Document:

Moody National REIT I, Inc. 10-Q

EXHIBIT 10.2

 

AGREEMENT OF PURCHASE AND SALE

 

THIS AGREEMENT OF PURCHASE
AND SALE (this “Agreement”) is made as of September 3, 2013, by and between Sethi
Family Trust dated October 1, 1998 (75%) and Kapil D. Prashar
and Sadhana Prashar (25%) (collectively, “Seller”),
and MOODY NATIONAL REIT I, INC., a Maryland corporation (the “Purchaser”).

 

RECITATIONS:

 

A.Seller is the
owner of that certain tract of land more particularly described on Exhibit “A” attached hereto and made
a part hereof, located at 4141 Governors Row, Austin, Texas 78744, together with all rights, titles, benefits, easements, privileges,
remainders, tenements, hereditaments, interests, reversions and appurtenances thereunto belonging or in any way appertaining, and
all of the estate, right, title, interest, claim or demand whatsoever of the Seller therein, including in and to adjacent strips
and gores, if any, between the Land and abutting properties, and in and to adjacent streets, highways, roads, alleys or rights-of-way,
and the beds thereof, either at law or in equity, in possession or expectancy, now or hereafter acquired, all water and mineral
rights, development rights and all easements, rights and other interests appurtenant thereto, (the “Land”),
and all buildings and improvements, including the 123-key hotel known as the Hampton Inn Austin/ Airport Area South, located on
the Land (the “Improvements”). The Land and the Improvements, together with the Personal Property are sometimes
referred to hereinafter together as the “Hotel”.

 

B.Purchaser desires
to purchase the Property, including the Hotel, from the Seller, and the Seller desires to sell the Property, including the Hotel,
to Purchaser, for the Purchase Price (as defined below) and upon the terms and conditions hereinafter set forth.

 

NOW, THEREFORE,
in consideration of the mutual covenants, promises and undertakings of the parties hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, it is agreed:

 

ARTICLE I

DEFINITIONS

 

The following terms
shall have the indicated meanings:

 

1.1             
“Accounts Receivable” shall mean all accounts receivable of the Hotel which are shown on the city ledger
or other applicable records of the Hotel.

 

1.2             
“Advance Bookings” shall mean reservations and agreements made or entered into by Seller or Manager prior
to Closing and assumed by Purchaser for Hotel rooms or meeting rooms to be utilized after Closing, or for catering services or
other Hotel services to be provided after Closing.

 

1.3             
“Affiliate” shall mean any Person that is directly or indirectly (through one or more intermediaries)
controlled by, under common control with, or controlling another Person. For the purposes of this definition, “control”
shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies
of any Person or the power to veto major policy decisions of any Person, whether through the ownership of voting securities, by
contract or otherwise.

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1.4             
“Agreement” shall have the meaning ascribed to such term in the Preamble.

 

1.5             
“Applicable Laws” shall mean any applicable building, zoning, subdivision, environmental, health, safety
or other governmental laws, statutes, ordinances, resolutions, rules, codes, regulations, orders or determinations of any Governmental
Authority or of any insurance boards of underwriters (or other body exercising similar functions), or any restrictive covenants
or deed restrictions affecting the Property or the ownership, operation, use, maintenance or condition thereof.

 

1.6             
 “Assignment and Assumption Agreement” shall mean an assignment and assumption agreement between Seller
and Purchaser, in a form reasonably acceptable to Seller and Purchaser, whereby Seller assigns and Purchaser assumes all of the
Seller’s rights, title and interest in and to the Hotel Agreements which are disclosed to Purchaser and not terminated prior
to Closing in accordance with this Agreement.

 

1.7             
“Authorizations” shall mean all certificates of occupancy, licenses, permits, authorizations and approvals
required by any governmental or quasi-governmental agency, body, department, commission, board, bureau, instrumentality or officer,
or otherwise appropriate with respect to the construction, ownership, operation, leasing, maintenance, or use of the Property or
any part thereof.

 

1.8             
“Bankruptcy Code” shall have the meaning ascribed to such term in Section 3.21.

 

1.9             
“Bill of Sale and General Assignment” shall mean a bill of sale and general assignment between
the Seller and Purchaser, in a form reasonably acceptable to Seller and Purchaser, conveying
title to the Personal Property (other than Leased Property) from Seller to Purchaser, together with any Warranties and Guaranties
related thereto, and the Advanced Bookings.

 

1.10         
“Closing” shall mean the consummation of the sale and purchase of the Property pursuant to this Agreement.

 

1.11         
“Closing Date” shall mean the date that is thirty (30) days following the expiration of the Study Period,
subject to Purchaser’s right to extend the Closing Date for up to an additional thirty (30) days by providing written notice
to Seller on or before the originally scheduled Closing Date.

 

1.12         
 “Closing Documents” shall have the meaning ascribed to such term in Section 7.1.

 

1.13         
“Code” shall have the meaning ascribed to such term in Section 10.13.

 

1.14         
“Covered Audit Period” shall have the meaning ascribed to such term in Section 2.4(f).

 

1.15         
 “Deed” shall mean a special warranty deed, in a form reasonably
acceptable to Seller and Purchaser, conveying fee title to the Real Property from the Seller to Purchaser, subject to the
Permitted Title Exceptions.

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1.16         
“Earnest Money” shall have the meaning ascribed to such term in Section 2.3.

 

1.17            
 “Effective Date” (or other similar phrases such as “date of this Agreement” or “date
hereof”) shall mean the first date on which the Escrow Agent shall have acknowledged receipt of this Agreement fully
executed by the Seller and the Purchaser.

 

1.18            
“Employees” shall have the meaning ascribed to such term in Section 3.6.

 

1.19            
“Environmental Conditions” shall have the meaning ascribed to such term in Section 4.6(c).

 

1.20            
“Environmental Laws” shall mean any present or future federal, state or local laws, statutes, codes,
ordinances, rules, regulations, standards, policies, court orders, decrees, administrative orders, guidelines or other governmental
directives, as well as common law, relating to protection of human health or safety or the environment or relating to Hazardous
Materials, including without limitation, the Water Pollution Control Act (33 U.S.C. § 1251 et seq.), Resource Conservation
and Recovery Act (42 U.S.C. § 6901 et seq.), Safe Drinking Water Act (42 U.S.C. § 3000(f) et seq.), Toxic
Substances Control Act (15 U.S.C. § 2601 et seq.), Clean Air Act (42 U.S.C. § 7401 et seq.), Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation
Act (49 U.S.C. § 1801 et seq.), and any law, statute, regulation, rule or ordinance of the state in which one
or more of the Properties is located and any other governmental entity with actual or asserted jurisdiction over the Property or
part thereof, concerning such hazardous, special or toxic materials, wastes or substances or any judicial, administrative, or otherwise
binding and applicable interpretation of any such laws, rules or regulations.

 

1.21            
“ERISA” shall have the meaning ascribed to such term in Section 3.6.

 

1.22            
“Escrow Agent” shall mean the Title Company.

 

1.23            
“Exchange” shall have the meaning ascribed to such term in Section 10.13.

 

1.24            
“Executive Orders” shall have the meaning ascribed to such term in Section 4.5.

 

1.25            
“Existing PIPS” shall mean any currently effective property improvement plan issued by Licensor to the
Seller with respect to the Hotel for calendar year 2013 (and, if applicable, prior years).

 

1.26            
 “Final Rooms Revenue” shall mean the final nights room revenue for the Hotel (revenue from rooms occupied
as of 11:59 p.m. on day prior to the Closing Date, exclusive of food, beverage, telephone and similar charges which shall be retained
by the Seller), including any sales taxes, room taxes or other taxes thereon.

 

1.27            
 “FIRPTA Certificate” shall mean the affidavit of Seller under Section 1445 of the Internal Revenue
Code, as amended.

 

1.28            
“First Earnest Money Deposit” shall have the meaning ascribed to such term in Section 2.3.

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1.29            
 “Governmental Authority” shall mean any federal, state, county, municipal or other government or governmental
or quasi-governmental agency, department, commission, board, bureau, office or instrumentality, foreign or domestic, or any of
the them.

 

1.30            
“Hazardous Substances” shall have the meaning ascribed to such term in Section 3.14. “Hotel”
shall have the definition ascribed to such term in the Recitals.

 

1.31            
“Hotel Agreements” shall mean collectively the Operating Agreements, Leased Property Agreements, Off-Site
Facility Agreements and the Occupancy Agreements.

 

1.32            
 “Improvements” shall mean the Hotel and all other buildings, structures, improvements, and all fixtures,
systems, facilities and other items of real estate located on the Land.

 

1.33            
“Independent Contract Consideration” shall mean One Hundred and No/100 Dollars ($100.00) of the Earnest
Money which shall be paid by the Escrow Agent to the Seller in the event that Purchaser elects to terminate this Agreement.

 

1.34            
“Insurance Policies” shall mean all policies of insurance maintained by or on behalf of the Seller pertaining
to the Property, its operation, or any part thereof.

 

1.35            
“Intangible Personal Property” shall mean the Seller’s right, title and interest in and to all
intangible personal property owned or possessed by the Seller and used in connection with the ownership or operation of the Property,
including, without limitation, (1) Authorizations, (2) utility and development rights and privileges, general intangibles,
business records, plans and specifications pertaining to the Real Property and the Personal Property, (3) any unpaid award
for taking by condemnation or any damage to the Land by reason of a change of grade or location of or access to any street or highway,
(4) the share of the Final Rooms Revenue determined under Section 7.6(i) hereof, and (5) Advance Bookings, excluding
the Seller’s cash on hand, in the bank accounts and invested with financial or other institutions.

 

1.36            
“Inventory” shall mean all inventories of food, beverage and consumable items in opened or unopened cases
and all in-use reserve stock of linens, towels, paper goods, soaps, cleaning supplies, office supplies, engineering supplies, maintenance
supplies, parts and tools and other “inventories of merchandise” and “inventories of supplies” as such
terms are defined in the Uniform System of Accounts for Hotels used in connection with the operation and maintenance of the Hotel.

 

1.37            
“Knowledge” shall mean the actual knowledge of Manager following such reasonable investigation
as may be necessary to obtain the relevant information, including inquiry made of Manager. For the purposes of this definition,
the term “actual knowledge” means, with respect to any person, the conscious awareness of such person at the time in
questions, and expressly excludes any constructive or implied knowledge of such person.

 

1.38            
“Land” shall mean approximately 2.470 acres of land more particularly described on Exhibit “A”,
together with all rights, titles, benefits, easements, privileges, remainders, tenements, hereditaments, interests, reversions
and appurtenances thereunto belonging or in any way appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of the Seller therein, including in and to adjacent strips and gores, if any, between the Land and abutting properties,
and in and to adjacent streets, highways, roads, alleys or rights-of-way, and the beds thereof, either at law or in equity, in
possession or expectancy, now or hereafter acquired, all water and mineral rights, development rights and all easements, rights
and other interests appurtenant thereto.

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1.39            
“Leased Property” shall mean all leased items of Tangible Personal Property, including items subject
to any capital lease, operating lease, financing lease, or any similar agreement (if any).

 

1.40         
“Leased Property Agreements” shall mean all lease agreements pertaining to the Leased Property (if any).

 

1.41         
“License Agreement” shall mean that certain Amended and Restated Franchise Agreement, dated July 1, 2012,
between Licensor and Seller with respect to the Hotel.

 

1.42         
“Licensor” shall mean Hampton Inn Franchise LLC.

 

1.43         
“Manager” shall mean Dev Prashar (Kapil D. Prashar).

 

1.44         
“Monetary Title Encumbrances” shall have the meaning ascribed to such term in Section 2.4(e).

 

1.45         
“New Manager” shall have the meaning ascribed to such term in Section 5.1(e).

 

1.46         
“Occupancy Agreements” shall mean the leases, concession or occupancy agreements in effect with respect
to the Real Property under which any tenants (other than Hotel guests and other than Seller) or concessionaires have the right
to occupy space upon the Real Property.

 

1.47         
“Off-Site Facility Agreements” shall mean the leases, contracts and agreements, if any, pertaining to
facilities not located on the Property but which are required and presently used for the operation of the Hotel including, without
limitation, use agreements for local golf courses, and parking or garage contracts or leases.

 

1.48         
“Operating Agreements” shall mean the service, supply, maintenance and repair, and other similar contracts
in effect with respect to the Property (other than the Occupancy Agreements, Leased Property Agreements, Off-Site Facility Agreements
and the Management Agreement) related to construction, operation, or maintenance of the Property and the business conducted thereon.

 

1.49         
 “Owner’s Title Policy” shall mean an owner’s policy of title insurance issued to Purchaser
by the Title Company, pursuant to which the Title Company (or any applicable underwriter) insures Purchaser’s ownership of
good and marketable fee simple title to the Real Property, subject only to Permitted Title Exceptions and including extended coverage
over the so-called “pre-printed” standard exceptions and such other endorsements as are customary in such transactions.

 

1.50         
“Patriot Act” shall have the meaning ascribed to such term in Section 4.5.

 

1.51         
“Permits” shall have the meaning ascribed to such term in Section 3.13.

 

1.52         
 “Permitted Title Exceptions” shall mean those exceptions to title to the Real Property that are satisfactory
or deemed satisfactory to Purchaser as determined pursuant to Section 2.5(e) hereof.

 

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1.53         
“Person” shall mean an individual, a partnership, a limited liability company, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization, or a Governmental Authority.

 

1.54         
 “Personal Property” shall mean collectively the Tangible Personal Property and the Intangible Personal
Property.

 

1.55         
“Property” shall mean collectively the Real Property and Personal Property.

 

1.56         
“Purchase Price” shall mean the amount of FIFTEEN MILLION FOUR HUNDRED TEN THOUSAND AND NO/100 DOLLARS
($15,410,000.00) payable in the manner described in Section 2.2 hereof, which amount shall include the Inventory.

 

1.57         
“Purchaser” shall have the meaning ascribed to such term in the Preamble.

 

1.58         
“Purchaser Parties” shall mean Purchaser’s directors, officers, lenders, employees, agents, counsel,
consultants or representatives.

 

1.59         
 “Purchaser’s Objections” shall have the meaning ascribed to such term in Section 2.4(e).

 

1.60         
“Purchaser’s PIP” shall have the meaning ascribed to such term in Section 7.12.

 

1.61         
“Real Property” shall mean the Land and the Improvements.

 

1.62         
 “REIT Audit” shall have the meaning ascribed to such term in Section 2.4(f).

 

1.63         
“SEC” shall have the meaning ascribed to such term in Section 6.8.

 

1.64         
“Second Earnest Money Deposit” shall have the meaning ascribed to such term in Section 2.3.

 

1.65         
“Seller” shall have the meaning ascribed to such term in the Preamble.

 

1.66         
“Seller’s Response” shall have the meaning ascribed to such term in Section 2.4(e).

 

1.67         
“Seller’s Response Period” shall have the meaning ascribed to such term in Section 2.4(e).

 

1.68         
 “Study Period” shall mean the period ending at 5:00 p.m. on the date which is forty (40) days following
the Effective Date. Except as expressly noted herein to the contrary, times referred to in this Agreement shall mean the times
as in effect, from time to time, in Houston, Texas.

 

1.69         
 “Survival Period” shall have the meaning ascribed to such term in Section 3.22

 

1.70         
“Tangible Personal Property” shall mean the items of tangible personal property consisting of all furniture,
fixtures, equipment, machinery, Inventory, all vehicles used in operation of Property and the Hotel and other tangible personal
property of every kind and nature (which does not include cash-on-hand and petty cash) located at the Hotel which shall be owned
by Seller or leased by Seller pursuant to a Leased Property Agreement, including, without limitation, Seller’s interest as
lessee with respect to any such leased Tangible Personal Property.

 

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1.71         
“Terrorism Executive Order” shall have the meaning ascribed to such term in Section 4.5.

 

1.72         
“Title Commitment” shall have the meaning ascribed to such term in Section 2.4(e).

 

1.73         
“Title Company” shall mean Moody National Title Company, L.P., 6363 Woodway Dr., Ste 250, Houston, Texas
77057, or other title insurance underwriter selected by Purchaser and reasonably acceptable to the Seller.

 

1.74         
 “Survey” shall mean a current ALTA as-built survey of the Real Property, certified to Purchaser and
the Title Company by a land surveyor or professional engineer qualified in the jurisdiction in which the Real Property is located,
to be provided pursuant to the provisions of Section 2.5(e).

 

1.75         
“Warranties and Guaranties” shall mean, to the extent assignable, all of Seller’s interest in any
existing warranties and guaranties relating to the development, construction, ownership and operation of the Improvements, the
Tangible Personal Property, the Hotel or any part thereof.

 

ARTICLE II

PURCHASE AND SALE; DEPOSIT; PAYMENT OF

PURCHASE PRICE; STUDY PERIOD

 

2.1             
Purchase and Sale. The Seller agrees to sell the Property, and Purchaser agrees to purchase the Property, free and
clear of all liens and encumbrances, for the Purchase Price and in accordance with and subject to the other terms and conditions
set forth herein.

 

2.2             
Payment of Purchase Price. Purchaser shall pay the Purchase Price, as adjusted in the manner specified in Article
VII and as set forth below, to the Seller (or other party designated by the Seller) at Closing by making a wire transfer of immediately
available federal funds to the account of the Seller (or other party designated by the Seller). Such wire transfer shall be sent
by Purchaser to the Escrow Agent for the account of the Seller on the Closing Date.

 

2.3             
Earnest Money. Within one (1) business day following the Effective Date, Purchaser will deliver to the Escrow Agent
the sum of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) (the “First Earnest Money Deposit”).
Within one (1) business day following the expiration of the Study Period, assuming Purchaser has not previously elected to terminate
this Agreement, Purchaser shall deliver to the Escrow Agent the additional sum of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00)
(the “Second Earnest Money Deposit”) (the First Earnest Money Deposit and the Second Earnest Money Deposit,
if any, and all interest earned thereon are hereinafter collectively referred to as the “Earnest Money”). The
Earnest Money shall be invested by the Escrow Agent in short term interest bearing accounts at banks or other financial institutions,
which accounts must be insured by the Federal Deposit Insurance Corporation. All interest earned on such deposits shall belong
to the party (as between the Seller and Purchaser) who is entitled to receive the Earnest Money under the applicable provisions
of this Agreement. In the event the transactions contemplated herein are not closed in accordance with the provisions hereof, the
Earnest Money shall be disbursed to either the Seller or Purchaser as provided in this Agreement.

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2.4             
Due Diligence.

 

(a)               
Purchaser shall have the right, until 5:00 p.m. the last day of the Study Period, and thereafter if Purchaser does not notify
the Seller in writing prior to the expiration of the Study Period that Purchaser has elected to terminate this Agreement, to enter
upon the Real Property upon not less than one (1) business day prior notice to the Seller, and to perform at Purchaser’s
expense and subject to terms and conditions set forth in Section 2.4(d) below, such due diligence investigations as Purchaser may
deem appropriate. If prior to the expiration of the Study Period, Purchaser provides written notice to the Seller and Escrow Agent
that it has determined in its sole, absolute and unreviewable discretion, to terminate the Agreement for any reason or no reason
whatsoever, this Agreement shall automatically terminate, the Earnest Money shall be returned to Purchaser and the Seller and
Purchaser shall be released from all further liability or obligation hereunder except those which expressly survive a termination
of this Agreement. In the event of such termination, the Earnest Money, less the Independent Contract Consideration, shall be refunded
by the Escrow Agent to Purchaser without any further notice to Escrow Agent.

 

(b)              
Seller shall, on or before 5:00 p.m. C.D.T. on the date which is fifteen (15) days following the Effective Date, deliver
copies of the items identified in Exhibit “B” (collectively, the “Submission Matters”)
to Purchaser. In addition, at all times prior to the Closing, Seller shall also provide to Purchaser, within two (2) days of Purchaser’s
request thereof, such other documents and information as Purchaser or Purchaser’s lender may from time to time request which
are in Seller’s or the Manager’s possession or control. During the Study Period, upon one (1) business day prior notice
and upon conditions reasonably established by the Seller, the Seller shall also make available at the Hotel to the Purchaser, and
the Purchaser’s agents, auditors, engineers, attorneys, consultants, and potential lessees, partners and lenders (collectively,
the “Purchaser Parties”), for inspections and/or copying at the Purchaser’s expense, the Seller’s
and the Manager’s books, records, and correspondence specifically relating to the Property which are in the Seller’s
or the Manager’s possession at the Hotel, excluding any correspondence or materials subject to the attorney-client privilege
or which the Seller is contractually or legally not permitted to disclose (as to which Seller shall give notice to Purchaser of
same).

 

(c)               
If for any reason whatsoever Purchaser does not purchase the Property, Purchaser shall promptly deliver to the Seller or
destroy copies of the Submission Matters delivered to or copied by Purchaser or Purchaser Parties; provided, however, that Purchaser
shall not be obligated to deliver to the Seller any materials of a proprietary nature (such as, for the purposes of example only,
any financial forecast or market repositioning plans) prepared for Purchaser or Purchaser Parties in connection with the Property,
and the Seller acknowledges that any such materials delivered to the Seller pursuant to the provisions of clause (ii) shall
be without cost to Purchaser and without warranty, representation or recourse whatsoever other than that such materials have been
fully paid for and may be delivered to the Seller. The terms of this Section 2.4(c) shall survive the termination of this Agreement.

 

(d)              
Purchaser shall indemnify, hold harmless and defend the Seller against any loss, damage, liability or claim for personal
injury or property damage and any other loss, damage, liability, claim or lien to the extent arising from the acts upon the Real
Property by Purchaser or Purchaser Parties or any agents, contractors or employees of Purchaser or Purchaser Parties, except for
the discovery of existing conditions of the Real Property. Purchaser understands and accepts that any on-site inspections of the
Property shall occur at reasonable times agreed upon by the Seller and Purchaser after not less than one (1) business day prior
notice to the Seller and shall be conducted so as not to interfere unreasonably with the operation of the Property and the use
of the Property by the tenants and the guests of the Hotel. The Seller shall have the right to have a representative present during
any such inspections. If Purchaser desires to do any invasive testing at the Property, Purchaser shall do so only after notifying
Seller and subject to reasonable terms and conditions as may be proposed by the Seller. Purchaser shall not permit any liens to
attach to the Property by reason of such inspections. Purchaser shall (i) restore the Property, at its own expense, to substantially
the same condition which existed prior to any inspections or other activities of Purchaser thereon; and (ii) be responsible
for and pay any and all liens by contractors, subcontractors, materialmen, or laborers performing the inspections or any work for
Purchaser or Purchaser Parties on or related to the Property. The provisions of this Section 2.4(d) shall survive any termination
of this Agreement and a closing of the transaction contemplated hereby.

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(e)               
Within fifteen (15) business days after the Effective Date, the Seller shall cause the Title Company to furnish to the
Purchaser and Seller, a title insurance commitment bearing an effective date not earlier than thirty (30) days prior to the Effective
Date issued by the Title Company covering the Real Property, binding the Title Company to issue the Owner’s Title Policy
together with legible copies (to the extent such legible copies are available) of all documents identified in such title insurance
commitment as exceptions to title (collectively, the “Title Commitment”) with respect to the state of title to the
Property. Within fifteen (15) days after delivery of the Title Commitment to Seller by Purchaser, the Purchaser shall cause a
surveyor licensed to practice in the state where the Property is located to furnish to Purchaser a survey (the “Survey”)
of the Land and Improvements. Within five (5) business days following its receipt of the Title Commitment and the Survey, or within
five (5) business days of any supplement to the Title commitment or Survey, the Purchaser shall notify the Seller of any matters
identified in the Title Commitment and the Survey that the Purchaser is unwilling to accept (including any defect or failure of
the Title Commitment and the Survey to comply with requirements of this Section 2.4(e)) (collectively, the “Purchaser’s
Objections”). Notwithstanding anything herein to the contrary, the Seller shall be obligated to pay and discharge any encumbrances
or obligations arising from delinquent taxes, mortgages, deeds of trust, security agreements, mechanics’ liens or other
similar liens or charges which were created, consented to, or expressly assumed by Seller, including without limitation any loans,
bonds or due and payable obligations to municipal or other governmental bodies (collectively, “Monetary Title Encumbrances”).
No Monetary Title Encumbrances shall be considered to be a Permitted Title Exception. For such purposes, the Seller may use all
or a portion of the Purchase Price to pay or discharge any such Monetary Title Encumbrances at the Closing. The Seller may notify
Purchaser within five (5) days after receipt of Purchaser’s Objections (the “Seller’s Response Period”)
whether the Seller, in its sole discretion, agrees to cure any of such Purchaser’s Objections, (the “Seller’s
Response”). If the Seller agrees in the Seller’s Response Period to cure any of such Purchaser’s Objections,
the Seller shall use good faith efforts (without the obligation to expend any money or incur any liability) to cure such Purchaser’s
Objections which the Seller has agreed to attempt to cure on or before the Closing. If the Seller does not provide the Seller’s
Response to the Purchaser within the Seller’s Response Period, the Seller shall be deemed to have elected not to cure Purchaser’s
Objections. If (i) Seller elects to not cure or is deemed to have elected not to cure any Purchaser’s Objections, within
five (5) days after receipt of Seller’s Response (or, after the expiration of Seller’s Response Period in the event
no Seller’s Response is delivered) or (ii) in the event Seller agrees in the Seller’s Response Period to cure any
of such Purchaser’s Objections, but fails to do so on or before the Closing, Purchaser shall, in its sole and absolute discretion,
elect (1) to waive such Purchaser’s Objections without any abatement in the Purchase Price and proceed to close or (2) to
terminate this Agreement in which case the parties hereto shall be released from all further obligations hereunder, except those
which expressly survive a termination of this Agreement. In the event Purchaser does not timely provide to the Seller notice of
Purchaser’s election in response to Seller’s Response, Purchaser shall be deemed to have elected clause (1) of the
preceding sentence. In the event of Purchaser’s termination or deemed termination pursuant to this Section 2.4(e), the Earnest
Money, less the Independent Contract Consideration, shall be refunded by the Escrow Agent to Purchaser without any further notice
to Escrow Agent and despite any objection or potential objection by Seller.

 

(f)               
At Purchaser’s sole cost and expense, Purchaser’s auditor may conduct an audit as required of Purchaser pursuant
to Rule 3-05 of Securities and Exchange Commission Regulation S-X (the “3-05 Audit”) of the financial statements
of the Property for the three (3) complete fiscal years immediately preceding the Closing Date and the stub period through the
Closing Date (the “Covered Audit Period”), and Seller shall reasonably cooperate (at no cost to Seller) with
Purchaser’s auditor in the conduct of such 3-05 Audit. Without limiting the foregoing, (i) Purchaser or its designated independent
or other auditor may audit the financial statements of the Property, at Purchaser’s expense and, upon Purchaser’s prior
written request, Seller shall allow Purchaser’s auditors reasonable access to such books and records maintained by Seller
in respect to the Property and pertaining to the Covered Audit Period as necessary to conduct such 3-05 Audit, and (ii) Seller
shall use reasonable efforts to provide to Purchaser such existing financial information as may be reasonably required by Purchaser
and required for Purchaser’s auditors to conduct such 3-05 Audit; provided, however, that the ongoing obligations of Seller
shall be limited to providing such information or documentation as may be in the possession or control of Seller, the Seller’s
accountants or Manager, at no cost to any of such parties, and in the format that Seller or its accountants or Manager have maintained
such information. Seller certifies and represents and warrants to Purchaser that the materials delivered to Purchaser in connection
with the 3-05 Audit shall be true and accurate in all material respects and to Seller’s knowledge there are no known fraud
or material misrepresentations, or material subsequent events not reflected in such materials. Notwithstanding anything contained
in this paragraph to the contrary, in no event shall Seller or any of Seller’s Affiliates be obligated to disclose any confidential
or non-public financial information with respect to any of Seller’s Affiliates or any property of any such Seller’s
Affiliate. This provision shall survive Closing.

 

ARTICLE III

SELLER’S REPRESENTATIONS AND WARRANTIES

 

In order to induce
Purchaser to enter into this Agreement and to purchase the Property, and to pay the Purchase Price therefor, Seller hereby makes
the representations and warranties set forth below. Each such representation shall be materially true and correct on the Effective
Date and shall be materially true and correct on the Closing Date.

 

3.1             
Organization and Power. Seller has all requisite power and authority to enter into and perform its obligations hereunder
and under any document or instrument required to be executed and delivered on behalf of the Seller hereunder.

 

3.2             
Authorization and Execution. This Agreement (and all documents contemplated hereby) has been duly authorized by all
necessary action on the part of the Seller, has been duly executed and delivered by the Seller, constitutes the valid and binding
agreement of the Seller and is enforceable against the Seller in accordance with its terms, except as such enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights generally or by the principles governing
the availability of equitable remedies. The Persons executing this Agreement on behalf of the Sellers, for and on behalf of the
Sellers, have the authority to do so.

 

3.3             
Non-contravention. Subject to any consent to the assignment of any particular Hotel Agreement required by the terms
thereof or by Applicable Laws, the execution and delivery of, and the performance by the Seller of its obligations under, this
Agreement do not and will not contravene, or constitute a default under, any provision of any Applicable Law or regulation, the
Seller’s organizational documents or any agreement, judgment, injunction, order, decree or other instrument binding upon
the Seller or to which the Property is subject, or result in the creation of any lien or other encumbrance on any asset of the
Seller.

 

    	9

    	 

    

3.4             
Litigation. There is no action, suit or proceeding, pending or, to Seller’s Knowledge, known to be threatened,
against or affecting Seller or the Property, in any court or before any arbitrator or before any Governmental Authority which would
materially and adversely affect the ability of the Seller to perform its obligations hereunder, or under any document to be delivered
pursuant hereto.

 

3.5             
Seller Is Not a “Foreign Person”. Seller is not a “foreign person” or a “disregarded
entity” within the meaning of Section 1445 of the Internal Revenue Code, as amended (i.e., the Seller is not a foreign
corporation, foreign partnership, foreign trust, foreign estate or foreign person as those terms are defined in the Internal Revenue
code and regulations promulgated thereunder).

 

3.6 
            Labor and Employment Matters. There are no employees of the Hotel other than those employees who are employed by
Manager with respect to the Hotel (collectively, the “Employees”). There are no agreements to which Seller is
a party relating to any labor or collective bargaining agreement affecting the Hotel. There are no pension plans of any type with
respect to which Seller or the Property has an obligation. Neither Seller nor Manager has received any written notice from any
labor union or group of employees that such union or group represents or believes or claims it represents or intends to represent
any of the employees of Seller or Manager at the Hotel nor has it received any notice of any claim of unfair labor practices. Seller
and Manager have and shall maintain through the Closing Date a level of employment at the Hotel that is sufficient for the normal
business operations of the Hotel at standards required by the License Agreement. The Closing of the transaction contemplated by
this Agreement will not constitute or result in a violation of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), or of any state or local statutes regulating investments of and fiduciary obligations with respect
to governmental plans (as defined in Section 3(32) of ERISA).

 

3.7             
Insurance. All insurance policies held with respect to the Property by Seller are valid and in full force and effect.

 

      3.8             
No Special Taxes. Except as disclosed by the Permitted Exceptions or due diligence materials delivered or otherwise made
available by Seller, Seller has no knowledge of, nor has it received any notice of, any special taxes or assessments relating
to the Property or any part thereof or any planned public improvements that may result in a special tax or assessment against
the Property.

 

3.9             
Right to Purchase. Seller has not granted to any Person other than Purchaser any right to purchase the Property or
any portion thereof or interest therein.

 

3.10           
Condemnation. There are no any pending or, to Seller’s Knowledge, threatened condemnation or similar proceedings
affecting the Property.

 

3.11           
Title. Seller has good and marketable fee simple to the Hotel, subject only to the Permitted Title Exceptions.

 

3.12           
Hotel. All Hotel Agreements are listed on Schedule 3.12 attached hereto. Seller has made or will make available to
Purchaser true and complete copies of all such Hotel Agreements. All such Hotel Agreements are in full force and effect, and there
are no defaults or events that with notice or the passage of time or both, would constitute a default by Seller (or any party constituting
Seller) or Manager under any such Hotel Agreement, nor, to Seller’s Knowledge, by any other party thereto.

    	10

    	 

    

 

3.13         
Management and Franchise Agreements. There are no existing management contracts or franchise (or other similar) agreements
relating to the Property other than the Management Agreement and the License Agreement.

 

3.14         
Permits. All licenses (including, without limitation, liquor licenses), certificates of occupancy, permits and approvals
required to be issued by any governmental authority or any third party and used in or necessary to the operation of the Hotel as
a fully functioning select service hotel (the “Permits”) have been obtained and are in full force and effect.
Each such Permit is listed on Schedule 3.14 attached hereto, and Seller has made or will make available to Purchaser true and complete
copies of each such Permit. Neither Seller nor Manager has received a written notice from any applicable governmental authority
(a) of any violation, default, intended or threatened non-renewal, suspension or revocation of any of the Permits, the loss of
which would have a material adverse effect on the present use and occupancy of the Hotel or (b) that such party is lacking any
permits or licenses necessary for the present use and occupancy of the Hotel.

 

3.15         
Environmental Matters. Except as disclosed on Schedule 3.15 or in the environmental reports (and all modifications
thereto) listed on Exhibit “D”, neither Seller nor Manager has received any written notice from any governmental
or regulatory authority of the presence or release of any substance that is regulated under any Environmental Laws as a pollutant,
contaminant or toxic, radioactive or otherwise hazardous substance, including petroleum, its derivatives or by-products and other
hydrocarbons (collectively and individually, “Hazardous Substances”) that would cause the Hotel to be in violation
of any applicable Environmental Laws and that remains uncured, nor has Seller received written notice from any applicable governmental
or regulatory authority or has any knowledge that the Hotel is not in compliance with applicable Environmental Laws. Except as
otherwise disclosed in such environmental reports (i) there are no Hazardous Substances located at, on or under the Hotel and (ii)
no Hazardous Substances have leaked, escaped or been discharged, emitted or otherwise released from the Land underlying the Hotel
onto any adjoining properties or from any adjoining property onto the Property.

 

3.16         
Financial Information. Attached as Schedule 3.16 is a schedule of (a) all of the financial statements of the Seller
for each of the last four complete fiscal years of the Seller, and (b) balance sheets and operating statements for the Hotel for
the fiscal periods ending December 31, 2009, 2010, 2011, 2012, and June 30, 2013 a true and complete copy of each of which has
been delivered to Purchaser. All of the information contained in the financial statements and the balance sheets and operating
statements has been prepared in accordance with generally accepted accounting principles applied consistently with past practices,
fairly presents the financial position of the Seller and the Hotel at the end of the period covered and the results of the operations
thereof for each such period, and there has been no material adverse change in the financial condition, operations, results of
operations or business of the Hotel since December 31, 2010.

 

        3.17          Compliance with Applicable Law. To Seller’s Knowledge, the Hotel is in compliance with all Applicable Laws.
Neither Seller nor Manager has received any written notice from any governmental authority nor is either aware of any violations
of law or municipal ordinances, orders or requirements with respect to the Hotel.

 

        3.18         
Taxes. Seller has duly and timely filed all federal, state and local tax returns required to be filed by it, and
all such returns are true, complete and correct. Seller has duly and timely paid all taxes and any interest and penalties thereon
(including, without limitation, transient occupancy (bed) taxes), assessments and other governmental charges affecting the Property
or required to be paid or collected by Seller in the operation of the Property which have been incurred or are due and payable
(except real property taxes). Neither Seller nor Manager has received any written notice from any tax assessor of any proposed
increase in real estate taxes with respect to the Hotel.

 

        3.19         
Hotel Improvements. Licensor has not identified or requested any repairs, improvements or alterations other than
those disclosed by the Existing PIPS. Seller has no knowledge of any deficiencies which are not in compliance with current Licensor
standards, including, but not limited to, any prior PIPs which are outstanding or overdue.

 

        3.20          Possession. Seller has not granted to any party any license, lease, or other right relating to the use or possession
of the Hotel or any part thereof, except tenants under the Occupancy Agreements and guests in the ordinary course of business.

 

        3.21          Municipal Assessment/Notices. There are no outstanding unpaid municipal assessment notices against the Property.

 

        3.22          Bankruptcy. None of the parties constituting Seller is insolvent within the meaning of Title 11 of the United
States Code, as amended (the “Bankruptcy Code”), and has not ceased to pay its debts as they become due. None
of the parties constituting Seller has filed or taken any action to file a voluntary petition, case or proceeding under any section
or chapter of the Bankruptcy Code, or under any similar law or statute of the United States or any state thereof, relating to bankruptcy,
insolvency, reorganization, winding up or composition or adjustment of its debts; and no such petition, case or proceeding has
been filed against it which has not been dismissed, vacated or stayed on appeal; and none has been adjudicated as a bankrupt or
insolvent or consented to, nor filed an answer admitting or failing reasonably to contest an allegation of bankruptcy or insolvency.
None has sought, or consented to or acquiesced in, the appointment of any receiver, trustee, liquidator or other custodian of it
or a material part of its assets, or has made or taken any action to make a general assignment for the benefit of creditors or
an arrangement, attachment or execution has been levied and no tax lien or other governmental or similar lien has been filed, against
it or a material part of its properties, which has not been duly and fully discharged prior to the Effective Date.

 

      3.23          Title to FF&E. Other than Personal Property subject to the Hotel Agreements, Seller has good title to
the Personal Property used in connection with the operation of the Hotel, which in each case shall be free and clear of all liens
and encumbrances as of the Closing Date, subject only to the related Permitted Title Exceptions.

 

      3.24          Hotel Agreements. There are no Leased Property Agreements, Occupancy Agreements, Off-Site Facility Agreements, Operating
Agreements, or Management Agreements currently in effect or otherwise affecting the Property. In addition, there is no liquor
service at the Hotel and no active liquor license.

 

     3.25         
Submission Matters. All information given by Seller to Purchaser in this Agreement or in connection with the transactions
contemplated hereunder shall be true and accurate in every material respect as of the date hereof and at the Closing Date, and
Seller has not failed to disclose any fact to Purchaser necessary to make the statements herein or otherwise provided in connection
with the transactions contemplated hereunder not misleading and Seller has no knowledge or information of any facts, circumstances,
or conditions that are inconsistent with the representations and warranties contained herein. Seller shall promptly notify Purchaser
in writing if there occurs any (i) material adverse change in the condition, financial or otherwise, of the Property, or
the operation thereof, at any time prior to the Closing Date or (ii) if any information, document, agreement or other material
delivered to Purchaser is amended, superseded, modified or supplemented.

 

    	11

    	 

    

The representations
and warranties in this Article III shall survive the Closing for a period of one (1) year following the Closing Date (“Survival
Period”).

 

 

 

ARTICLE IV

PURCHASER’S REPRESENTATIONS AND WARRANTIES

 

In order to induce
the Seller to enter into this Agreement and to sell the Property, Purchaser hereby makes the following representations and warranties,
each of which is made to Purchaser’s knowledge:

 

4.1             
Organization and Power. Purchaser is a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland and has all requisite power and authority to enter into and perform its obligations under this Agreement
and any document or instrument required to be executed and delivered on behalf of Purchaser hereunder.

 

4.2             
Authorization and Execution. This Agreement has been (or will, with respect to transactions occurring after the expiration
of the Study Period, prior to the expiration of the Study Period, be) duly authorized by all necessary action on the part of Purchaser,
has been duly executed and delivered by Purchaser, constitutes the valid and binding agreement of Purchaser and is enforceable
against Purchaser in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable
remedies. The Person executing this Agreement on behalf of Purchaser has the authority to do so.

 

4.3             
Non-contravention. The execution and delivery of this Agreement and the performance by Purchaser of its obligations
hereunder do not and will not contravene, or constitute a default under, any provisions of applicable law or regulation, Purchaser’s
organizational documents, or any agreement, judgment, injunction, order, decree or other instrument binding upon Purchaser or result
in the creation of any lien or other encumbrance on any asset of Purchaser.

 

4.4             
Litigation. There is no action, suit or proceeding, pending or known to be threatened, against or affecting Purchaser
in any court or before any arbitrator or before any Governmental Authority which would materially and adversely affect the ability
of Purchaser to perform its obligations hereunder, or under any document to be delivered pursuant hereto.

 

4.5             
OFAC. Purchaser represents and warrants to Seller that neither Purchaser nor any affiliate of Purchaser is subject
to sanctions of the United States government or in violation of any federal, state, municipal or local laws, statutes, codes, ordinances,
orders, decrees, rules or regulations relating to terrorism or money laundering, including, without limitation, Executive Order
No. 13224, 66 Fed. Reg. 49079 (published September 25, 2001) (the “Terrorism Executive Order”) or is similarly
designated under any related enabling legislation or any other similar Executive Orders (collectively with the Terrorism Executive
Order, the “Executive Orders”), the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, the “Patriot Act”), any sanctions and regulations
promulgated under authority granted by the Trading with the Enemy Act, 50 U.S.C. App. 1-44, as amended from time to time, the International
Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, as amended from time to time, the Iraqi Sanctions Act, Publ. L.
No. 101-513; United Nations Participation Act, 22 U.S.C. § 287c, as amended from time to time, the International Security
and Development Cooperation Act, 22 U.S.C. § 2349 aa-9, as amended from time to time, The Cuban Democracy Act, 22 U.S.C. §§
6001-10, as amended from time to time, The Cuban Liberty and Democratic Solidarity Act, 18 U.S.C. §§ 2332d and 2339b,
as amended from time to time, and The Foreign Narcotics Kingpin Designation Act, Publ. L. No. 106-120, as amended from time to
time.

    	12

    	 

    

 

ARTICLE V

CONDITIONS PRECEDENT

 

       5.1               As to Purchaser’s Obligations. Subject to the provisions of Section 9.1, Purchaser’s obligations
hereunder are subject to the timely satisfaction of the following conditions precedent on or before the Closing Date or such earlier
date as is set forth below.

 

(a)               
Seller’s Deliveries. The Seller shall have delivered to or for the benefit of Purchaser, on or before the Closing
Date, all of the documents required of the Seller pursuant to Sections 7.2 and 7.4 hereof.

 

(b)              
Representations, Warranties and Covenants; Obligations of the Seller; Certificate. All of the Seller’s representations
and warranties made in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing
Date as if then made; and the Seller shall have performed in all material respects all of its covenants and other obligations under
this Agreement. Further, a duly authorized officer of the Seller shall have executed at Closing a “bring down certificate”
with respect to the aforesaid representations and warranties.

 

(c)               
Title. Title Company shall unconditionally be prepared to deliver to Purchaser Owner’s Title Policy (subject
to the premiums therefor and delivery of the documents specified in Section 7.2 below and Purchaser’s authority documents).

 

(d)              
License Agreement. Licensor shall have approved of Purchaser or its designee as a franchisee of the Hotel and shall
have entered into a new license agreement with Purchaser or shall have agreed with Purchaser on the terms of an assignment of the
License Agreement.

 

(e)               
Litigation.  There shall be no actions, suits, arbitrations, governmental investigations or other proceedings
pending or, to Seller’s Knowledge, threatened against Seller or affecting the Property before any court or governmental authority,
an adverse determination of which might materially and adversely affect (a) the financial condition or operations of Seller or
the Hotel, (b) Seller’s ability to enter into or perform this Agreement or (c) Seller’s title to the Property.

 

(f)               
Management Agreement. Prior to the Closing Date, Seller shall have terminated the Management Agreement effective
as of the Closing. If Purchaser shall have designated a replacement manager for the Hotel (the “New Manager”),
Seller shall, and shall cause Manager to, cooperate with the New Manager in order to permit the New Manager to prepare to manage
the Hotel from and after Closing.

 

(g)               
REIT Audit. Purchaser shall have completed the REIT Audit as contemplated under Section 2.4(f).

 

    	13

    	 

    

Each of the conditions
contained in this Section are intended for the benefit of the Purchaser and may be waived in whole or in part, by the Purchaser.
If the conditions precedent set forth above are neither satisfied nor waived by Purchaser by the Closing Date, Purchaser shall
have the right to terminate this Agreement, obtain a refund of the Earnest Money and Seller and Purchaser shall be released from
all further liability or obligation hereunder except those which expressly survive the termination of this Agreement; provided
however that if Seller is in default hereof at the time of such termination, Section 9.1 shall additionally apply.

 

5.2             
As to the Seller’s Obligations. Subject to the provisions of Section 9.2, the Seller’s obligations
hereunder are subject to the satisfaction of the following conditions precedent:

 

(a)               
Purchaser’s Deliveries. Purchaser shall have delivered to or for the benefit of the Seller, on or before the
Closing Date, all of the documents and payments required of the Purchaser pursuant to Sections 7.3 and 7.4 hereof.

 

(b)              
Representations, Warranties and Covenants; Obligations of Purchaser; Certificate. All of Purchaser’s representations
and warranties made in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing
Date as if then made; and Purchaser shall have performed in all material respects all of its covenants and other obligations under
this Agreement. Further, a duly authorized officer of Purchaser shall have executed at Closing a “bring down certificate”
with respect to the aforesaid representations and warranties.

 

Each of the conditions
contained in this Section are intended for the benefit of Seller and may be waived in whole or in part, by Seller.

 

ARTICLE VI

PRE-CLOSING (AND CERTAIN POST CLOSING)

COVENANTS OF SELLER AND PURCHASER

 

        6.1             
Operating Agreements/Occupancy Agreements/Leased Property Agreements/Off-Site Facility Agreements. Purchaser will
advise Seller in writing within twenty (20) days after the Effective Date as to which Hotel Agreements Purchaser will assume and
which Hotel Agreements Purchaser requires be terminated at Closing; and Seller shall, at Seller’s cost, terminate, as of
the Closing Date, all Hotel Agreements with respect to the Property which Purchaser does not expressly agree to assume. Seller
shall, at Seller’s cost, terminate, as of the Closing Date, all existing management agreements with respect to the Property.
Seller shall not enter into any new agreement affecting the Property (except to address an emergency), or modify any existing agreement
affecting the Property (but may terminate any Service Contract that is in default), which will be binding on the Property after
Closing, without first obtaining Purchaser’s approval of the proposed action, which approval or disapproval shall be in Purchaser’s
sole discretion. Should Purchaser fail to notify Seller in writing of any objections to a new agreement within five (5) Business
Days after receipt of Seller’s written request for approval, then Purchaser shall be deemed to have approved such new agreement.

 

       6.2             
Warranties. The Seller shall not, before or after Closing, release or modify any Warranties and Guaranties, if any,
except with the prior written consent of the Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.

 

       6.3             
Insurance. The Seller shall pay, all premiums on, and shall not cancel or voluntarily allow to expire, any of the
Seller’s Insurance Policies unless such policy is replaced, without any lapse of coverage, by another policy or policies
providing coverage at least as extensive as the policy or policies being replaced.

    	14

    	 

    

 

        6.4             
Operation of Property Prior to Closing. The Seller covenants and agrees with the Purchaser that, to the extent it
is legally entitled to do so, between the date of this Agreement and the date of Closing:

 

(a)               
Subject to the restrictions contained herein, the Seller shall instruct the Manager to operate and maintain the Property
in substantially the same manner in which it operated and maintained the Property prior to the execution of this Agreement and
with the operations of other similarly situated hospitality properties of similar size and quality. Seller shall cause the Property
to be maintained in its present order and condition, normal wear and tear excepted, so that the Property shall, except for normal
wear and tear, be in substantially the same condition on the Closing Date as on the Effective Date.

 

(b)              
The Seller shall instruct the Manager to maintain its books of account and records in the usual, regular and ordinary manner,
in accordance with accounting principles and applied on a basis, both consistent with that used in keeping its books in prior years.

 

(c)               
The Seller shall instruct the Manager to pay (subject to legal rights of appeal and protest) prior to delinquency all ad
valorem, occupancy and sales taxes due and payable with respect to the Property or the operation of the Hotel.

 

(d)              
The Seller shall instruct the Manager to continue to take guest room reservations and to book functions and meetings and
otherwise to promote the business of the Property in generally the same manner as it did prior to the execution of this Agreement;
and all advance room bookings and reservations and all meetings and function bookings shall be booked at rates, prices and charges
charged by the Seller for such purposes in the ordinary course of business consistent with past practices. The Seller acknowledges
that the Purchase Price includes the transfer of Advance Bookings.

 

(e)               
The Seller shall not enter into any employment agreements with any Hotel employee which would be binding on the Purchaser
with respect to the Property.

 

(f)               
The Seller shall promptly advise the Purchaser of any litigation, arbitration or administrative hearing concerning the Property
of which the Seller obtains knowledge.

 

(g)               
The Seller shall instruct the Manager to refrain from removing or causing or permitting to be removed any material part
or portion of the Real Property or the Tangible Personal Property owned by the Seller other that in the normal course of business
without the prior written consent of the Purchaser, unless the same is replaced, prior to Closing, with similar items of at least
equal suitability, quality and value, free and clear of any liens or security interests.

 

(h)              
The Seller shall cause Manager to keep the Inventory adequately stocked, consistent with the standards for hotel properties
of similar size, quality and location as the Hotel and as otherwise set forth in the License Agreement, as if the sale of the Hotel
were not to occur.

 

(i)                
 Seller will not take or cause to be taken any action or fail to perform any obligation which would cause any of the representations
or warranties contained in this Agreement to be untrue as of the Closing Date. Seller shall promptly notify Purchaser, in writing,
of any event or condition known to Seller which occurs prior to the Closing Date hereunder, which causes a change in the facts
relating to, or the truth of, any of the representations or warranties.

    	15

    	 

    

 

       6.5             
Hotel Employees. Seller acknowledges that Purchaser does not intend to hire or otherwise engage any of the Hotel
Employees subsequent to the Closing.

 

       6.6             
Employee Claims. The Seller shall indemnify and defend or cause to be indemnified and defended the Purchaser and
its Affiliates from and against any and all claims, causes of action, proceedings, judgments, damages, penalties, liabilities,
costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by the Purchaser with respect to claims,
causes of action, judgments, damages, penalties and liabilities asserted by Hotel Employees arising out of or related to any act,
failure to act, any transaction or any facts or circumstances (a) occurring prior to the Closing Date, or (b) undertaken
or caused by the Seller in connection with Hotel Employees at Closing, including: (i) the termination of such Hotel Employees;
(ii) the failure of the Seller or the Manager to comply with the provisions of any collective bargaining agreement; (iii) any
alleged discrimination, breach of contract or other wrongful termination; and (iv) any alleged right to workers’ compensation
benefits, unemployment compensation, or statutory or contractual severance, including claims for any withdrawal liability or unfunded
liability incurred because of participation in any pension plan covered by the Multiemployer Pension Plan Amendments Act of 1980
or other multiemployer pension plan or similar fund.

 

       6.7             
Reasonable Inspection After Closing.

 

(a)               
After Closing, the Seller and Manager shall afford the Purchaser and its agents reasonable access to their books of account,
financial and other records, information, employees and auditors to the extent such items and contact with such persons relate
solely to the Property and to the extent necessary in connection with any audit or any other reasonable business purpose relating
to the Property (other than litigation or investigation of any claim or action against the Seller or the Manager), including, but
not limited to a 3-05 Audit or any other audit which may be required by the Securities Exchange Commission; provided that: (i) any
such access by the Purchaser or its agents shall not unreasonably interfere with the conduct of the Seller’s or the Manager’s
business; and (ii) Purchaser or its agents shall keep the information contained in such records confidential; provided, however,
that any such information compiled in a report and distributed in accordance with Securities and Exchange Commission Regulation
S-X and Rule 3-05 and/or Rule 3-14 shall not be prohibited.

 

(b)              
After Closing, the Purchaser shall afford the Seller and the Manager and their agents reasonable access to its books of
account, financial and other records, information, employees and auditors to the extent such items and contact with such persons
relate solely to the Property prior to the Closing and to the extent necessary in connection with any audit or any other reasonable
business purpose relating to the Property (other than litigation or investigation of any claim or action against the Purchaser);
provided that (i) any such access by the Seller, the Manager or their agents shall not unreasonably interfere with the conduct
of the Purchaser’s business; and (ii) the Seller, Manager or their agents shall keep the information contained in such
records confidential. The provisions of this Section 6.7 (a) and (b) shall survive the Closing.

 

       6.8             
Condition of Property. Except as otherwise provided herein, the Seller shall not, after the date of this Agreement,
sell, mortgage, encumber, hypothecate or otherwise transfer or dispose of the Property or any interest therein, or subject the
Property to any, covenants, conditions, restrictions, easements or other title matters or seek any zoning changes without the Purchaser’s
prior written consent, which consent shall be given or withheld in Purchaser’s sole discretion.

 

    	16

    	 

    

6.9             
Access to Financial Information. Purchaser’s representatives shall have access to, and the Seller and Seller’s
Manager shall cooperate with Purchaser and furnish upon request, all financial and other information relating to the Property to
the extent necessary to enable Purchaser’s representatives to complete the REIT Audit and prepare audited financial statements
in conformity with Regulation S-X of the Securities and Exchange Commission (the “SEC”) and other applicable rules
and regulations of the SEC and to enable them to prepare a registration statement, report or disclosure statement for filing with
the SEC on behalf of Purchaser or its affiliates, whether before or after Closing and regardless of whether such information is
included in the records to be transferred to Purchaser hereunder. Seller shall also provide to Purchaser’s representative
a signed representation letter in form and substance reasonably acceptable to Seller sufficient to enable an independent public
accountant to render an opinion on the financial statements related to the Property. Seller shall maintain its records for use
under this Section for a period of not less than one (1) year after the Closing Date. The provisions of this Section shall survive
Closing or termination of this Agreement.

 

ARTICLE VII

CLOSING

 

7.1             
Closing. The Closing shall occur on the Closing Date. As more particularly described below, at the Closing the parties
hereto will (a) execute or cause to be executed (and acknowledged where appropriate) all of the documents required to be delivered
in connection with the transactions contemplated hereby (the “Closing Documents”), (b) deliver or cause
to be delivered the same to the Escrow Agent, and (c) take or cause to be taken all other action required to be taken in respect
of the transactions contemplated hereby. The Closing will occur through escrow, at the Title Company, or at any such other place
as the Seller and Purchaser may mutually agree. At the Closing, Purchaser shall deliver the balance of the Purchase Price to Escrow
Agent as provided herein. As provided herein, the parties hereto will agree upon adjustments and prorations to certain items which
cannot be exactly determined at the Closing and will make the appropriate adjustments with respect thereto. Possession of the Property
shall be delivered to Purchaser at the Closing, subject to Permitted Title Exceptions and guests in possession.

 

7.2             
Seller’s Deliveries. At the Closing, the Seller shall deliver (or cause to be delivered) to the Escrow Agent
all of the following instruments, each of which shall have been duly executed and, where applicable, acknowledged and/or sworn,
on behalf of the Seller, and shall be dated to be effective as of the Closing Date:

 

(a)               
The Deed.

 

(b)              
The Bill of Sale and General Assignment.

 

(c)               
The Assignment and Assumption Agreement.

 

(d)              
A bills paid affidavit verifying that there are no unpaid bills or claims for labor performed or materials furnished to
the Property prior to the Closing, and by which Seller indemnifies and holds Purchaser and Title Company harmless from any loss,
liability, cost or expense of Purchaser resulting from or incident to claims against the Property.

 

(e)               
Certificate(s)/Registration of Title for any vehicle owned by the Seller and used in connection with the Property (if any).

 

(f)               
The FIRPTA Certificate.

    	17

    	 

    

 

(g)               
The “bring-down certificate” specified in Section 6.1(b).

 

(h)              
Evidence of the termination of the Management Agreement.

 

(i)                
An owner’s title affidavit duly executed and acknowledged by Seller.

 

(j)                
Any other document or instrument specifically required by this Agreement.

 

The Seller shall also
cause the Manager to deliver to Purchaser or make available to Purchaser at the Property:

 

(k)              
all original Warranties, Guarantees, and Hotel Agreements to be assigned to and assumed by Purchaser and in the Seller’s
or the Manager’s possession,

 

(l)                
information as to all Advance Bookings, in reasonable detail so as to enable Purchaser to honor the Seller’s commitments
in that regard,

 

(m)            
information as to outstanding Accounts Receivable as of midnight on the date prior to the Closing, including the name of
each account and the amount due,

 

(n)              
all keys, passwords, access cards, combinations, codes and other similar entry or control devices with respect to the Property.

 

7.3             
Purchaser’s Deliveries. At the Closing, Purchaser shall deliver to Escrow Agent the following, duly executed
and, where applicable, acknowledged and/or sworn on behalf of Purchaser, and dated as of the Closing Date:

 

(a)               
The Assignment and Assumption Agreement.

 

(b)              
The Bill of Sale and General Assignment.

 

(c)               
The “bring-down certificate” specified in Section 6.2(b).

 

(d)              
Any other document or instrument specifically required by this Agreement.

 

(e)               
At the Closing, Purchaser shall deliver to Escrow Agent the Purchase Price (less the Earnest Money and any interest thereon
and subject to the revenue and expense allocations as set forth below) as described in Section 2.2 hereof.

 

       7.4               Mutual Deliveries. At the Closing, Purchaser and the Seller shall mutually execute and deliver each to the other:

 

(a)               
A closing statement reflecting the Purchase Price and the adjustments and prorations required hereunder and the allocation
of income and expenses required hereby.

 

(b)              
Such other and further documents, papers and instruments as may be reasonably required by the parties hereto or their respective
counsel or the Title Company to consummate the transactions contemplated by this Agreement and which are not inconsistent with
the Agreement or the other Closing Documents.

 

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7.5             
Closing Costs. The Seller and Purchaser shall equally divide any escrow fee, recording fees or other expenses or
similar charges charged by the Title Company and all transfer taxes. The Seller shall pay for the cost of the Title Commitment
and for the premium for the basic Owner Title Policy. The Purchaser shall pay for the cost of any endorsements or other “extended
coverage” to the Owner’s Title Policy, the cost of the Survey, and the cost of and any of all inspections or tests
undertaken by Purchaser. Purchaser shall pay all costs associated with the assignment of the License Agreement (or issuance of
a new License Agreement), including, without limitation, all application fees, inspection fees, transfer fees, and all expenses
of Licensor, including, without limitation, legal fees and expenses, incurred in connection therewith, provided, however, that
Seller shall pay all fees, costs and expenses under the License Agreement which have accrued prior to the Closing. Unless the payment
of any other cost is specifically provided for in this Agreement, all other costs shall be apportioned between the parties by the
Title Company in the manner customary in the location of the Hotel, for properties of a similar nature. Except as otherwise provided
in Section 9.3, each party shall be responsible for the payment of its own attorney’s fees incurred in connection with
transaction which is the subject of this Agreement.

 

       7.6             
Revenue and Expense Allocations. All revenues and expenses with respect to the Property, and applicable to the period
of time before and after Closing, determined in accordance with sound accounting principles consistently applied, shall be allocated
between the Seller and the Purchaser as provided herein. The Seller shall be entitled to all revenue and shall be responsible for
all expenses for the period of time up to but not including the Closing Date, and the Purchaser shall be entitled to all revenue
and shall be responsible for all expenses for the period of time from, after and including the Closing Date provided that the housekeeping
costs and the Final Rooms Revenue shall be shared equally between the Seller and the Purchaser. Such adjustments shall be
shown on the closing statement (with such supporting documentation as the parties hereto may reasonably require being attached
as exhibits to the closing statements) and shall increase or decrease (as the case may be) the cash amount payable by the Purchaser
pursuant to Section 2.2 hereof. All prorations shall be made on the basis of the actual number of days in the year and month
in which the Closing occurs or in the period of computation. Without limiting the generality of the foregoing, the following items
of revenue and expense shall be allocated and prorated at Closing:

 

(a)              
Current rents.

 

(b)              
Real estate and personal property taxes (with maximum allowable discounts for early or prompt payment).

 

(c)              
Revenue and expenses under the Operating Agreements, Leased Property Agreements and Off-Site Facility Agreements to be assigned
to and assumed by the Purchaser.

 

(d)             
Utility charges (including, but not limited to, charges for phone service, cable television, gas, water, sewer and electricity).

 

(e)              
Payments due under any assessments imposed by private covenant.

 

(f)              
Municipal or other governmental improvement liens and special assessments, which shall be paid by the Seller at Closing
where the work has been assessed, and which shall be assumed by the Purchaser at Closing where the work has not been assessed;
provided, however, that if such liens or assessments are payable in installments, the Seller shall be responsible for the payment
of such installments relating to periods prior to the Closing Date and the Purchaser shall be responsible for the payments of such
installments relating to periods on and subsequent to the Closing Date.

 

    	19

    	 

    

(g)               
License and permit fees, where transferable.

 

(h)              
All other revenues and expenses of the Property, including, but not limited to, such things as restaurant, bar and meeting
room income and expenses and the like.

 

(i)               
The Final Rooms Revenue and housekeeping costs for the Closing Date (to be apportioned equally between the Seller and the
Purchaser).

 

(j)               
Advance Deposits.

 

(k)            
  Cash on hand (house accounts).

 

(l)               
Such other items as are usually and customarily prorated between purchasers and sellers of hotel properties in the area
where the Property is located.

 

The Seller shall receive
a credit for any prepaid expenses accruing to periods on or after the Closing Date. The Purchaser shall receive a credit against
the Purchase Price for the total of (a) prepaid rents, (b) prepaid room receipts and deposits, function receipts and deposits and
other reservation receipts and deposits, and (c) unforfeited security deposits together with any interest payable to a tenant thereon
held by the Seller under Occupancy Agreements. At 11:59 p.m. the day prior to Closing, Seller shall check-out those hotel guests
who are in occupancy at the Hotel, so as to directly bill and collect all revenues generated prior to the Closing Date, and then
immediately check those hotel guests back into the Hotel so they can be included in the Final Rooms Revenue for the Closing Date.
At Closing, the Seller shall sell to the Purchaser in connection with the Hotel, and Purchaser shall purchase from the Seller at
face value all petty cash funds in connection with the hotel guest operations at the Property, which shall be an amount equal to
the total of all petty cash funds on hand and transferred to the Purchaser. In addition, the Seller shall provide a credit to the
Purchaser in an amount equal to one-half (1/2) of the Final Rooms Revenue from the night prior to the Closing Date. The procedure
and method of making the proration adjustments set forth in this Section 7.6 is attached to this Agreement as Exhibit C.

 

The Purchaser shall
receive a credit for all retail sales (as distinguished from any tax on the sale of any personal property effected pursuant to
this Agreement), occupancy and liquor taxes and like impositions up to but not including the date of Closing. Any such taxes applicable
to the Final Rooms Revenue shall be apportioned equally between the Seller and the Purchaser. The Seller shall cooperate reasonably
with the Purchaser to permit the Purchaser to obtain, if desired by the Purchaser, sale and occupancy tax clearance certificates
from the State in which the Real Property is located.

 

Seller will terminate
all employees effective as of the Closing and pay all accrued payroll and benefits due to said employees in full. No costs associated
with Seller’s accrued and/or unpaid payroll or benefits will be shown on the closing statement.

 

If accurate allocations
cannot be made at Closing because current bills are not obtainable (as, for example, in the case of utility bills and/or real estate
or personal property taxes), the parties shall allocate such revenue or expenses at Closing on the best available information,
subject to adjustment upon receipt of the final bill or other evidence of the applicable revenue or expense. The obligation to
make the adjustment shall survive the Closing of the transaction contemplated by this Agreement. Any revenue received or expense
incurred by the Seller or by the Purchaser with respect to the Property after the date of Closing shall be promptly allocated in
the manner described herein and the parties shall promptly pay or reimburse any amount due. With respect to any closing statements
amounts or issues relating to prorations that are not agreed upon at Closing, the Seller and the Purchaser shall thereafter work
in good faith to resolve such amounts or issues; provided that if such amounts or issues are not fully agreed upon and paid within
one hundred twenty (120) days after the Closing, then, in such event, such amounts or issues shall be submitted to an independent
certified public accountant with a hospitality practice (reasonably acceptable to the Seller and the Purchaser) for final resolution,
and the Seller and the Purchaser agree to be bound by the determination of such accountant. The costs and expenses incurred in
connection with the services of such accountant shall be borne equally by the Seller and the Purchaser. The provisions of this
Section 7.6 shall survive the Closing.

 

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       7.7              Safe Deposit Boxes. On the Closing Date, the Seller shall cause the Manager to make available to the Purchaser at
the Hotel all receipts and agreements in the Manager’s possession relating to all safe deposit boxes in use at the Hotel,
other than safes or lockboxes, if any, located inside individual guest rooms in Hotel. During the Study Period, the Seller and
the Purchaser shall mutually agree upon a procedure to provide notice to each Hotel guest utilizing a safe deposit box on the Closing
Date about the sale of the Property and to cause each such Hotel guest to adhere to the procedure set forth in the notice so that
a proper inventory can be prepared and an orderly transition made. From and after the Closing, the Seller and the Manager shall
be relieved of any and all responsibility in connection with each said box, and the Purchaser shall indemnify, defend and hold
the Seller and the Manager and harmless from and against any claim, liability, cost or expense (including reasonable attorneys’
fees) with respect to such safety deposit box arising after the Closing. The Seller hereby agrees to hold the Purchaser harmless
from any other liability or claims with respect to such safe deposit boxes arising prior to the Closing Date. The provisions of
this Section 7.7 shall survive the Closing.

 

       7.8             
Inventory of Baggage. The representatives of the Seller and/or the Manager, and of the Purchaser shall prepare an
inventory of baggage at the Hotel as of 12:00 noon on the Closing Date (which inventory of baggage shall be binding on all parties
thereto) of (a) all luggage, valises and trunks checked or left in the care of the Hotel by guests then or formerly in the
Hotel, (b) parcels, laundry, valet packages and other property of guests checked or left in the care of the Hotel by guests
then or formerly in the Hotel (excluding, however, property in Hotel safe deposit boxes), (c) all luggage or other property
of guests retained by Seller as security for any unpaid accounts receivable, and (d) all items contained in the Hotel lost
and found. The Purchaser shall be responsible from and after the Closing Date for all baggage and other items listed in such inventory
of baggage, and the Purchaser shall indemnify, defend and hold the Seller and the Manager harmless from and against any claim liability,
cost or expense (including reasonable attorneys’ fees) incurred by the Seller or the Manager or any Affiliate thereof with
respect thereto arising after the Closing Date. The Seller hereby agrees to hold the Purchaser harmless from any other liability
or claims with respect to such inventory of baggage arising prior to the Closing Date. The provisions of this Section 7.8
shall survive the Closing.

 

       7.9             
Accounts Receivable. It is expressly agreed by and between Purchaser and Seller that Seller is not hereby agreeing
to sell to Purchaser, and Purchaser is not hereby agreeing to purchase from Seller, any of Seller’s accounts receivable.
All of Seller’s accounts receivable shall be and remain the property of Seller. At the Closing, Seller shall prepare a list
of its outstanding accounts receivable as of midnight on the date prior to the Closing, specifying the name of each account and
the amount due to Seller. Purchaser shall hold any funds received by Purchaser explicitly designated as payment of such accounts
receivable, in trust, if Purchaser actually collects any such amounts, and shall pay the monies collected in respect thereof to
Seller at the end of each calendar month, accompanied by a statement showing the amount collected on each such account. Other than
the foregoing, Purchaser shall have no obligation with respect to any such account, and Purchaser shall not be required to take
any legal proceeding or action to effect collection on behalf of Seller. It is generally the intention of Purchaser and Seller
that although all of Seller’s accounts receivable shall be and remain the property of Seller, if any such accounts are paid
to Purchaser, then Purchaser shall collect same and remit to Seller in the manner above provided. Nothing herein contained shall
be construed as requiring Purchaser to remit to Seller any funds collected by Purchaser on account of Purchaser’s accounts
receivable generated from Hotel operations after the Closing, even if the person or entity paying same is also indebted to Seller.

 

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        7.10         
Accounts Payable. The Purchaser shall receive a credit for any and all accounts payable owed by the Seller in connection
with any portions of Property which Purchaser is assuming as of the Closing Date.

 

7.11         
Property Improvement Plan. It is contemplated that, as of the Closing Date, the Purchaser shall have received from
the Licensor a property improvement plan (the “Purchaser’s PIP”) with respect to the Hotel for the remainder
of calendar 2013 (and, if applicable, subsequent years). The Purchaser shall be responsible for all actions and expenses required
by the Purchaser’s PIP, except as specifically stated otherwise herein.  Notwithstanding anything herein to the contrary,
in no event shall Purchaser be responsible for the cost outstanding Hotel improvement deficiencies which are not in compliance
with current Licensor standards other than the requirement for Guest Bedroom (2510.05), which obligation Buyer shall assume. The
provisions of this Section 7.11 shall survive the Closing.

 

ARTICLE VIII

GENERAL PROVISIONS

 

8.1             
Fire or Other Casualty. The Seller agrees to give Purchaser prompt notice of any fire or other casualty to the Property
occurring between the Effective Date and the Closing Date of which the Seller has knowledge. If, prior to Closing, the Property
is damaged by fire or other casualty which is fully insured (without regard to deductibles) and would cost less than Two Hundred
Fifty Thousand Dollars ($250,000.00) and require less than forty-five (45) days to repair, then neither party shall have the right
to terminate this Agreement by reason thereof and the Closing shall take place without abatement of the Purchase Price, but the
Seller shall assign to Purchaser at the Closing all of the Seller’s interest in any insurance proceeds (except use and occupancy
insurance, rent loss and business interruption insurance, and any similar insurance, attributable to the period preceding the Closing
Date) that may be payable to the Seller on account of any such fire or other casualty, to the extent such proceeds have not been
previously expended or are otherwise required to reimburse the Seller for actual expenditures of restoration made prior to the
Closing Date, plus Seller shall credit the amount of any deductibles under any policies related to such proceeds to the
Purchase Price together with any amount not covered by insurance. If any such damage due to fire or other casualty is insured and
would cost in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) or require forty-five (45) days or more to repair, then
Purchaser may terminate this Agreement by written notice given to the Seller within ten (10) days after the Seller has given Purchaser
the notice of damage or casualty referred to in this Section 8.1, or on the Closing Date, whichever is earlier, in which case
the parties hereto shall be released of all further obligations hereunder with respect to the Property except those which expressly
survive a termination of this Agreement. Should Purchaser elect to proceed to Closing notwithstanding the amount of the insured
loss or the time required for repairs, the Closing shall take place without abatement of the Purchase Price and at Closing the
Seller shall assign to Purchaser the insurance proceeds and grant to Purchaser a credit against the Purchase Price equal to the
amount of the applicable deductible plus any amount not covered by insurance. If, prior to Closing, any Property is damaged by
fire or casualty which is uninsured and would cost Five Hundred Thousand Dollars ($500,000.00) or more to repair, then Purchaser
may terminate this Agreement by written notice given to the Seller within ten (10) days after the Seller has given Purchaser the
notice of damage or casualty or on the Closing Date, whichever is earlier, in which case the parties hereto shall be released of
all further obligations hereunder, except those which expressly survive a termination of this Agreement. If Purchaser does not
elect to terminate its obligations under this Agreement pursuant to the immediately preceding sentence, or if any uninsured fire
or casualty would cost less than Five Hundred Thousand Dollars ($500,000.00) to repair, then the Closing shall take place as provided
herein, and the Purchase Price shall be reduced by the estimated amount to repair such casualty, not to exceed Five Hundred Thousand
Dollars ($500,000.00).

 

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8.2             
Condemnation. After the Effective Date, the Seller agrees to give Purchaser prompt written notice of any knowledge
of or notice of any taking by condemnation of any part of or rights appurtenant to the Real Property. If taking involves property
having a value in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) or will materially interfere with the operation or
use of any Hotel which constitutes a part of such Real Property, Purchaser may terminate this Agreement by written notice to the
Seller given within ten (10) days after the Seller has given Purchaser the notice of taking referred to in this Section 8.2,
or on the Closing Date, whichever is earlier. If Purchaser exercises its option to terminate its obligations to purchase the Property
pursuant to this Section 8.2, the parties hereto shall be released from all further obligations hereunder with respect to
the Property, except those which expressly survive a termination of the Agreement. If Purchaser does not so elect to terminate
this Agreement, then the Closing shall take place as provided herein, and the Seller shall assign to Purchaser at the Closing all
of the Seller’s interest in any condemnation award which may be payable to the Seller on account of any such condemnation
and, at Closing, the Seller shall credit to the amount of the Purchase Price payable by Purchaser the amount, if any, of condemnation
proceeds received by the Seller between the Effective Date and Closing less (a) any amounts reasonably expended by the Seller
in collecting such sums and (b) any amounts reasonably used by the Seller to repair the Property as a result of such condemnation.
If, prior to Closing, there shall occur a taking by condemnation of any part of or rights appurtenant to the Property that involves
property having a value of Two Hundred Fifty Thousand Dollars ($250,000.00) or less and does not materially interfere with the
operation or use of the Hotel which constitutes a part of the Property, Purchaser shall not have the right to terminate this Agreement
by reason thereof and the Closing shall take place without abatement of the Purchase Price, but the Seller shall assign to Purchaser
at Closing all of the Seller’s interest in any condemnation award which may be payable to the Seller on account of any such
condemnation and, at Closing, the Seller shall credit to the amount of the Purchase Price payable by Purchaser the amount, if any,
of condemnation proceeds received by the Seller between the Effective Date and Closing less (a) any amounts reasonably expended
by the Seller in collecting such sums and (b) any amounts reasonably used by the Seller to repair the Property as a result
of such condemnation. Provided Purchaser has not exercised its right to terminate this Agreement pursuant to Section 8.2,
the Seller shall notify Purchaser in advance regarding any proceeding or negotiation with respect to the condemnation and Purchaser
shall have a reasonable right, at its own cost and expense, to appear and participate in any such proceeding or negotiation. For
purposes of Sections 8.1 and 8.2 if this Agreement, estimates of costs and time required for restoration or repair shall be made
by an architect or engineer, as appropriate, designated by the Seller and reasonably acceptable to Purchaser.

 

Any disputes regarding
the allocation of insurance or condemnation proceeds, as set forth above in Sections 8.1 and 8.2, shall be resolved by a forensic
account mutually agreed upon by both parties.

 

8.3             
Broker. Seller and Purchaser each represents and warrants to the other that it has not
employed any real estate sales representatives or brokers regarding the transaction contemplated by this Agreement other than,
in Seller’s case, the engagement of Marcus & Millichap, in respect of which Seller shall be solely responsible for the
payment of a brokerage fee pursuant to a separate written agreement. Seller shall indemnify, defend and hold Purchaser harmless
from any commission or fee claimed to be owing due to the acts of Seller. Purchaser shall indemnify, defend and hold Seller harmless
from any commission or fee claimed to be owing due to the acts of Purchaser. This Section relates solely to the transaction contemplated
by this Agreement between Seller and Purchaser and shall not create any third party right or obligation in favor of either or any
broker. The provisions of this Section 8.3 shall survive the Closing and any termination of this Agreement.

 

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ARTICLE IX

DEFAULT; TERMINATION RIGHTS; INDEMNIFICATIONS

 

9.1             
Default by Seller. If the sale contemplated hereby is not consummated because of a default by Seller in accordance
with this Agreement after Purchaser has performed or tendered performance of all of its obligations in accordance with this Agreement,
then Purchaser, as its sole and exclusive remedy shall elect (a) to terminate this Agreement, in which event the Earnest Money
Deposit shall be returned to Purchaser, Seller shall reimburse Purchaser for its reasonable aggregate out-of-pocket expenses in
connection with the proposed purchase of the Property (not to exceed the sum of One Hundred Thousand Dollars ($100,000.00)), and
all other rights and obligations of the Seller and Purchaser hereunder (except those set forth herein which expressly survive a
termination of this Agreement) shall terminate immediately; (b) to waive such matter or condition and proceed to Closing, with
no reduction in the Purchase Price, or (c) to pursue the remedy of specific performance, provided, however, that in the event such
remedy is unavailable by reason of any act of Seller, then Purchaser may pursue all remedies available at law or in equity. In
the event of any termination by Purchaser pursuant to the provisions of this Section 9.1, the Earnest Money shall be refunded by
the Escrow Agent to Purchaser.

 

9.2             
Default by Purchaser. If the sale contemplated hereby is not consummated because of a default by Purchaser in its
obligation to purchase the Property in accordance with this Agreement after Seller has performed or tendered performance of all
of its obligations in accordance with this Agreement, the Seller, as its sole and exclusive remedy, shall be permitted to terminate
this Agreement in which event the parties hereto shall be released from all further obligations hereunder except those which expressly
survive a termination of this Agreement. In the event of such termination, the Seller shall be entitled to receive the Earnest
Money from the Escrow Agent as liquidated damages and not as penalty, in full satisfaction of its claims against Purchaser hereunder.
Seller and Purchaser agree that the Seller’s damages resulting from Purchaser’s
default are difficult, if not impossible, to determine and the Earnest Money is a fair estimate of those damages which has been
agreed to in an effort to cause the amount of said damages to be certain.

 

9.3             
Costs and Attorneys’ Fees. In the event of any litigation or dispute between the parties arising out of or
in any way connected with this Agreement, resulting in any litigation, then the prevailing party in such shall be entitled to recover
its costs of prosecuting and/or defending same, including, without limitation, reasonable attorneys’ fees at trial and all
appellate levels. The provisions of this Section 9.3 shall survive the termination of this Agreement.

 

9.4             
Limitation of Liability. Notwithstanding anything herein to the contrary, the liability of each party hereto resulting
from the breach or default by such party shall be limited to direct actual damages incurred by the injured party and each party
hereto hereby waives its rights to recover from the other party consequential, punitive, exemplary, and speculative damages. The
provisions of this Section 9.4 shall survive the termination of this Agreement.

 

9.5            
Agreement to Indemnify.

 

(a)               
Notwithstanding any provisions of this Agreement to the contrary, Seller shall hold harmless, indemnify and defend Purchaser
against any and all claims asserted by any third-party(ies) with respect to obligations, claims, losses, damages, liabilities and
expenses (including, without limitation, reasonable attorneys’ fees and other charges) connected with the ownership or operation
of the Hotel and relating to the period during which Seller owned the Hotel, including, without limitation, actions or claims asserted
by such third-party(ies) relating to damage to property or injury to or death of any person during the period of Seller’s
ownership of the Hotel, or any claims by any such third-party(ies) for any debts or obligations occurring on or about or in connection
with the Hotel or any portion thereof or with respect to the Hotel’s operations at any time during such period.

    	24

    	 

    

 

(b)              
Purchaser shall hold harmless, indemnify and defend Seller against any and all obligations, claims, losses, damages, liabilities
and expenses (including, without limitation, reasonable attorneys’ fees and other charges) connected with the ownership or
operation of the Hotel and relating to the period from or after the Closing Date, including, without limitation, actions or claims
relating to damage to property or injury to or death of any person during the period in which the applicable Hotel is owned by
Purchaser (or Purchaser’s affiliates) or any claims for any debts or obligations occurring on or about the Hotel or any portion
thereof or with respect to the Hotel’s operations at any time during such period. The foregoing indemnities shall survive
the Closing.

 

       
        (c)             Whenever it is provided in this Agreement that an obligation of one party will be assumed by the other party on or
after the Closing, the party so assuming such liability also shall be deemed to have agreed to indemnify, defend and hold
harmless the other party and its successors and assigns, from and against all claims, losses, damages, liabilities, costs and
expenses (including reasonable attorneys’ fees and other charges) arising from any failure of the assuming party to
perform the obligation so assumed after the Closing and from all third party claims brought against the other party to the
extent relating to the period from and after assumption of the liability on which the claim is based.

 

Whenever either
party shall learn through the filing of a claim or the commencement of a proceeding or otherwise of the existence of any liability
for which the other party is or may be responsible under this Agreement, the party learning of such liability shall notify the
other party promptly and furnish such copies of documents (and make originals thereof available) and such other information as
such party may have that may be used or useful in the defense of such claims and shall afford said other party full opportunity
to defend the same in the name of the notifying party and generally shall cooperate with said other party in the defense of any
such claim. Upon receipt of such notice of possible liability, the party obligated to provide indemnity shall have the right to
provide a written notice to the party entitled to indemnity that the indemnifying party elects to assume the defense of such matter,
including, without limitation, the employment of counsel reasonably satisfactory to the indemnified party; whereupon the indemnifying
party shall have the right to prosecute such defense and shall be responsible for the payment of the fees and disbursements of
such counsel; provided, however, if in the reasonable judgment of the indemnified party, (i) such
litigation, action, suit, demand, claim or the resolution thereof, would have a material adverse effect on the indemnified party
or (ii) the indemnifying party shall have a conflict of interest in defending such action on the indemnified party’s behalf,
then at the indemnified party’s election, the indemnified party may defend itself, and in either of such instances it shall
be at the indemnifying party’s expense; provided, however, that the indemnifying party shall
be responsible for the reasonable fees of no more than one counsel in each jurisdiction in each proceeding. No indemnifying party
shall be responsible for any obligation, loss, cost, expense or other liability to the extent that (a) the party entitled to indemnification
failed to provide prompt notice thereof to the indemnifying party and (b) such obligation, loss, cost, expense or other liability
could have been avoided if prompt notice had been given.

 

    	25

    	 

    

ARTICLE X

MISCELLANEOUS PROVISIONS

 

10.1         
Completeness; Modification. This Agreement constitutes the entire agreement between the parties hereto with respect
to the transactions contemplated hereby and supersedes all prior discussions, understandings, agreements and negotiations between
the parties hereto. This Agreement may be modified only by a written instrument duly executed by the parties hereto.

 

10.2         
Successors and Assigns. This Agreement shall bind and inure to the benefit of the parties hereto and their permitted
respective successors and assigns.

 

10.3         
Days. If any action is required to be performed, or if any notice, consent or other communication is given, on a
day that is a Saturday or Sunday or a legal holiday in the jurisdiction in which the action is required to be performed or in which
is located the intended recipient of such notice, consent or other communication, such performance shall be deemed to be required,
and such notice, consent or other communication shall be deemed to be given, on the first business day following such Saturday,
Sunday or legal holiday. Unless otherwise specified herein, all references herein to a “day” or “days”
shall refer to calendar days and not business days.

 

10.4         
Governing Law. This Agreement and all documents referred to herein shall be governed by and construed and interpreted
in accordance with the laws of the state in which the Property is located without regard to its principle of conflicts of law.

 

10.5         
Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required.
It shall not be necessary that the signature on behalf of both parties hereto appear on each counterpart hereof. All counterparts
hereto shall collectively constitute a single agreement. Telecopied signatures shall have the same valid and binding effect as
original signatures.

 

10.6         
Severability. If any term, covenant or condition of this Agreement, or the application thereof to any person or circumstance,
shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or
condition to other persons or circumstances, shall not be affected thereby, and each term, covenant or condition of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.

 

10.7         
Costs. Regardless of whether Closing occurs hereunder, and except as otherwise expressly provided herein, each party
hereto shall be responsible for its own costs in connection with this Agreement and the transactions contemplated hereby, including,
without limitation, fees of attorneys, engineers and accountants.

 

10.8         
Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be delivered
by hand, sent prepaid for next-day delivery by Federal Express (or a comparable overnight delivery service) or sent by the United
States mail, certified, postage prepaid, return receipt requested, at the addresses and with such copies as designated below. Any
notice, request, demand or other communication delivered or sent in the manner aforesaid may be given by the party required to
give such notice, etc., or its attorney, and shall be deemed given or made (as the case may be) when actually delivered to or refused
by the intended recipient.

    	26

    	 

    

 

	 	If to
Seller:	 J. P. Seti & Renu Sethi	 
	 	 	P.O. Box 235927	 
	 	 	Encinitas,  CA  92023	 
	 	 	 	 
	 	and	Kapil
D. Prashar & Sadhana Prashar	 
	 	 	11309 Bastogne Loop	 
	 	 	Austin, Texas 78739	 
	 	 	kassameer@sbcglobal.net	 
	 	 	 	 
	 	with a copy
to:	Michael Baucum	 
	 	 	Baucum Steed Barker	 
	 	 	1100 NW Loop 410 #260	 
	 	 	San Antonio TX 78213	 
	 	 	210-349-5311 ext 208	 
	 	 	baucum@baucumsteedlaw.com	 
	 	 	 	 
	 	If to Purchaser:	Moody
National REIT I, Inc.	 
	 	 	6363 Woodway, Suite 110	 
	 	 	Houston, Texas 77057	 
	 	 	Attn: Brett Moody/ Lisa Bunner	 
	 	 	Telephone: (713) 977-7500	 
	 	 	Facsimile: (713) 977-7505	 
	 	 	bmoody@moodynational.com	 
	 	 	lbunner@moodynational.com	 
	 	 	 	 
	 	with a copy to:	Mr. Adam
S. Wilk	 
	 	 	Ms. Kasi Moeskau	 
	 	 	Sneed, Vine
& Perry, P.C	 
	 	 	900 Congress,
Suite 300	 
	 	 	Austin, Texas
78701	 
	 	 	Telephone No.
(512) 494-3126	 
	 	 	E-awilk@sneedvine.com	 
	 	 	kmoeskau@sneedvine.com	 
	 	 	 	 
	 	If to Escrow
Agent:	Xochitl Valdez	 
	 	 	Title Branch Manager	 
	 	 	Moody National Title Company, L.P	 
	 	 	6363 Woodway Dr., Ste 250	 
	 	 	Houston, Texas 77057	 
	 	 	(Main) 713-977-1700	 
	 	 	(Direct) 713-273-6680	 
	 	 	(Fax) 713-977-0117	 
	 	 	xvaldez@moodynational.com	 

 

or to such other address as the intended
recipient may have specified in a notice to the other party. Any party hereto may change its address or designate different or
other persons or entities to receive copies by notifying the other party and Escrow Agent in a manner described in this Section.

 

    	27

    	 

    

10.1          Escrow Agent. Escrow Agent has agreed to act as such for the convenience of the parties without fee or other charges
for such services as Escrow Agent. Escrow Agent shall not be liable: (a) to any of the parties for any act or omission to
act except for its own willful misconduct; (b) for any legal effect, insufficiency, or undesirability or any instrument deposited
with or delivered by Escrow Agent or exchanged by the parties hereunder, whether or not Escrow Agent prepared such instrument;
(c) for any loss or impairment of funds that have been deposited in escrow while those funds are in the course of collection,
or while those funds are on deposit in a financial institution, if such loss or impairment results from the failure, insolvency
or suspension of a financial institution; (d) for the expiration of any time limit or other consequences of delay, unless
a properly executed written instruction, accepted by Escrow Agent, has instructed Escrow Agent to comply with said time limit;
I for the default, error, action or omission of either party to the escrow. Escrow Agent, in its capacity as escrow agent,
shall be entitled to rely on any document or paper received by it, believed by such Escrow Agent, in good faith, to be bona fide
and genuine. In the event of any dispute as to the disposition of any monies held in escrow, or of any documents held in escrow,
Escrow Agent may, if such Escrow Agent so elects, interplead the matter by filing an interpleader action in a court of competent
jurisdiction in the county or circuit where the Real Property is located (to the jurisdiction of which both parties do hereby consent),
and pay into the registry of the court such monies held by Escrow Agent, or deposit any such documents with respect to which there
is a dispute in the registry of such court, whereupon such Escrow Agent shall be relieved and released from any further liability
as Escrow Agent hereunder. Escrow Agent shall not be liable for Escrow Agent’s compliance with any legal process, subpoena,
writ, order, judgment and decree of any court, whether issued with or without jurisdiction, and whether or not subsequently vacated,
modified, set aside or reversed.

 

10.2         
Incorporation by Reference. All of the exhibits and schedules attached hereto are by this reference incorporated
and made a part hereof.

 

10.3         
Further Assurances. The Seller and Purchaser each covenant and agree to sign, execute and deliver, or cause to be
signed, executed and delivered, and to do or make, or cause to be done or made, upon the written request of the other party, any
and all agreements, instruments, papers, deeds, acts or things, supplemental, confirmatory or otherwise, as may be reasonably required
by either party hereto for the purpose of or in connection with consummating the transactions described herein provided that compliance
with the provision of this Section shall not increase the liability of the complying party.

 

10.4         
No Partnership. This Agreement does not and shall not be construed to create a partnership, joint venture or any
other relationship between the parties hereto except the relationship of seller and purchaser specifically established hereby.

 

10.5         
Time of Essence. Time is of the essence with respect to every provision hereof.

 

10.6         
Signatory Exculpation. The signatory(ies) for the Seller and Purchaser is/are executing this Agreement in
his/their capacity as representative of such party and not individually and, therefore, shall have no personal or individual
liability of any kind in connection with this Agreement and the transactions contemplated by it.

 

10.7         
Rules of Construction. The following rules shall apply to the construction and interpretation of this Agreement:

 

(a)               
Singular words shall connote the plural number as well as the singular and vice versa, and the masculine shall include the
feminine and the neuter.

 

(b)              
All references herein to particular articles, sections, subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.

 

(c)              
The headings contained herein are solely for convenience of reference and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect.

 

    	28

    	 

    

(d)              
Each party hereto and its counsel have reviewed and revised (or requested revisions of) this Agreement and have participated
in the preparation of this Agreement, and therefore any usual rules of construction requiring that ambiguities are to be resolved
against a particular party shall not be applicable in the construction and interpretation of this Agreement or any exhibits hereto.

 

10.8         
No Recording. Neither this Agreement nor any memorandum hereof, or any other instrument intended to give notice hereof
(or which actually gives notice hereof) shall be recorded.

 

10.9         
Facsimile Signatures. The execution of this Agreement and all notices given hereunder and all amendments hereto,
may be effected by facsimile signatures, all of which shall be treated as originals; provided, however, that the party receiving
a document with a facsimile signature may, by notice to the other, require the prompt delivery of an original signature to evidence
and confirm the delivery of the facsimile signature.

 

10.10       
Assignment by the Parties. Neither party shall assign or transfer or permit the assignment or transfer of its rights
or obligations under this Agreement without the prior written consent of the other, any such assignment or transfer without such
prior consent being hereby declared to be null and void; provided, however, that Purchaser shall have the right to
either nominate one or more Affiliates to take title to the Property or to certain components of the Property or to assign this
Agreement to one or more Affiliates without Seller’s consent.

 

10.11       
Waiver. The excuse or waiver of the performance by a party of any obligation of the other party under this Agreement
shall only be effective if evidenced by a written statement signed by the party so excusing or waiving. No delay in exercising
any right or remedy shall constitute a waiver thereof, and no waiver by Seller or Purchaser of the breach of any covenant of this
Agreement shall be construed as a waiver of any preceding or succeeding breach of the same or any other covenant or condition of
this Agreement.

 

10.12       
Exclusivity. After the Effective Date, Seller and its respective agents, representatives and employees shall immediately
cease all marketing of the Property until such time as this Agreement is terminated and Seller shall not directly or indirectly
make, accept, negotiate, entertain or otherwise pursue any offers for the sale of the Property.

 

10.13       
Section 1031 Exchange. Either party may consummate the purchase or sale of the Property as part of a so-called
like kind exchange (an “Exchange”) pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended
(the “Code”), provided that (i) the Closing shall not be delayed or affected by reason of an Exchange nor
shall the consummation or accomplishment of any Exchange be a condition precedent or condition subsequent to a party’s obligations
under this Agreement; (ii) any party desiring an Exchange shall effect its Exchange through an assignment of this Agreement,
or its rights under this Agreement, to a qualified intermediary and the other party shall not be required to take an assignment
of the purchase agreement for the relinquished or replacement property or be required to acquire or hold title to any real property
for purposes of consummating such Exchange; and (iii) the party desiring an Exchange shall be responsible for all costs and
expenses, including reasonable attorney’s fees, that would not otherwise have been incurred by Purchaser or Seller had such
party not consummated its purchase or sale through an Exchange. Neither party shall by this agreement or acquiescence to an Exchange
desired by the other party (1) have its rights under this Agreement affected or diminished in any manner or (2) be responsible
for compliance with or be deemed to have warranted to the other party that such party’s Exchange in fact complies with Section 1031
of the Code. In connection with such cooperation, Seller agrees, upon request of Purchaser to “direct deed” for actual
interests in the property to designees of Purchaser.

 

    	29

    	 

    

10.14       
Public Announcements. Except as otherwise expressly provided herein, neither Seller nor Purchaser shall make any
public statement or issue any press release prior to the Closing with respect to this Agreement or the transactions contemplated
hereby without the prior written consent of the other party. Seller hereby expressly acknowledges that Purchaser is a wholly-owned
subsidiary  of a publicly-traded company and that Seller is aware and will advise its owners, employees and agents that federal
and state securities laws prohibit any person who has material, non-public information about a company from purchasing or selling
securities of such a company or from communicating such information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.  Seller further agrees that Purchaser shall have
the right to disclose the fact that it is contemplating the purchase of the Property and such other details of the transaction
to the extent Purchaser reasonably deems necessary to comply with applicable federal or state securities laws, rules or regulations.

 

 

    	30

    	 

    

 

IN WITNESS WHEREOF,
the Seller and Purchaser have caused this Agreement to be executed in their names by their respective duly authorized representatives.

 

	 	SELLER:
	 	 
	 	Sethi Family Trust dated October 1,
1998
	 	 
	 	/s/ J.P.
Sethi
	 	J.P. Sethi, Trustee
	 
	 	 
	 	/s/ Renu Sethi
	 	Renu Sethi, Trustee
	 	 
	 	 
	 	
	 	/s/ Kapil D.
Prashar
	 	Kapil D.
Prashar, individually
	 	
	 	 
	 	/s/ Sadhana
Prashar
	 	Sadhana
Prashar, individually
	 	 
	 	 
	 	 
	 	 

 

    	

    	 

    

	 	PurchaseR:
	 	 
	 	MOODY NATIONAL REIT I INC., a Maryland corporation
	 	 
	 	By: 	/s/ Brett C. Moody
	 	 	Brett Moody, President

 

    	

    	 

    

 

EXHIBIT A

 

LEGAL DESCRIPTION

 

Lot 1, Block A, RESUBDIVISION OF LOT B-1 OF
LOTS B-1 AND B-2 CROW INDUSTRIAL PARK SOUTH SECTION 9, A subdivision in Travis County, Texas according to map or plat recorded
in Volume 96, Pages 149-150 of the Plat Records of Travis County, Texas.

 

    	

    	 

    

EXHIBIT B

 

SUBMISSION
MATTERS

 

See Attached.

    	

    	 

    

 

EXHIBIT C

 

PROCEDURE AND METHOD OF PRORATION

AND OTHER ADJUSTMENTS

 

Prior to the Closing,
the Seller and Purchaser shall jointly prepare a proposed closing statement containing the parties’ reasonable estimate
of the items requiring proration and adjustment under Section 7.6 and other applicable Sections of this Agreement. Subsequent
to the Closing, final adjustments and resulting payments between the parties (“true-ups”) shall be made in
cash or immediately available funds as soon as practical, but not later than one hundred twenty (120) days following the Closing
Date.

 

    	

    	 

    

 

EXHIBIT D

 

 ENVIRONMENTAL MATTERS

 

 

 

None.Bonds.com 10-Q

 

 

Exhibit
10.1

 

 

BONDS.COM
GROUP, INC.

MANAGEMENT
INCENTIVE PLAN

 

1.                 
Purpose. Bonds.com Group, Inc., a Delaware corporation (the “Company”), establishes this Management
Incentive Plan (the “Plan”) to promote the interests of the Company and its stockholders by attracting, retaining
and motivating key employees of the Company in critical positions by awarding bonuses.

 

2.                 
Definitions. The following terms as used in the Plan have the meanings set forth below:

 

“Adjusted
EBITDA” has the meaning set forth on the attached Exhibit A.

 

“Bonus
Pool Award” means a bonus awarded under the Plan.

 

“Board”
means the Board of Directors of the Company.

 

“Bonus
Pool” means the aggregate cash award established under this Plan.

 

“Change
in Control” means the first to occur of the following:

 

(a)When
any person or group of persons, as such terms are used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) (excluding, for this purpose, the Company, a Subsidiary,
and any of their respective affiliates), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing more than 50 percent of the combined voting power
of the Company’s then outstanding securities; or

 

(b)The
occurrence of a transaction requiring shareholder approval and involving the sale of all or substantially all of the assets of
the Company;

 

provided
that, in any event, the transaction must constitute either (x) a change in the ownership of the Company within the meaning
of Code Section 409A(a)(2)(A)(v) and Treasury Regulations Section 1.409A-3(i)(5)(v) or (y) a change in the ownership of a substantial
portion of the assets of the Company within the meaning of Code Section 409A(a)(2)(A)(v) and Treasury Regulations Section 1.409A-3(i)(5)(vii).

 

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

 

“Committee”
means the Compensation Committee of the Board, or such other committee as the Board may designate to have responsibility to administer
the Plan.

  

    	1

    	 

    

“Company”
means Bonds.com Group, Inc., a Delaware corporation, and its successors and assigns.

 

“Effective
Date” means October 31, 2013.

 

“Participant”
means any eligible employee granted a Bonus Pool Award by the Committee (or by executives of the Company designated by the Committee
to grant such awards).

 

“Performance
Period” means the period of time beginning on November 1, 2013 and ending on the close of business on June 30, 2014.

 

“Person”
means any individual, partnership, corporation, limited liability company, limited liability partnership,
unincorporated association, trust or other entity.

 

“Plan”
means this Management Incentive Plan of the Company, as amended
from time to time.

 

“Subsidiary”
means, for any Person, any corporation or other entity of which the securities or other ownership interests having the voting
power to elect a majority of the board of directors or other governing body are, at the time of determination, owned by such Person,
directly or through one or more Subsidiaries. Unless otherwise provided, any reference to a “Subsidiary” herein
means a Subsidiary of the Company.

 

“Termination
Event” means, with respect to any Participant, the termination of the Participant’s employment with the Company
(and its Subsidiaries) for any reason, voluntarily or involuntarily, including, without limitation, by reason of the Participant’s
death or Disability.

 

“Treasury
Regulations” means the regulations (to the extent not superseded, overruled or repealed) promulgated by the Department
of Treasury under the Code.

 

3.                 
The Committee.

 

3.1             
General Authority of the Committee. Subject to the terms of the Plan and applicable law and subject to such resolutions,
not inconsistent with the Plan, as may be adopted by the Committee or the Board, the Committee shall administer the Plan and shall
have full power and authority, in its sole discretion, to: (a) establish, amend, suspend, terminate or waive such rules and regulations
and appoint such agents as it deems necessary or advisable for the proper administration of the Plan, (b) construe, interpret,
and administer the Plan and any instrument or agreement relating to, or any Bonus Pool Award made under, the Plan, (c) make all
other determinations and take all other actions necessary or advisable for the administration of the Plan.

 

    	2

    	 

    

  

3.2             
Reservation of Authority by Board of Directors. Notwithstanding anything to the contrary in the Plan, the Board may
reserve to itself any of the power and authority conferred on the Committee under the Plan. All references in the Plan to the
Committee shall include the Board whenever it is exercising the power and authority of the Committee.

 

3.3             
Delegation. The Committee may delegate its powers and duties under the Plan to one or more executive officers of the
Company or a committee of such executive officers, subject to such terms, conditions and limitations as the Committee may establish
in its sole discretion; provided, however, that the Committee shall not delegate its power to (a) amend the Plan as provided
herein, or (b) approve the final determination of Adjusted EBITDA (defined below).

 

3.4             
Liability; Indemnification. A member of the Committee and any officer or employee of the Company properly delegated
authority to carry out the duties of the Committee pursuant to this Plan (each a “Protected Party”) is not
liable for, and the Company and each Participant releases each Protected Party from all liability for, any punitive, incidental,
compensatory, consequential, or other damages or obligation to the Company or Participant for any act or omission by the Protected
Party with respect to the carrying out of such duties pursuant to the Plan (including the person’s own negligence), or by
any agent, employee, professional advisor, or other expert used or engaged by the Protected Party, if the act or omission does
not constitute gross negligence or willful misconduct and is done or omitted in good faith, on behalf of the Company, and in a
manner reasonably believed by the Protected Party to be both in the best interests of the Company and within the scope of the
authority granted to the Protected Party under the Plan or by the Committee pursuant to the Plan. In addition to such other rights
of indemnification as they may have as directors of the Company or as officers or employees of the Company, the Company shall
indemnify and hold harmless each Protected Party for any cost, loss, damage, expense, or liability (including fines, amounts paid
in settlement, and legal fees and expenses) incurred by the person arising out of any act or omission for which the Protected
Party is released from liability pursuant to this Section 3.4.

 

4.                 
Establishment of Bonus Pool. The Committee establishes a Bonus Pool in the following amounts:

 

		(a)	On
                                                                 December 15, 2013, the amount of $225,000;

 

		(b)	On
                                                                 February 15, 2014, the amount of $150,000; and

 

		(c)	On
                                                                 July 15, 2014, the amount of Adjusted EBITDA generated during
                                                                 the Performance Period, minus $375,000.

 

The Company
shall pay all Bonus Pool Awards in cash. The Committee shall have sole discretionary authority to approve the final determination
of Adjusted EBITDA for the Performance Period.

 

    	3

    	 

    

  

5.                 
Participants and Bonus Pool Awards.

 

5.1             
 Participants. The Committee may determine the percentage share of the Bonus Pool to be paid as a Bonus Pool
Award to any eligible employee (but the sum of such individual percentages shall not exceed 100%). Alternatively, the Committee
may delegate to the Company’s executive officers (or a committee of the Company’s executive officers) the selection
of the eligible employees and the percentage share of the Bonus Pool to be awarded to such employees. The percentage share of
the Bonus Pool awarded to any Participant or with respect to different Participants will be determined by the Committee (or the
designated executives) in its (or their) sole discretion, and no employee is entitled to an award.

 

6.                 
Change in Control.

 

6.1             
Effect of Change in Control. If a Change in Control occurs during the Performance Period, the Company shall pay all
remaining unpaid Bonus Pool Amounts ($375,000 less the amounts paid thus far) to designated Participants in a lump sum cash payment
on the effective date of the Change in Control. Further, the Performance Period shall be deemed to end on the effective date of
the Change in Control and the determination of Adjusted EBITDA shall be based on the performance through the effective date of
the Change in Control. If the Change of Control occurs after February 15, 2014, the amount paid with respect to Adjusted EBITDA
will not be less than $100,000.

 

7.                 
Effective Date; Amendment.

 

7.1             
Effective Date. The Plan is effective as of the Effective Date.

 

7.2             
Amendment and Termination of Plan. The Committee may, in its sole discretion, amend, modify, suspend or discontinue
the Plan without the consent of the Participants, provided, however, that no such amendment, modification, suspension or
discontinuance shall be made that would materially and adversely affect the rights of any Participant under any outstanding grant,
without his or her consent.

 

8.                 
Miscellaneous.

 

8.1             
Withholding. The Company may require the Participant to pay to the Company the amount of any taxes that the Company
is required by applicable federal, state, local or foreign law to withhold with respect to any Bonus Pool Award.

 

8.2             
No Contract of Employment; No Ownership of Company Equity or Assets. The Plan shall not give a Participant any of the
following: (a) any stock or other equity ownership in the Company or any Subsidiary, or any ownership interest in the assets of
the Company or any Subsidiary, or (b) any right to remain an employee of the Company or a Subsidiary or any right to limit the
Company’s or a Subsidiary’s ability to terminate the Participant’s employment at any time and for any or no
reason, with or without cause.

 

8.3             
No Right to Award; No Uniformity. No employee shall have the right to be granted a Bonus Pool Award. Subject to the
express terms of the Plan, there is no obligation for uniformity of treatment of employees or Participants under the Plan. The
terms and conditions of the Bonus Pool Awards and the Committee’s determinations and interpretations with respect thereto
need not be the same with respect to any Participant or with respect to different Participants, even if the Participants are similarly
situated.

 

    	4

    	 

    

  

8.4             
Successors and Assigns. The Plan shall be binding on all successors and assigns of the Company and the Participants,
including, without limitation, the estate of a Participant and the executor, liquidator, administrator or trustee of such estate,
and any receiver or trustee in bankruptcy or representative of a Participant’s creditors.

 

8.5             
Severability. If any provision of the Plan or any Bonus Pool Award is or is deemed to be invalid, illegal or unenforceable
in any jurisdiction or as to any Person or Bonus Pool Award, or would disqualify the Plan or any Bonus Pool Award under any law,
it shall be deemed amended to conform to applicable laws or, if it cannot be construed or deemed amended without, in the determination
of the Committee, materially altering the intent of the Plan, it shall be deleted and the remainder of the Plan shall remain in
full force and effect; provided, however, that, unless otherwise determined by the Committee, the provision shall not be
construed or deemed amended or deleted with respect to any Participant whose rights and obligations under the Plan are not subject
to the law of such jurisdiction or the law deemed applicable by the Committee.

 

8.6             
Governing Law. The Plan and the rights of any Person under the Plan shall be governed by and interpreted in accordance
with the laws of the State of Delaware, without regard to conflict of laws principles.

 

8.7             
Captions and References. Captions contained in the Plan are inserted only as a matter of convenience and in no way
define, limit or extend the scope or intent of the Plan or any provision of the Plan. Unless otherwise expressly provided to the
contrary, references in this Plan to sections, paragraphs, exhibits and the like constitute references to the sections, paragraphs,
exhibits and the like of the Plan.

 

8.8             
Compliance with Section 409A.  Although the Company does not guarantee the tax treatment of any particular payment
or benefit under the Plan or any Bonus Pool Award, the Company intends for the Plan to provide for payments and benefits that
either comply with, or are exempt from, Code Section 409A, and all provisions of the Plan shall be construed in a manner consistent
with this intent.

 

8.9             
No Tax Advice. Each Participant, by accepting an Bonus Pool Award, represents and warrants that he or she has reviewed
or will review with his or her own tax advisors the federal, state, local and employment tax consequences of participating in
the Plan, including, without limitation, under Code Section 409A, and that, with respect to such matters, the Participant relies
solely on such advisors.

*
  *   *

 

Adopted
by the Board of Directors of the Company as of November 12, 2013.

 

	 	ATTESTED:
	 	 
	 	/s/ John Ryan
	 	John Ryan

        Chief Financial Officer

 

 

    	5

    	 

    

Exhibit
A

 

“Adjusted
EBITDA”

 

 

“Adjusted
EBITDA” means net income before charging interest, taxes, depreciation and amortization, and for purposes of this agreement,
adjusted for expenses associated with:

 

1.The
internal staff restructuring of October 2013.

2.Any
capital raise.

3Legacy
non-operating items (e.g., FINRA audit settlement).

4.Directors
Fees.

5.Non-cash
Stock based compensation expense.

6.Realized
or unrealized gains or losses on derivative liabilities.

7.Accruals
or payment of bonuses.

8. Other
items agreed from time to time with the Committee that should be adjusted for.

 

6

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