buyer because Seller has conveyed the Property
to a third party in violation of this Agreement, then Buyer shall be entitled to
seek Buyer’s actual  damages from Seller up to an aggregate amount of
Six Hundred Thousand and 00/100 Dollars ($600,000.00).

       

      9.04 Buyer’s
Default.  The parties acknowledge that in the event of Buyer’s
failure to fulfill its obligations hereunder it is impossible to compute exactly
the damages which would accrue to Seller in such event.  The parties
have taken these facts into account in setting the amount of the Deposit,
required pursuant to Section 2.03, and hereby agree that: (a) such
amount together with the interest earned thereon is the pre-estimate of such
damages which would accrue to Seller; (b) such amount represents damages
and not any penalty against Buyer; and (c) if this Agreement shall be
terminated by Seller by reason of Buyer’s failure to fulfill Buyer’s obligations
hereunder, the Deposit together with the interest thereon shall be Seller’s full
and liquidated damages in lieu of all other rights and remedies which Seller may
have against Buyer at law or in equity.

       

      9.05 Cure.  If
either Buyer or Seller fails to perform any of their respective obligations
under this Agreement (excluding the closing obligations under Sections 9 and 10
hereof), the non-defaulting party shall give written notice to the defaulting
party specifying such default and, except as to defaults which occur as of
Closing, the defaulting party shall not be in default under this Agreement
unless the defaulting party fails to cure such default within five (5) days
after the delivery by the non-defaulting party of said written
notice.  Notwithstanding anything in the foregoing sentence to the
contrary, if either party is in default of their respective closing obligations
under Sections 9 and 10 hereof, the non-defaulting party shall not be required
to deliver notice and the defaulting party shall not be entitled to a cure
period with respect to a default of any closing obligation under said
Sections.

       

      
        
          
             

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      BROKERAGE
FEES

       

      Seller
and Buyer mutually represent and warrant that CB Richard Ellis (“Broker”) is the only
broker with whom they have dealt in connection with this purchase and sale and
that neither Seller nor Buyer knows of other any broker who has claimed or may
have the right to claim a commission in connection with this purchase and
sale.  The commission of the Broker shall be paid by Seller pursuant
to a separate agreement, but Seller shall be obligated to pay such commission
only if, as and when the Deed is recorded and not otherwise.  In any
event, Buyer shall have no obligation to pay a brokerage commission to
Broker.  Seller and Buyer shall indemnify and defend each other
against any costs, claims or expenses, including attorneys’ fees, arising out of
the breach on their respective parts of any representations, warranties or
agreements contained in this Section.  Buyer acknowledges and agrees
that Broker is not authorized by Seller to make, and Broker has not at any time
made, any representation or warranty of any kind or character, express or
implied, with respect to Seller or the Property.  The representations
and obligations under this Section shall survive the Closing or, if the Closing
does not occur, the termination of this Agreement.

       

      SECTION
10

       

      

       

      CONDITIONS TO
CLOSING

       

      The
obligation of Buyer to consummate the transaction contemplated hereby is
conditioned upon satisfaction by Seller or waiver by Buyer of the following
conditions precedent as of the Closing Date:

       

      (a) All
representations and warranties of Seller made herein remain materially true and
correct except with respect to changes in the ordinary course of Seller’s
operation of the Property (including, without limitation, activities conducted
in accordance with Section 8 of this Agreement);

       

      (b) Seller
shall have materially performed all of the obligations and covenants undertaken
by Seller in this Agreement to be performed by Seller at or prior to the
Closing;

       

      If the
conditions set forth in this Section 14 are not satisfied at or prior to
Closing, Buyer may elect either to terminate this Agreement in writing at or
prior to Closing (in which event the Deposit shall be refunded to Buyer and the
parties hereto shall have no further rights or obligations to one another except
those which explicitly survive termination), to pursue its remedies as set forth
in Section 12 if the failure of a condition shall have occurred on account of a
default by Seller under this Agreement, or to waive the unsatisfied condition
and close escrow without a reduction in the Purchase Price.  The
failure of the Buyer to elect any of the foregoing options at or prior to
Closing shall be deemed a waiver of the failed condition by Buyer.

       

      SECTION
11

       

      

       

      NOTICES

       

      11.01 Effective
Notices.  All notices and/or notifications under this Agreement
shall be in writing and shall be delivered personally or shall be sent by
Federal Express or other comparable overnight delivery courier (delivery is
deemed to be one business day after deposit with such overnight courier),
addressed as set forth at the beginning of this Agreement or by telecopier to
the telecopier number as set forth at the beginning of this Agreement, provided
that transmission is confirmed by the sender’s telecopier and followed by a copy
sent by overnight delivery courier.  Notices shall be
deemed

       

      
        
          
             

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      11.02 effective,
when so delivered.  Copies of all such notices to Buyer shall be sent
to Stephen F. White, Esq., Nelson Mullins Riley & Scarborough LLP, Atlantic
Station, 201 17th Street
NW, Suite 1700, Atlanta, Georgia  30363, Telephone No.: 404-322-6122,
Telecopier No. 404-322-6091, and copies of all such notices to Seller shall be
sent to Richard A. Toelke, Esq., Bingham McCutchen LLP, 150 Federal Street,
Boston, Massachusetts 02110, Telephone No.: 617-951-8830, Telecopier
No. 617-951-8736 and to Mary Beth Bloom, General Counsel, The Berkshire
Group, One Beacon Street, Suite 1500, Boston, Massachusetts  02108,
Telephone No.: 617-556-1588, Telecopier No. 617-556-1408.

       

      SECTION
12

       

      

       

      LIMITATIONS ON
SURVIVAL

       

      12.01 Representations and
Warranties.  Except as otherwise expressly provided in this
Agreement, no representations, warranties, covenants or other obligations of
Seller set forth in this Agreement shall survive the Closing, and no action
based thereon shall be commenced after Closing.  The representations,
warranties, covenants and other obligations of Seller set forth in
Section 5 shall survive until six (6) months after the Closing, and no
action based thereon shall be commenced more than six (6) months after the
Closing.

       

      12.02 Merger.  The
delivery of the Deed by Seller, and the acceptance and recording thereof by
Buyer, shall be deemed the full performance and discharge of each and every
obligation on the part of Seller to be performed hereunder and shall be merged
in the delivery and acceptance of the Deed, except as provided in
Section 16.01 and except for such other obligations of Seller which are
expressly provided herein to survive the Closing.

       

      SECTION
13

       

      

       

      MISCELLANEOUS
PROVISIONS

       

      13.01 Assignment.  Buyer
shall be entitled to assign this Agreement and its rights hereunder to a
corporation, general partnership, limited partnership, limited liability company
or other lawful entity entitled to do business in the state in which the
Property is located provided such entity shall be (a) controlled by, controlling
or under the common control with Buyer or Williams Multifamily Acquisition Fund,
LP, a Delaware limited partnership, and (b) acceptable to the Existing Lender
(“Assignee”).  In
the event of such an assignment of this Agreement to Assignee (a) Buyer
shall notify Seller promptly, (b) Buyer and Assignee shall be jointly and
severally liable under this Agreement from and after such assignment,
(c) Assignee shall assume all obligations of Buyer under this Agreement and
(d) from and after any such assignment the term “Buyer” shall be deemed to
mean the Assignee under any such assignment.

       

      13.02 Limitation of
Liability.  No shareholders, partners or members of either
party, nor any of its or their respective officers, directors, agents,
employees, heirs, successors or assigns shall have any personal liability of any
kind or nature for or by reason of any matter or thing whatsoever under, in
connection with, arising out of or in any way related to this Agreement and the
transactions contemplated herein, and each party hereby waives for itself and
anyone who may claim by, through or under such party any and all rights to sue
or recover on account of any such alleged personal liability.

       

      Notwithstanding
anything set forth in this Agreement to the contrary, Buyer agrees that Seller
shall have no liability to Buyer for any breach of Seller’s covenants,
agreements, representations or warranties hereunder or under any other
agreement, document, certificate or instrument delivered by Seller to Buyer
unless the valid claims for all such breaches collectively aggregate more than
Twenty

       

      
        
          
             

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      Five
Thousand and 00/100 Dollars ($25,000.00), in which event the full amount of such
valid claims shall be actionable, up to the cap set forth in the following
sentence.  Further, Buyer agrees that any recovery against Seller for
any breach of Seller’s covenants, agreements, representations and warranties
hereunder or under any other agreement, document, certificate or instrument
delivered by Seller to Buyer, or under any law applicable to the Property or
this transaction, shall be limited to Buyer’s actual damages not in excess of
Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) in the aggregate
and that in no event shall Buyer be entitled to seek or obtain any other damages
of any kind, including, without limitation, consequential, indirect or punitive
damages.

       

      13.03 Integration.  This
Agreement embodies and constitutes the entire understanding between the parties
with respect to the transaction contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement.  Neither this Agreement nor any provision hereof may
be waived, modified, amended, discharged or terminated except by an instrument
signed by the party against whom the enforcement of such waiver, modification,
amendment, discharge or termination is sought, and then only to the extent set
forth in such instrument.

       

      13.04 Governing
Law.  This Agreement shall be governed by, and construed in
accordance with the laws of the state in which the Property is
located.

       

      13.05 Captions.  The
captions in this Agreement are inserted for convenience of reference only and in
no way define, describe or limit the scope or intent of this Agreement or any of
the provisions hereof.

       

      13.06 Bind and
Inure.  This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns.

       

      13.07 Drafts.  This
Agreement shall not be binding or effective until properly executed and
delivered by both Seller and Buyer.  The delivery by Buyer to Seller
of an executed counterpart of this Agreement shall constitute an offer which may
be accepted by the delivery to Buyer of a duly executed counterpart of this
Agreement and the satisfaction of all conditions under which such offer is made,
but such offer may be revoked by Buyer by written notice given at any time prior
to such acceptance and satisfaction.

       

      13.08 Number and
Gender.  As used in this Agreement, the masculine shall include
the feminine and neuter, the singular shall include the plural and the plural
shall include the singular, as the context may require.

       

      13.09 Attachments.  If
the provisions of any schedule or rider to this Agreement are inconsistent with
the provisions of this Agreement, the provisions of such schedule or rider shall
prevail.  The Schedules attached are hereby incorporated as integral
parts of this Agreement.

       

      13.10 Confidentiality.  Prior
to Closing, both Seller and Buyer agree to keep this Agreement confidential, and
not to disclose its contents to anyone except (a) their respective lenders,
investors, partners, legal counsel, accountants, and other representatives that
are involved with the consummation of this transaction; or (b) as may be
required by applicable law, except that either party may make such public
announcement regarding the transaction contemplated by this Agreement as may, in
such party’s judgment, be required by, or appropriate under, applicable
law.

       

      13.11 Tax-Free
Exchange. If
either party (the “Advising Party”)
advises the other party (the “Non-Advising Party”)
of its intention to seek to effect a tax deferred exchange pursuant to Section
1031 of the Internal Revenue Code, in connection with the purchase of the
Property, Non-Advising Party

       

      
        
          
             

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      13.12 agrees to
accommodate Advising Party in seeking to effect a tax deferred exchange for the
Property, provided that such exchange shall not (i) delay the Closing or (ii)
require Non-Advising Party to incur any cost or liability of any kind or nature
on account of such exchange.  Advising Party may assign its rights
under this Agreement immediately prior to Closing to an Exchange Accommodation
Titleholder of Advising Party’s choice for the purpose of completing such an
exchange.  Non-Advising Party agrees to cooperate with Advising Party
and the Exchange Accommodation Titleholder with respect to such exchange and
agrees to execute all documentation required to effectuate such exchange, at no
cost or liability to Non-Advising Party.  Non-Advising Party makes no
warranty whatsoever with respect to the qualification of the transaction for tax
deferred exchange treatment under Section 1031 and Non-Advising Party shall have
no responsibility, obligation or liability with respect to the tax consequences
to Advising Party.

       

      13.13 Further
Assurances.  In addition to the acts and deeds recited herein
and contemplated to be performed, executed and/or delivered by either party at
Closing, each party agrees to perform, execute and deliver, but without any
obligation to incur any additional liability or expense, on or after the Closing
any further deliveries and assurances as may be reasonably necessary to
consummate the transactions contemplated hereby or to further perfect the
conveyance, transfer and assignment of the Property to Buyer.

       

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        IN
WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as
of the date first above written.

         

        SELLER:

         

        ST.
MARIN/KARRINGTON LIMITED PARTNERSHIP,

        a
Delaware limited partnership

         

        By:           SM
Karrington, L.L.C.,

        a
Delaware limited liability company,

        its
general partner

         

        By:     
  /s/ David C. Quade

            
         __________________________________

        Name:  
David C. Quade

        Title:    
Executive Vice President

         

        BUYER:

         

        WILLIAMS
ASSET MANAGEMENT, LLC,

        a Georgia
limited liability company

         

        By:      
 /s/ Andrew H. Day      

                    
 _________________________________

                                                                                                       
Name:   Andrew H. Day

                                                                                                       
Title:     Chief Operating
Officer

      
        
          
             

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      RECEIPT

       

      The
Purchase and Sale Agreement, together with the Initial Deposit, has been
received by the Escrow Agent on this the ___28th_ day of __February_, 2008, and
the Escrow Agent acknowledges the terms thereof and agrees to perform as Escrow
Agent in accordance therewith.

       

      ESCROW
AGENT:

       

      LAWYERS
TITLE INSURANCE CORPORATION

       

      By:         /s/  Anne N.
Wilbur

      Name:     Anne N.
Wilbur

      Title:        A.V.P

       

      
        
          
             

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      LIST OF
SCHEDULES

       

      Schedules

       

      Schedule
A - Description of Land

      Schedule
B - Personal Property

      Schedule
C - Rent Roll

      Schedule
D - Service Contracts

      Schedule
E - Litigation

      Schedule
F - Lead Warning Statement

      Schedule
G - Current Market Rents

       

      Exhibits

       

      Exhibit A
- Form of Deed

      Exhibit B
- Form of Bill of Sale

      Exhibit C
- Form of General Assignment

      Exhibit D
- Form of Tenant Notice Letter

      Exhibit E
- Form of FIRPTA Certificate

      Exhibit F
- Form of Rent Roll Certificate

      Exhibit G
- Form of Termination of Management Agreement

      Exhibit H
- Form of Title Affidavit

      
        
          
            A/72401704.6 

          

           

        

        
          24SECOND AMENDED AND RESTATED

CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been omitted pursuant to a request for confidential treatment and, where applicable, have been marked with and asterisk ("[******]") to denote where omissions have been made.  The confidential material will befiled with the Securities and Exchange Commission.

FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This First Amended and Restated Employment Agreement ("Agreement") dated this 30th day of April, 2008 between Choice Hotels International, Inc. ("Employer"), a Delaware corporation with principal offices at 10750 Columbia Pike, Silver Spring, Maryland 20901, and Stephen P. Joyce ("Employee"), sets forth the terms and conditions governing the employment relationship between Employee and Employer, and replaces the Employment Agreement between the parties dated March 20th, 2008 (the "First Employment Agreement").

	Employment.  During the first six (6) months of the Term, as hereinafter defined, Employer hereby employs Employee as President and Chief Operating Officer ("COO"), and thereafter during the remainder of the Term as President and Chief Executive Officer ("CEO").  Employee hereby accepts such employment upon the terms and conditions hereinafter set forth and agrees to faithfully and to the best of his ability perform such duties as may be from time to time assigned by Employer's CEO or Employer's Board of Directors (the "Board of Directors") (while he is COO) and by the Board of Directors (while he is CEO), such duties to be rendered at the principal office of Employer, subject to reasonable travel.  Employer shall assign to Employee only those duties consistent with his position as President and COO or President and CEO, as applicable.  Employee, in his position as President and COO, shall report directly to Employer's CEO and the Board of Directors and all senior executives of Employer shall report either directly to Employee or indirectly through other senior executives.  Employee, in his position as President and CEO, shall report directly to the Board of Directors and all senior executives of Employer shall continue to report either directly to Employee or indirectly through other senior executives.  Employee also agrees to perform his duties in accordance with policies established by the Board of Directors, which may be changed from time to time.  During the Term, Employee shall be nominated by the Board of Directors for election to the Board of Directors as a Class III director.

	Term.  Subject to the provisions for termination hereinafter provided, the term of this Agreement (the "Term") shall begin on May 1, 2008 (the "Effective Date") and shall terminate five (5) years thereafter (the "Termination Date"). 

	Compensation.  For all services rendered by Employee under this Agreement during the Term, Employer shall pay Employee the following compensation:

	Salary.  A base salary at the rate of Six Hundred Seventy-Five Thousand Dollars ($675,000) per annum while he is employed as COO, which will be increased to Seven Hundred Seventy-Five Thousand Dollars ($775,000) per annum when he becomes CEO.  The base salary will be payable in equal bi-weekly installments, less required and authorized deductions and withholdings.  Such salary shall be reviewed by the Compensation Committee of the Board of Directors on the next annual review of officers and each annual review thereafter and may be increased at the discretion of Employer.  If the base salary is increased it shall not thereafter be decreased during the Term. 

	Incentive Bonus.  Beginning in fiscal year 2008 and continuing through the Term, Employee shall have the opportunity to earn a target bonus of One Hundred Percent (100%) per annum of the base salary set forth in subparagraph 3(a) above in Employer's bonus plans as adopted from time to time by the Board of Directors.  The fiscal year 2008 bonus will not be pro-rated and will be paid if earned as if Employee was employed by Employer the entire year.  If earned, the bonus will be paid no later than March 15 of the year following the year in which the bonus was earned.

	Initial Awards of Performance-Based Restricted Stock and Stock Options.  On the Effective Date, Employer shall issue to Employee: (i) such number of restricted shares of Choice Hotels' common stock ("Common Stock") that have a fair market value on the Effective Date in the amount of Two Million Three Hundred Ten Thousand Nine Hundred Eighteen Dollars ($2,310,918), vesting of which shall occur in four (4) equal annual installments beginning one (1) year from the Effective Date; (ii) such number of options to purchase Common Stock that have a Black-Scholes valuation on the Effective Date equal to Two Million Eight Hundred Eighty-One Thousand Nine Hundred Twenty-One Dollars ($2,881,921), which options shall have an option exercise price at least equal to the current fair market value on the Effective Date of the underlying stock to which such options relate and shall vest in four (4) equal annual installments beginning one (1) year from the Effective Date; and (iii) such number of performance based restricted stock units that have a fair market value on the Effective Date in the amount of Two Million Dollars ($2,000,000), vesting of which shall occur five (5) years from the Effective Date, provided (in the case of this clause (iii) only) that there is [******] (the "Initial PBRS").  

	Automobile.  Employer shall provide Employee with an allowance for automobile expenses of One Thousand One Hundred Dollars ($1,100) per month beginning on the Effective Date.  

	Club Membership.  Employer shall provide Employee with an appropriate corporate membership, including initial and annual fees, at a dining and/or recreational club at the choice of Employee for the purpose of business entertainment.

	Stock Awards and Option Grants.  In addition to the awards set forth in Section 3(c) above, Employee shall be eligible to receive annual awards of options to purchase Common Stock and/or performance-based restricted stock ("Annual Awards") under the Choice Hotels International, Inc. Long Term Incentive Plan (the "LTIP"), or similar plan, in accordance with the policy of the Board of Directors as in effect from time to time.  The value of the Annual Awards issued to Employee each year after the Effective Date will be based on a multiple of Employee's base salary, which multiple shall be determined in the discretion of the Compensation Committee of the Board of Directors, but in no event will the Annual Awards have a value of less than $1,550,000 on the date of grant.  The value of stock options will be based on a Black-Scholes valuation.  Awards of performance-vested restricted shares will be referred to herein as the "PVRS."  

	SERP and Deferred Compensation Plan.  From and after the commencement of Employee's employment, Employee shall participate in the Choice Hotels International, Inc. Supplemental Executive Retirement Plan (the "SERP") and the Choice Hotels International Executive Deferred Compensation Plan approved September 25, 2002 (the "Deferred Comp Plan").  As applied to Employee, Section 1.11 of the SERP shall be amended by adding the following at the end thereto: "From and after attaining age fifty-five (55), the Participant's Years of Service shall be deemed to be his actual Years of Service plus ten (10) years".  For purposes of Section 5.1 of the Deferred Comp Plan, Employee upon attaining age fifty-five (55) shall be deemed to have ten (10) Years of Service.

	Use of Employer's Aircraft.  When Employee becomes CEO, Employee shall, subject to availability, have the right to use Employer's corporate aircraft for personal use for up to twenty-five (25) flight hours per year during the Term consistent with Employer's Aircraft Use Policy.  

	Reimbursement of Expenses.  Employee shall be entitled to receive prompt reimbursement for all reasonable (given the position and title of Employee) expenses incurred by Employee in the performance of services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of Employer in accordance with Employer's policy for Employer's President and COO or President and CEO, as applicable.  Such expenses will be reimbursed by Employer no later than March 15 of the calendar year following the year in which the expenses were incurred.

	Other Benefits.  Employee shall, when eligible, be entitled to participate in all other retirement, health, welfare and fringe benefit plans and policies, including Employer's vacation policy, generally accorded the other most senior executive officers of Employer as are in effect from time to time on the same basis as such other senior executive officers at the participation level associated with Employer's President and COO or President and CEO, as applicable.  Such participation level shall be no less favorable than that generally accorded to the other most senior executive officers of Employer.

	Gross-Up Payments.  Employer shall provide additional payments to Employee on a fully grossed up basis to cover applicable federal, state and local income and excise taxes, when and to the extent, if any, that such taxes are payable by Employee with respect to compensation set forth under Sections  3(d), 3(e) and 3(h).

	Extent of Services.  Employee shall devote his full professional time, attention, and energies to the business of Employer, and shall not, during the Term, be engaged in any other business activity whether or not such business activity is pursued for gain, profit, or other pecuniary advantage; but the foregoing shall not be construed as preventing Employee from investing his assets in (i) the securities of public companies, or (ii) the securities of private companies or limited partnerships outside the lodging industry, if such holdings are passive investments of one percent (1%) or less of outstanding securities and Employee does not hold positions of officer, employee or general partner in such companies or partnerships.  Employee shall be permitted to serve as a director of companies outside of the lodging industry so long as such service does not inhibit his performance of services to Employer.  Employee shall not be permitted to serve as a director of any company within the lodging industry unless (i) Employer's Corporate Compliance officer has determined in advance that there is no conflict of interest and (ii) such service does not inhibit his performance of services to Employer.  Employee warrants and represents that he has no contracts with, or obligations to, others which would materially inhibit the performance of his services under this Agreement.  Employee may engage in charitable, civic, fraternal, professional and trade association activities that do not materially interfere with Employee's obligations to Employer.

	Disclosure and Use of Confidential Information, Non-Compete.

	Employee recognizes and acknowledges that information about Employer's and affiliates' present and prospective clients, customers, franchises, management contracts, acquisitions and personnel, as they may exist from time to time, and to the extent it has not been otherwise disclosed, is a valuable, special and unique asset of Employer's business ("Confidential Information").  Throughout the Term and after termination or expiration of this Agreement for whatever cause or reason Employee shall not directly or indirectly, or cause others to, make use of or disclose to others any Confidential Information; provided that Employee may disclose any information (i) as may be required by Employee's duties to Employer and for the benefit of Employer, (ii) as may be required by applicable law, order, regulation or ruling, and (iii) as may be required or appropriate in response to any summons or subpoena in connection with any litigation.  Notwithstanding the foregoing, Confidential Information does not include information which (i) was or becomes generally available to the public other than as a result of a disclosure by Employee; or (ii) is developed by Employee or on his behalf without reliance on information furnished to Employee by Employer or its agents.
	For a period of two (2) years after the expiration or termination of Employee's employment with Employer, Employee will not, except as required by Employee's duties for Employer and for the benefit of Employer, or with the prior written consent of the Board of Directors, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Employee's name to be used in connection with, any business or enterprise which is engaged in the mid-market or economy hotel franchising business or any other line of business in which Employer is materially engaged at the time of termination ("Competing Business") in the United States or Canada; provided, however, the foregoing shall not be construed as preventing Employee from (i) investing his assets in (A) the securities of any Competing Business that is a public company; or (B) the securities of any Competing Business that is a privately held corporation, limited partnership, limited liability company or other business entity, if such holdings are passive investments of one percent (1%) or less of such entity's outstanding securities; or (ii) becoming an employee, agent or representative of, consultant to, or otherwise connected with any business entity that has multiple lines of business, some of which are not a Competing Business, if Employee's services for such entity are restricted so that he will provide no services or other assistance in support of, and will not otherwise be involved with, any such Competing Business conducted by such entity.  
	During the Term and for a period of two (2) years after its expiration or termination, Employee agrees not to solicit for employment, directly or indirectly, on his behalf or on behalf of any person or entity, other than on behalf of Employer, any person employed by Employer, or its subsidiaries or affiliates during such period, unless Employer consents in writing; provided that Employee shall not be precluded from hiring any such employee who (i) initiates discussions regarding such employment without any direct or indirect solicitation by Employee and responds to any general public advertisement or (ii) was not an employee of Employer during the three (3) month period prior to commencement of employment discussions between Employee and such employee.  Additionally, during such period, Employee agrees not to solicit for business nor to solicit to end their relationship with Employer any person or entity who was a franchisee of Employer (or its subsidiaries) during the Term; provided, however, the foregoing shall not be construed as preventing Employee from soliciting business from any such franchisee that is for a line of business other than any Competing Business.  
	Employee acknowledges and agrees that the restrictions contained in this Section 5 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of Employer, that Employer would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by Employer should Employee breach any of those provisions.  Employee represents and acknowledges that (i) Employee has been advised by Employer to consult Employee's own legal counsel in respect of this Agreement, and (ii) that Employee has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Employee's counsel.  Employee further acknowledges and agrees that a breach of any of the restrictions in this Section 5 cannot be adequately compensated by monetary damages and that Employer shall be entitled to seek preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as any other appropriate equitable relief, which rights shall be cumulative and in addition to any other rights or remedies to which Employer may be entitled.  In the event that any of the provisions of this Section 5 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law.

	Notices.  Any notice, request or demand required or permitted to be given under this Agreement shall be in writing, and shall be delivered personally to the recipient or, if sent by certified or registered mail or overnight courier service to his residence in the case of Employee, or to its principal office in the case of Employer, return receipt requested.  Such notice shall be deemed given when delivered if personally delivered or when actually received if sent certified or registered mail or overnight courier.

	Constructive Termination.

	Nothing contained in this Agreement is intended to nor shall be construed to abrogate, limit or affect the powers, rights and privileges of (i) Employee to resign from the positions set forth in Section 1 during the Term pursuant to the terms set forth in this Agreement or (ii) the Board of Directors or Employer's stockholders to remove Employee from the positions set forth in Section 1, with or without Cause (as defined in Section 10 below), during the Term or to elect someone other than Employee to those positions, as provided by law and the By-Laws of Employer.  In the event Employer elects to terminate Employee's employment without Cause, Employer must provide Employee with fourteen (14) days' prior written notice. 
	If Employee is Constructively Terminated (as defined in Section 7(c) below), it is expressly understood and agreed that Employee's rights under this Agreement shall in no way be prejudiced except as expressly otherwise provided for herein.  Employee shall, at his sole discretion, either (i) assume another position with Employer under a title and terms that are mutually agreed upon by Employer and Employee or (ii) if such Constructive Termination occurs (x) within two (2) years of the Effective Date, be entitled to receive all forms of compensation referred to in Sections 3(a) through 3(g) and Section 3(k) above for three (3) years after the date of such Constructive Termination, payable in installments in accordance with Employer's payroll cycle, including bonuses (calculated based only on the actual payout of the EPS portion of the bonus as all Employer's officers receive in a given year) but excluding ungranted stock options and restricted shares or (y) more than two (2) years after the Effective Date, be entitled to receive all forms of compensation referred to in Sections 3(a) through 3(g) and Section 3(k) above for the longer of the remainder of the Term or two (2) years, payable in installments in accordance with Employer's payroll cycle, including bonuses (calculated based only on the actual payout of the EPS portion of the bonus as all Employer's officers receive in a given year) but excluding ungranted stock options and restricted shares.  The period of time that Employee receives compensation pursuant to clause (ii)(x) or (ii)(y) above shall be referred to as the "Constructive Termination Severance Period".  Additionally, except for the Initial PBRS, all unvested shares of restricted Common Stock and stock options then held by Employee shall continue to vest as otherwise set forth herein during the applicable Constructive Termination Severance Period.  With respect to the Initial PBRS, if the Initial PBRS would otherwise be deemed to have vested pursuant to the terms set forth in Section 3(c)(iii) above, Employee will be entitled to vesting of a fraction of the Initial PBRS, the numerator of which is the amount of time from the Effective Date until the date of Constructive Termination (rounded to the nearest whole number of years) and the denominator of which is five (5) years.  With respect to the PVRS, such shares will not continue to vest following any such Constructive Termination, nor will they immediately become vested or exercisable immediately following any such Constructive Termination.  If required under section 409A of the Internal Revenue Code (the "Code"), any payments which would otherwise be made to Employee during the first six (6) months following the date of Constructive Termination will be deferred and paid to Employee in a lump sum amount six (6) months following the date of Constructive Termination together with interest at the Applicable Federal Rate (the "AFR") on such date; provided, however, that any payments or benefits provided under this Section 7(b) that may be considered deferred compensation under section 409A of the Code but that do not exceed the Section 409A Limit (as defined below) and which qualify as separation pay under Treasury Regulation Section 1.409A-1(b)(9)(iii), may be paid within the first six (6) months following Employee's Constructive Termination under this Agreement.  For purposes of this Agreement, "Section 409A Limit" means two (2) multiplied by the lesser of: (i) the annualized compensation paid to Employee during Employer's taxable year preceding the taxable year of Employee's Constructive Termination as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and any related Internal Revenue Service guidance; or (ii) the maximum amount of compensation that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which such Constructive Termination occurs.  Additionally, if Employee is Constructively Terminated then Employer will provide Employee and his family health insurance coverage, through COBRA reimbursement, until the earlier of eighteen (18) months following such Constructive Termination or the date that Employee starts other full-time employment.  From and after the date of Constructive Termination, Employee shall have no further obligation to provide any services to Employer under this Agreement, and shall not be required to mitigate damages but nevertheless shall be entitled in his sole discretion to pursue other employment.  Employer agrees that, if Employee's employment is terminated during the Term, Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to Employee by Employer.  Further, the amount of any payment provided hereunder shall not be reduced by any compensation otherwise earned by Employee.
	For purposes of this Agreement, "Constructively Terminated" shall mean, and "Constructive Termination" shall mean termination of employment with Employer of Employee after the occurrence of, (i) Employer's removal or termination of Employee other than in accordance with Section 10, (ii) failure of Employer to place Employee's name in nomination for election or re-election to the Board of Directors, (iii) assignment of duties by Employer inconsistent with Section 1, (iv) a decrease in Employee's compensation or benefits, (v) a change in Employee's title or the line of reporting set forth in Section 1, (vi) a significant reduction in the scope of Employee's authority, position, duties or responsibilities, (vii) the relocating of Employee's office location to a location more than 25 miles from Employee's prior principal place of employment; (viii) a change in Employer's annual bonus program which would adversely affect Employee or (ix) any other material breach of this Agreement by Employer.  Except in the case of bad faith, Employer shall have an opportunity to cure the basis for Constructive Termination during the fourteen (14) day period after written notice by Employee to Employer of material breach.  If Employer fails to cure such basis within such fourteen (14) day period, Employee shall be considered to have been Constructively Terminated as of the last day of such fourteen (14) day period.

	Waiver of Breach.  The waiver of either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

	Assignment.  The rights and obligations of Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Employer.  The obligations of Employee hereunder may not be assigned or delegated.

	Termination of Agreement.  This Agreement shall terminate upon the following events and conditions:

	Upon expiration of the Term.  In the event of termination due to such expiration, granting and vesting of all Annual Awards and options and shares, including without limitation the PVRS, will cease as of the date of such termination.
	After written notice by Employer, for Cause, which means a reasonable determination by the Board of Directors (i) of Employee's gross negligence, willful misconduct or willful nonfeasance in the performance of duties to Employer, (ii) of Employee's material breach of this Agreement, (iii) of Employee's conviction following final disposition of any available appeal of a felony, or pleading guilty or no contest to a felony, or (iv) after an investigation in which Employee is accorded his right of due process that Employee has committed a material violation of Employer's anti- harassment, ethics or discrimination policies.  Employee shall be entitled to fourteen (14) days advance written notice of termination, except in the case of clause (iii) or if the basis for termination constitutes willful misconduct on the part of Employee involving dishonesty or bad faith, in which case the termination shall be effective upon receipt of notice.  Such written notice shall specify in reasonable detail the grounds for Cause and Employee shall have an opportunity to contest or cure such basis for termination during the fourteen (14) day period after receipt of written notice.  In the event of a termination for Cause, granting and vesting of all Annual Awards and options and shares, including without limitation the Initial PBRS and the PVRS, will cease as of date of such termination.
	Upon written notice by Employer, subject to state and federal laws, if Employee is unable to perform the essential functions of the services described herein, after reasonable accommodation, for more than 180 days (whether or not consecutive) in any period of 365 consecutive days.  In the event of such termination, all non-vested stock option and other non-vested obligations granted after the Effective Date shall continue to vest in accordance with their terms, except for the Initial PBRS and the PVRS.  With respect to the Initial PBRS, if the Initial PBRS would otherwise be deemed to have vested pursuant to the terms set forth in Section 3(c)(iii) above, Employee will be entitled to vesting of a fraction of the Initial PBRS, the numerator of which is the amount of time from the Effective Date until the date of such termination (rounded to the nearest whole number of years) pursuant to this Section 10(c) and the denominator of which is five (5) years.  With respect to the PVRS, such shares will not continue to vest following such termination, nor will they immediately become vested or exercisable immediately following such termination.
	Upon Employee's death during the Term.  In the event of such termination, all non-vested stock option and other non-vested obligations granted after the Effective Date shall continue to vest in accordance with their terms, except for the Initial PBRS and the PVRS.  With respect to the Initial PBRS, if the Initial PBRS would otherwise be deemed to have vested pursuant to the terms set forth in Section 3(c)(iii) above, Employee will be entitled to vesting of a fraction of the Initial PBRS, the numerator of which is the amount of time from the Effective Date until date of death (rounded to the nearest whole number of years) and the denominator of which is five (5) years.  With respect to the PVRS, such shares will not continue to vest following such termination, nor will they immediately become vested or exercisable immediately following such termination.
	Upon termination of employment of Employee, after written notice by Employee to Employer of voluntary resignation of Employee, which resignation shall not be effective, if such resignation is not a Change of Control Termination or due to Constructive Termination, until the expiration of ninety (90) days after providing such written notice of resignation.  In the event of such voluntary resignation, granting and vesting of all Annual Awards and options and shares, including without limitation the Initial PBRS and the PVRS, will cease as of the date of such termination.

	Change of Control Severance.

	If, within twelve (12) months after a Change in Control, as defined in Section 11(c), there occurs a Change of Control Termination, as defined in Section 11(d), Employee shall receive as severance compensation a payment in an amount equal to (i) if such Change of Control Termination occurs within two (2) years of the Effective Date, all forms of compensation referred to in Sections 3(a) through 3(g) and Section 3(k) above for three (3) years after the date of such Change of Control Termination, payable in installments in accordance with Employer's payroll cycle, including bonuses (calculated based only on the actual payout of the EPS portion of the bonus as all Employer's officers receive in a given year) but excluding ungranted stock options and restricted shares; or (ii) if such Change of Control Termination occurs more than two (2) years after the Effective Date, all forms of compensation referred to in Sections 3(a) through 3(g) and Section 3(k) above for the longer of the remainder of the Term or two and one-half (2.5) years, payable in installments in accordance with Employer's payroll cycle, including bonuses (calculated based only on the actual payout of the EPS portion of the bonus as all Employer's officers receive in a given year) but excluding ungranted stock options and restricted shares.  The period of time that Employee receives compensation pursuant to clause (i) or (ii) above shall be referred to as the "Change of Control Severance Period".  Moreover, all unvested shares of restricted Common Stock and stock options then held by Employee (except the Initial PBRS) shall automatically become fully vested and any and all restrictions thereon shall lapse immediately prior to the date of such Change of Control Termination.  With respect to the Initial PBRS, if the Initial PBRS would otherwise be deemed to have vested pursuant to the terms set forth in Section 3(c)(iii) above, Employee will be entitled to vesting of a fraction of the Initial PBRS, the numerator of which is the amount of time from the Effective Date until the date of Change of Control Termination (rounded to the nearest whole number of years) and the denominator of which is five (5) years.  With respect to the PVRS, such shares will not continue to vest following any such Change of Control Termination, nor will they immediately become vested or exercisable immediately following any such Change of Control Termination.  If required under section 409A of the Code, any payments which would otherwise be made to Employee during the first six (6) months following the date of the Change of Control Termination will be deferred and paid to Employee in a lump sum amount six (6) months following the date of the Change of Control Termination together with interest at the AFR on such date; provided, however, that any payments or benefits provided under this Section 11(a) that may be considered deferred compensation under section 409A of the Code but that do not exceed the Section 409A Limit (as defined in Section 7(b) above) and that qualify as separation pay under Treasury Regulation Section 1.409A-1(b)(9)(iii), may be paid within the first six (6) months following Employee's Change of Control Termination under this Agreement.  Additionally, Employer will provide Employee and his family health insurance coverage, through COBRA reimbursement, until the earlier of eighteen (18) months following such Change of Control Termination and the date that Employee starts other full-time employment.  
	Employee's right to receive the benefits described in Section 11(a) shall be conditioned upon Employee's executing Employer's standard release agreement in which Employee releases all claims against Employer.
	A Change in Control of Employer shall occur upon the happening of the earliest to occur of the following:

	Any "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than (i) Employer, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of Employer, (iii) any corporations owned, directly or indirectly, by the stockholders of Employer in substantially the same proportions as their ownership of stock, or (iv) Stewart Bainum, his wife, their lineal descendants, and their spouses (so long as they remain spouses) and the estate of any of the foregoing persons, and any partnership, trust, corporation or other entity to the extent shares of common stock (or their equivalent) are considered to be beneficially owned by any of the persons or estates referred to in the foregoing provisions of this Section 11(c) or any transferee thereof) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Employer representing 33% or more of the combined voting power of Employer's then outstanding voting securities.
	Individuals constituting the Board of Directors on the Effective Date and the successors of such individuals ("Continuing Directors') cease to constitute a majority of the Board of Directors.  For this purpose, a director shall be a successor if and only if he or she was nominated by a Board of Directors (or a Nominating Committee thereof) on which individuals constituting the Board of Directors on the Effective Date and their successors (determined by prior application of this sentence) constituted a majority.
	The stockholders of Employer approve a plan of merger or consolidation ("Combination") with any other corporation or legal person, other than a Combination which would result in stockholders of Employer immediately prior to such Combination owning, immediately thereafter, more than sixty-five percent (65%) of the combined voting power of either the surviving entity or the entity owning directly or indirectly all of the common stock, or its equivalent, of the surviving entity; provided, however, that if stockholder approval is not required for such Combination, the Change in Control shall occur upon the consummation of such Combination.
	The stockholders of Employer approve a plan of complete liquidation of Employer or an agreement for the sale or disposition by Employer of all or substantially all of Employer's stock and/or assets, or accept a tender offer for substantially all of Employer's stock (or any transaction having a similar effect); provided, however, that if stockholder approval is not required for such transaction, the Change in Control shall occur upon consummation of such transaction.

	"Change of Control Termination" shall mean and include the termination of Employee's employment with Employer at any time during the twelve (l2) month period after a Change of Control if such termination is (i) by Employer without Cause or (ii) a Constructive Termination.

	Excise Taxes.

	Notwithstanding anything in this Agreement to the contrary and except as set forth below, in the event it shall be determined that any payment that is paid or payable to or for the benefit of Employee during the Term (collectively, the "Payments") would be subject to the tax imposed by Section 4999 of the Code (the "Excise Tax"), Employee shall be entitled to receive an additional payment (a "280G Gross-Up Payment") in an amount such that, after payment by Employee of all taxes (and any interest or penalties imposed with respect to such taxes), including any income and employment taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon such 280G Gross-Up Payment, Employee retains a portion of such 280G Gross-Up Payment equal to the Excise Tax imposed upon such Payment.
	Except as contemplated by Section 12(d), all determinations required to be made under this Section 12, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment, and the assumptions to be utilized in arriving at such determinations shall be made by Accountants which determinations shall be provided to Employee and Employer with detailed supporting calculations with respect to such Gross-Up Payment at the time Employee is entitled to receive any Payment that is a parachute payment.  For the purposes of this Section 12, the "Accountants" shall mean independent certified public accountants mutually agreed upon by Employer and Employee, which agreement shall not unreasonably be withheld.  All fees and expenses of the Accountants shall be borne solely by Employer.  For the purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, all Payments will be treated as "parachute payments" within the meaning of section 280G of the Code, and all "parachute payments" in excess of Employee's "base amount" (as defined under section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, except to the extent in the opinion of the Accountants that, more likely than not, such Payments either do not constitute "parachute payments", represent reasonable compensation for services actually rendered by Employee (within the meaning of section 280G(b)(4) of the Code) in excess of the "base amount," or are "parachute payments" not otherwise subject to such Excise Tax.  For purposes of determining the amount of a Gross-Up Payment, Employee shall be deemed to pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which such Gross-Up Payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which such Gross-Up Payment is to be made.  Any determination by the Accountants shall be binding upon Employer and Employee.  
	If any tax authority finally determines that a greater Excise Tax should be imposed upon the Payments or the Gross-Up Payment that is determined by the Accountants, Employee shall be entitled to receive an additional Gross-Up Payment calculated on the basis of the additional amount of Excise Tax determined to be payable by such tax authority (including related penalties and interest) from Employer.  Employee shall cooperate with Employer as it may reasonably request to permit Employer (at its sole expense) to contest the determination of such taxing authority to minimize the amount payable under this Section 12(c).  If any tax authority finally determines the Excise Tax payable by Employee to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, Employee shall repay Employer within 30 days after Employee's receipt of a tax refund resulting from that determination, to the extent of such refund, the portion of the Gross-Up Payment attributable to such reduction (including the refunded portion of Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid, less any additional income tax resulting from receipt of such refund).
	Any Gross-Up Payment determined by the Accountants to be due with respect to any Payment shall be paid by Employer at the time Employee is entitled to receive such Payment, and any Gross-up Payment determined to be due after the making of such Payment by reason of an increased assessment by a tax authority of Excise Tax, shall be paid at the time that such tax assessment is required to be paid by Employee.  In no event shall any such Gross-Up Payment be made in a manner inconsistent with Treasury Regulation section 1.409A-3(i)(1)(v).

	Legal Fees.  Employer shall reimburse Employee for all reasonable attorneys' fees incurred in connection with the negotiation and execution of this Agreement, up to a maximum of $20,000.  Such reimbursement will occur by no later than March 15 of the calendar year following the year in which such expenses are incurred.

	Tax Indemnity.  In the event Employee incurs any penalty, interest, or additional taxes imposed under section 409A of the Code and the corresponding regulations with respect to amounts payable by the Employer or its affiliates under this Agreement or otherwise, Employer shall indemnify and hold Employee harmless for any such taxes, penalty, or interest and any additional federal, state, or local income or employment taxes imposed on Employee due to satisfaction of the foregoing indemnification, by payment of an additional amount that causes Employee's After-Tax Proceeds from such payment to equal the After-Tax Proceeds that Employee would have had if section 409A of the Code had not applied.  Employee shall give Employer timely notice of any IRS notices and proceedings to which this indemnity obligation applies.  Any and all amounts incurred by Employee in a year which are subject to Employer's indemnification obligations shall be paid by Employer in that year (or pursuant to such other schedule or at such other times as may be required to comply with section 409A of the Code).

	D&O Insurance; Indemnification.  Employer shall indemnify Employee against all expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection with any threatened or pending action, suit or proceeding, whether civil, criminal, administrative or investigative that Employee is made a party to by reason of the fact that he is or was performing services as an officer or director of Employer or any of its subsidiaries to the same extent and on the same terms that such indemnification is provided to the other directors and most senior executives of Employer.  If applicable, such indemnification shall continue as to Employee even if he has ceased to be an employee, officer or director of Employer and shall inure to the benefit of his heirs and estate.  During Employee's employment with Employer and from and after the date that Employee's employment is terminated for whatever reason, Employee shall receive the same benefits provided to any of Employer's officers and directors under any D&O insurance or similar policy, indemnification agreement or Employer policy or under the certificate of incorporation or by-laws of Employer.

	Survival.  The rights and obligations of Employee and Employer set forth in this Agreement shall survive any termination or expiration of this Agreement to the extent that such rights and obligations are intended by their terms to so survive.

	Headings.  The section headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

	Entire Agreement.  This instrument contains the entire agreement of the parties concerning the subject matter.  It may be changed only by an agreement in writing signed by both parties.  This Agreement supersedes all previous agreements, discussions or understandings between the parties with respect to the subject matter hereof.  The First Employment Agreement is hereby terminated and is of no further force or effect.  This Agreement shall be governed by the laws of the State of Maryland, and any disputes arising out of or relating to this Agreement shall be brought and heard in any court of competent jurisdiction in the State of Maryland.

	Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

[Signatures on Following Page]

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first set forth above.
Employer:

CHOICE HOTELS INTERNATIONAL, INC.

By: /s/ Thomas Mirgon

 

Title:  Senior Vice President, Administration

Employee:

/s/ Stephen P. Joyce

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