Document:

EXHIBIT 10.3

APPLE REIT TEN, INC.

2010 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

EFFECTIVE JANUARY 21, 2011

APPLE REIT TEN, INC.

2010 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

EFFECTIVE JANUARY 21, 2011

          1.
Purpose. The purpose of this Apple REIT Ten, Inc. 2010
Non-Employee Directors Stock Option Plan (the “Plan”) is to encourage ownership
in Apple REIT Ten, Inc. (the “Company) by non-employee members of the Board, in
order to promote long-term stockholder value and to provide non-employee members
of the Board with an incentive to continue as directors of the Company. 

          2.
Definitions. As used in the Plan, the following terms
have the meanings indicated:

	
  

 	
  

 
	
  

 	
           (a)
 “Act” means the Securities Exchange Act of 1934, as amended.

 
	
  

 	
  

 
	
  

 	
           (b)
 “Board” means the board of directors of the Company.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (d)
 “Company” means Apple REIT Ten, Inc., a Virginia corporation.

 
	
  

 	
  

 
	
  

 	
           (e)
 “Date of Grant” means the date as of which an Eligible Director is
 automatically awarded an Option pursuant to Section 7.

 
	
  

 	
  

 
	
  

 	
           (f)
 “Disability” or “Disabled” means that the participant (i) is unable to engage
 in any substantial gainful activity by reason of any medically determinable
 physical or mental impairment which can be expected to result in death or can
 be expected to last for a continuous period of not less than 12 months, or
 (ii) is, by reason of any medically determinable physical or mental impairment
 which can be expected to result in death or can be expected to last for a
 continuous period of not less than 12 months, receiving income replacement
 benefits for a period of not less than 3 months under an accident and health
 plan covering employees of the Employer.

 
	
  

 	
  

 
	
  

 	
           (g)
 “Eligible Director” means a director described in Section 4.

 
	
  

 	
  

 
	
  

 	
           (h)
 “Fair Market Value” means, on any given date, (i) if the Units are traded on
 an exchange, the closing registered sales prices of the Company Stock on such
 day on the exchange on which it generally has the greatest trading volume,
 (ii) if the Units are traded on the over-the-counter market, the average
 between the closing bid and asked prices on such day as reported by NASDAQ,
 or (iii) if the Units are not traded on any exchange or over-the-counter
 market, the fair market value shall be determined by the Board using the
 reasonable application of a reasonable valuation method consistent with the
 requirements of Treasury Regulations section 1.409A-1(b)(5)(iv)(B).

 
	
  

 	
  

 
	
  

 	
           (i)
 “Initial Closing” means the first closing of the Offering that will occur
 after the Minimum Offering is achieved.

 
	
  

 	
  

 
	
  

 	
           (j)
 “Insider” means a person subject to Section 16(b) of the Act.

 
	
  

 	
  

 
	
  

 	
           (k)
 “Minimum Offering” means the sale of 9,523,810 Units pursuant to the
 Offering.

 
	
  

 	
  

 
	
  

 	
           (l)
 “Offering” means, collectively, (1) the sale of up to $2,000,000,000 in Units
 to the public and the registration of such shares with the Securities and
 Exchange Commission, as authorized by resolutions of the Board dated August
 11, 2010 (the “Initial Offering”), and (2) the issuance of any additional
 Units as authorized by resolutions of the Board from time to time, which
 issuance occurs before the termination of this Plan (the “Additional
 Offerings”).

 

	
  

 	
  

 
	
  

 	
           (m)
 “Option” means a right to acquire Units granted under the Plan, at a price
 determined in accordance with the Plan.

 
	
  

 	
  

 
	
  

 	
           (n)
 “Treasury Regulations” mean the final, temporary or proposed regulations
 issued by the Treasury Department and/or Internal Revenue Service as codified
 in Title 26 of the United States Code of Federal Regulations

 
	
  

 	
  

 
	
  

 	
           (o)
 “Unit” means one common share and one Series A preferred share, no par value,
 of the Company. If the par value of the common shares or Series A preferred
 shares is changed, or in the event of a change in the capital structure of
 the Company (as provided in Section 12), the Units resulting from such a
 change shall be deemed to be Units within the meaning of the Plan.

 

          3.
Administration. The Plan shall be administered by the
Board. Options shall be granted as described in Section 7. However, the Board
shall have all powers vested in it by the terms of the Plan, including, without
limitation, the authority (within the limitations described herein) to
prescribe the form of the agreement embodying the grant of Options, to construe
the Plan, to determine all questions arising under the Plan, and to adopt and
amend rules and regulations for the administration of the Plan as it may deem
desirable. Any decision of the Board in the administration of the Plan, as
described herein, shall be final and conclusive. The Board may act only by a
majority of its members in office, except that members thereof may authorize
any one or more of their number or any officer of the Company to execute and
deliver documents on behalf of the Board. No member of the Board shall be
liable for anything done or omitted to be done by him or any other member of the
Board in connection with the Plan, except for his own willful misconduct or as
expressly provided by statue.

          4.
Participation in the Plan. Each director of the
Company who is not otherwise an employee of the Company or any subsidiary of
the Company and was not an employee of the Company or subsidiary for a period
of at least one year before the Date of Grant shall be eligible to participate
in the Plan.

          5.
Securities Subject to the Plan. Subject to Section 12
of the Plan, there shall be reserved for issuance under the Plan an aggregate
of 45,000 Units plus 1.8% of the total number of Units issued in the Offering
in excess of the Minimum Offering, which shall be authorized, but unissued
Units. Units allocable to Options or portions thereof granted under the Plan
that expire, are forfeited or otherwise terminate unexercised may again be
subjected to an Option under the Plan. The cash proceeds from Option exercises
shall not be used to repurchase common shares and Series A preferred share of
the Company on the open market or otherwise for reuse under the Plan. 

          6.
Non-Statutory Stock Options. All Options granted under
the Plan shall be non-statutory in nature and shall not be entitled to special
tax treatment under Code section 422.

          7.
Award, Terms, Conditions and Form of Options. Each
Option shall be evidenced by a written agreement in such form as the Board
shall from time to time approve, which agreement shall comply with and be
subject to the following terms and conditions:

	
  

 	
  

 	
  

 
	
  

 	
           (a)
 Automatic Award of Option.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 As of the Initial Closing, each Eligible Director shall automatically receive
 an Option to purchase 5,500 Units plus 0.0125% of the number of Units in
 excess of the Minimum Offering sold by the Initial Closing.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 As of each June 1 during the years 2011 and ending upon the termination of
 the Plan, each Eligible Director shall automatically receive an Option to
 purchase 0.02% of the total number of Units issued and outstanding on that
 date.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)
 As of the election as a director of any new person who qualifies as an
 Eligible Director,

 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 such
 Eligible Director shall automatically receive an Option to purchase 5,500
 Units.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iv)
 If at any time under the Plan there are not sufficient Units available to
 fully permit the automatic Option grants described in this paragraph, the
 Option grants shall be reduced pro rata (to zero if necessary) so as not to
 exceed the number of Units available.

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)
 Option Exercise Price. Subject to Section 12 below, the Option
 exercise price shall never become less than 100% of the Fair Market Value of
 the Units subject to the Option on the Date of Grant.

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)
 Options Not Transferable. An Option shall not be transferable by the
 optionee otherwise than by will, or by the laws of descent and distribution,
 and shall be exercised during the lifetime of the optionee only by him. An
 Option transferred by will or by the laws of descent and distribution may be
 exercised by the optionee’s personal representative within one year of the
 date of the optionee’s death to the extent the optionee could have exercised
 the Option on the date of his death. No Option or interest therein may be
 transferred, assigned, pledged or hypothecated by the optionee during his
 lifetime, whether by operation of law or otherwise, or be made subject to
 execution, attachment or similar process.

 
	
  

 	
  

 	
  

 
	
  

 	
           (d)
 Exercise of Options. In no event shall an Option be exercisable
 earlier than six months from the later of the Date of Grant or the date of
 approval of the Plan by shareholders of the Company. Furthermore, no Option
 may be exercised:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 Before any amendment or restatement that requires shareholder approval
 pursuant to Section 13 of the Plan, is approved by shareholders of the
 Company;

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 Unless at such time the optionee is a director of the Company, except that he
 may exercise the Option within three years of the date he ceases to be a
 director of the Company if he ceased to be a director more than six months
 after the Date of Grant of the Option;

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)
 After the expiration of ten years from the Date of Grant; and

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iv)
 Except by written notice to the Company at its principal office, stating the
 number of Units the optionee has elected to purchase, accompanied by payment
 in cash and/or by delivery to the Company of the Units (valued at Fair Market
 Value on the date of exercise) in the amount of the full Option exercise
 price for the shares of Units being acquired thereunder.

 

          8.
Modification and Extension of Options Prohibited.

	
  

 	
  

 
	
  

 	
           (a)
 Notwithstanding any provision of this Plan or any Option agreement to the
 contrary, (i) no Modification shall be made in respect to any Option if such
 Modification would result in the Option constituting a deferral of
 compensation, and (ii) no Extension shall be made in respect to any Option,
 if such Extension would result in the Option having an additional deferral
 feature from the Date of Grant, in each case within the meaning of applicable
 Treasury Regulations under Code section 409A.

 
	
  

 	
  

 
	
  

 	
           (b)
 Subject to subsection (d) below, a “Modification” for purposes of subsection (a)
 means any change in the terms of the Option (or change in the terms of the
 Plan or applicable Option agreement) that may provide the holder of the
 Option with a direct or indirect reduction in the exercise price of the
 Option, regardless of whether the holder in fact benefits from the change in
 terms.

 
	
  

 	
  

 
	
  

 	
           (c)
 Subject to subsection (d) below, an “Extension” for purposes of subsection
 (a) means either (i) the provision to the holder of an additional period of
 time within which to exercise the Option beyond the time originally
 prescribed, or (ii) the conversion or exchange of the Option for a legally
 binding right to compensation in a future taxable year, or (iii) the addition
 of any feature for the deferral of compensation to the terms of the Option,
 or (iv) any renewal of the Option that has the effect of (i) through (iii)
 above.

 

	
  

 	
  

 
	
  

 	
           (d)
 Notwithstanding subsections (b) and (c) above, it shall not be a Modification
 or an Extension, respectively, to change the terms of an Option in accordance
 with Section 13 of the Plan, or in any of the other ways or for any of the
 other purposes provided in applicable Treasury Regulations or other guidance
 under Code section 409A as not resulting in a Modification or Extension for
 purposes of that section. In particular, it shall not be an Extension to
 extend the exercise period of an Option to a date no later than the earlier
 of (i) the latest date upon which the Option could have expired by its
 original terms under any circumstances or (ii) the 10th
 anniversary of the original Date of Grant.

 

          9.
Effective Date of the Plan. This Plan was originally
effective on January 21, 2011 having been approved by the shareholders of the
Company on such date. Until the requirements of any applicable state or federal
securities laws have been met, no Option shall be exercisable that is not
contingent on the satisfaction of these requirements. If at any time subsequent
to the initial satisfaction of these requirements, the requirements of any
applicable federal or state securities laws fail to be met, no Option granted
shall be exercisable until the Board has determined that these requirements
have again been met.

          10.
Termination. The Plan shall terminate upon the earlier
of:

	
  

 	
  

 
	
  

 	
           (a)
 The adoption of a resolution of the Board terminating the Plan; or

 
	
  

 	
  

 
	
  

 	
           (b)
 The date on which the Company’s existence terminates (provided, however, that
 if the existence of the Company is reinstated as permitted by law, the Plan
 shall continue during the effective period of any reinstatement, subject to
 earlier termination pursuant to Section 10(a) above).

 

No termination
of the Plan shall without his consent materially and adversely affect any of
the rights or obligations of any person under any Option previously granted
under the Plan.

          11.
Limitation of Rights. 

	
  

 	
  

 
	
  

 	
           (a)
 No Right to Continue as a Director. Neither the Plan nor any action
 taken pursuant to the Plan shall constitute or be evidence of any agreement
 or understanding, express or implied, that the Company will retain any person
 as a director for any period of time.

 
	
  

 	
  

 
	
  

 	
           (b)
 No Shareholders Rights Under Options. An optionee shall have no rights
 as a shareholder with respect to Units covered by his Option until the date
 of exercise of the Option, and, except as provided in Section 12, no
 adjustment will be made for dividends or other rights for which the record
 date is prior to the date of such exercise.

 

          12.
Changes in Capital Structure. 

	
  

 	
  

 
	
  

 	
           (a)
 In the event of a stock dividend, stock split or combination of stock,
 recapitalization or merger in which the Company is the surviving corporation
 or other change in the Company’s capital stock (including, but not limited
 to, the creation or issuance to shareholders generally of rights, options or
 warrants for the purchase of common shares or preferred shares of the
 Company), the number and kind of units or other securities to be subject to
 the Plan and to Options then outstanding or to be granted thereunder, the
 maximum number of units or securities which may be delivered under the Plan,
 the exercise price and other relevant provisions shall be proportionately
 adjusted by the Board, whose determination shall be binding on all persons.
 If the adjustment would produce fractional Units or other securities with
 respect to any unexercised Option, the Board shall round down the number of
 Units or other securities covered by the Option to the nearest whole Unit and
 round up the exercise price of the Option to the nearest cent so as to
 eliminate the fractional Unit and/or fractional cents.

 
	
  

 	
  

 
	
  

 	
           (b)
 If the Company is a party to a consolidation or a merger in which the Company
 is not the surviving corporation, a transaction that results in the
 acquisition of substantially all of the Company’s outstanding stock by a
 single person or entity, or a sale or transfer of substantially all of the
 Company’s assets, the Board may take such actions with respect to outstanding
 Options as the Board deems 

 

	
  

 	
  

 
	
  

 	
 appropriate,
 consistent with applicable provisions of the Code and any applicable federal
 or state securities laws.

 
	
  

 	
  

 
	
  

 	
           (c)
 Notwithstanding anything in the Plan to the contrary, the Board may take the
 foregoing actions without the consent of any optionee and the Board’s
 determination shall be conclusive and binding on all persons for all
 purposes.

 

          13.
Continuing Securities Law Compliance. If at any time
on or after the effective date of the Plan as described above, the requirements
of any applicable federal or state securities laws should fail to be met, no
Options shall be exercisable until the Board has determined that these
requirements have again been met. The Board may suspend the right to exercise
an Option at any time when it determines that allowing the exercise and
issuance of Units would violate any federal or state securities or other laws,
and may provide that any time periods to exercise the Option are extended
during a period of suspension.

          14.
Amendment of the Plan. The Board may terminate the
Plan at any time and may amend the Plan at any time in any respect as it shall
deem advisable; provided that no change shall be made that increases the total
number of Units reserved for issuance under the Plan (except pursuant to
Section 12), materially modifies the requirements as to eligibility for
participation in the Plan, unless the change is authorized by the shareholders
of the Company owning a majority of the outstanding Units of the Company.
Notwithstanding the foregoing, the Board may unilaterally amend the Plan and
outstanding Options with respect to participants as it deems appropriate to
ensure compliance with Rule 16b-3 and other applicable federal or state
securities laws and to meet the requirements of the Code and applicable
regulations or other generally applicable guidance thereunder. Except as
provided in the preceding sentence, a termination or amendment of the Plan
shall not, without the consent of the Participant, adversely affect a
participant’s rights under an Award previously granted to him or her. 

          15.
Notice. All notices and other communications required
or permitted to be given under this Plan shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed first class,
postage prepaid, as follows: (a) if the Company – at its principal business
address to the attention of the President; (b) if to any participant – at the
last address of the participant know to the sender at the time the notice or other
communication is sent.

          16.
Governing Law. The terms of this Plan are subject to
all present and future regulations and rulings of the Secretary of the Treasury
of the United States or his or her delegate. If any provision of the Plan
conflicts with any such regulation or ruling, then that provision of the Plan
shall be void and of no effect. Options granted under the Plan are not intended
to provide for any deferral of compensation that would be subject to Code
section 409A. The terms of the Plan shall be governed by the laws of the
Commonwealth of Virginia without regard to conflicts of law.

          IN
WITNESS WHEREOF, the Company has caused this Plan to be executed this 21st
day of January, 2011.

	
  

 	
  

 	
  

 
	
  

 	
 APPLE REIT TEN, INC.

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Glade M. Knight 

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Glade M.
 Knight,

 
	
  

 	
  

 	
 Chairman of
 the BoardExhibit 10.4

PURCHASE CONTRACT

Purchase Contract dated as of February 1, 2011 between 5280 Lodging, LLC and

Apple Ten Hospitality Ownership, Inc 

i

TABLE OF CONTENTS

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 Page No.

 
	
  

 	
  

 	
  

 	
  

 	

 

 
	
 ARTICLE I

 	
  

 	
 DEFINED
 TERMS

 	
  

 	
 1

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 1.1

 	
  

 	
 Definitions

 	
  

 	
 1

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE II

 	
  

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

 	
  

 	
 6

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2.1

 	
  

 	
 Purchase and
 Sale

 	
  

 	
 6

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2.2

 	
  

 	
 Purchase
 Price

 	
  

 	
 7

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2.3

 	
  

 	
 Allocation

 	
  

 	
 7

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2.4

 	
  

 	
 Payment

 	
  

 	
 7

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2.5

 	
  

 	
 Earnest
 Money Deposit

 	
  

 	
 7

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE III

 	
  

 	
 REVIEW PERIOD

 	
  

 	
 8

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3.1

 	
  

 	
 Review
 Period

 	
  

 	
 8

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3.2

 	
  

 	
 Due
 Diligence Examination

 	
  

 	
 9

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3.3

 	
  

 	
 Restoration

 	
  

 	
 9

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3.4

 	
  

 	
 Seller
 Exhibits

 	
  

 	
 10

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3.5

 	
  

 	
 Extension of
 Closing Date

 	
  

 	
 10

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE IV

 	
  

 	
 SURVEY AND TITLE APPROVAL

 	
  

 	
 10

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 4.1

 	
  

 	
 Survey

 	
  

 	
 10

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 4.2

 	
  

 	
 Title

 	
  

 	
 10

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 4.3

 	
  

 	
 Survey or
 Title Objections

 	
  

 	
 11

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE V

 	
  

 	
 MANAGEMENT AGREEMENT AND FRANCHISE
 AGREEMENT

 	
  

 	
 11

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE VI

 	
  

 	
 BROKERS

 	
  

 	
 12

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE VII

 	
  

 	
 REPRESENTATIONS, WARRANTIES AND COVENANTS

 	
  

 	
 12

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7.1

 	
  

 	
 Representations,
 Warranties and Covenants of Seller

 	
  

 	
 12

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7.2

 	
  

 	
 Deleted

 	
  

 	
 17

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7.3

 	
  

 	
 Buyer’s
 Representations, Warranties and Covenants

 	
  

 	
 17

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7.4

 	
  

 	
 No Implied
 Representations or Warranties

 	
  

 	
 17

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7.5

 	
  

 	
 Survival

 	
  

 	
 17

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7.6

 	
  

 	
 Notice of
 Breach

 	
  

 	
 18

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE VIII

 	
 ADDITIONAL COVENANTS

 	
  

 	
 18

 	
  

 

ii

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.1

 	
  

 	
 Subsequent
 Developments

 	
  

 	
 18

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.2

 	
  

 	
 Operations

 	
  

 	
 18

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.3

 	
  

 	
 Third Party
 Consents

 	
  

 	
 19

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.4

 	
  

 	
 Employees

 	
  

 	
 20

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.5

 	
  

 	
 Estoppel
 Certificates

 	
  

 	
 20

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.6

 	
  

 	
 Access to
 Financial Information

 	
  

 	
 20

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.7

 	
  

 	
 Bulk Sales

 	
  

 	
 20

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.8

 	
  

 	
 Indemnification

 	
  

 	
 20

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.9

 	
  

 	
 PIP Escrow

 	
  

 	
 23

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8.10

 	
  

 	
 Liquor
 Licenses

 	
  

 	
 23

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE IX

 	
  

 	
 CONDITIONS FOR CLOSING

 	
  

 	
 24

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 9.1

 	
  

 	
 Buyer’s
 Conditions for Closing

 	
  

 	
 24

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 9.2

 	
  

 	
 (Intentionally
 Omitted)

 	
  

 	
 24

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE X

 	
  

 	
 CLOSING AND CONVEYANCE

 	
  

 	
 25

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 10.1

 	
  

 	
 Closing

 	
  

 	
 25

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 10.2

 	
  

 	
 Deliveries
 of Seller

 	
  

 	
 25

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 10.3

 	
  

 	
 Buyer’s
 Deliveries

 	
  

 	
 27

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE XI

 	
  

 	
 COSTS

 	
  

 	
 27

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 11.1

 	
  

 	
 Seller’s
 Costs

 	
  

 	
 27

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 11.2

 	
  

 	
 Buyer’s
 Costs

 	
  

 	
 28

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE XII

 	
 ADJUSTMENTS

 	
  

 	
 28

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 12.1

 	
  

 	
 Adjustments

 	
  

 	
 28

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 12.2

 	
  

 	
 Reconciliation
 and Final Payment

 	
  

 	
 30

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 12.3

 	
  

 	
 Employees

 	
  

 	
 30

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE XIII

 	
 CASUALTY AND CONDEMNATION

 	
  

 	
 30

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 13.1

 	
  

 	
 Risk of
 Loss; Notice

 	
  

 	
 30

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 13.2

 	
  

 	
 Buyer’s
 Termination Right

 	
  

 	
 30

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 13.3

 	
  

 	
 Procedure
 for Closing

 	
  

 	
 31

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE XIV

 	
 DEFAULT REMEDIES

 	
  

 	
 31

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 14.1

 	
  

 	
 Buyer
 Default

 	
  

 	
 31

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 14.2

 	
  

 	
 Seller
 Default

 	
  

 	
 31

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 14.3

 	
  

 	
 Attorney’s
 Fees

 	
  

 	
 32

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE XV

 	
 NOTICES

 	
  

 	
 32

 	
  

 

ii

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE XVI

 	
 MISCELLANEOUS

 	
  

 	
 33

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.1

 	
  

 	
 Performance

 	
  

 	
 33

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.2

 	
  

 	
 Binding
 Effect; Assignment

 	
  

 	
 33

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.3

 	
  

 	
 Entire
 Agreement

 	
  

 	
 33

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.4

 	
  

 	
 Governing
 Law

 	
  

 	
 33

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.5

 	
  

 	
 Captions

 	
  

 	
 33

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.6

 	
  

 	
 Confidentiality

 	
  

 	
 33

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.7

 	
  

 	
 Closing
 Documents

 	
  

 	
 34

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.8

 	
  

 	
 Counterparts

 	
  

 	
 34

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.9

 	
  

 	
 Severability

 	
  

 	
 34

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.10

 	
  

 	
 Interpretation

 	
  

 	
 34

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.11

 	
  

 	
 (Intentionally
 Omitted)

 	
  

 	
 34

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.12

 	
  

 	
 Further Acts

 	
  

 	
 34

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 16.13

 	
  

 	
 Joint and
 Several Obligations

 	
  

 	
 34

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 SCHEDULES:

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Schedule 1

 	
  

 	
 Hotel
 Specific Data

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 EXHIBITS:

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Exhibit A

 	
  

 	
 Legal
 Description

 	
  

 	
  

 	
  

 
	
 Exhibit B

 	
  

 	
 List of
 FF&E

 	
  

 	
  

 	
  

 
	
 Exhibit C

 	
  

 	
 List of
 Hotel Contracts

 	
  

 	
  

 	
  

 
	
 Exhibit D

 	
  

 	
 Consents and
 Approvals

 	
  

 	
  

 	
  

 
	
 Exhibit E

 	
  

 	
 Environmental
 Reports

 	
  

 	
  

 	
  

 
	
 Exhibit F

 	
  

 	
 Claims or
 Litigation Pending

 	
  

 	
  

 	
  

 
	
 Exhibit G

 	
  

 	
 List of
 Vehicles to be Conveyed

 	
  

 	
  

 	
  

 
	
 Exhibit H

 	
  

 	
 Excluded
 Assets

 	
  

 	
  

 	
  

 
	
 Exhibit I

 	
  

 	
 New
 Management Contract

 	
  

 	
  

 	
  

 

iii

PURCHASE CONTRACT

          This
PURCHASE CONTRACT (this “Contract”) is made and entered into as of the 1st
day of February, 2011, by and between 5280 LODGING, LLC, a Colorado limited
liability company (“Seller”), with its principal office c/o Stonebridge
Companies, 9100 East Panorama Drive, Suite 300, Englewood, Colorado 80112, and
APPLE TEN HOSPITALITY OWNERSHIP, INC., a Virginia corporation, with its
principal office at 814 East Main Street, Richmond, Virginia 23219, or its
affiliates or assigns (“Buyer”). 

RECITALS

          A.
Seller is the fee simple owner of the hotel property known as the Hilton Garden
Inn Denver Downtown located at 1400 Welton Street, Denver, Colorado 80202.

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

AGREEMENT:

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

ARTICLE I

DEFINED TERMS

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

          “Advance
Bookings” shall mean and include any payments or reservations for a date or
time period following Closing for future public functions, banquets or rooms in
the Hotel.

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

          “Affiliated
Manager” means a Manager who is an Affiliate of Seller.

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

strips or
gores of real estate adjacent to the Land, and (iv) the use of all alleys,
easements and rights-of-way, if any, abutting, adjacent, contiguous to or
adjoining the Land.

          “Brand”
shall mean Hilton Garden Inn.

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

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

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

          “Contracts,
Plans and Specs” shall mean all construction and other contracts, plans,
drawings, specifications, surveys, soil reports, engineering reports,
inspection reports, and other technical descriptions and reports.

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

          “Deposits”
shall mean, to the extent assignable, all prepaid rents and deposits,
including, but not limited to, refundable security deposits and rental
deposits, and all other deposits for advance reservations, banquets or future
services, made in connection with the use or occupancy of the Improvements.

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

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

          “Environmental
Requirements” shall have the meaning set forth in Section 7.1(f).

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

          “Escrow
Agreement” shall have the meaning set forth in Section 2.5(d).

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

          “Excluded
Assets” shall mean the property described in Exhibit “H”

          “Extension
Notice” shall have the meaning set forth in Section 3.5.

          “FF&E”
shall mean all tangible personal property and fixtures of any kind used at, on
or in connection with the Property (specifically excluding personal property
(i) owned by guests of the Hotel, (ii) leased by Seller pursuant to an FF&E
Lease or (iii) constituting Excluded Assets attached to, or located upon and
used in connection with the ownership, maintenance, use or operation of the
Land or Improvements as of the date hereof (or acquired by Seller and so
employed prior to Closing)), including, but not limited to, all furniture,
fixtures, equipment, signs and related personal property; all heating,
lighting, plumbing, drainage, electrical, air conditioning, and other
mechanical fixtures and equipment and systems; all elevators, and related
motors and electrical equipment and systems; all hot water heaters, furnaces,
heating controls, 

2

motors and
equipment, all shelving and partitions, all ventilating equipment, and all
disposal equipment; all spa, health club and fitness equipment; all equipment
used in connection with the use and/or maintenance of the guestrooms,
restaurants, lounges, business centers, meeting rooms, swimming pools, indoor
and/or outdoor sports facilities and other common areas and recreational areas;
all carpet, drapes, beds, furniture, televisions and other furnishings; all
stoves, ovens, freezers, refrigerators, dishwashers, disposals, kitchen
equipment and utensils, tables, chairs, plates and other dishes, glasses,
silverware, serving pieces and other restaurant and bar equipment, apparatus
and utensils. A current list of FF&E is attached hereto as Exhibit B.

          “FF&E
Leases” shall mean all leases of any FF&E and other contracts
permitting the use of any FF&E at the Improvements that are assumed by
Buyer.

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

          “Franchise
Agreement” shall mean the franchise agreement dated June 23, 2003 between
Seller and Franchisor.

          “Franchisor”
shall mean Hilton Worldwide, Inc. or its Affiliate.

          “Hotel”
shall mean the hotel located on the Land, including all Improvements and
Personal Property associated therewith, known generally as the Hilton Garden
Inn Denver Downtown.

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

          “Improvements”
shall mean all buildings, structures, fixtures, parking areas and other
improvements to the Land, including, without limitation, all improvements and
amenities and facilities related to the Hotel.

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

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

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

          “Knowledge”
or “known to” or similar statements shall mean, with reference to
Seller, the actual knowledge of Navin C. Dimond and the knowledge after
reasonable inquiry by Seller of the general manager of the Hotel, the Senior
Vice President of Hotel Operations and the Vice President of Hotel Operations
of the Manager. 

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

          “Leases”
shall mean all leases, franchises, licenses, occupancy agreements, “trade-out”
agreements, Advance Bookings, convention reservations, or other agreements
demising space in, 

3

providing for
the use or occupancy of, or otherwise similarly affecting or relating to the
use or occupancy of, the Improvements or Land, together with all amendments,
modifications, renewals and extensions thereof, and all guaranties by third
parties of the obligations of the tenants, licensees, franchisees,
concessionaires or other entities thereunder.

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

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

          “Liquor
Licenses” shall have the meaning set forth in Section 8.10.

          “Management
Agreement” shall mean the management agreement between to be executed by
Buyer and Manager on or before Closing in the form agreed upon by the parties.

          “Manager”
shall mean Stonebridge Realty Advisors, Inc. d/b/a Stonebridge Companies.

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

          “Other
Property” shall have the meaning set forth in Section 16.14.

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

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

          “Property”
shall mean, collectively, (i) all of the following with respect to the Hotel:
the Land, Improvements, Appurtenances, FF&E, Supplies, Leases, Deposits,
Records, Service Contracts, Warranties, Licenses, FF&E Leases, Contracts,
Plans and Specs, Tradenames, the Franchise Agreement, Utility Reservations and
Advance Bookings, as well as all other real, personal or intangible property of
Seller related to any of the foregoing and (ii) any and all of the following that
relate to or affect in any way the design, construction, ownership, use,
occupancy, leasing, maintenance, service or operation of the Real Property,
FF&E, Supplies, Leases, Deposits or Records: Service Contracts, Warranties,
Licenses, Tradenames, Contracts, Plans and Specs and FF&E Leases; but
excluding from the above the Excluded Assets. 

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

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

          “Records”
shall mean all books, records, promotional material, tenant data, guest history
information (other than any such information owned exclusively by the
Franchisor), marketing and leasing material and forms (including but not
limited to any such records, data, information, 

4

material and
forms in the form of computerized files located at the Hotel), market studies
prepared in connection with Seller’s current annual plan and other materials,
information, data, legal or other documents or records (including, without
limitation, all documentation relating to any litigation or other proceedings,
all zoning and/or land use notices relating to or affecting the Property, all
business plans and projections and all studies, plans, budgets and contracts
related to the development, construction and/or operation of the Hotel) owned
by Seller and/or in Seller’s possession or control, or to which Seller has
access or may obtain from the Manager or which are readily available to Seller
or obtainable by Seller upon request (including, without limitation, any of the
foregoing that may be obtainable from the Franchisor), that are used in or
relating to the Property and/or the operation of the Hotel, including the Land,
the Improvements or the FF&E, but excluding Seller’s partnership tax
returns, financial information, business plans and projections prepared for
internal partnership disclosure purposes and partner’s K-1 and any and all
appraisals and internal communications of Seller, provided that Seller shall
furnish to Buyer (and the term “Records” shall include) a list of the general
contractors, architects and engineers providing goods and/or services in
connection with the construction of the Hotel, all construction warranties and
guaranties in effect at Closing and copies of the final plans and
specifications for the Hotel.

          “Release”
shall have the meaning set forth in Section 7.1(f).

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

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

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

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

          “Service
Contracts” shall mean contracts or agreements, such as maintenance, supply,
service or utility contracts relating to the Property.

          “Supplies”
shall mean all merchandise, supplies, inventory and other items used for the
operation and maintenance of guest rooms, restaurants, lounges, swimming pools,
health clubs, spas, business centers, meeting rooms and other common areas and
recreational areas located within or relating to the Improvements, including,
without limitation, all food and beverage (alcoholic and non-alcoholic) inventory,
office supplies and stationery, advertising and promotional materials, china,
glasses, silver/flatware, towels, linen and bedding (all of which shall be
2-par level for all suites or rooms in the Hotel), guest cleaning, paper and
other supplies, upholstery material, carpets, rugs, furniture, engineers’
supplies, paint and painters’ supplies, employee uniforms, and all cleaning and
maintenance supplies, including those used in connection with the swimming
pools, indoor and/or outdoor sports facilities, health clubs, spas, fitness
centers, restaurants, business centers, meeting rooms and other common areas
and recreational areas.

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

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

5

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

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

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

          “Tradenames”
shall mean all telephone exchanges and numbers, trade names, trade styles,
trade marks and other identifying material and all variations thereof used in
connection with the Property, together with all related goodwill (it being
understood and agreed that the Brand or the name of the hotel chain to which
the Hotel is affiliated by franchise, license or management agreement is a
protected name or registered service mark of such hotel chain and cannot be
transferred to Buyer by this Contract, provided that all such franchise,
license, management and other agreements granting a right to use the name of
such hotel chain or any other trademark or trade name and all waivers of any
brand standard shall be assigned to Buyer), but excluding Tradenames and marks
associated with “Pi” restaurant and bar which shall remain with Seller.
Notwithstanding the aforesaid exclusion, Buyer shall have the right to use, at
no cost, the Tradenames and marks associated with “Pi” restaurant and bar so
long as Manager is managing the Hotel.

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

          “Warranties”
shall mean all warranties, guaranties, indemnities and claims for the benefit
of Seller with respect to the Hotel, the Property or any portion thereof,
including, without limitation, all warranties and guaranties of the
development, construction, completion, installation, equipping and furnishing
of the Hotel, and all indemnities, bonds and claims of Seller related thereto.

ARTICLE II

PURCHASE AND SALE; PURCHASE PRICE; PAYMENT;

EARNEST MONEY DEPOSIT

          2.1
Purchase and Sale. Seller agrees to sell and convey to Buyer or its Affiliates
and/or assigns, and Buyer or its assigns agrees to purchase from Seller, the
Property, in consideration of the Purchase Price and upon the terms and
conditions hereof. All of the Property shall be conveyed, assigned, and
transferred to Buyer at Closing, free and clear of all mortgages, liens,
encumbrances, licenses, franchises (other than any Hotel franchises assumed by
Buyer), concession agreements, security interests, prior assignments or
conveyances, 

6

conditions,
restrictions, rights-of-way, easements, encroachments, claims and other matters
affecting title or possession, except for the Permitted Exceptions.

          2.2
Purchase Price. Buyer agrees to pay, and Seller agrees to accept, as
consideration for the conveyance of the Property, subject to the adjustments
provided for in this Contract, the amount of Fifty-eight Million Five Hundred
Thousand and 00/100 Dollars ($58,500,000.00) (the “Purchase Price”).

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

          2.4
Payment. The portion of the Purchase Price, less the Earnest Money
Deposit and interest earned thereon, if any, which Buyer elects to have applied
against the Purchase Price (as provided below), and taking into account any
adjustments to the Purchase Price provided for in this Contract, shall be paid
to Seller in cash or immediately available funds by wire transfer at the
Closing of the Property. At the Closing, the Earnest Money Deposit, together
with interest earned thereon, if any, shall, at Buyer’s election, be returned
to Buyer or shall be paid over to Seller by Escrow Agent to be applied to the
portion of the Purchase Price on behalf of Buyer. 

          2.5
Earnest Money Deposit.

	
  

 	
  

 
	
  

 	
                (a)
 Within two (2) Business Days following the full execution and delivery of
 this Contract, Buyer shall deposit the sum of Fifty Thousand and No/100
 Dollars ($50,000.00) in cash, certified bank check or by wire transfer of
 immediately available funds (the “Initial Earnest Money Deposit”) with
 the Title Company (“Escrow Agent”). If, pursuant to the provisions of
 Section 3.1 of this Contract, Buyer elects to terminate this Contract at any
 time prior to the expiration of the Review Period, then the Escrow Agent
 shall return the Initial Earnest Money Deposit to Buyer promptly upon written
 notice to that effect from Buyer.

 
	
  

 	
  

 
	
  

 	
                
 (b) If Buyer has not elected to terminate this Contract on or before the
 expiration of the Review Period, Buyer, within two (2) Business Days after
 the expiration of the Review Period, shall deposit with the Escrow Agent the
 additional sum of One Hundred Fifty Thousand and No/100 Dollars ($150,000.00)
 in cash, certified bank check or by wire transfer of immediately available
 funds (the “Second Earnest Money Deposit”), which sum shall be held by
 Escrow Agent, together with the Initial Earnest Money Deposit, as earnest
 money. The Initial Earnest Money Deposit, the Second Earnest Money Deposit
 and the Extension Deposit (if any) deposited pursuant to Section 3.5,
 together with all interest earned thereon, are collectively referred to as
 the “Earnest Money Deposit”.

 
	
  

 	
  

 
	
  

 	
                
 (c) Upon the expiration of the Review Period, the Earnest Money Deposit shall
 become non-refundable and shall either be applied to the Purchase Price at
 Closing as provided in Section 2.4 of this Contract, or refunded to Buyer or
 paid over to Seller as provided in Article III, Article IV, Article V,
 Article IX and Article XIV of this Contract.

 

7

	
  

 	
  

 
	
  

 	
                (d)
 The Earnest Money Deposit shall be held by Escrow Agent subject to the terms
 and conditions of an Escrow Agreement dated as of the date of this Contract
 entered into by Seller, Buyer and Escrow Agent (the “Escrow Agreement”).
 The Earnest Money Deposit shall be held in an interest-bearing account in a
 federally insured bank or savings institution reasonably acceptable to Seller
 and Buyer, with all interest to accrue to the benefit of the party entitled
 to receive the Earnest Money Deposit and to be reportable by such party for
 income tax purposes. 

 

ARTICLE III

REVIEW PERIOD

          3.1
Review Period. Buyer shall have a period through 6:00 p.m. Eastern
Daylight Time on the date that is fifteen (15) business days after the date of
this Contract, unless a longer period of time is otherwise provided for in this
Contract and except as otherwise agreed to in writing by Buyer and Seller (the
“Review Period”), to evaluate the legal, title, survey, construction,
engineering, physical condition, structural, mechanical, environmental, zoning,
economic, permit status, franchise status, marketing and economic data,
financial statements and information, property statements franchise agreements,
loan documents and other documents and information related to the Property and
the business of the Hotel. Within five (5) days following the date of this
Contract, Seller, at Seller’s sole cost and expense, will deliver to Buyer (or
make available at the Hotel) for Buyer’s review, to the extent not previously
delivered to Buyer and, with respect to the items listed in paragraphs (a),
(c), (d) and (f) of this Section 3.1, to the extent within Seller’s possession
and control or readily available to or obtainable upon request of Seller or to
which Seller has access or may obtain from Manager, true, correct and complete
copies of the following, together with all amendments, modifications, renewals
or extensions thereof:

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                (b)
 Income and expense statements and budgets for the Hotel, for the current year
 to date and for two (2) prior years, including all income and expense
 statements prepared or provided by the existing manager or any affiliated or
 third party auditor or other financial advisor (collectively, the “Financial
 Statements”); provided, however, the foregoing shall not, in any manner,
 be deemed to relieve Seller of its obligation to provide to Buyer’s auditors
 and representatives all financial and other information necessary or
 appropriate for preparation of audited financial statements for Buyer and/or
 its Affiliates as provided in Section 8.6 below;

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                (d)
 Engineering, mechanical, architectural and construction plans, drawings,
 specifications and contracts, payment and performance bonds, title policies,
 reports and commitments, zoning information and marketing and economic data
 relating to the Hotel and the construction, development, installation and
 equipping thereof, as well as copies of all environmental reports and
 information, topographical, boundary or “as built” surveys, engineering
 reports, subsurface studies and other Contracts, Plans and Specs relating to
 or 

 

8

	
  

 	
  

 
	
  

 	
 affecting
 the Hotel. If the Hotel is purchased by Buyer, all such documents and
 information relating to the Hotel shall thereupon be and become the property
 of Buyer without payment of any additional consideration therefor;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                (f)
 All notices received from governmental authorities in connection with the
 Hotel for the current year and each of the three (3) calendar years prior to
 the current year and all other notices received from governmental authorities
 received at any time that relate to any noncompliance or violation of law
 that has not been corrected.

 

          Seller
shall, upon request of Buyer, make available to Buyer and Buyer’s
representatives and agents, for inspection and copying during normal business hours,
Records located at Seller’s corporate offices, and Seller agrees to provide
Buyer copies of all other reasonably requested information that is relevant to
the management, operation, use, occupancy or leasing of or title to the Hotel
and the plans and specifications for development of the Hotel. At any time
during the Review Period, Buyer may, in its sole and absolute discretion, elect
not to proceed with the purchase of the Property for any reason whatsoever by
giving written notice thereof to Seller, in which event: (i) the Initial
Earnest Money Deposit shall be promptly returned by Escrow Agent to Buyer
together with all accrued interest, if any, (ii) this Contract shall be
terminated automatically, (iii) all materials supplied by Seller to Buyer shall
be returned promptly to Seller, and (iv) both parties will be relieved of all
other rights, obligations and liabilities hereunder, except for the parties’
obligations pursuant to Sections 3.3 and 16.6 below.

          3.2
Due Diligence Examination. At any time during the Review Period, and
thereafter through Closing of the Property, Buyer and/or its representatives
and agents shall have the right to enter upon the Property at all reasonable
times for the purposes of reviewing all Records and other data, documents
and/or information relating to the Property and conducting such surveys,
appraisals, engineering tests, soil tests (including, without limitation, Phase
I and Phase II environmental site assessments), inspections of construction and
other inspections and other studies as Buyer deems reasonable and necessary or
appropriate to evaluate the Property, subject to providing reasonable prior
notice to Seller unless otherwise agreed to by Buyer and Seller (the “Due
Diligence Examination”). Seller shall have the right to have its
representative present during Buyer’s physical inspections of the Property,
provided that failure of Seller to do so shall not prevent Buyer from
exercising its due diligence, review and inspection rights hereunder. Buyer
agrees to exercise reasonable care when visiting the Property, in a manner
which shall not materially adversely affect the operation of the Property or
the Franchise Agreement.

          3.3
Restoration. Buyer shall defend, indemnify and save harmless Seller and
Manager from and against any loss, expense (including reasonable attorneys’
fees) or damage incurred or suffered by Seller, by reasons arising out of,
caused by or connected with the examinations and studies of the Property
conducted by Buyer, its agents or contractors; provided, however, Buyer shall
not be responsible for any pre-existing conditions that may be encountered 

9

during the
activities conducted by Buyer or its agents on the Property during the Review
Period. Buyer covenants and agrees, prior to performing any intrusive
activities on the Property during the Due Diligence Examination, to provide
reasonable prior notice to Seller of the nature of such activities and to
obtain the approval of Seller with respect to such activities, which approval shall
not be unreasonably withheld, conditioned or delayed. Buyer further covenants
and agrees not to damage or destroy any portion of the Property in conducting
its examinations and studies of the Property during the Due Diligence
Examination and, if Closing does not occur, shall repair any portion of the
Property damaged by the conduct of Buyer, its agents or employees, to
substantially the condition such portion(s) of the Property were in immediately
prior to such examinations or studies. 

          3.4
Seller Exhibits. Buyer shall have until the end of the Review Period to
review and approve the information on Exhibits B, C, D-1, D-2, E and F.
In the event Buyer does not approve any such Exhibit or the information
contained therein, Buyer shall be entitled to terminate this Contract by notice
to Seller and the Earnest Money Deposit shall be returned to Buyer with all
interest thereon and both parties shall be relieved of all rights, obligations
and liabilities hereunder except for the parties’ obligations pursuant to
Sections 3.3 and 16.6.

ARTICLE IV

SURVEY AND TITLE APPROVAL

          4.1
Survey. Seller has delivered to Buyer true, correct and complete copies
of the most recent survey of the Real Property. In the event that an update of
the survey or a new survey (such updated or new survey being referred to as the
“Survey”) are desired by Buyer, then Buyer shall be responsible for all
costs related thereto.

          4.2
Title. Seller has delivered to Buyer Seller’s existing title insurance
policy, including copies of all documents referred to therein, for the Real
Property. Buyer’s obligations under this Contract are conditioned upon Buyer
being able to obtain (i) a Commitment for Title Insurance (the “Title
Commitment”) issued by Chicago Title Company - 5501 LBJ Freeway, Ste. 200,
Dallas, Texas 75240 Attn: Debby Moore (the “Title Company”), for the
most recent standard form of owner’s policy of title insurance in the state in
which the Real Property is located, covering the Real Property, setting forth
the current status of the title to the Real Property, showing all liens,
claims, encumbrances, easements, rights of way, encroachments, reservations,
restrictions and any other matters affecting the Real Property and pursuant to
which the Title Company agrees to issue to Buyer at Closing an Owner’s Policy
of Title Insurance on the most recent form of ALTA (where available) owner’s
policy available in the state in which the Land is located, with extended
coverage and, to the extent applicable and available in such state,
comprehensive, access, single tax parcel, contiguity, Fairway and such other
endorsements as may be required by Buyer (collectively, the “Title Policy”);
and (ii) true, complete, legible and, where applicable, recorded copies of all
documents and instruments (the “Exception Documents”) referred to or
identified in the Title Commitment, including, but not limited to, all deeds,
lien instruments, leases, plats, surveys, reservations, restrictions, and
easements affecting the Real Property. Buyer shall promptly provide Seller with
a copy of the Title Commitment issued by the Title Company.

10

          4.3
Survey or Title Objections. If Buyer discovers any title or survey
matter which is objectionable to Buyer (each such objectionable title or survey
matter a “Title Defect”), Buyer may provide Seller with written notice
of its objection to any such Title Defect at any time prior to the expiration
of the Review Period, together with copies of all exceptions noted in such
Title Commitment or on such Survey. If Buyer fails to so object in writing to
any Title Defect set forth in the Survey or Title Commitment, it shall be
conclusively assumed that Buyer has approved same. If Buyer disapproves any
condition of title, survey or other matters by written objection to Seller on
or before the expiration of the Review Period, Seller shall elect either to attempt
to cure or not cure any Title Defect by written notice sent to Buyer within
five (5) days after Seller’s receipt of notice from Buyer, and if Seller
commits in writing to attempt to cure any Title Defect, Seller shall be given
until the Closing Date to cure any such Title Defect. In the event Seller shall
fail to cure a Title Defect which Seller has committed in writing to cure prior
to Closing, or if a new Title Defect arises after the date of Buyer’s Title
Commitment or Survey, as applicable, but prior to Closing, such events shall
not constitute a default by Seller hereunder; however, in such case Buyer may
elect, in Buyer’s sole and absolute discretion: (i) to waive such objection and
proceed to Closing, or (ii) to terminate this Contract and receive a return of
the Earnest Money Deposit, and any interest thereon. The items shown on the
Title Commitment which are not objected to by Buyer as set forth above (other
than exceptions and Title Defects arising after the Review Period or which are
not disclosed by the Title Commitment and other than those standard exceptions
which are ordinarily and customarily omitted in the state in which the Hotel is
located, so long as Seller provides the appropriate owner’s affidavit, gap
indemnity or other documentation reasonably required by the Title Company for
such omission) are hereinafter referred to as the “Permitted Exceptions.”
In no event shall Permitted Exceptions include liens, or documents evidencing
liens, securing any indebtedness or any mechanics’ or materialmen’s liens or
any claims or potential claims therefor encumbering the Property or any portion
thereof (“Seller Liens”), each of which shall be paid in full by Seller
and released at Closing. 

ARTICLE V

MANAGEMENT AGREEMENT AND FRANCHISE AGREEMENT

          Seller
has entered into the Franchise Agreement for the operation of the Hotel. At the
Closing, Seller shall assign its interest in the Franchise Agreement to Buyer
(although Seller shall remain liable for all of its obligations arising under
the Franchise Agreement prior to the Closing Date), and Buyer shall assume
Seller’s obligations thereunder arising or required to be performed on and
after the Closing Date, subject to the consent of the Franchisor, where
applicable, to such assignment and assumption and subject to such amendments
thereto as may be required or otherwise agreed to by Buyer (including, without
limitation, such amendments as may be required to accommodate Buyer’s and/or
Buyer’s Affiliates’ REIT structure). Notwithstanding the foregoing, Buyer
covenants and agrees to request that the Franchisor enter into a new franchise
agreement with Buyer, effective as of the Closing Date, to replace the existing
Franchise Agreement, and, if permitted by the Franchisor without additional
cost, expense or delay, Buyer shall, in lieu of taking an assignment of
Seller’s interest in the Franchise Agreement, enter into a new franchise
agreement with the Franchisor, effective as of the Closing Date, replacing the
existing Franchise Agreement and containing terms and conditions acceptable to
Buyer. In such case, Seller and the Manager and the Franchisor shall terminate
the existing management agreement for the Hotel and the Franchise Agreement as
of the Closing

11

Date, and
Seller shall be solely responsible for all claims and liabilities arising
thereunder. Seller shall convey the Property free and clear of any existing
management agreement and/or rights of the Manager and shall obtain the
Manager’s consent to the termination of Seller’s existing management agreement,
and Seller shall cause the Manager to enter into a new Management Agreement
with Buyer at Closing in the form attached hereto as Exhibit “I”. With
respect to the Franchise Agreement, Buyer agrees to apply for and use
reasonable efforts, and Seller shall cooperate in all reasonable respects with
Buyer, to obtain the Franchisor’s written consent to the Manager and the new
Management Agreement (if required) and to the assignment to Buyer of the
Franchise Agreement (or to a new franchise agreement, as the case may be),
together with the assignment to Buyer of all waivers of any brand standard
necessary or appropriate for the operation of the Hotel under the Brand, and it
shall be a condition to Closing for Buyer and Seller that the Franchisor provide
such consents. Any fees charged by the Franchisor related to the assignment and
amendment of the Franchise Agreement (or to the termination of the Franchise
Agreement, as applicable, and the execution of a new franchise agreement, as
the case may be), including but not limited to, the payment of license,
application, transfer and similar fees thereunder, shall be paid by Buyer, and
Buyer shall pay all costs and fees of its attorneys and consultants and all
costs associated with any releases or other provisions requested by or for the
benefit of Buyer, in each case, incurred in connection with such assignment
and/or termination and execution of new agreements. Seller shall be responsible
for (i) all costs of terminating Seller’s existing management agreement with
the Manager (including without limitation all termination and cancellation fees
and/or penalties), (ii) all costs of entering into a new Management Agreement
with the Manager (except for Buyer’s attorneys fees, which shall be paid by
Buyer). Seller shall use best efforts to promptly provide all information
required by the Franchisor in connection with each such assignment and
amendment (or in connection with a new franchise agreement, as the case may
be), and Seller and Buyer shall diligently pursue obtaining each the same.

ARTICLE VI

BROKERS

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

ARTICLE VII

REPRESENTATIONS, WARRANTIES AND COVENANTS

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

	
  

 	
  

 
	
  

 	
                     (a)
 Authority; No Conflicts. Seller is a limited liability company and is
 duly formed, validly existing and in good standing in the state of Colorado.
 Seller has obtained all necessary consents to enter into and perform this
 Contract and is fully authorized to enter into and perform this Contract and
 to complete the transactions contemplated by this

 

12

	
  

 	
  

 	
  

 
	
  

 	
 Contract. No
 consent or approval of any person, entity or governmental authority is
 required for the execution, delivery or performance by Seller of this
 Contract, except as set forth in Exhibit D, and this Contract is
 hereby binding and enforceable against Seller. Neither the execution nor the
 performance of, or compliance with, this Contract by Seller has resulted, or
 will result, in any violation of, or default under, or acceleration of, any
 obligation under any existing corporate charter, certificate of
 incorporation, bylaw, articles of organization, limited liability company
 agreement or regulations, partnership agreement or other organizational
 documents and under any, mortgage indenture, lien agreement, promissory note,
 contract, or permit, or any judgment, decree, order, restrictive covenant,
 statute, rule or regulation, applicable to Seller or to the Hotel.

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
                     (d)
 Property Agreements. A complete list of all FF&E Leases, Service
 Contracts and Leases used in or otherwise relating to the operation and
 business of the Hotel is attached hereto as Exhibit C-1, and a
 complete list of all other FF&E Leases, Service Contracts and Leases used
 in or otherwise relating to the operation and business of the Hotel is
 attached hereto as Exhibit C-2. The assets constituting the Property
 to be conveyed to Buyer hereunder constitute all of the property and assets
 of Seller used in connection with the operation and business of the Hotel.
 There are no leases, license agreements, leasing agent’s agreements,
 equipment leases, building service agreements, maintenance contracts,
 suppliers contracts, warranty contracts, operating agreements, or other
 agreements (i) to which Seller is a party or an assignee, or
 (ii) binding upon the Hotel, relating to the ownership, occupancy,
 operation, management or maintenance of the Real Property, FF&E, Supplies
 or Tradenames, except for those Service Contracts, Leases, Warranties and
 FF&E Leases disclosed on Exhibit C or to be delivered to Buyer
 pursuant to Section 3.1. The Service Contracts, Leases, Warranties and
 FF&E Leases disclosed on Exhibit C or to be delivered to Buyer
 pursuant to Section 3.1 are in full force and effect, and, to the knowledge
 of Seller, no default has occurred and is continuing thereunder and no
 circumstances exist which, with the giving of notice, the lapse of time or
 both, would constitute such a default, and Seller has received no notice of
 any such default or circumstances. No party has any right or option to
 acquire the Hotel or any portion thereof, other than Buyer.

 
	
  

 	
  

 	
  

 
	
  

 	
                     (e)
 Pending Claims. To the knowledge of Seller, there are no, and Seller
 has not received any notice of any: (i) claims, demands, litigation,
 proceedings or governmental investigations pending or threatened against
 Seller, the Manager or any managing member or general partner of any of them
 (collectively, “Seller Parties”) or related to the business or assets
 of the Hotel, except as set forth on Exhibit F attached hereto and
 incorporated herein by reference, (ii) special assessments or extraordinary
 taxes, except as set forth in the Title Commitment, or (iii) pending or
 threatened condemnation or eminent 

 

13

	
  

 	
  

 	
  

 
	
  

 	
 domain
 proceeding which would affect the Property or any part thereof. There are no
 pending arbitration proceedings or unsatisfied arbitration awards, or
 judicial proceedings or orders respecting awards, which might become a lien
 on the Property or any portion thereof, pending unfair labor practice charges
 or complaints, unsatisfied unfair labor practice orders or judicial
 proceedings or orders with respect thereto, pending charges or complaints
 with or by city, state or federal civil or human rights agencies, unremedied
 orders by such agencies or judicial proceedings or orders with respect to
 obligations under city, state or federal civil or human rights or
 antidiscrimination laws or executive orders affecting the Hotel, or other
 pending, actual or, to the knowledge of Seller, threatened litigation claims,
 charges, complaints, petitions or unsatisfied orders by or before any
 administrative agency or court which affect the Hotel or might become a lien
 on the Hotel (collectively, the “Pending Claims”).

 
	
  

 	
  

 	
  

 
	
  

 	
                     (f)
 Environmental. To the knowledge of Seller, with respect to
 environmental matters: (i) there has been no Release or threat of Release of
 Hazardous Materials in, on, under, to, from or in the area of the Real
 Property, except as disclosed in the reports and documents set forth on Exhibit
 E attached hereto and incorporated herein by reference, (ii) no portion
 of the Property is being used for the treatment, storage, disposal or other
 handling of Hazardous Materials or machinery containing Hazardous Materials
 other than standard amounts of cleaning supplies and chlorine for the
 swimming pool, all of which are stored on the Property in strict accordance
 with applicable Environmental Requirements and do not exceed limits permitted
 under applicable laws, including without limitation Environmental
 Requirements, (iii) no underground storage tanks are currently located on or
 in the Real Property or any portion thereof, (iv) no environmental
 investigation, administrative order, notification, consent order, litigation,
 claim, judgment or settlement with respect to the Property or any portion
 thereof is pending or threatened, (v) there is not currently and never has
 been any mold, fungal or other microbial growth in or on the Real Property,
 or existing conditions within buildings, structures or mechanical equipment
 serving such buildings or structures, that could reasonably be expected to
 result in material liability or material costs or expenses to remediate the
 mold, fungal or microbial growth, or to remedy such conditions that could
 reasonably be expected to result in such growth, and (vi) except as disclosed
 on Exhibit E, there are no reports or other documentation regarding
 the environmental condition of the Real Property in the possession of Seller
 or Manager or the Affiliates, consultants, contractors or agents of Seller or
 the Manager. As used in this Contract: “Hazardous Materials” means (1)
 “hazardous wastes” as defined by the Resource Conservation and Recovery Act
 of 1976, as amended from time to time (“RCRA”), (2) “hazardous
 substances” as defined by the Comprehensive Environmental Response,
 Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.),
 as amended by the Superfund Amendment and Reauthorization Act of 1986 and as
 otherwise amended from time to time (“CERCLA”); (3) “toxic substances”
 as defined by the Toxic Substances Control Act, as amended from time to time
 (“TSCA”), (4) “hazardous materials” as defined by the Hazardous
 Materials Transportation Act, as amended from time to time (“HMTA”),
 (5) asbestos, oil or other petroleum products, radioactive materials, urea
 formaldehyde foam insulation, radon gas and transformers or other equipment
 that contains dielectric fluid containing polychlorinated biphenyls, (6)
 microbial or fungal matter or mold, or (7) any other substance that is
 regulated by federal, state and local environmental laws (including, without
 limitation, RCRA, CERCLA, TSCA, HMTA), rules, regulations and orders,
 regulating, 

 

14

	
  

 	
  

 	
  

 
	
  

 	
 relating to
 or imposing liability or standards of conduct concerning protection of human
 health, safety or the environment (collectively, “Environmental
 Requirements”). As used in this Contract, “Release” means
 spilling, leaking, pumping, pouring, emitting, emptying, discharging,
 injecting, escaping, leaching, dumping or disposing.

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
                     (i)
 Licenses, Permits and Approvals. Seller has not received any notice,
 nor has any knowledge, that the Property fails to comply with all applicable
 licenses, permits and approvals and federal, state or local statutes, laws,
 ordinances, rules, regulations, requirements and codes including, without
 limitation, those regarding zoning, land use, building, fire, health, safety,
 environmental, subdivision, water quality, sanitation controls and the
 Americans with Disabilities Act, and similar rules and regulations relating
 and/or applicable to the ownership, use and operation of the Property as it
 is now operated. To the knowledge of Seller, Seller has received all
 licenses, permits and approvals required or needed for the lawful conduct,
 occupancy and operation of the business of the Hotel, and each license and
 permit is in full force and effect, and will be received and in full force
 and effect as of the Closing, except as set forth in Exhibit D-1. No
 licenses, permits or approvals necessary for the lawful conduct, occupancy or
 operation of the business of the Hotel requires any approval of a
 governmental authority for transfer of the Property, except as set forth in Exhibit
 D-2.

 
	
  

 	
  

 	
  

 
	
  

 	
                     (j)
 Financial Statements. Seller has delivered copies of all prior and
 current Financial Statements for the Hotel, including all operating
 statements and monthly financial statements for the Hotel. Each of such
 statements is complete and accurate in all material respects and, except in
 the case of budgets prepared in advance of the applicable operating period to
 which such budgets relate, fairly presents the results of operations of the
 Hotel for the respective periods represented thereby. Seller has relied upon
 the Financial Statements in connection with its ownership and operation of
 the Hotel, and there are no other independent audits or financial statements
 prepared by third parties relating to the operation of the Hotel other than
 the Financial Statements, all of which have been provided to Buyer.

 

15

	
  

 	
  

 	
  

 
	
  

 	
                     (k)
 No Material Adverse Change. Since the end of the period covered by the
 Financial Statements, there has not been any material adverse change in the
 business, operations, properties, prospects, results of operations or
 condition (financial or otherwise) of the Hotel, and no event has occurred or
 circumstance exists that may result in such a material adverse change.

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
                     (m)
 Operations. The Hotel has, to the knowledge of Seller, at all times
 during the period of the ownership thereof by Seller or its Affiliates been
 operated by the Manager in accordance with all applicable laws, rules,
 regulations, ordinances and codes.

 
	
  

 	
  

 	
  

 
	
  

 	
                     (n)
 Management Agreement and Franchise Agreement. Seller has furnished to
 Buyer a true and complete copy of the Franchise Agreement which constitutes
 the entire agreement of the parties with respect to the subject matter
 thereof and which has not been amended or supplemented in any respect except.
 Except for the existing management agreement and the Franchise Agreement,
 there are no other franchise agreements, license agreements or similar
 agreements for the operation or management of the Hotel or relating to the
 Brand, to which Seller is a party or which are binding upon the Property. The
 Improvements comply with, and the Hotel is being operated in accordance with,
 all requirements of the existing management agreement and the Franchise
 Agreement and all other requirements of the existing manager and the
 Franchisor, including all “brand standard” requirements of the Franchisor.
 The existing management agreement and the Franchise Agreement are in full
 force and effect. No default has occurred and is continuing under the
 existing management agreement or the Franchise Agreement and no circumstances
 exist which, with the giving of notice, the lapse of time or both, would
 constitute such a default. 

 
	
  

 	
  

 	
  

 
	
  

 	
                     (o)
 Construction of Hotel.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 To the knowledge of Navin C. Dimond, the Hotel has been constructed in a good
 and workmanlike manner without encroachments and in accordance in all
 material respects with the Contracts, Plans and Specs, and all building
 permits and certificates of occupancy therefor and all applicable zoning,
 platting, subdivision, health, safety and similar laws, rules, regulations,
 ordinances and codes.

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 

16

	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)
 To the knowledge of Seller, all easements necessary or desirable for ingress
 and egress, drainage, signage and utilities serving the Hotel have either
 been dedicated to the public, conveyed to the appropriate utility or will be
 conveyed to Buyer along with the Property.

 
	
  

 	
  

 	
  

 
	
  

 	
                     (p)
 Disclosure. No representation or warranty or other statement made by
 Seller in this Contract or the certificates delivered pursuant hereto
 contains any untrue statement of a material fact or omits to state a material
 fact necessary to make any of them, in light of the circumstances in which it
 was made, not misleading. Seller has no knowledge of any fact that has
 specific application to the Hotel (other than general economic or industry
 conditions) and that may materially adversely affect the assets, business,
 prospects, financial condition or results of operations of the Hotel that has
 not been set forth in this Contract.

 

          7.2
Deleted. 

          7.3
Buyer’s Representations, Warranties and Covenants. Buyer represents,
warrants and covenants: 

	
  

 	
  

 
	
  

 	
                     (a)
 Authority; No Conflicts. Buyer is a corporation duly formed, validly
 existing and in good standing in the Commonwealth of Virginia. Buyer has
 obtained all necessary consents of the Board of Directors of Buyer and is
 fully authorized to enter into and complete the transactions contemplated by
 this Contract. No other consent or approval of any person, entity or
 governmental authority is required for the execution, delivery or performance
 by Buyer of this Contract, and this Contract is hereby binding and
 enforceable against Buyer. Neither the execution nor the performance of, or
 compliance with, this Contract by Buyer has resulted, or will result, in a
 violation of or conflict with Buyer’s articles of incorporation or bylaws or
 any agreement, order, decree, ruling or injunction to which Buyer is subject
 or a party or by which Buyer is bound, except where such violation or
 conflict would not have a material adverse effect on Buyer or Buyer’s ability
 to consummate the transactions contemplated hereby.

 
	
  

 	
  

 
	
  

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

 

          7.4
No Implied Representations or Warranties. Buyer acknowledges and agrees
that, except as expressly set forth herein, Seller shall not be deemed to have
made any additional representations or warranties with respect to the Property
and the subject matter of this Contract, whether express or implied.

          7.5
Survival. All of the representations and warranties are true, correct
and complete in all material respects as of the date hereof and the statements
set forth therein (without qualification or limitation as to a party’s
knowledge thereof except as expressly provided for in this Article VII) shall
be true, correct and complete in all material respects as of the Closing Date.
All of the representations and warranties made herein shall survive Closing for
a period of one (1) year and shall not be deemed to merge into or be waived by
any Seller’s Deed or any other closing documents.

17

          7.6
Notice of Breach. Each of the parties hereto shall give to the other
party prompt written notice with particularity upon receipt of notice or having
knowledge of any matter that would constitute a breach of any representation,
warranty, agreement or covenant contained in this Contract.

ARTICLE VIII

ADDITIONAL COVENANTS

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

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (d)
 Maintain the levels and quality of the Personal Property generally at the
 levels and quality existing on the date hereof and keep merchandise, Supplies
 and inventory adequately stocked, consistent with good business practice, as
 if the sale of the 

 

18

	
  

 	
  

 
	
  

 	
 Hotel
 hereunder were not to occur, including, without limitation, maintaining
 linens and bath towels at least at a 2-par level for all suites or rooms of
 the Hotel;

 
	
  

 	
  

 
	
  

 	
                     (e)
 Advise Buyer promptly in writing of any litigation, arbitration, or
 administrative hearing before any court or governmental agency concerning or
 affecting the Hotel which is instituted or threatened after the date of this
 Contract or if any representation or warranty contained in this Contract
 shall become false; 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (h)
 Not sell or assign, or enter into any agreement to sell or assign, or create
 or permit to exist any lien or encumbrance (other than a Permitted Exception)
 on, the Property or any portion thereof; and

 
	
  

 	
  

 
	
  

 	
                     (i)
 Not allow any permit, receipt, license, franchise or right currently in
 existence with respect to the operation, use, occupancy or maintenance of the
 Hotel to expire, be canceled or otherwise terminated without the prior
 written consent of Buyer.

 

          Seller
shall promptly furnish to Buyer copies of all new, amended or extended FF&E
Leases, Service Contracts, Leases and other contracts or agreements (other than
routine Hotel room bookings entered into in the ordinary course of business)
relating to the Hotel and entered into by the Manager prior to Closing. Buyer
shall have the right to extend the Review Period for a period of five (5)
Business Days in order to review any of the foregoing that are not received by
Buyer at least five (5) Business Days prior to the expiration of the Review
Period. Seller shall not, without first obtaining the written approval of
Buyer, which approval shall not be unreasonably withheld, enter into any new
FF&E Leases, Service Contracts, Leases or other contracts or agreements
related to the Hotel (other than routine Hotel room bookings or Advance
Bookings entered into in the ordinary course of business as provided in
paragraph (a) of this Section 8.2), or extend any existing such agreements,
unless such agreements (x) can be terminated, without penalty, upon thirty (30)
days’ prior notice or (y) will expire prior to the Closing Date.

          8.3
Third Party Consents. Prior to the Closing Date, Seller shall, at
Seller’s expense, (i) obtain any and all third party consents and approvals (x)
required in order to transfer the Hotel to Buyer (provided that it shall be a
condition to Closing for Buyer and Seller that the Franchisor provide the
consents contemplated by Article V), or (y) which, if not obtained, would
materially adversely affect the operation of the Hotel, including, without
limitation, all consents and approvals referred to on Exhibit D-2 and
(ii) use best efforts to obtain all other third party consents and approvals
(all of such consents and approvals in (i) and (ii) above being referred to
collectively as, the “Third Party Consents”).

19

          8.4
Employees. Upon reasonable prior notice to Seller by Buyer, Buyer and
its employees, representatives and agents shall have the right to communicate
with Seller’s staff, the Hotel staff and the existing manager’s staff,
including without limitation the general manager, the director of sales, the
engineering staff and other key management employees of the Hotel, at any time
before Closing. Buyer shall not interfere with the operations of the Hotel
while engaging in such communication in a manner that materially adversely
affects the operation of the Property or the existing management agreement or the
Franchise Agreement. 

          8.5
Estoppel Certificates. Seller shall obtain from each lessor under each
FF&E Lease for the Hotel identified by Buyer as a material FF&E Lease,
the estoppel certificates substantially in the forms provided by Buyer to Seller
during the Review Period and reasonably acceptable to Seller, and deliver such
certificates to Buyer not less than five (5) days before the Closing.

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

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

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

	
  

 	
  

 	
  

 
	
  

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

 

20

	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                               (ii)
 the breach of any representation, warranty, covenant or agreement of Seller
 contained in this Contract;

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                               (i)
 the breach of any representation, warranty, covenant or agreement of Buyer
 contained in this Contract; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                               (ii)
 the conduct and operation by or on behalf of Buyer of its business at the
 Hotel or Buyer’s ownership or use of the Property after the Closing;
 provided, however, that in no event shall Buyer be obligated to indemnify
 Seller from or against any loss, judgment, liability, claim, damage or
 expense arising out of or relating to any acts or omissions of the Manager;
 and

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 

21

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 to indemnify
 unless (and then solely to the extent that) the Indemnifying Party is
 prejudiced by such delay.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                               (ii)
 If in any action, suit or proceeding (a “Legal Action”) the relief
 sought is solely the payment of money damages, and if the Indemnifying Party
 specifically agrees in writing to indemnify such Indemnified Party with
 respect thereto and demonstrates to the reasonable satisfaction of such
 Indemnified Party its financial ability to do so, the Indemnifying Party
 shall have the right, commencing thirty (30) days after such notice, at its
 option, to elect to settle, compromise or defend, pursuant to this paragraph,
 by its own counsel and at its own expense, any such Legal Action involving
 such Indemnified Party’s asserted liability. If the Indemnifying Party does
 not undertake to settle, compromise or defend any such Legal Action, such
 settlement, compromise or defense shall be conducted in the sole discretion
 of such Indemnified Party, but such Indemnified Party shall provide the
 Indemnifying Party with such information concerning such settlement,
 compromise or defense as the Indemnifying Party may reasonably request from
 time to time. If the Indemnifying Party undertakes to settle, compromise or
 defend any such asserted liability, it shall notify such Indemnified Party in
 writing of its intention to do so within thirty (30) days of notice from such
 Indemnified Party provided above.

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

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

 

22

	
  

 	
  

 	
  

 
	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
                     (d)
 Cut-off Date for Claims. The indemnification obligations of Seller and
 Buyer pursuant to this Section 8.8 shall terminate on the date which is one
 (1) year after the Closing Date, except as to claims asserted in writing
 within such one (1) year period.

 
	
  

 	
  

 	
  

 
	
  

 	
                     (e)
 Security for Seller’s Indemnification Obligations. To ensure the
 timely payment by Seller of any indemnification obligations of Seller that
 might arise pursuant to this Section 8.8, from and after the Closing Date,
 Seller shall maintain on deposit in Seller’s deposit account(s) the minimum
 sum of Two Hundred Thousand and No/100 Dollars ($300,000.00) to fund any
 indemnification obligations of Seller under Section 8.8 of this Contract.
 Seller’s obligation to maintain such amount in Seller’s deposit account(s)
 shall terminate thirteen (13) full calendar months after the Closing Date;
 provided, however, if there are any claims then pending for which Seller may
 be required to indemnify Buyer pursuant to this Section 8.8, Seller shall
 continue to maintain in Seller’s deposit account(s) until such claims are
 resolved an amount sufficient to cover Seller’s potential liability under this
 Section 8.8 (but not in excess of $300,000.00). At any time during which
 Seller is required to maintain the sums provided herein in Seller’s deposit
 account(s), Seller shall, within two (2) Business Days after receipt of
 Buyer’s written request therefor, provide evidence reasonably acceptable to
 Buyer in order to demonstrate Seller’s compliance with the terms of this
 Section 8.8(e).

 

          8.9
Deleted.

          8.10
Liquor Licenses. As a condition to Buyer’s obligations under this
Contract, (i) the Manager (or an affiliate thereof identified to Buyer during
the Review Period) shall have or shall have obtained all liquor licenses and
alcoholic beverage licenses necessary or desirable to operate any restaurants,
bars and lounges presently located within the Hotel (collectively, the “Liquor
Licenses”) and, in the case of an affiliate of the Manager, the Hotel has
the right to use such Liquor License, and (ii) if permitted under the laws of
the jurisdiction in which the Hotel is located, the Manager shall execute and
file any and all necessary forms, applications and other documents (and Seller
shall cooperate with reasonable requests from the Manager in filing such forms,
applications and other documents) with the appropriate liquor and alcoholic
beverage authorities prior to Closing so that the Liquor Licenses remain in
full force and effect upon completion of Closing. If Colorado or local law
requires Buyer to obtain Liquor Licenses in its own name, then the foregoing
condition to closing shall be of no force and effect.

23

ARTICLE IX

CONDITIONS FOR CLOSING

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (d)
 All Liquor Licenses shall be in full force and effect and shall remain in
 full force and effect following Closing and shall have been or shall be
 transferred to, or new Liquor Licenses issued to, Manager (or an affiliate
 thereof identified to Buyer during the Review Period), at or as of Closing,
 and Buyer shall have received satisfactory evidence thereof.

 
	
  

 	
  

 
	
  

 	
                     (e)
 Third Party Consents (if any are required) in form and substance reasonably
 satisfactory to Buyer shall have been obtained and furnished to Buyer.

 
	
  

 	
  

 
	
  

 	
                     (f)
 Assignment of the Franchise Agreement or, if the Franchise Agreement is to be
 terminated as provided in Article V, such agreement shall have been
 terminated and a new franchise agreement, upon terms and conditions acceptable
 to Buyer, shall have been executed by the Franchisor; provided, however, if
 this condition has not been satisfied as of the date set for Closing pursuant
 to Section 10.1 hereof, Buyer and Seller may elect to mutually extend the
 Closing Date pursuant to Section 10.1 hereof. Notwithstanding anything
 contained in this Agreement to the contrary, the Closing Date (defined below)
 may 

 

24

	
  

 	
  

 
	
  

 	
 be extended
 unilaterally by Buyer in the event the condition contained in this Section
 9.1(f) has not been satisfied.

 
	
  

 	
  

 
	
  

 	
                     (g)
 As provided in Article V hereof, the existing management agreement shall have
 been terminated and the new Management Agreement shall have been executed by
 the Manager.

 
	
  

 	
  

 
	
  

 	
                     (h)
 All accounts, escrow, reserves and cash required to be transferred by the
 terms of this Contract shall have been transferred to and become the property
 of Buyer.

 

ARTICLE X

CLOSING AND CONVEYANCE

          10.1
Closing.

	
  

 	
  

 
	
  

 	
                     (a)
 Unless otherwise agreed by Buyer and Seller, the Closing on the Property
 shall occur on a date selected by Buyer that is not later than ten (10) days
 after expiration of the Review Period, provided that all conditions to
 Closing by Buyer and Seller hereunder have been satisfied including, without
 limitation, receipt of a new, or assignment of the existing, Franchise
 Agreement by or to Buyer as the case may be. The date on which the Closing is
 to occur as provided in this Section 10.1, or such other date as may be
 agreed upon by Buyer and Seller, is referred to in this Contract as the “Closing
 Date” for the Property. The Closing shall be held at 10:00 a.m., Central
 Time, at the offices of the Title Company, or as otherwise determined by
 Buyer and Seller. The parties acknowledge and agree that it shall not be
 necessary for either Buyer or Seller to be physically present at the Closing.
 

 

          10.2
Deliveries of Seller. At Closing, Seller shall deliver to Buyer the
following, and, as appropriate, all instruments shall be properly executed and
conveyance instruments to be acknowledged in recordable form (the terms,
provisions and conditions of all instruments not attached hereto as Exhibits
shall be mutually agreed upon by Buyer and Seller prior to such Closing).

	
  

 	
  

 
	
  

 	
                     (a)
 Deed. A Special Warranty Deed conveying to Buyer fee simple title to
 the Real Property, subject only to the Permitted Exceptions (the “Deed”).

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (c)
 Management Agreement and Franchise Agreement. Evidence satisfactory to
 Buyer of the termination of the existing management agreement and execution
 and delivery by the Manager of a new Management Agreement with Buyer or its
 designated lessee, and an assignment of Seller’s interest in the Franchise
 Agreement to Buyer or its designated lessee (unless the existing Franchise
 Agreement is to be terminated as provided in Article V, in which case Buyer
 shall have received evidence of such termination and Buyer shall have entered
 into a new franchise agreement with the Franchisor).

 

25

	
  

 	
  

 
	
  

 	
                     (d)
 General Assignments. Assignments of all of Seller’s right, title and
 interest in and to all FF&E Leases, Service Contracts and Leases
 identified on Exhibit C hereto (the “Hotel Contracts”). The
 assignment shall also be a general assignment and shall provide for the
 assignment of all of Seller’s right, title and interest in all Records,
 Warranties, Licenses, Tradenames (exclusive of the “Pi” tradename or mark),
 Contracts, Plans and Specs and all other intangible Personal Property
 applicable to the Hotel to the extent such items are assignable.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (f)
 Title Company Documents. All affidavits, gap indemnity agreements and
 other documents reasonably required by the Title Company. At Buyer’s sole
 expense, Buyer shall have obtained an irrevocable commitment directly from
 the Title Company (or in the event the Title Company is not willing to issue
 such an irrevocable commitment, then from such other national title company
 as may be selected by either Buyer or Seller) for issuance of an Owner’s
 Policy of Title Insurance to Buyer insuring good and marketable fee simple
 absolute title to the Real Property constituting part of the Property,
 subject only to the Permitted Exceptions, in the amount of the Purchase
 Price.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (i)
 Authority Documents. Certified copies of resolutions of the partners
 or members, as applicable, of Seller and the Manager authorizing the sale of
 the Property and the other transactions contemplated by this Contract, and/or
 other evidence reasonably satisfactory to Buyer and the Title Company that
 the person or persons executing the closing documents on behalf of Seller and
 the Manager have full right, power and authority to do so, along with
 certificates of good standing of the Manager from the State of its
 organization and of Seller from the State of its organization and the State
 in which the Property is located.

 
	
  

 	
  

 
	
  

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

 

26

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

ARTICLE XI

COSTS

          All
Closing costs shall be paid as set forth below:

          11.1
Seller’s Costs. In connection with the sale of the Property contemplated
under this Contract, Seller shall be responsible for all transfer and
recordation taxes, including, without limitation, all transfer, sales, use or
bulk transfer taxes or like taxes on or in connection with the transfer of the
Personal Property constituting part of the Property pursuant to the Bill of
Sale and all accrued taxes of Seller prior to Closing and income, sales and use
taxes and other such taxes of Seller attributable to the sale of the Property
to Buyer, provided that Buyer and Seller shall share equally all transfer and
recordation taxes payable in connection with the recordation of the Deed.
Seller shall be responsible for all costs related to the termination of the
existing management agreement with the Manager and execution of a new
Management Agreement with the Manager (other than Buyer’s legal fees). Seller
shall also be responsible for the costs and expenses of its attorneys,
accountants, appraisers and other professionals, consultants and 

27

representatives.
Seller shall also be responsible for payment of all prepayment penalties and
other amounts payable in connection with the pay-off of any liens and/or
indebtedness encumbering the Property. 

          11.2
Buyer’s Costs. In connection with the purchase of the Property
contemplated under this Contract, Buyer shall be responsible for the costs and
expenses of its attorneys, accountants and other professionals, consultants and
representatives. Buyer shall also be responsible for the costs and expenses in
connection with the preparation of any environmental report, any update to the
survey and the costs and expenses of preparation of the Title Commitment and
the issuance of the title insurance policy contemplated by Article IV, the per page
recording charges for the Deed (if applicable) and one half (1⁄2) of all transfer
and recordation taxes payable in connection with the recordation of the Deed.
As provided in Article V, Buyer shall also be responsible for costs related to
the assignment and amendment of the Franchise Agreement or the termination of
the Franchise Agreement and the execution of a new franchise agreement, as
applicable.

ARTICLE XII

ADJUSTMENTS

          12.1
Adjustments. Unless otherwise provided herein, at Closing, adjustments
between the parties shall be made as of 12:01 a.m. on the Closing Date (the “Cutoff
Time”), with the income and expenses accrued prior to the Closing Date
being allocated to Seller and the income and expenses accruing on and after the
Closing Date being allocated to Buyer, all as set forth below. All of such
adjustments and allocations shall be made in cash at Closing and shall be
collected through and/or adjusted in accordance with the terms of the
Management Agreement and/or as settlement statement items as mutually directed
by the parties. Except as otherwise expressly provided herein, all
apportionments and adjustments shall be made on an accrual basis in accordance
with generally accepted accounting principles. Buyer and Seller shall request
that the Manager determine the apportionments, allocations, prorations and
adjustments as of the Cutoff Time.

	
  

 	
  

 
	
  

 	
                     (a)
 Taxes. All real estate taxes, personal property taxes, or any other
 taxes and special assessments (special or otherwise) of any nature upon the
 Property levied, assessed or pending for the calendar year in which the
 Closing occurs (including the period prior to Closing, regardless of when due
 and payable) shall be prorated as of the Cutoff Time and, if no tax bills or
 assessment statements for such calendar year are available, such amounts
 shall be estimated on the basis of the best available information for such
 taxes and assessments that will be due and payable on the Hotel for the
 calendar year in which Closing occurs.

 
	
  

 	
  

 
	
  

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

 

28

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (d)
 Accounts. Seller shall fund at Closing the working capital account in
 the amount of $45,000. Seller shall be entitled to a credit at Closing for
 amounts held in the following accounts to the extent transferred to and
 assumed by Buyer at Closing: (i) amounts held in reserve accounts and escrow
 accounts (including FF&E accounts, tax and insurance escrow accounts and
 utility deposits and (ii) petty cash, cash in cash registers and cash in
 vending machines, whether such accounts and/or amounts are held by or on
 behalf of the existing manager or any Lender or any other person or entity,
 all of which shall become the property of Buyer without Buyer being required
 to fund the same and without additional charge to Buyer. Seller shall cause
 all such accounts and amounts to be transferred to Buyer at Closing. 

 
	
  

 	
  

 
	
  

 	
                     (e)
 Guest Ledger. Subject to (f) below, all accounts receivable of
 registered guests at the Hotel who have not checked out and were occupying
 rooms as of the Cutoff Time, shall be prorated as provided herein.

 
	
  

 	
  

 
	
  

 	
                     (f)
 Room Rentals. All receipts from guest room rentals and other suite
 revenues for the night in which the Cutoff Time occurs shall belong to
 Seller, but Seller shall provide Buyer a credit at Closing in an amount equal
 to $35.00 per room to cover the expenses to be incurred by Buyer to clean
 such guests’ rooms.

 
	
  

 	
  

 
	
  

 	
                     (g)
 Deposits. To the extent Seller has received and not transferred to
 Buyer any portion of the Deposits, Buyer shall be entitled to a credit at
 Closing in an amount equal to that portion of the Deposits. To the extent
 Seller has not received or has received and is transferring to Buyer at
 Closing any portion of the Deposits, Buyer shall not be entitled to a credit
 at Closing for that portion of the Deposits.

 
	
  

 	
  

 
	
  

 	
                     (h)
 Accounts Receivable. To the extent not apportioned at Closing and
 subject to (e) and (f) above, all accounts receivable and credit card claims
 as of the Cutoff Time shall remain the property of Seller, and collection
 thereof shall be the sole responsibility of Seller.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (j)
 Restaurants, Bars, Machines, Other Income. All monies received in
 connection with bar, restaurant, banquet and similar and other services at
 the Hotel (other than amounts due from any guest and included in room
 rentals) prior to the close of business 

 

29

	
  

 	
  

 
	
  

 	
 for each
 such operation for the night in which the Cutoff Time occurs shall belong to
 Seller, and all other receipts and revenues (not previously described in this
 Section 12.1) from the operation of any department of the Hotel shall be
 prorated between Seller and Buyer at Closing.

 

          12.2
Reconciliation and Final Payment. Seller and Buyer shall reasonably
cooperate after Closing to make a final determination of the allocations and
prorations required under this Contract within sixty (60) days after the
Closing Date. Upon the final reconciliation of the allocations and prorations
under this Section, the party which owes the other party any sums hereunder
shall pay such party such sums within ten (10) days after the reconciliation of
such sums. The obligations to calculate such prorations, make such
reconciliations and pay any such sums shall survive the Closing.

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

ARTICLE XIII

CASUALTY AND CONDEMNATION

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

          13.2
Buyer’s Termination Right. If, prior to Closing and the delivery of
possession of the Property to Buyer in accordance with this Contract, (a) any
condemnation proceeding shall be pending against a substantial portion of the
Hotel or (b) there is any substantial casualty loss or damage to the Hotel,
Buyer shall have the option to terminate this Contract, provided Buyer 

30

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

          13.3
Procedure for Closing. If Buyer shall not timely elect to terminate this
Contract under Section 13.2 above, or if the loss, damage or condemnation is
not substantial, Seller agrees to pay to Buyer at the Closing all insurance proceeds
or condemnation awards which Seller has received as a result of the same, plus
an amount equal to the insurance deductible, and assign to Buyer all insurance
proceeds and condemnation awards payable as a result of the same, in which
event the Closing shall occur without Seller replacing or repairing such
damage. In the case of damage or casualty, at Buyer’s election, Seller shall
repair and restore the Property to its condition immediately prior to such
damage or casualty and any excess insurance proceeds shall remain the property
of Seller, provided (i) Buyer has reviewed and approved the plans and
specifications and proposed budget for any such repair and restoration work and
(ii) the Manager guarantees to Buyer the quality of such repair and restoration
work.

ARTICLE XIV

DEFAULT REMEDIES

          14.1
Buyer Default. If Buyer defaults under this Contract after the Review
Period by failing to close as required hereunder, and such default continues
for ten (10) days following written notice from Seller (provided no notice
shall extend the time for Closing and provided further that, in the case of a
failure by Buyer to deposit the Initial Earnest Money Deposit, the Second
Earnest Money Deposit or the Extension Deposit (if any) with the Escrow Agent within
the applicable time frames set forth in Section 2.5 and Section 3.5 above, the
aforementioned ten (10) day period shall be reduced to five (5) days and Seller
shall not be required to provide notice of such failure to Buyer), then at
Seller’s election by written notice to Buyer, this Contract shall be terminated
and of no effect, in which event the Earnest Money Deposit, including any
interest thereon, shall be paid to and retained by the Seller as Seller’s sole
and exclusive remedy hereunder, and as liquidated damages for Buyer’s default
or failure to close, and both Buyer and Seller shall thereupon be released from
all obligations hereunder.

          14.2
Seller Default. If Seller defaults under this Contract by failing to
close as required hereunder, and such default continues for ten (10) days
following written notice from Buyer, Buyer may elect, as Buyer’s sole and
exclusive remedy, either (i) to terminate this Contract by written notice to
Seller delivered to Seller at any time prior to the completion of such cure, in
which event the Earnest Money Deposit, including any interest thereon, shall be
returned to the Buyer, and Seller shall pay to Buyer the additional sum of Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00) as liquidated damages,
and thereafter both the Buyer and Seller shall thereupon be released from all
obligations with respect to this Contract, except as otherwise expressly
provided herein; or (ii) to treat this Contract as being in full force and
effect

31

by written
notice to Seller delivered to Seller at any time prior to the completion of
such cure, in which event the Buyer shall have the right to an action against
Seller for damages, specific performance and all other rights and remedies
available at law or in equity. Notwithstanding the foregoing, the parties
hereto acknowledge and agree that the failure of the Franchisor to provide the
consents required pursuant to Article V hereof shall not constitute a default
by Seller under this Contract.

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

ARTICLE XV

NOTICES

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

	
  

 	
  

 	
  

 
	
  

 	
 If to Buyer:

 	
 Apple Ten
 Hospitality Ownership, Inc.

 
	
  

 	
  

 	
 814 East
 Main Street

 
	
  

 	
  

 	
 Richmond,
 Virginia 23219

 
	
  

 	
  

 	
 Attention:
 Justin G. Knight, President

 
	
  

 	
  

 	
 Fax No.:
 (804) 344-8129

 
	
  

 	
  

 	
  

 
	
  

 	
 with a copy
 to:

 	
 Apple REIT
 Companies

 
	
  

 	
  

 	
 814 East
 Main Street

 
	
  

 	
  

 	
 Richmond,
 Virginia 23219

 
	
  

 	
  

 	
 Attention:
 Legal Dept.

 
	
  

 	
  

 	
 Fax No.:
 (804) 727-6349

 

32

	
  

 	
  

 	
  

 
	
  

 	
 If to
 Seller:

 	
 5280
 Lodging, LLC

 
	
  

 	
  

 	
 c/o
 Stonebridge Companies

 
	
  

 	
  

 	
 9100 East
 Panorama Drive, Suite 300

 
	
  

 	
  

 	
 Englewood,
 Colorado 80112

 
	
  

 	
  

 	
 Attention:
 Navin C. Dimond

 
	
  

 	
  

 	
 Fax No.:
 (303) 785-3107

 
	
  

 	
  

 	
  

 
	
  

 	
 with a copy
 to:

 	
 Stonebridge
 Realty Advisors, Inc.

 
	
  

 	
  

 	
 c/o
 Stonebridge Companies

 
	
  

 	
  

 	
 9100 East
 Panorama Drive, Suite 300

 
	
  

 	
  

 	
 Englewood,
 Colorado 80112

 
	
  

 	
  

 	
 Attention:
 Howard Pollack, General Counsel

 
	
  

 	
  

 	
 Fax No.:
 (303) 785-3107

 

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

ARTICLE XVI

MISCELLANEOUS

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

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

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

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

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

          16.6
Confidentiality. Except as either party may reasonably determine is
required by law (including without limitation laws and regulations applicable
to Buyer or its Affiliates who may be public companies): (i) prior to Closing,
Buyer and Seller shall not disclose the existence of this Contract or their
respective intentions to purchase and sell the Property or generate or
participate in any publicity or press release regarding this transaction,
except to Buyer’s and Seller’s legal counsel, Buyer’s consultants and agents,
the Manager, the Franchisor, the Lender (if any) and the Title Company and
except as necessitated by Buyer’s Due Diligence Examination and/or shadow
management, unless both Buyer and Seller agree in writing and as necessary to

33

effectuate the
transactions contemplated hereby and (ii) following Closing, the parties shall
coordinate any public disclosure or release of information related to the
transactions contemplated by this Contract, and no such disclosure or release
shall be made without the prior written consent of Buyer, and no press release
shall be made without the prior written approval of Buyer and Seller. 

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

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

          16.9
Severability. If any provision of this Contract shall, for any reason,
be adjudged by any court of competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Contract but shall be confined in its operation to the
provision or provisions hereof directly involved in the controversy in which
such judgment shall have been rendered, and this Contract shall be construed as
if such provision had never existed, unless such construction would operate as
an undue hardship on Seller or Buyer or would constitute a substantial
deviation from the general intent of the parties as reflected in this Contract.

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

          16.11
(Intentionally Omitted)

          16.12
Further Acts. In addition to the acts, deeds, instruments and agreements
recited herein and contemplated to be performed, executed and delivered by
Buyer and Seller, Buyer and Seller shall perform, execute and deliver or cause
to be performed, executed and delivered at the Closing or after the Closing,
any and all further acts, deeds, instruments and agreements and provide such
further assurances as the other party or the Title Company may reasonably
require to consummate the transaction contemplated hereunder.

          16.13
Joint and Several Obligations. If Seller consists of more than one
person or entity, each such person or entity shall be jointly and severally
liable with respect to the obligations of Seller under this Contract.

[Signatures Begin on Following Page]

34

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 SELLER: 

 
	
  

 	
  

 
	
  

 	
 5280 LODGING, LLC,
 a Colorado limited liability company

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: /s/

 	
 Navin C.
 Dimond

 
	
  

 	
  

 	

 

 
	
  

 	
 Name: 

 	
 Navin C.
 Dimond

 
	
  

 	
  

 	

 

 
	
  

 	
 Title: 

 	
 Manager

 
	
  

 	
  

 	

 

 

	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 BUYER: 

 
	
  

 	
  

 
	
  

 	
 APPLE TEN HOSPITALITY OWNERSHIP,
INC.,
 a Virginia corporation

 
	
  

 	
  

 
	
  

 	
 By: 

 	
 /s/ Justin
 G. Knight

 
	
  

 	
  

 	

 

 
	
  

 	
 Name: 

 	
 Justin G.
 Knight

 
	
  

 	
  

 	

 

 
	
  

 	
 Title: 

 	
 President

 
	
  

 	
  

 	

 

 

Exhibit A

LEGAL DESCRIPTION

LOTS 10
THROUGH 16, BLOCK 172, EAST DENVER, CITY AND COUNTY OF DENVER, STATE OF
COLORADO.

Exhibit B

LIST OF FF&E

Please use
Attached PDF File 

Exhibit C

LIST OF HOTEL CONTRACTS

ASI Modulex
(Reader Boards) 10/23/06

DMX Inc. (Public Area Music) 7/18/07

Hilton (HSIA Circuit Agrmt.) 5/30/08

iBAHN (HSIA) 5/8/09

Schindler (Elevator Maintenance) 2/1/09

Towne Park (Valet / Parking Garage Operation) 8/1/07

Waste Management (Trash Service) 7/19/07

Orkin (Pest Control) 6/23/10

Exhibit D

CONSENTS AND APPROVALS

None

Exhibit E

ENVIRONMENTAL REPORTS

Phase I
Environmental Site Assessment prepared by Environmental Property
Investigations, Inc. and dated April 15, 2004.

Exhibit F

CLAIMS OR LITIGATION PENDING

6/1/2010 –
Guest damaged sprinkler head which resulted in water damage.

Exhibit G

LIST OF VEHICLES TO BE CONVEYED

None

Exhibit H

EXCLUDED ASSETS

None

Exhibit I

MANAGEMENT AGREEMENT

Hilton Garden Inn

Denver, CO

MANAGEMENT AGREEMENT

by and between

STONEBRIDGE REALTY ADVISORS, INC.,

d/b/a STONEBRIDGE COMPANIES

as “MANAGER”

and

APPLE TEN HOSPITALITY MANAGEMENT, INC.

as “OWNER”

Dated as of February __, 2011

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE I

	
 

	
APPOINTMENT OF MANAGER

	
 

	
1

	
 

	
 

	
1.01.

	
 

	
Appointment

	
 

	
1

	
 

	
 

	
1.02.

	
 

	
Management
of the Hotel

	
 

	
2

	
 

	
 

	
1.03.

	
 

	
Employees

	
 

	
3

	
 

	
 

	
1.04.

	
 

	
Owner’s
Right to Inspect

	
 

	
4

	
 

	
 

	
1.05.

	
 

	
Regular
Meetings

	
 

	
4

	
 

	
 

	
1.06.

	
 

	
System
Standards

	
 

	
5

	
 

	
 

	
1.07.

	
 

	
Limitations
on Manager’s Authority

	
 

	
5

	
 

	
 

	
1.08.

	
 

	
Representations
and Warranties of Manager

	
 

	
5

	
 

	
 

	
1.09.

	
 

	
Limitations
on Manager’s Duties

	
 

	
5

	
 

	
 

	
1.10.

	
 

	
Centralized
Services

	
 

	
6

	
 

	
 

	
ARTICLE II

	
 

	
TERM

	
 

	
6

	
 

	
 

	
2.01.

	
 

	
Term

	
 

	
6

	
 

	
 

	
2.02.

	
 

	
Performance
Termination

	
 

	
6

	
 

	
 

	
ARTICLE III

	
 

	
COMPENSATION
OF MANAGER

	
 

	
8

	
 

	
 

	
3.01.

	
 

	
Management
Fees

	
 

	
8

	
 

	
 

	
3.02.

	
 

	
Operating
Profit

	
 

	
8

	
 

	
 

	
3.03.

	
 

	
Accounting
Fee

	
 

	
10

	
 

	
 

	
ARTICLE IV

	
 

	
ACCOUNTING,
BOOKKEEPING AND BANK ACCOUNTS

	
 

	
11

	
 

	
 

	
4.01.

	
 

	
Accounting,
Distributions and Annual Reconciliation

	
 

	
11

	
 

	
 

	
4.02.

	
 

	
Books and
Records

	
 

	
12

	
 

	
 

	
4.03.

	
 

	
Accounts,
Expenditures

	
 

	
12

	
 

	
 

	
4.04.

	
 

	
Annual
Operating Projection

	
 

	
13

	
 

	
 

	
4.05.

	
 

	
Working
Capital

	
 

	
13

	
 

	
 

	
4.06.

	
 

	
Fixed Asset
Supplies

	
 

	
14

	
 

	
 

	
4.07.

	
 

	
Real Estate
and Personal Property Taxes

	
 

	
14

	
 

	
 

	
4.08.

	
 

	
Sarbanes-Oxley
Certification

	
 

	
15

	
 

	
 

	
ARTICLE V

	
 

	
REPAIRS,
MAINTENANCE AND REPLACEMENTS

	
 

	
16

	
 

	
 

	
5.01.

	
 

	
Repairs and
Maintenance to be Paid from Gross Revenues

	
 

	
16

	
 

	
 

	
5.02.

	
 

	
Repairs,
Maintenance and Equipment Replacements to be Paid from Reserve

	
 

	
16

	
 

	
 

	
ARTICLE VI

	
 

	
INSURANCE

	
 

	
18

	
 

	
 

	
6.01.

	
 

	
Property
Insurance

	
 

	
18

	
 

i

	
 

	
 

	
 

	
 

	
 

	
 

	
6.02.

	
 

	
Operational
Insurance

	
 

	
18

	
 

	
 

	
6.03.

	
 

	
Coverage;
Deductibles

	
 

	
19

	
 

	
 

	
6.04.

	
 

	
Costs and
Expenses

	
 

	
20

	
 

	
 

	
6.05.

	
 

	
Owner’s
Right to Provide Insurance

	
 

	
20

	
 

	
 

	
ARTICLE VII

	
 

	
DAMAGE AND
REPAIR

	
 

	
20

	
 

	
 

	
7.01.

	
 

	
Damage and
Repair

	
 

	
20

	
 

	
 

	
7.02.

	
 

	
Condemnation

	
 

	
21

	
 

	
 

	
7.03.

	
 

	
Subordination
to Qualified Mortgage

	
 

	
22

	
 

	
 

	
7.04.

	
 

	
No
Covenants, Conditions or Restrictions

	
 

	
22

	
 

	
 

	
7.05.

	
 

	
Liens;
Credit

	
 

	
23

	
 

	
 

	
7.06.

	
 

	
Hotel Lease

	
 

	
23

	
 

	
 

	
ARTICLE VIII

	
 

	
DEFAULTS

	
 

	
23

	
 

	
 

	
8.01.

	
 

	
Events of
Default

	
 

	
23

	
 

	
 

	
8.02.

	
 

	
Remedies

	
 

	
24

	
 

	
 

	
8.03.

	
 

	
Additional
Remedies

	
 

	
25

	
 

	
 

	
ARTICLE IX

	
 

	
ASSIGNMENT
AND SALE

	
 

	
25

	
 

	
 

	
9.01.

	
 

	
Assignment

	
 

	
25

	
 

	
 

	
9.02.

	
 

	
Sale of the
Hotel

	
 

	
26

	
 

	
 

	
ARTICLE X

	
 

	
MISCELLANEOUS

	
 

	
26

	
 

	
 

	
10.01.

	
 

	
Right to
Make Agreement

	
 

	
26

	
 

	
 

	
10.02.

	
 

	
Consents and
Cooperation

	
 

	
27

	
 

	
 

	
10.03.

	
 

	
Relationship

	
 

	
27

	
 

	
 

	
10.04.

	
 

	
Applicable
Law

	
 

	
27

	
 

	
 

	
10.05.

	
 

	
Recordation

	
 

	
28

	
 

	
 

	
10.06.

	
 

	
Headings

	
 

	
28

	
 

	
 

	
10.07.

	
 

	
Notices

	
 

	
28

	
 

	
 

	
10.08.

	
 

	
Environmental
Matters

	
 

	
29

	
 

	
 

	
10.09.

	
 

	
Confidentiality

	
 

	
30

	
 

	
 

	
10.10.

	
 

	
Indemnification

	
 

	
30

	
 

	
 

	
10.11.

	
 

	
Actions to
be Taken Upon Termination

	
 

	
30

	
 

	
 

	
10.12.

	
 

	
Waiver

	
 

	
32

	
 

	
 

	
10.13.

	
 

	
Partial
Invalidity

	
 

	
32

	
 

	
 

	
10.14.

	
 

	
Survival

	
 

	
32

	
 

ii

	
 

	
 

	
 

	
 

	
 

	
 

	
10.15.

	
 

	
Negotiation
of Agreement

	
 

	
32

	
 

	
 

	
10.16.

	
 

	
Estoppel
Certificates

	
 

	
32

	
 

	
 

	
10.17.

	
 

	
Affiliates

	
 

	
33

	
 

	
 

	
10.18.

	
 

	
Blocked
Persons or Entities

	
 

	
33

	
 

	
 

	
10.19.

	
 

	
Restrictions
on Operating the Hotel in Accordance with System Standards

	
 

	
34

	
 

	
 

	
10.20.

	
 

	
Counterparts

	
 

	
34

	
 

	
 

	
10.21.

	
 

	
Entire
Agreement

	
 

	
34

	
 

	
 

	
10.22.

	
 

	
Franchise
Agreement

	
 

	
34

	
 

	
 

	
10.23.

	
 

	
Operation of
Other Hotels

	
 

	
35

	
 

	
 

	
10.24.

	
 

	
Expert
Decisions

	
 

	
35

	
 

	
 

	
10.25.

	
 

	
Waiver of
Jury Trial and Punitive Damages

	
 

	
36

	
 

	
 

	
ARTICLE XI

	
 

	
DEFINITION OF TERMS

	
 

	
36

	
 

	
 

	
11.01.

	
 

	
Definition
of Terms

	
 

	
36

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Schedule 1

	
 

	
-

	
Hotel Specific Data

	
 

	
 

	
 

	
Exhibit A

	
 

	
-

	
Legal Description of Site

	
 

	
 

	
 

	
Exhibit B

	
 

	
-

	
Representations and Warranties

	
 

	
 

	
 

iii

MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT (“Agreement”)
is executed as of the __ day of February, 2011 (“Effective Date”), by APPLE TEN HOSPITALTY MANAGEMENT,
INC., a Virginia corporation, (“Owner”),
with a mailing address at c/o Apple REIT Companies, 1814 East Main Street,
Richmond, Virginia 23219, Attention: Krissy Gathright, and STONEBRIDGE REALTY
ADVISORS, INC., a Colorado corporation, d/b/a STONEBRIDGE COMPANIES (“Manager”), with a mailing address at
c/o Stonebridge Companies, 9100 East Panorama Drive, Suite 300, Englewood,
Colorado 80112, Attention: Navin C. Dimond.

R E C I T A L S:

          Apple
Ten Hospitality Ownership, Inc., a Virginia corporation (“Landlord”), is the owner of that
certain hotel consisting of the Buildings located on the Site. The Site and the
Buildings, in addition to certain other rights, improvements, and personal
property as more particularly described in the definition of “Hotel” in Section 11.01 hereof, are
collectively referred to as the “Hotel.”

          Landlord
and Owner have entered into that certain Hotel Lease Agreement dated as of the
Effective Date (the “Hotel Lease”)
pursuant to which Landlord leases the Hotel to Owner. Concurrently with the
execution of this Agreement, Landlord, Owner and Manager have entered into a
recognition agreement, pursuant to which Landlord has agreed to recognize
Manager as the operator of the Hotel and assume the remaining obligations of
Owner under this Agreement or cause Manager to be so recognized and such
remaining obligations to be assumed by a successor tenant, if the Hotel Lease
terminates prior to the end of the term of this Agreement, as it may be
extended.

          All
capitalized terms used in this Agreement shall have the meaning set forth in
Section 11.01 hereof.

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

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

ARTICLE I

APPOINTMENT OF MANAGER

          1.01. Appointment.

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

          1.02. Management of the Hotel.

                    A.
Manager shall manage the Hotel, including, without limitation, performance of
the following functions, in accordance with Prudent Industry Practices, the
provisions of this Agreement and all standards imposed by the Franchise
Agreement (provided that in all cases, except as otherwise specifically set
forth in this Agreement, the costs and expenses of performing such functions
shall be Deductions):

                              1.
Recruit, employ, supervise, direct and discharge the employees at the Hotel and
maintain adequate staff, consistent with Prudent Industry Practices, to carry
out its duties under this Agreement, which employees may be employed by an
Affiliate of Manager as provided in Section 1.03.

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

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

                              4.
Make payments on accounts payable and collect accounts receivable.

                              5.
Procure (for Owner) all Inventories and replace Fixed Asset Supplies.

                              6.
Prepare and deliver interim accountings, annual accountings, Annual Operating
Statements, Building Estimates, Repairs and Equipment Estimates and such other
information as is required by this Agreement.

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

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

                              9.
Obtain and keep in full force and effect, either in its own name or in Owner’s
or Owner’s affiliate’s name, as may be required by applicable law, any and all
licenses (including, without limitation, liquor licenses which shall be
maintained in the name of Manager to the extent permitted by law) and permits
to the extent same is within the control of Manager (or, if same is not within
the control of Manager, Manager shall use reasonable efforts to obtain and keep
same in full force and effect).

                              10.
Subject to the terms of this Agreement, execute subordination agreements,
estoppel certificates and other documentation required by any purchaser or
mortgagee and reasonably cooperate (provided that Manager shall not be
obligated to enter into 

2

any amendments of this Agreement) with Owner or Landlord in any
attempt(s) by Owner or Landlord to effectuate a Sale of the Hotel or to obtain
a Qualified Mortgage.

                              11.
Arrange for and supervise public relations and advertising and prepare
marketing plans.

                              12.
Manage and operate the Hotel at all times in compliance with the Franchise
Agreement, including (without limitation) the Manual and the System standards
(as such terms are defined therein).

                    B.
The operation of the Hotel shall be under the exclusive supervision and control
of Manager, except as otherwise specifically provided in this Agreement, and
Manager shall be responsible for the proper and efficient operation of the
Hotel. In fulfilling its obligations under this Agreement, Manager will act as
a reasonable, prudent operator of the Hotel, having regard for the status of
the Hotel, operating the Hotel in accordance with Prudent Industry Practices
and at all times maintaining and complying with all standards imposed by the
Franchise Agreement, and subject to the foregoing and all other terms and
conditions of this Agreement, shall have discretion in the following: charges,
terms and conditions for Guest Rooms and commercial space; credit policies and
services provided by the Hotel; food and beverage services; employment
policies; granting of leases, subleases, licenses and concessions for shops and
businesses within the Hotel, provided that the term of any such lease,
sublease, license or concession shall not exceed the lesser of one (1) year or
the Term without the prior written approval of Owner; receipt, holding and
disbursement of funds; maintenance of bank accounts; procurement of
Inventories, supplies and services; promotion and publicity; payment of costs
and expenses as are specifically provided for in this Agreement or are
otherwise reasonably necessary for the proper and efficient operation of the
Hotel; and, generally, all activities necessary for operation of the Hotel.
With respect to all Material Management Decisions, Manager shall consult with
Owner in advance of making any such decisions. The term “Material Management Decisions” means a
decision to be made in connection with any expenditure of more than $10,000 in
each instance, or aggregate expenditures in any Fiscal Year of five percent
(5%) or more of the total annual expenses provided for in the approved Annual
Operating Projection for such Fiscal Year, if such expenditure is not included
in the approved Annual Operating Projection for such Fiscal Year or if such
expenditure would result in an increase in the overall Annual Operating
Projection approved by Owner, unless such expenditure is made to address an emergency
situation.

                    C.
Manager shall comply with and abide by all applicable Legal Requirements
pertaining to its operation of the Hotel. Any of Landlord, Owner or Manager
shall have the right, but not the obligation, in its reasonable discretion, to
contest or oppose, by appropriate proceedings, any such Legal Requirements. The
reasonable expenses of any such contest of a Legal Requirement shall be
Deductions and shall be paid from Gross Revenues or from other funds in the
Operating Accounts.

          1.03. Employees

          All
personnel employed at the Hotel shall at all times be the employees of Manager
(or, after disclosure to Owner, one of its Affiliates) and not the employees of
Owner. Manager shall

3

have reasonable discretion with respect to all personnel employed at
the Hotel, including, without limitation, decisions regarding hiring,
promoting, transferring, compensating, supervising, terminating, directing and
training all employees at the Hotel, and, generally, establishing and
maintaining all policies relating to employment; provided, however, that (i)
Owner shall have the right to approve the hiring of the persons who occupy the
position of General Manager for the Hotel in accordance with the procedures set
forth below and (ii) except as otherwise required by applicable Legal
Requirements, Manager shall not negotiate or enter into any collective
bargaining or other labor agreement with employees or with any organization
representing or claiming to represent employees without Owner’s prior consent.
No person shall be given gratuitous accommodations or services without prior
joint approval of Owner and Manager except in accordance with policies agreed
upon by Owner and Manager and except corporate personnel of Manager at the
Hotel on a temporary basis for Hotel business (such as the meetings described
in Section 1.05). Manager shall reimburse Owner for the costs (including
relocation costs) of hiring and training General Managers who are employed at
the Hotel for six (6) months or less and are transferred or relocated (other
than to another hotel managed by Manager for Owner or any of Owner’s
Affiliates), and for such costs on a pro-rated basis (over twelve (12) months)
for General Managers employed at the Hotel for more than six (6) months but
less than twelve (12) months (other than those transferred or relocated to
another hotel managed by Manager for Owner or any of Owner’s Affiliates), and
Manager shall promptly reimburse Owner for any such costs that are payable by
Manager, which amounts shall be Manager’s Liabilities. 

          The
procedures for selection of the General Manager shall be as follows: Manager
shall provide Owner with the resume of the candidate for General Manager who is
qualified for such position in Manager’s reasonable judgment. Owner shall
notify Manager in writing of its approval or disapproval of such candidate
within five (5) Business Days after Owner’s receipt of the candidate’s resume,
Owner’s approval not to be unreasonably withheld. If Owner approves the
candidate or fails to notify Manager in writing of Owner’s approval or
disapproval of the candidate presented by Manager, Manager may appoint such
candidate to the position of General Manager. If Owner disapproves any
candidate presented by Manager, Manager shall not appoint such candidate as
General Manager. 

          1.04. Owner’s
Right to Inspect.

          Owner, its
representatives, employees, agents, Affiliates and Mortgagees shall have access
to the Hotel at any and all reasonable times for the purpose of inspection,
exercising any of its rights under this Agreement or showing the Hotel to
prospective purchasers, tenants or Mortgagees, provided that the operation of
the Hotel is not unreasonably interfered with, and at any time in case of an
emergency.

          1.05. Regular
Meetings.

          At Owner’s
request, Owner and Manager shall have meetings at the Hotel and at mutually
convenient times no more frequently than once a quarter. Manager shall be
represented at such meetings by the General Manager of the Hotel and such other
personnel as the General Manager and Owner may deem appropriate. The travel
costs and expenses for such other personnel to attend the meetings shall be
paid from the Operating Accounts as Deductions. The purpose of 

4

the meetings shall be, inter alia, to discuss the
performance of the Hotel and other related issues, including any variations
from the approved Annual Operating Projection for the preceding quarter.

          1.06. System
Standards

          Subject to
the availability of adequate funds, Manager shall take such actions consistent
with this Agreement as are necessary for the Hotel to comply with the System
Standards, and Manager shall operate the Hotel so that the Hotel will at all
times comply with System Standards.

          1.07. Limitations
on Manager’s Authority

          Unless
provided for in the approved Annual Operating Projection, Manager shall not,
without Owner’s prior written approval, enter into any FF&E Lease if (i)
the fair market value of the FF&E subject to such FF&E Lease at the
time of entering into such FF&E Lease exceeds Thirty-Five Thousand Dollars
($35,000); (ii) the fair market value of the FF&E subject to all FF&E
Leases at the time of entering into such FF&E Lease exceeds Sixty Thousand
Dollars ($60,000) in the aggregate; (iii) the FF&E subject to such FF&E
Lease is FF&E that is not, consistent with Prudent Industry Practices,
customarily leased; (iv) such FF&E Lease is with an Affiliate of Manager or
is on payment terms (including the amounts and schedule of payments) that would
be materially more favorable to the lessor thereof than payment terms customary
under Prudent Industry Practices for leases of similar FF&E; or (v) such
FF&E Lease is not terminable by Owner upon thirty (30) days’ notice if such
FF&E Lease is more than one (1) year in duration.

          1.08. Representations
and Warranties of Manager.

          Manager
hereby makes the representations and warranties to Owner set forth in Exhibit B
attached hereto and made a part hereof by this reference. 

          1.09. Limitations
on Manager’s Duties

                    A.
Manager’s duties under this Agreement are subject to the availability of
sufficient funds from the operation of the Hotel or which are otherwise provided
by Owner. Except as otherwise expressly provided in this Agreement, all costs
and expenses of operating, maintaining, marketing and improving the Hotel shall
be payable out of funds from the operation of the Hotel or which are otherwise
provided by Owner. In no event shall Manager be obligated to advance any of its
own funds to pay any such costs or expenses for the Hotel except as expressly
provided in this Agreement. Anything in this Agreement to the contrary
notwithstanding, Manager shall be excused from its obligations to operate the
Hotel in conformity with its obligations hereunder to the extent and whenever
Manager shall be prevented from compliance with such standard by reason of the
occurrence of a Force Majeure.

                    B.
In connection with any insurance coverages required or obtained under this
Agreement, neither Manager nor any insurance broker Manager or its Affiliates
may retain makes any warranty or representation regarding the advisability,
nature, or extent of the insurance coverages provided by Manager for the
benefit of Owner or any other coverages that 

5

Owner should consider for the protection of Owner, the Hotel and its
operations. Owner agrees to rely exclusively on its own insurance advisors with
respect to all insurance matters.

                    C.
Any and all financial projections and budgets prepared by Manager under this
Agreement, including the Annual Operating Projection, are intended to assist in
operating the Hotel, but are not to be relied on by Owner or any third party as
to the accuracy of the information contained therein or the results predicted.
Manager does not guarantee the accuracy of the information contained in such
projections and budgets, nor does it guarantee the results of such projections
and budgets, and Owner acknowledges that Manager shall not be held responsible
by Owner or any third party for any divergence between such projections and
budgets and actual operating results achieved. If Owner provides any such
financial projections or budgets to a third party, Owner shall be obligated to
advise such third party in writing of the substance of this disclaimer.

          1.10. Centralized
Services.

          Manager may
provide to the Hotel the following services that are furnished generally on a
central or system-wide basis to other hotels operated by Manager or its
Affiliates: Director of Engineering and Maintenance, Revenue/Channel Manager,
Risk Manager, Group/Tour Sales Department, MIS Support Services and joint
advertising and marketing. The salaries, wages, development costs and overhead
related to the employees of Manager providing such centralized services shall
be allocated on a fair basis among all hotels receiving such services based
upon the extent to which such services benefit the Hotel. Manager shall provide
to Owner for Owner’s approval as a part of the Annual Operating Projection
pursuant to Section 4.04 the projected costs of such centralized services.

ARTICLE II

TERM

          2.01. Term.

          The “Term” of this Agreement shall begin on
the Effective Date and shall continue until the expiration of the tenth
anniversary of the date hereof. The Term of this Agreement may be extended only
upon mutual agreement of Manager and Owner, each in the exercise of its sole
and absolute discretion, on all the same terms (other than term) as set forth
in this Agreement for two (2) consecutive periods, each such extension term
being for periods of five (5) years each. In the event the parties do not reach
an agreement to so extend, this Agreement shall terminate as provided in the
first sentence of this Section.

          2.02. Performance
Termination.

                    A.
Owner shall have the option to terminate this Agreement if during any of the
first five (5) Fiscal Years both of the following occur:

                              1.
Operating Profit for (i) the second Fiscal Year is insufficient to pay to Owner
at least $4,680,000 in Owner’s Priority for such Fiscal Year or (ii) the third
Fiscal Year is insufficient to pay to Owner at least $5,265,000 in Owner’s
Priority for such Fiscal Year, or 

6

(iii) in each of the fourth or fifth Fiscal Year is insufficient to pay
to Owner at least $5,850,000 in Owner’s Priority for such Fiscal Year; and

                              2.
The Revenue Index of the Hotel for such Fiscal Year is less than the Revenue
Index Threshold.

                    B.
Owner shall have the option to terminate this Agreement if during the sixth (6th)
Fiscal Year or any Fiscal Year thereafter any of the following occur:

                              1.
Operating Profit for any such Fiscal Year is insufficient to pay to Owner the
full amount of Owner’s Priority for such Fiscal Year; or

                              2.
The Revenue Index of the Hotel for such Fiscal Year is less than the Revenue
Index Threshold.

                    C.
For purposes of determining whether Owner has the option to terminate this
Agreement under Subsection A or Subsection B of this Section 2.02, to the
extent the operating results of the Hotel were materially and quantifiably
affected by Force Majeure affecting the Hotel or by major renovations of the
Hotel, the Operating Profit or Revenue Index, as applicable, shall be equitably
adjusted to amounts reasonably projected absent such Force Majeure or major
renovations, such adjustments to be substantiated by such evidence and
reasonably detailed calculations provided by Manager to Owner as are reasonably
acceptable to Owner. Owner shall exercise its option to terminate pursuant to
Subsection A or B of this Section 2.02 based upon the Operating Profit and/or
Revenue Index, as applicable, for a Fiscal Year by serving written notice
thereof on Manager no later than sixty (60) days after Owner’s receipt of the
Annual Operating Statement under Section 4.01.A for such Fiscal Year, and this
Agreement shall terminate as of the end of the second (2nd) full
Accounting Period following the date on which Manager receives the
above-described notice from Owner.

                    D.
Owner’s failure to exercise its right to terminate this Agreement pursuant to
this Section 2.02 shall not be deemed an estoppel or waiver of Owner’s right to
terminate this Agreement with respect to any subsequent event or circumstance
that could give Owner the right to terminate hereunder.

                    E.
Upon receipt of Owner’s written notice of termination under Section 2.02A or B,
above, if Operating Profit is less than five percent (5%) below the full amount
of Owner’s Priority for the applicable Fiscal Year, Manager shall have the
option, to be exercised within ten (10) days after receipt of the notice, to
avoid the termination by electing (in a notice to Owner) to pay Owner the
amount (the “Cure Payment”)
by which Owner’s Priority exceeded Operating Profit for the Fiscal Year in
which the performance test was failed. Except as expressly provided in the
preceding sentence of this Section 2.02E, Manager shall not have any right to
avoid termination without the prior written consent of Owner.

7

ARTICLE III

COMPENSATION OF MANAGER

          3.01. Management Fees. 

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

                    A. the Base Management Fee, which shall
be retained by Manager from Gross Revenues; plus 

                    B. the Incentive Management Fee but
only to the extent of available Operating Profit after payment of Owner’s
Priority (including, without limitation, all accrued and unpaid Owner’s
Priority) as provided in Section 3.02 below. 

          3.02. Operating Profit. 

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

                              1. Any accrued but unpaid Base
Management Fee payable in respect of any prior Accounting Period shall be paid
to Manager; 

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

                              3.
The Incentive Management Fee shall be paid to Manager; and 

                              4.
Any remaining balance of Operating Profit shall be paid to Owner. 

          Owner’s
Priority shall not be cumulative from one Fiscal Year to the next, and to the
extent the maximum amount of Owner’s Priority is unpaid in any Fiscal Year,
such unpaid amount shall not accrue or be payable in any subsequent Fiscal
Year. The Incentive Management Fee for each Fiscal Year will be payable to
Manager, in quarterly installments at the end of each calendar quarter, based
upon the projected Incentive Management Fee provided for in the approved Annual
Operating Projection for such Fiscal Year, calculated and adjusted quarterly
using actual operating results to date for such Fiscal Year and projected
Operating Profit for the remainder of such Fiscal Year as provided for in the
approved Annual Operating Projection. Notwithstanding anything in this
Agreement to the contrary, Manager acknowledges and agrees that (i) Base
Management Fees are payable monthly within thirty (30) days after the end of
each Accounting Period during the Term; (ii) estimated and unpaid Incentive
Management Fees for the remainder of any Fiscal Year shall be adjusted at the
end of each calendar quarter in such Fiscal Year based upon the actual
operating results to date for such Fiscal Year, with all final adjustments to
be made (and payment made to Owner or Manager, as applicable, any amount payable
by Manager to a Manager’s Liability) annually within thirty (30) days after
Owner’s receipt and acceptance of the Annual Operating Statement; (iii)
Incentive Management Fees are payable only to the extent of available Operating
Profit after payment in 

8

full of Owner’s Priority; and (iv) in no event shall Incentive
Management Fees accrue or be deemed to accrue. 

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

                    C. During any period of discontinued or
reduced operations of the Hotel or any part thereof as a result of damage,
destruction or condemnation that does not result in a termination of this
Agreement and during repair or restoration thereafter, Owner shall pay to
Manager for each Accounting Period, in lieu of any Base Management Fee and/or
Incentive Management Fee that might otherwise be payable under this Agreement,
an amount equal to the higher of (a) the Base Management Fee for such
Accounting Period that would be payable pursuant to Section 3.01A treating
business interruption insurance proceeds and/or condemnation proceeds as Gross
Revenues or (b) the Base Management Fee and Incentive Management Fee (if any)
for such Accounting Period that would have been payable if the Hotel had
achieved the projected operating results set forth in the approved Annual
Operating Projection. Notwithstanding the foregoing, in no event will any Base
Management Fees, Incentive Management Fees or management fees in lieu thereof
accrue or be payable by Owner to Manager in excess of the amount included as
management fees in any business interruption proceeds received by Owner in
respect of such Accounting Period. 

          3.03. Accounting Fee. 

          Manager
will perform certain data processing and accounting functions for the Hotel at
Manager’s headquarters or central office using personnel that are not employed
at the Hotel. In consideration of Manager’s performance of these data
processing and accounting functions for the benefit of the Hotel, Owner will
pay to Manager on a monthly basis the Accounting Fee, which Accounting Fee
shall be prorated for any partial month and may be withheld by Manager from
Gross Revenues. 

9

ARTICLE IV

ACCOUNTING, BOOKKEEPING AND BANK ACCOUNTS

          4.01. Accounting, Distributions and
Annual Reconciliation. 

                    A. Within fifteen (15) days after the
close of each Accounting Period, Manager shall deliver an interim accounting
(the “Accounting Period Statement”)
to Owner, prepared in accordance with the Uniform System of Accounts, showing
Gross Revenues, Deductions, Operating Profit and applications and distributions
thereof for the preceding Accounting Period and any other information
reasonably requested by Owner. Manager shall transfer to Owner, with each
Accounting Period Statement, any interim amounts due Owner, subject to Working
Capital needs reasonably proposed by Manager and approved by Owner, such
approval not to be unreasonably withheld, and shall retain any interim amounts
payable to Manager pursuant to the terms of this Agreement. 

                    B. Calculations and payments of the
Incentive Management Fee, the Base Management Fee and distributions of
Operating Profit made with respect to each Accounting Period shall be accounted
for cumulatively within a Fiscal Year, but shall not be cumulative from one
Fiscal Year to the next. Within the SEC Filing Period, Manager shall deliver to
Owner a statement (the “Annual Operating
Statement”) in reasonable detail summarizing the operations of the
Hotel for the immediately preceding Fiscal Year and a certificate of Manager’s
chief accounting officer certifying that, to the best of his or her knowledge,
such Annual Operating Statement is true and correct. The parties shall, within
five (5) Business Days after Owner’s receipt of such Annual Operating
Statement, make any adjustments, by cash payment, in the amounts paid or
retained for such Fiscal Year as are needed because of the final figures set
forth in such Annual Operating Statement. Such Annual Operating Statement shall
be controlling over the preceding Accounting Period Statements. 

                    C. To the extent there is an Operating
Loss for any Accounting Period, no Base Management Fee shall be paid to or
retained from Gross Revenues by Manager. Any Base Management Fee that would have
been payable to Manager had there been an Operating Profit for such Accounting
Period shall accrue (but not beyond the Term of this Agreement) and shall be
payable to Manager as provided in Article III to the extent of Operating Profit
in subsequent Accounting Periods. 

          To the
extent there is an Operating Loss for any Accounting Period, additional funds
in the amount of any such Operating Loss (other than the amount of any Base
Management Fee) shall be provided by Owner within thirty (30) days after
Manager has delivered written notice thereof to Owner. If Owner does not fund
such Operating Loss within the thirty (30) day time period, Manager shall have
the right after prior written notice to Owner (without affecting Manager’s
other remedies under this Agreement) to withdraw an amount equal to such
Operating Loss from future distributions of funds otherwise due to Owner. In
the event an Operating Loss occurs for each of six (6) consecutive Accounting
Periods during any Fiscal Year, Owner may elect to terminate this Agreement,
provided that, in determining whether Owner has the option to terminate this
Agreement pursuant to this sentence, to the extent the operating results of the
Hotel were materially and quantifiably affected by Force Majeure affecting the
Hotel or by major renovations to the Hotel, such operating results shall be
equitably adjusted to amounts reasonably 

10

projected absent such Force Majeure or major renovations, such
adjustments to be substantiated by such evidence and reasonably detailed
calculations provided by Manager to Owner as are reasonably acceptable to Owner. 

          4.02. Books and Records. 

          Books
of control and account pertaining to operations at the Hotel shall be kept on
the accrual basis and in all material respects in accordance with the Uniform
System of Accounts. Owner may at reasonable intervals during Manager’s normal
business hours examine such records. If Owner desires (at its own expense,
except as provided below) to audit, examine or review the Annual Operating
Statement, Owner shall notify Manager in writing within sixty (60) days after
receipt of such Annual Operating Statement of its intention to audit and begin
such audit no sooner than ten (10) days after Manager’s receipt of such notice and
not later than sixty (60) days after Manager’s receipt of such notice. Owner
shall use reasonable efforts to complete such audit within one hundred twenty
(120) days after commencement thereof. If Owner does not make such an audit,
then such Annual Operating Statement shall be deemed to be conclusively
accepted by Owner as being correct, except in the event of manifest error or
fraud, misrepresentation, misconduct or negligence by Manager or its agents,
employees, representatives or contractors or other third parties. If any audit
by Owner discloses an understatement of any amounts due Owner, Manager shall
promptly pay Owner such amounts found to be due, plus interest thereon at the
Prime Rate plus one percent (1%) per annum from the date such amounts should
originally have been paid. If any audit discloses that Manager has not received
any amounts due it, Owner shall pay Manager such amounts, plus interest thereon
at the Prime Rate plus one percent (1%) per annum from the date such amounts
should originally have been paid. The cost of the audit shall be paid by Owner;
provided, however, Manager shall pay for such cost if such audit discloses an
underpayment to Owner for the Fiscal Year so audited of five percent (5%) or
more of the amount that should have been paid to Owner for such Fiscal Year. In
addition, if the Franchise Agreement requires Owner to pay interest and/or the
cost of an audit to the franchisor on account of an understatement in reports
provided by Manager, Manager shall pay such interest and costs in accordance
with the Franchise Agreement without (either directly or indirectly) passing
such charges on to Owner. 

          4.03. Accounts, Expenditures. 

                    A. All funds derived from operation of
the Hotel shall be deposited by Manager in Owner’s bank accounts (the “Operating Accounts”) established by Manager
in a bank or banks designated by Manager with the concurrence of Owner.
Withdrawals by Manager from said Operating Accounts shall be made solely by
representatives of Manager, but only those representatives whose signatures
have been authorized by Manager with the concurrence of Owner. Reasonable petty
cash funds shall be maintained at the Hotel. 

                    B. Except as otherwise provided in this
Agreement, all payments made by Manager hereunder shall be made from the
Operating Accounts, petty cash funds, or from the Reserve (in accordance with
Section 5.02). Manager shall not be required to make any advance or payment
with respect to the Hotel except out of such funds, and Manager shall not be
obligated to incur any liability or obligation with respect to the Hotel except
as otherwise 

11

provided in this Agreement (including, without limitation, pursuant to
Sections 1.03, 3.02A, 3.03 and 10.10A) (each, “Manager’s Liability”, and, collectively, “Manager’s Liabilities”). 

                    C. Debts and liabilities (other than
Manager’s Liabilities) incurred by Manager as a result of its operation and
management of the Hotel pursuant to the terms hereof, whether asserted before
or after Termination, will be paid by Owner to the extent funds are not
available for that purpose from Gross Revenues. Manager shall pay all of
Manager’s Liabilities. The provisions of this Section 4.03C shall survive
Termination. 

          4.04. Annual Operating Projection. 

          Manager
shall deliver to Owner for its review, at least thirty (30) days prior to the
beginning of each Fiscal Year after the first Fiscal Year following the
Effective Date, a preliminary draft of the business plan (including a proposed
budget) and a projection of the estimated Gross Revenues, departmental profits,
Deductions, and Operating Profit for the forthcoming Fiscal Year for the Hotel
(the “Annual Operating Projection”)
for approval by Owner. Manager will consider in good faith suggestions made by
Owner with respect to the Annual Operating Projection and make modifications
thereto that are agreed upon by Owner and Manager. In the case of the Fiscal
Year beginning on the Effective Date, Manager and Owner have already agreed
upon the Annual Operating Projection for such Fiscal Year. Notwithstanding the
foregoing, Owner shall not be entitled to withhold its approval of the Annual
Operating Projection based solely on its objection to: (i) Manager’s reasonable
projections of either Gross Revenues or the components thereof, (ii)
Impositions, utility charges and similar charges determined by governmental
authorities or providers whose rates cannot be controlled or negotiated by
Manager, or (iii) increases in projected costs and expenses of operating the
Hotel caused by projected increases in occupancy or use of Hotel facilities
that are projected to increase Gross Revenues. Upon approval of the Annual
Operating Projection by Owner and Manager, Manager in good faith shall use best
efforts to adhere to such Annual Operating Projection. In the event Owner and
Manager (each acting reasonably and in good faith in considering projections
for operation of the Hotel pursuant to Prudent Industry Practice, the Franchise
Agreement, any Qualified Mortgage affecting the Hotel and this Agreement) are
unable to agree upon the Annual Operating Projection by the commencement of the
Fiscal Year to which it relates, Owner or Manager may elect to terminate this
Agreement by serving written notice to the other party, and this Agreement
shall terminate as of the end of the second (2nd) full Accounting
Period following the date on which such party receives such notice of
termination. Any such notice of termination shall be given not later than
thirty (30) days after the end of the then-current Fiscal Year, provided that
Owner shall have received the proposed Annual Operating Projection from Manager
at least thirty (30) days prior to the end of the then-current Fiscal Year.
Pending such termination, Manager shall operate the Hotel with respect to those
categories that are in dispute based on the previous Fiscal Year’s approved
Annual Operating Projection. 

          4.05. Working Capital. 

          The parties
recognize that, as of the Effective Date, the level of Working Capital funds,
which shall be held in the Operating Accounts, is reasonably believed to be
reasonably sufficient for the operations of the Hotel, subject at all times to
seasonal differences and changes in 

12

circumstances after the Effective Date. To the extent the expenditure
of additional Working Capital funds has been reasonably proposed by Manager and
approved by Owner, such approval not to be unreasonably withheld, Owner shall
from time to time during the Term advance any such additional funds which
Manager shall use to satisfy such needs of the Hotel as have been reasonably
proposed by Manager and approved by Owner. If Owner does not so fund additional
Working Capital as approved by Owner within thirty (30) days after receipt by
Owner of a written request therefor from Manager, Manager shall have the right
(without affecting Manager’s other remedies under this Agreement) to withdraw,
after prior written notice to Owner, from future distributions of funds
otherwise due to Owner an amount equal to the funds agreed upon by Owner and
Manager for additional Working Capital. All funds so advanced for Working
Capital shall be utilized by Manager for the purposes of this Agreement. In the
event Owner and Manager are unable to agree upon the need for and/or amount of
additional Working Capital within thirty (30) days after Owner’s receipt of a
written notice from Manager of the need for additional funds for Working
Capital, Owner shall have no obligation to fund additional Working Capital and
Manager may elect to terminate this Agreement. Upon Termination, Manager shall
immediately return the outstanding balance of the Working Capital to Owner. 

          4.06. Fixed Asset Supplies. 

          The parties
further recognize that, as of the Effective Date, the level of funds for Fixed
Asset Supplies is reasonably believed to be reasonably sufficient for the
operations of the Hotel, subject at all times to seasonal differences and
changes in circumstances after the Effective Date. Any additional funds which
are necessary to maintain Fixed Asset Supplies at levels reasonably proposed by
Manager and approved by Owner, such approval not to be unreasonably withheld,
as being necessary to satisfy the needs of the Hotel, shall be paid from available
Gross Revenues or, at Owner’s election, funded by Owner within thirty (30) days
after Owner’s approval of such additional funds and, in each case, shall be
Deductions. Fixed Asset Supplies shall remain the property of Owner throughout
the term of this Agreement and upon Termination. 

          4.07. Real Estate and Personal Property Taxes. 

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

13

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

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

          4.08. Sarbanes-Oxley Certification.

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

14

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

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

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

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

ARTICLE V

REPAIRS, MAINTENANCE AND REPLACEMENTS 

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

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

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

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

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

                    2.
Routine Capital Expenditures. 

15

                    B.
Manager shall deposit funds in the
Reserve as provided in Item 3 of Schedule 1.
Transfers into the Reserve shall be made at the time of each interim
accounting described in Section 4.01 hereof. All amounts transferred to the
Reserve shall be deducted from Gross Revenues in determining Operating Profit
and shall be deposited in the special Reserve account described in Section
5.02.A. 

                    C.
Subject to the availability of
adequate funds, Manager shall from time to time make such (1) replacements and
renewals to the FF&E of the Hotel, and (2) Routine Capital Expenditures, as
may be provided for in the approved Annual Operating Projection, as may be
agreed upon by Owner and Manager or as may be required by the Franchise
Agreement. Except as may be required by the Franchise Agreement, no expenditures
will be made in excess of the balance of the Reserve without the approval of
Owner. At the end of each Fiscal Year, any amounts remaining in the Reserve
shall be carried forward to the next Fiscal Year. Proceeds from the sale of
FF&E no longer necessary to the operation of the Hotel shall be added to
the Reserve. The Reserve will be kept in an interest-bearing account, and any
interest which accrues thereon shall be retained in the Reserve. Neither (x)
proceeds from the disposition of FF&E, nor (y) interest which accrues on
amounts held in the Reserve, shall (a) result in any reduction in the required
contributions to the Reserve set forth in Section 5.02.B above, nor (b) be
included in Gross Revenues. Withdrawals by Manager from the Reserve may be made
in accordance with the approved Annual Operating Projection only by
representatives of Manager whose signatures have been authorized by Manager
with the concurrence of Owner. 

                    D.
All repairs, alterations,
improvements, renewals or replacements made pursuant to this Article V, and all
amounts kept in the Reserve, shall be the property of Owner, subject to
Manager’s rights to apply such funds as otherwise provided in this Agreement.
In addition and notwithstanding anything contained herein to the contrary, no
funds shall be expended for replacements, renewals and additions to the
FF&E, for Routine Capital Expenditures or for any other capital
expenditures unless each such expenditure is included in the approved Annual
Operating Projection or is necessary in an emergency to protect or preserve the
Hotel or the health and safety of Hotel employees, guests or customers. If
Owner elects to use Manager’s construction management services for construction
projects in connection with any Routine Capital Expenditures or other
non-emergency alterations or improvements, Owner will pay Manager such
construction management fee as may be agreed upon by the parties. 

                    E.
Notwithstanding anything contained
herein to the contrary, upon the mutual agreement of Owner and Manager, the
amounts that would otherwise be deposited into the Reserve pursuant to this
Section 5.02 shall be included in the Operating Profit, not deducted from Gross
Revenues and shall be distributed in cash to Owner along with the remainder of
the Owner’s Priority. In such case, Manager shall accrue such amounts as a
reserve on the accounting records of the Hotel, and Owner shall fund the same
only when required under this Agreement to cover the appropriate costs actually
incurred. If Owner does not so fund such amounts within thirty (30) days after
Owner is required to do so under this Agreement, Manager shall have the right
after prior written notice to Owner (without affecting Manager’s other remedies
under this Agreement) to withdraw from future distributions of funds otherwise
due to Owner an amount equal to such amount required to be so funded by Owner.
However, such accrued and unfunded reserves shall be deducted from Gross
Revenues for purposes of calculating the Incentive Management Fee. 

16

                    F.
Unless otherwise expressly covered
by this Article V, except in the case of an emergency, Manager shall not make
any capital expenditure or improvement without first obtaining Owner’s prior
written consent and approval. 

ARTICLE VI

INSURANCE

          6.01.
Property Insurance. 

                    A.
Subject to the provisions of Section
6.05, Manager shall, commencing with the Effective Date and for the duration of
the Term, procure and maintain, using funds deducted from Gross Revenues as a
Deduction in determining Operating Profit, the following insurance and/or such
other insurance as may be approved or required by Owner: 

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

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

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

                              4.
If the Hotel is in an
earthquake-prone area, earthquake insurance in accordance with Prudent Industry
Practices. 

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

          6.02.
Operational Insurance. 

          Subject to
the provisions of Section 6.05, Manager shall, commencing with the Effective
Date and for the duration of the Term, procure and maintain, using funds
deducted from Gross Revenues as a Deduction in determining Operating Profit,
with insurance companies approved by Owner the following insurance and/or such
other insurance as may be approved or required by Owner: 

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

17

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

                    C.
Fidelity bonds with respect to the
Hotel employees handling funds of the Hotel, in an amount agreed upon by Owner
and Manager; 

                    D.
Employment practices liability
insurance; and 

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

          Owner and
Landlord shall be the named insureds with respect to the insurance described in
Subsection 6.02B and 6.02D (to the extent possible) and, to the extent
applicable, Subsection 6.02E. Manager shall be the named insured and Owner and
Landlord shall be additional insureds on the policies described in Subsections
6.02A and 6.02C.

          6.03.
Coverage; Deductibles. 

          All
policies of insurance described in Sections 6.02 and 6.03, including the
coverages and the deductibles thereunder, shall be subject to Owner’s prior
approval, and Owner may require that any such coverage or policy be eliminated
or not be carried, provided that Owner will not require Manager to eliminate
any coverage that is customarily carried in accordance with Prudent Industry
Practice or that is required under a Qualified Mortgage, the Franchise
Agreement or other agreement binding on the Hotel. Either Owner or Manager may
require that insurance and/or additional insurance and/or coverage be
maintained in excess of that customarily carried in accordance with Prudent
Industry Practice, provided that the cost of such excess insurance and/or
coverage shall not be a Deduction and shall be borne by the party requesting
the same. Subject to Owner’s prior approval, such approval not to be
unreasonably withheld, and the provisions of Section 6.05, all insurance
described in Sections 6.01 and 6.02 may be obtained by Manager by endorsement
or equivalent means under its blanket insurance policies, provided that such
blanket policies fulfill the requirements specified herein. Deductible limits
shall be as agreed upon by Owner and Manager. No coverage required hereunder
shall be self-insured by Manager without prior written approval of Owner. Owner
shall have the right to approve the insurance policies to be obtained by
Manager pursuant hereto and the insurance companies issuing such policies. In
order to avoid any lapse in insurance coverage required to be maintained
pursuant to this Article VI, Manager shall request any consent required from
Owner hereunder with respect to insurance matters in a timely manner so that
Owner has a reasonable period of time to consider any such request, and Owner
shall respond within ten (10) days after receipt of any such request. Failure
to respond within such ten (10) day period shall be deemed approval by Owner. 

          6.04.
Costs and Expenses. 

18

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

          6.05.
Owner’s Right to Provide Insurance. 

          Notwithstanding
anything contained in this Agreement to the contrary, Owner and/or its
Affiliates (including, without limitation, Landlord) shall have the right to
procure and maintain any or all of the insurance for the Hotel otherwise
required to be maintained by Manager under this Article VI and in lieu of
Manager procuring the same, provided that Owner shall give Manager not less
than thirty (30) days notice of Owner’s intent to provide such insurance, shall
maintain such insurance as is customary in accordance with Prudent Industry
Practice and shall provide to Manager upon request certificates of insurance
evidencing the same. In such case, all of the terms and conditions of this
Article VI, to the extent applicable, shall govern the insurance procured by
Owner under this Section 6.05, including, without limitation, the requirement
that Owner be a named insured on the operational insurance described in Section
6.02. Without limiting the generality of the foregoing, all insurance premiums
and any costs or expenses and all deductibles with respect to such insurance
shall be Deductions in determining Operating Profit., provided that, in the
event the premiums for the insurance maintained by Owner are in excess of the
premiums that would have been payable by Manager had Manager maintained the
same insurance, the amount of such excess shall be payable by Owner and shall
not be a Deduction for the purposes of determining Operating Profit. Each
insurance policy maintained by Owner or Manager in accordance with this Section
6.05 shall contain a waiver of subrogation in favor of the other party, and
Owner and Manager each release the other from claims against the other to the
extent the same are covered by insurance.

ARTICLE
VII

DAMAGE AND REPAIR

          7.01.
Damage and Repair.

                    A.
If, during the Term, the Hotel is damaged or destroyed by fire, casualty or
other cause, Owner and/or Landlord may elect, in its sole and absolute
discretion, to repair or replace the damaged or destroyed portion of the Hotel
with such modifications as Owner may deem appropriate or as may be required by
law, and Manager shall have the right to discontinue operating the Hotel to the
extent it deems necessary to comply with applicable law, ordinance, regulation
or order or as necessary for the safe and orderly operation of the Hotel,
provided that Manager and Owner acknowledge that, in the event such damage is a
Minor Casualty, such damage shall be repaired as provided in Section 7.01C and
this Agreement shall remain in effect. Proceeds of insurance with respect to
the insurance described in Subsections 6.02A, 6.02C and 6.02D shall be paid to
Owner, Landlord and/or Manager, as their interests may appear. All proceeds
from all other insurance described in this Agreement shall be paid to Owner
and/or Landlord, as their interests may appear. If such damage or destruction
is other than a Minor

19

Casualty and Owner elects
not to repair or replace said damaged portion of the Hotel, Owner shall so
notify Manager by written notice within ninety (90) days after the date of the
casualty.

                    B.
In the event damage or destruction to the Hotel is other than a Minor Casualty
and Owner notifies Manager that Owner will not repair or replace such damage,
either party may terminate by at least sixty (60) days prior written notice to
the other party.

                    C.
If, during the Term, the Hotel is damaged by fire, casualty or other cause and
such damage is a Minor Casualty or Owner otherwise elects to repair or replace
such damaged or destroyed portion of the Hotel, Manager, with the concurrence
of Owner, shall, with all reasonable diligence, proceed to process the claim
with the applicable insurance carriers, including settling such claim, and to
make the necessary arrangements with appropriate contractors and suppliers to
repair and/or replace the damaged portion of the Hotel. Owner’s consent shall
be needed for Manager to perform any of the foregoing, all of which shall be
performed in accordance with Prudent Industry Practices. Owner agrees to sign
promptly any documents which are necessary to process and/or adjust the claim
with the insurance carriers, as well as any contracts with such contractors
and/or suppliers, provided that in each instance such documents and contracts
have previously been approved by Owner. If Owner elects to use Manager’s
construction management services for construction projects in connection with
any non-emergency repairs or replacements, Owner will pay Manager such
construction management fee as may be agreed upon by the parties.
Notwithstanding anything in this Agreement to the contrary, Manager agrees to
make or cause to have made all emergency repairs and replacements at the actual
cost paid or incurred for such repair or replacement.

          7.02.
Condemnation.

                    A.
In the event all or substantially all of the Hotel shall be taken in any
eminent domain, condemnation, compulsory acquisition, or similar proceeding by
any competent authority for any public or quasi-public use or purpose, or in
the event a portion of the Hotel shall be so taken, but the result is that
either Owner or Manager reasonably determines that it is not feasible to
continue to operate the Hotel in accordance with the standards required by this
Agreement, Owner or Manager may terminate this Agreement as of the effective
date of such taking. All awards and proceeds of any such taking or proceeding
shall belong to Owner and/or Landlord, as the case may be. 

                    B.
In the event this Agreement is not terminated pursuant to Section 7.02.A, such
portion of the Hotel that is not so taken shall be repaired or replaced, with
such modifications as Owner may deem appropriate or as may be required by law,
and this Agreement shall continue except as may be otherwise agreed by the
parties. All awards for any such partial taking or condemnation shall belong to
Owner and/or Landlord, as the case may be. Manager shall have the right to
discontinue temporarily operating the Hotel to the extent it deems necessary
for the safe and orderly operation of the Hotel.

          7.03.
Subordination to Qualified Mortgage.

                    A.
Manager shall provide to any Mortgagee an instrument (the “Subordination Agreement”),
reasonably satisfactory in all respects to Owner and such

20

Mortgagee, which shall be
recordable in the jurisdiction where the Hotel is located, pursuant to which:

                              1.
This Agreement and any extensions, renewals, replacements or modifications
thereto, and all right and interest of Manager in and to the Hotel, shall be
subject and subordinate to such Mortgagee’s Qualified Mortgage, with notice and
opportunity to cure rights and post-default cure rights in favor of Mortgagee;

                              2.
Manager shall be obligated to each of the Subsequent Owners (as defined below)
to perform all of the terms and conditions of this Agreement for the balance of
the remaining Term hereof, with the same force and effect as if such Subsequent
Owner were the Owner; and

                              3.
In the event that there is a Foreclosure of such Qualified Mortgage in connection
with which title or possession of the Hotel is transferred to the Mortgagee (or
its designee) or to a purchaser at foreclosure or to a subsequent purchaser
from the Mortgagee (or from its designee) (all of the foregoing shall
collectively be referred to as “Subsequent Owners”), this Agreement may
be terminated at the election of such Subsequent Owner as of the date of such
Foreclosure or upon thirty (30) days notice, unless and to the extent the
Mortgagee, in its sole and absolute discretion, shall have agreed to recognize
Manager’s rights under this Agreement following foreclosure or deed-in-lieu of
foreclosure, which recognition may be requested from such Mortgagee by Manager
prior to encumbrance of the Hotel by such Mortgagee’s Qualified Mortgage. Such
recognition may be granted or denied by such Mortgagee in its sole and absolute
discretion and shall not be a condition to Owner’s or Landlord’s right to
mortgage the Hotel with any such Qualified Mortgage and denial of recognition
of this Agreement by a Mortgagee shall not affect any of Manager’s obligations
or duties under this Agreement.

                    B.
Except as otherwise agreed by Owner and Manager, Owner will not encumber its
leasehold estate under the Hotel Lease with any Mortgage other than a Qualified
Mortgage. Manager shall have no responsibility for payment of debt service due
with respect to the Hotel, from Gross Revenues or otherwise, and such
responsibility shall be solely that of Owner, provided that Manager shall
comply with any requirements of any Mortgagee with respect to establishment of
escrows and payment of Impositions. 

          7.04.
No Covenants, Conditions or Restrictions.

                    A.
Manager acknowledges and agrees with Owner, and represents and warrants to
Owner, that, as of the Effective Date, to the best of Manager’s knowledge,
except as disclosed to Owner in writing, there are no covenants, conditions or
restrictions, including reciprocal easement agreements or cost-sharing
arrangements (individually or collectively referred to as “CC&R(s)”)
affecting the Site or the Hotel which: (i) would prohibit or limit Manager from
operating the Hotel in accordance with the System Standards; (ii) would allow
the Hotel facilities (for example, parking spaces) to be used by persons other
than guests, invitees or employees of the Hotel; (iii) would allow the Hotel
facilities to be used for specified charges or rates which have not been
approved by Manager; (iv) would subject the Hotel to exclusive

21

arrangements regarding
food and beverage operation or retail merchandise; or (v) would impose any
financial obligations on Owner or Landlord or on the Hotel.

          7.05.
Liens; Credit.

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

          7.06.
Hotel Lease.

          Manager
shall use reasonable efforts to comply with any requirements of the Hotel Lease
respecting operation of the Hotel, and Owner shall comply with any other
obligations of Owner under the Hotel Lease, including but not limited to
payment as and when due, of any and all rental and other payments due under the
Hotel Lease. Manager shall have no responsibility for payment of rental or
other sums due under the Hotel Lease, from Gross Revenues or otherwise, and
such responsibility shall be solely that of Owner.

ARTICLE
VIII

DEFAULTS

          8.01.
Events of Default.

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

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

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

                    C.
The entering of an order, judgment or decree by any court of competent
jurisdiction, on the application of a creditor, adjudicating either party as
bankrupt or insolvent or approving a petition seeking reorganization or
appointing a receiver, trustee, or liquidator of all or a substantial part of
such party’s assets, and such order, judgment or decree’s continuing unstayed
and in effect for an aggregate of sixty (60) days (whether or not consecutive).

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

22

non-defaulting party
demanding such cure, or in the case of any failure by Manager to make payments
of Owner’s Priority or other distributions of Operating Profit payable to
Owner, such failure is not cured within three (3) Business Days after receipt
of written notice from Owner.

                    E.
Any employee at the Hotel is or becomes a Specially Designated National or
Blocked Person and is not terminated from his or her employment at the Hotel on
or before thirty (30) days after Manager’s receipt of notice of such employee’s
status.

                    F.
In carrying out its duties hereunder, any principal or owner of Manager or its
Affiliates providing services to the Hotel commits any act involving fraud or
moral turpitude relating to the business or affairs of the Hotel, or is
indicted or convicted of an act which constitutes a felony.

                    G.
Any representation or warranty by Manager or any of its Affiliates in this
Agreement or in any certificate or document or financial or other statement
furnished or delivered to Owner or any of its Affiliates at any time under or
in connection with this Agreement shall have been intentionally false or
misleading in any material respect on or as of the date made or deemed made.

                    H.
The failure of either party to perform, keep or fulfill any of the other
covenants, undertakings, obligations or conditions set forth in this Agreement,
and the continuance of such default for a period of thirty (30) days after the
defaulting party’s receipt of written notice from the non-defaulting party of
said failure, or, if the default is such that it cannot reasonably be cured
within said thirty (30) day period of time, if the defaulting party fails to
commence the cure of such default within said thirty (30) day period of time or
thereafter fails to diligently pursue such efforts to completion, provided that
(i) in the case of any default by Manager (other than in clause (ii) below),
such default is cured not later than ninety (90) days after Manager’s receipt
of such written notice, (ii) in the case of Manager’s failure to maintain the
insurance required by Article VI (except with respect to any insurance that
Owner has elected to maintain pursuant to Section 6.05), such failure is cured
not later than ten (10) days after Manager’s receipt of such written notice
and, in any event, prior to the date any insurance coverage would lapse, and
(iii) in the event Owner has elected to maintain insurance pursuant to Section
6.05 and fails to maintain such insurance, such failure is cured not later than
ten (10) days after Owner’s receipt of written notice of default from Manager. 

23

          8.02.
Remedies.

          Upon
the occurrence of an Event of Default, the non-defaulting party shall have the
right to pursue any one or more of the following courses of action: (1) to
terminate this Agreement by written notice to the defaulting party, which
termination shall be effective as of the effective date which is set forth in
said notice, provided that said effective date shall be at least thirty (30)
days after the date of said notice in the case of an Event of Default by Owner;
(2) to institute forthwith any and all proceedings permitted by law or equity
including, without limitation (but subject to the provisions of Section 10.20
hereof), actions for specific performance and/or damages; and/or (3) to avail
itself of the remedies described in Section 8.03.

          8.03.
Additional Remedies.

                    A.
Upon the occurrence of a Default by either party under the provisions of
Section 8.0l.D, the amount owed to the non-defaulting party shall accrue
interest, at an annual rate equal to the Prime Rate plus three (3) percentage
points, from and after the date on which the Default occurred.

                    B.
The remedies granted under Section 8.02 and Section 8.03 shall not be in
substitution for, but shall be in addition, to, any and all rights and remedies
available to the non-defaulting party (including, without limitation,
injunctive relief and damages) by reason of applicable provisions of law or
equity and shall survive Termination.

ARTICLE IX

ASSIGNMENT AND SALE

          9.01.
Assignment.

                    A.
Manager shall not assign or transfer its interest in this Agreement without the
prior written consent of Owner and any franchisor under the Franchise
Agreement. Any assignee consented to by Owner and by such franchisor shall
agree in writing to be bound by and comply with the terms of this Agreement
(such written agreement to be acceptable in form and substance to Owner and
such franchisor). For purposes of the foregoing, a transfer of Manager’s
interest in this Agreement shall include (i) an assignment or pledge of this
Agreement as security for an obligation, (ii) a transfer of more than fifty
percent (50%) ownership or beneficial interest, direct or indirect, in Manager,
including any such transfer by operation of law and (iii) a transfer of
Manager’s interest in this Agreement by operation of law, including by merger
or consolidation.

                    B.
Owner shall have the right to assign or transfer its interest in this Agreement
without the prior written consent of the Manager (1) as security for a
Qualified Mortgage of the Hotel in accordance with this Agreement, (2) in
connection with a sale, assignment, transfer or other disposition of the Hotel
by Owner or Landlord and (3) in connection with a merger or consolidation or
reorganization of, or a sale of all or substantially all of the assets of,
Apple REIT Ten, Inc., or any Affiliate thereof.

                    C.
In the event Owner and the franchisor under the Franchise Agreement consent to
an assignment of this Agreement by Manager, no further assignment or transfer
shall

24

be made without the express consent in writing of such parties. An
assignment by Manager of its interest in this Agreement shall not relieve
Manager from its obligations under this Agreement.

                    D.
Notwithstanding anything contained herein to the contrary, Manager shall not
assign its interest in this Agreement to a Specially Designated National or
Blocked Person.

          9.02.
Sale of the Hotel.

          Owner
or Landlord may, in its or their sole and absolute discretion, enter into any
Sale of the Hotel to any Person. In connection with any such Sale of the Hotel
during the first five (5) years of the Term, this Agreement will be assigned
and not terminated so long as no Event of Default exists. In connection with
any Sale of the Hotel thereafter, Owner may assign this Agreement as provided
in Section 9.01 or terminate this Agreement upon thirty (30) days notice to
Manager, provided that if this Agreement is terminated as a result of such Sale
during the second five (5) years (i.e., years six (6) through ten (10)) of the
Term, and no Event of Default exists, Owner will pay or cause to be paid to
Manager a termination fee within five (5) Business Days after the effective
date of such termination, such fee to be in an amount equal to eighty percent
(80%) of the Base Management Fee reasonably estimated to be payable to Manager
from the effective date of the termination until the end of the tenth (10th)
year of the Term. In connection with any Sale of the Hotel after the tenth (10th)
year of the Term, Owner, in its sole discretion, may assign this Agreement as
provided in Section 9.01 or terminate this Agreement upon thirty (30) days
notice to Manager, and no termination fee shall be payable to Manager. Upon any
such sale or assignment, Owner shall be released of all liabilities and
obligations arising under and with respect to this Agreement on and after the
date of such Sale of the Hotel. 

ARTICLE X

MISCELLANEOUS

          10.01.
Right to Make Agreement.

          Each
party warrants, with respect to itself, that neither the execution of this
Agreement nor the performance of the transactions contemplated hereby shall
violate any provision of law or judgment, writ, injunction, order or decree of
any court or governmental authority having jurisdiction over it; result in or
constitute a breach or default under any indenture, contract, other commitment
or restriction to which it is a party or by which it is bound; or, require any
consent, vote or approval which has not been taken, or at the time of the
transaction involved shall not have been given or taken. Each party covenants
that it has and will continue to have throughout the Term and any extensions
thereof, the full right to enter into this Agreement and perform its
obligations hereunder.

          10.02.
Consents and Cooperation.

          Wherever
in this Agreement the consent or approval of Owner or Manager is required,
except as otherwise provided in this Agreement or agreed by the parties, such
consent or approval shall not be unreasonably withheld, delayed or conditioned
by the party whose consent or approval is required, shall be in writing and
shall be executed by a duly authorized officer or agent of such party. Owner
agrees to cooperate with Manager by executing such leases, subleases, licenses,
concessions, equipment leases, service contracts and other agreements

25

negotiated in
good faith and at arm’s length by Manager and pertaining to the Hotel that, in
Manager’s reasonable judgment, should be made in the name of the Owner,
provided that all such agreements shall be subject to Owner’s prior approval.

          10.03.
Relationship.

          The
relationship of Owner and Manager shall be that of independent contractors, and
neither this Agreement nor any agreements, instruments, documents, or
transactions contemplated hereby shall in any respect be interpreted, deemed or
construed as making Manager an agent of or partner or joint venturer with
Owner. Owner and Manager agree that neither party will make any contrary
assertion, claim or counterclaim in any action, suit, arbitration or other
legal proceedings involving Owner and Manager. Any contract or agreement that
Manager enters into with an Affiliate of Manager or with a third party to
provide goods or services to the Hotel shall be entered into in the name of
Manager and not Owner, and Owner have no liability with respect to any such
contract or agreement except for contracts or agreements to which Owner has previously
consented to in writing and which are consistent with the Annual Operating
Projection.

          10.04.
Applicable Law.

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

          10.05.
Recordation.

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

          10.06.
Headings.

26

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

          10.07.
Notices.

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

	
  

 	
  

 
	
 To Owner:

 	
 Apple Ten
 Hospitality Management, Inc.

 
	
  

 	
 c/o Apple
 REIT Companies

 
	
  

 	
 814 East
 Main Street

 
	
  

 	
 Richmond,
 Virginia 23219

 
	
  

 	
 Attn: Krissy
 Gathright

 
	
  

 	
 Attn:
 General Counsel

 
	
  

 	
 Phone: (804)
 344-8121

 
	
  

 	
 Fax: (804)
 344-8129

 
	
  

 	
  

 
	
 To Manager:

 	
 Stonebridge
 Realty Advisors, Inc.

 
	
  

 	
 c/o
 Stonebridge Companies

 
	
  

 	
 9100 East
 Panorama Drive, Suite 300

 
	
  

 	
 Englewood,
 Colorado 80112

 
	
  

 	
 Attn: Navin
 C. Dimond

 
	
  

 	
 Phone: (303)
 785-3100, ext. 122

 
	
  

 	
 Fax: (303)
 785-3107

 
	
  

 	
  

 
	
 With copy
 to:

 	
 Stonebridge
 Realty Advisors, Inc.

 
	
  

 	
 c/o
 Stonebridge Companies

 
	
  

 	
 9100 East
 Panorama Drive, Suite 300

 
	
  

 	
 Englewood,
 Colorado 80112

 
	
  

 	
 Attention:
 Howard Pollack, General Counsel

 
	
  

 	
 Phone: (303)
 785-3100, ext. 126

 
	
  

 	
 Fax No.:
 (303) 785-3107

 

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

          10.08. Environmental Matters.

27

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

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

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

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

          10.09.
Confidentiality.

          Owner
and Manager agree that the terms of this Agreement are strictly confidential
and will use their reasonable efforts to ensure that the terms of this
Agreement are not disclosed to any outside person or entities without the prior
written consent of the other party, except (1) as Owner may determine is
required by any law, rule, regulation or judicial process, or by any regulatory
or supervisory authority having jurisdiction over the parties or any of their
Affiliates or (2) to the extent reasonably necessary, (i) to obtain licenses,
permits and other public approvals, (ii) in connection with a financing of the
Hotel, Owner, or any Affiliate thereof, (iii)

28

in connection
with a Sale of the Hotel or other sale of Owner, or any Affiliate thereof or
its or their corporate assets, (iv) subject to the provisions of Section 4.02,
in connection with an audit or other investigation conducted pursuant to this
Agreement or (v) in connection with either party’s enforcement of its rights
and remedies under this Agreement. Notwithstanding the foregoing or anything to
the contrary set forth herein, the terms of this Agreement shall not be deemed
confidential to the extent: (a) such information becomes generally available to
the public other than as a result of unauthorized disclosure by the recipient
or persons to whom such recipient has made the information available; or (b)
the party seeking to disclose such confidential information can demonstrate to
the reasonable satisfaction of the other party that the information sought to
be disclosed is customarily disclosed by at least 80% of all Persons directly
or indirectly owning hotels in the United States.

          10.10.
Indemnification.

                    A.
Manager hereby agrees to indemnify, defend and hold harmless Owner, its
officers, directors, stockholders, employees, agents and their respective
successors and assigns from and against any and all claims, liabilities,
damages, losses, obligations and costs (including reasonable attorneys’ fees)
arising from (i) Manager’s or any of its Affiliates’ failure to comply with its
obligations under this Agreement, and (ii) any gross negligence, theft, fraud
or willful misconduct of the corporate level staff of Manager or its Affiliates
or the on-site executive staff at the Hotel. All liabilities of Manager
pursuant to this Section 10.10A shall be Manager’s Liabilities.

                    B.
Owner hereby agrees to indemnify, defend and hold harmless Manager, its
officers, directors, stockholders, employees, agents and their respective
successors and assigns from and against any and all claims, liabilities,
damages, losses, obligations and costs (including reasonable attorneys’ fees)
arising from Owner’s failure to comply with its obligations under this
Agreement.

          10.11.
Actions to be Taken Upon Termination.

          Upon
a Termination, the following shall be applicable:

                    A.
Manager shall, within ninety (90) days after Termination, prepare and deliver
to Owner a final accounting statement with respect to the Hotel, as more
particularly described in Section 4.01 hereof, along with a statement of any
sums due from Owner to Manager pursuant hereto, dated as of the date of
Termination. Within thirty (30) days of the receipt by Owner of such final
accounting statement, the parties will make whatever cash adjustments are
necessary pursuant to such final statement. The cost of preparing such final
accounting statement shall be a Deduction, unless the Termination occurs as a
result of an Event of Default by either party, in which case the defaulting
party shall pay such cost. Manager and Owner acknowledge that there may be
certain adjustments for which the information will not be available at the time
of the final accounting and the parties agree to readjust such amounts and make
the necessary cash adjustments when such information becomes available;
provided, however, that all accounts shall be deemed final two (2) years after
Termination.

29

                    B.
Manager shall immediately release and transfer to Owner any of Owner’s funds
which are held or controlled by Manager with respect to the Hotel, after
deducting any amounts due and owing to Manager under this Agreement.

                    C.
Manager shall make available to Owner such books and records respecting the
Hotel (including those from prior Fiscal Years during the Term of this
Agreement) as will be needed by Owner to prepare the accounting statements, in
accordance with the Uniform System of Accounts, for the Hotel for the year in
which the Termination occurs. Manager’s obligation under this Subsection 10.11C
shall expire two (2) years after the date of termination of this Agreement.

                    D.
Manager shall (to the extent permitted by law) assign to Owner or to the new
manager all operating licenses and permits for the Hotel which have been issued
in Manager’s name (including liquor and restaurant licenses, if any); provided
that if Manager has expended any of its own funds in the acquisition of any of
any of such licenses or permits, Owner shall reimburse Manager therefor if it
has not done so already unless such expenditure is a Manager’s Liability.

                    E.
If this Agreement is terminated by reason of Owner’s Event of Default, a
reasonable reserve shall be established from Gross Revenues to reimburse
Manager for all costs and expenses incurred by Manager in terminating its
employees at the Hotel, such as severance pay, unemployment compensation,
employment relocation and other employee liability costs arising out of the
termination of employment of Manager’s employees at the Hotel. If Gross
Revenues are insufficient to meet the requirements of such reserve, then Owner
shall deliver to Manager, within ten (10) Business Days after receipt of
Manager’s written request therefor, the sums necessary to establish such
reserve.

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

                    G.
Various other actions shall be taken, as described in this Agreement,
including, but not limited to, the actions described in Section 4.05 and
Section 6.04.

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

                    I.
Owner may elect to maintain any insurance coverages or policies that Manager
has procured pursuant to Article VI. In the event Owner elects to cancel any
such insurance coverages or policies prior to the applicable expiration date(s)
thereof, Owner shall pay any cancellation penalties with respect to the
cancelled insurance coverage unless termination results from a default by
Manager.

30

          The
provisions of this Section 10.11 shall survive Termination.

          10.12.
Waiver.

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

          10.13.
Partial Invalidity.

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

          10.14.
Survival.

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

          10.15.
Negotiation of Agreement.

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

          10.16.
Estoppel Certificates.

          Each
party to this Agreement shall at any time and from time to time, upon not less
than fifteen (15) days’ prior notice from the other party, execute, acknowledge
and deliver to such other party, or to any third party specified by such other
party, a statement in writing: (a) certifying that this Agreement is unmodified
and in full force and effect (or if there have been modifications, that the
same, as modified, is in full force and effect and stating the modifications);
and (b) stating to the best knowledge of the certifying party (i) whether or
not there is a continuing Default or Event of Default by the non-certifying
party in the performance or observance of any covenant, agreement or condition
contained in this Agreement, (ii) the amount, if any, of any past due fees or
other past due amounts owed to Manager or Owner; and (iii) whether or not there
are any past due and unpaid obligations with respect to the Hotel, other than
in the ordinary course of business. Such statement shall be binding upon the
certifying

31

party and may
be relied upon by the non-certifying party and/or such third party specified by
the non-certifying party as aforesaid. In addition, upon written request after
a Termination, each party agrees to execute and deliver to the non-certifying
party and to any such third party a statement certifying that this Agreement
has been terminated.

          10.17.
Affiliates.

          Except
for the contract between Manager and its Affiliate that furnishes employees for
the Hotel as provided in Section 1.03, Manager shall not be entitled to
contract with companies that are Affiliates (or companies in which Manager has
an ownership interest if such interest is not sufficient to make such a company
an Affiliate) to provide goods and/or services to the Hotel without the prior
written consent of Owner. Owner agrees not to unreasonably withhold consent if
the terms of such contracts are on terms as favorable to Owner and the Hotel as
are available from third parties that are not affiliated and the terms of the
contract have been specifically disclosed and approved in the approved Annual
Operating Projection. In addition, Manager shall not be entitled to contract
with third parties or their Affiliates that have other contractual
relationships with Manager and/or its Affiliates to provide goods and/or
services to the Hotel without the prior written consent of Owner unless the
terms of such contracts are as favorable to Owner and the Hotel as are
available from unrelated third parties, except for geographic and regional
differences in the pricing of goods and services that are attributable to the
location of the Hotel. In each instance, all direct and indirect benefits of
such contractual relationships with affiliated companies and/or third parties
having other contractual relationships shall have been disclosed to Owner and
shall accrue to the benefit of the Hotel and/or Owner, other than incidental
entertainment of Manager’s senior staff and principals that is not material and
could not reasonably be expected to influence any decision made by Manager, its
Affiliates or its or their officers, directors, employees or principals with
respect to any contract affecting the Hotel.

          10.18.
Blocked Persons or Entities. 

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

          10.19.
Restrictions on Operating the Hotel in Accordance with System Standards.

          In
the event of either (i) a Legal Requirement, including an order, judgment or
directive by a court or administrative body which is issued in connection with
any Litigation involving Owner, or (ii) any action taken by a Mortgagee in
connection with a Foreclosure, which in either case restricts or prevents
Manager, in a material and adverse manner, from operating the Hotel in

32

accordance
with System Standards (including without limitation, any restrictions on
expenditures by Manager from the Operating Accounts or from the Reserve, other
than restrictions which are set forth in this Agreement), Manager shall be
entitled, at its option, to terminate this Agreement upon sixty (60) days’
written notice to Owner. The foregoing shall not reduce or otherwise affect the
rights of the parties under Article VIII.

          10.20.
Counterparts.

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

          10.21.
Entire Agreement.

          This
Agreement, together with any other writings signed by the parties expressly
stated to be supplemental hereto and together with any instruments to be
executed and delivered pursuant to this Agreement, constitutes the entire
agreement between the parties and supersedes all prior understandings and
writings, and may be changed only by a written non-electronic instrument that
has been duly executed by the non-electronic (which shall not be deemed to
exclude facsimile) signature of an authorized representative of the parties
hereto.

          10.22.
Franchise Agreement. 

          During
the Term of this Agreement, Manager shall perform all of the obligations of
Owner as “Franchisee” under the Franchise Agreement to the extent such
obligations relate to the management or operation of the Hotel, including,
without limitation, the obligations of “Franchisee” under Paragraphs ____ ____
_____ _____ of the Franchise Agreement, and Manager shall not commit any act or
omit to take any action that would cause a default by the Franchisee under the
Franchise Agreement. In the event of any inconsistency between the provisions
of this Agreement and the provisions of the Franchise Agreement, the provisions
of the Franchise Agreement shall prevail. Manager and Owner shall each send
promptly to the other any and all material notices that it receives from the
Franchisor with respect to the Hotel or the Franchise Agreement, and Manager
shall keep Owner fully informed with respect to all matters that come to
Manager’s attention under the Franchise Agreement that could be material to
Owner and/or the business operated at the Hotel. Notwithstanding the foregoing,
Manager shall not have the right to grant any consent, approval or other right
reserved to the Franchisee under the Franchise Agreement or to make any
decision or agreement on behalf of Owner under the Franchise Agreement. In the
event the Franchise Agreement is terminated as a result of any Event of Default
or any other act, omission or default by Manager or its Affiliates, this
Agreement shall also terminate effective as of the date of termination of the
Franchise Agreement; if the Franchise Agreement is terminated for any other
reason, the Agreement shall not terminate but shall remain in full force and
effect, unless the parties hereto agree otherwise. 

33

          10.23.
Operation of Other Hotels. 

          During
the Term and except for the Hotel and the hotel listed in Schedule 1 attached hereto
(the “Excluded
Hotel”), if Manager or any of its Affiliates shall acquire,
lease, own, manage or operate, directly or indirectly, any hotel, inn, motel or
other type of lodging facility, regardless of whether similar to the Hotel or
whether operated under the same or a different brand, in the same geographic
area or market as the Hotel, Manager shall not permit unfair favoritism in the
operation and management of such other hotels that would disadvantage the
operation or business of the Hotel (such as, by way of example only, directing
potential Hotel guests to such other hotels instead of to the Hotel). At
Owner’s request, Manager shall provide such information as may reasonably be
requested by Owner to determine if there has been any such unfair favoritism
and, in the event Owner, in its reasonable business judgment, determines that
any such unfair favoritism has occurred, Owner may terminate the Agreement,
provided that if Manager is able to demonstrate to Owner’s reasonable
satisfaction that Manager can effect a cure of such unfair favoritism, Owner
will permit Manager to effect such cure, and if such cure is effected to
Owner’s reasonable satisfaction, this Agreement will not be terminated as a
result of such unfair favoritism, provided that this Agreement shall again
become terminable pursuant to this Section 10.23 if there is unfair favoritism
after such cure. 

          10.24.
Expert Decisions. 

          Where
a matter is to be referred to an Expert for determination, the following
provisions shall apply to such Expert’s determination:

                    A.
The use of the Expert shall be the exclusive remedy of the parties and neither
party shall attempt to adjudicate any dispute in any other forum. The decision
of the Expert shall be final and binding on the parties and shall not be
capable of challenge, whether by arbitration, in court or otherwise;

                    B.
Each party shall be entitled to make written submissions to the Expert, and if
a party makes any submission it shall also provide a copy to the other party
and the other party shall have the right to comment on such submission. The
parties shall make available to the Expert all books and records relating to
the issue in dispute and shall render to the Expert any assistance requested of
the parties. The costs of the Expert and the proceedings shall be borne as
directed by the Expert unless otherwise provided for herein. The Expert may
direct that such costs be treated as Deductions;

                    C.
The Expert shall make its decision with respect to the matter referred for
determination by applying the standards applicable to first-class hotels in
accordance with the System Standards (including the requirements of any quality
assurance program) and determining whether the matter at issue is necessary to
satisfy such standards; and

                    D.
The terms of engagement of the Expert shall include an obligation on the part
of the Expert to: (i) notify the parties in writing of his decision within
forty-five (45) days from the date on which the Expert has been selected (or
such other period as the parties may 

34

agree or as
set forth herein); and (ii) establish a timetable for the making of submissions
and replies.

          10.25.
Waiver of Jury Trial and Punitive Damages. 

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

ARTICLE XI

DEFINITION OF TERMS

          11.01.
Definition of Terms.

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

          “Accounting
Fee” shall mean a monthly fee of One Thousand Five Hundred Fifty
and No/100 Dollars ($1,550.00) payable to Manager and pro-rated, as applicable,
as provided in Section 3.04. The Accounting Fee will be increased on each
anniversary of the Effective Date by five percent (5%) of the amount then in
effect.

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

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

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

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

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

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

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

35

          “Base
Management Fee” shall mean an amount payable to Manager as a
Deduction from Gross Revenues for all services provided by Manager pursuant to
this Agreement, except as otherwise expressly provided herein. The Base Management
Fee shall be three percent (3%) of Gross Revenues.

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

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

          
“CC&R’s”
shall have the meaning ascribed to it in Section 7.04.A.

          
“Competitive
Set” shall mean the group of hotels which are closest in
geographical distance from the Hotel and which are generally within the same
hotel market segment as the Hotel. The initial Competitive Set is identified on
Schedule 1 attached hereto and made a part hereof. If any such hotels,
subsequent to the Effective Date, either changes its chain affiliation or
ceases to operate or otherwise ceases to reflect the general criteria set forth
in the first sentence of this definition, the Competitive set shall be changed
at the request of either Owner or Manager and approval of both parties, such
approval not to be unreasonably withheld, conditioned or delayed so that it
continues to satisfy the criteria set forth in the first sentence of this
definition. Any disagreements shall be resolved by the Expert in accordance
with Section 10.24.

          “Deductible
Leases” shall mean the lease of the property management computer
system for the Hotel and such other leases as Owner and Manager may mutually
agree will be “Deductible Leases.”

          “Deductions”
shall have the meaning ascribed to it in the definition of Operating Profit.

          “Default”
shall mean the occurrence of any event which, with the lapse of time, the
giving of notice or both, would constitute an Event of Default.

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

          “Environmental
Laws” shall have the meaning ascribed to it in Section 10.08.A.

          “Event of
Default” shall have the meaning ascribed to it in Section 8.01.

          “Expert”
shall mean an independent, nationally recognized hotel consulting firm or
individual who is qualified to resolve the issue in question, and who is
appointed in each instance by agreement of the parties or, failing agreement,
each party shall select one (1) such nationally recognized consulting firm or
individual and the two (2) respective firms and/or individuals so selected
shall select another such nationally recognized consulting firm or individual
to be the Expert. Each party agrees that it shall not appoint an individual as
an Expert hereunder if the

36

individual is
as of the date of appointment, or prior to such date was, an Affiliate of such
party or employed by such party or its Affiliates, either directly or as a
consultant, in connection with any other matter. In the event that either party
calls for an Expert determination pursuant to the terms hereof, the parties
shall have ten (10) days from the date of such request to agree upon an Expert
and, if they fail to agree, each party shall have an additional ten (10) days
to make its respective selection of a firm or individual, and within ten (10)
days of such respective selections, the two (2) respective firms and/or
individuals so selected shall select another such nationally recognized
consulting firm or individual to be the Expert. If either party fails to make
its respective selection of a firm or individual within the ten (10) day period
provided for above, then the other party’s selection shall be the Expert. Also,
if the two (2) respective firms and/or individuals so selected shall fail to
select a third nationally recognized consulting firm or individual to be the
Expert, then such Expert shall be appointed by the American Arbitration
Association and shall be a qualified person having at least ten (10) years
recent professional experience as to the subject matter in question.

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

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

          
“Fiscal
Year” shall mean, initially, the period beginning as of the
Effective Date and ending at midnight on the following December 31 and
thereafter each calendar year during the Term. Any partial Fiscal Year between
the Effective Date and the commencement of the first full Fiscal Year shall
constitute a separate Fiscal Year. A partial Fiscal Year between the end of the
last full Fiscal Year and the Termination of this Agreement shall also
constitute a separate Fiscal Year. If Fiscal Year is changed in the future,
appropriate adjustment to this Agreement’s reporting and accounting procedures
shall be made; provided, however, that no such change or adjustment shall alter
the term of this Agreement or in any way reduce the distributions of Operating
Profit or other payments due hereunder except as may otherwise be expressly
agreed upon by the parties to this Agreement.

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

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

37

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

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

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

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

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

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

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

38

          “Hotel Lease” shall have the meaning
ascribed to it in Recital B.

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

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

          “Incentive
Management Fee” shall mean an amount payable to Manager,
pursuant to Section 3.01 and Section 4.01, that is equal to twenty percent
(20%) of Available Cash Flow in any Fiscal Year (or portion thereof) after
payment to Owner of Owner’s Priority (including, without limitation, all
accrued and unpaid Owner’s Priority).

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

          “Inventories”
shall mean “Inventories” as defined in the Uniform System of Accounts, such as,
but not limited to, provisions in storerooms, refrigerators, pantries and
kitchens; beverages in wine cellars and bars; other merchandise intended for
sale; fuel; mechanical supplies; stationery; and other expensed supplies and
similar items.

          “Landlord” shall mean the Person
identified as Landlord on Schedule 1 attached hereto and made part
hereof.

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

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

          “Manager”
shall have the meaning ascribed to it in the Preamble hereto or shall mean any
permitted successor or assign, as applicable.

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

          “Minor
Casualty” shall mean any fire or other casualty that results in
damage to the Hotel and/or its contents, the repair cost for which is less
than fifteen percent (15%) of the replacement cost of the Hotel, as reasonably
determined by Manager and substantiated estimates prepared by independent third
party general contractors or consultants reasonably selected by Manager and
reasonably approved by Owner.

          “Mortgage”
shall mean any mortgage creating a lien on the Hotel.

39

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

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

          “Operating
Loss” shall mean a negative Operating Profit.

          “Operating
Profit” shall mean the excess of Gross Revenues over the
following deductions (“Deductions”) incurred by Manager, on
behalf of Owner, in operating the Hotel:

                    1.
the cost of sales, including, without limitation, costs associated with the
employment, management and termination of Hotel employees (including hiring and
recruitment fees and expenses), the costs of moving the Hotel General Manager
and Director of Sales to the area in which the Hotel is located at the
commencement of their employment at the Hotel (except to the extent Manager is
required to reimburse Owner for such costs as provided in Section 1.03),
compensation, benefits, employment taxes, training and severance payments and
other costs related to Hotel employees, provided that the foregoing costs shall
not include salaries and other employee costs of executive personnel of Manager
who do not work at the Hotel on a regular basis, which salaries and costs shall
be Manager’s Liability;

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

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

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

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

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

                    7.
the Base Management Fee;

40

                    8.
all “Monthly Royalty Fees,” “Monthly Program Fees,” and other similar fees
payable to the Franchisor under the Franchise Agreement;

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

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

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

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

                    13.
payments pursuant to Deductible Leases; 

                    14.
the per diem (or hourly, if charged on that basis by Manager to hotels it
operates) charge for personnel of Manager assigned to special projects for the
Hotel approved by Owner;

                    15.
travel expenses of headquarters and regional personnel of Manager supervising
the Hotel or providing specialized services to the Hotel and of Hotel employees
for attendance at training sessions, in connection with marketing of the Hotel
or other purposes related to Manager’s performance of its obligations under
this Agreement;

                    16.
the allocated costs of the centralized services provided to the Hotel pursuant
to Section 1.10; and

                    17.
to the extent included in the approved Annual Operating Projection or approved
in advance by Owner, such other costs and expenses incurred by Manager as are
specifically provided for elsewhere in this Agreement or are otherwise
reasonably necessary for the proper and efficient operation of the Hotel,
including without limitation, travel expenses or supervisory personnel of
Manager incurred in connection with managing the Hotel.

          The
term “Deductions”
shall not include (a) debt service payments pursuant to a Qualified Mortgage,
or (b) rental payments under any Hotel Lease, all of which shall be paid by
Owner from its own funds, (c) FF&E Leases (other than Deductible Leases),
which FF&E Leases (if any) shall be funded from the Reserve, (d) expenses
incurred for improvements under the Hotel property improvement plan that are
funded from the PIP Escrow, or (e) other capital expenditures, determined in
accordance with generally accepted accounting principles that are funded from
the Reserve or that increase Owner’s Priority.

          “Owner”
shall have the meaning ascribed to it in the Preamble or shall mean any
successor or assign, as applicable.

41

          “Owner’s
Priority” shall mean an amount up to, but not in excess of the
amount shown as Owner’s Priority on Schedule 1 attached hereto and made
a part hereof, per Fiscal Year (prorated for any partial Fiscal Year). Owner’s
Priority for each Fiscal Year shall be paid to the extent of Operating Profit
available in such Fiscal Year, as provided in Section 3.02 of this Agreement.
In the event of any capital expenditures made with respect to the Hotel in
accordance with the approved Annual Operating Projection after the Effective
Date that are in excess of the Reserve, the Owner’s Priority shall be increased
(but not decreased) for the remaining portion of the Fiscal Year in which such
capital expenditures are made and all subsequent Fiscal Years by an amount
equal to ten and one-half percent (10.5%) of such capital expenditures.. 

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

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

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

          “Qualified
Mortgage” shall mean a Mortgage securing a loan the original
principal amount of which is not greater than seventy-five percent (75%) of the
fair market value of the Hotel.

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

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

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

          “Revenue
Index Threshold” shall mean the number shown on Schedule 1
attached hereto and made a part hereof. However, if the entry of a new hotel
into the Competitive Set (or

42

the removal of
a hotel from the Competitive Set) causes significant variations in the Revenue
Index that do not reflect the Hotel’s true position in the relevant market,
appropriate adjustments shall be made to the Revenue Index Threshold by mutual
consent of Owner and Manager each acting in good faith.

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

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

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

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

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

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

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

43

          “Subordination
Agreement” shall have the meaning ascribed to it in Section
7.03.

          “Subsequent
Owners” shall have the meaning ascribed to it in Section 7.03.A.

          “System”
shall have the meaning set forth in the Franchise Agreement.

          “System
Standards” shall mean any one or more (as the context requires)
of the following three (3) categories of standards: (i) operational standards
(for example, services offered to guests, quality of food and beverages,
cleanliness, staffing and employee compensation and benefits, frequent traveler
programs and other similar programs; (ii) physical standards (for example,
quality of the hotel, FF&E, and Fixed Asset Supplies, frequency of FF&E
replacements, etc.); and (iii) technology standards (for example, those
relating to software, hardware, telecommunications, systems security and
information technology); each of such standards shall be the standard which is
generally prevailing or in the process of being implemented at other hotels in
the System represented by the Franchise Agreement.

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

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

          “Trade
Name” shall mean any name, whether informal (such as a
fictitious name or d/b/a) or formal (such as the full legal name of a
corporation or partnership) which is used to identify an entity.

          “Uniform
System of Accounts” shall mean the Uniform System of Accounts
for the Lodging Industry, Ninth Revised Edition, 1996, as published by the
Educational Institute of the American Hotel & Motel Association, as
revised.

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

          “Working
Capital” shall mean funds that are used in the day-to-day
operation of the business of the Hotel, including, without limitation, amounts
sufficient for the maintenance of change and petty cash funds, amounts
deposited in operating bank accounts, receivables, amounts deposited in payroll
accounts, prepaid expenses and funds required to maintain Inventories, less
accounts payable and accrued current liabilities. The initial Working Capital
deposited by Owner as of the Effective Date shall be Forty-Five Thousand and
No/100 Dollars ($45,000.00).

44

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

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 OWNER:

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 APPLE TEN
 HOSPITALTY MANAGEMENT, INC.

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
  

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
 Name: 

 	
  

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
 Title: 

 	
  

 	
  

 
	
  

 	
  

 	

 

 	
  

 

S - 1 – Management Agreement

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 MANAGER:

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 STONEBRIDGE
 REALTY ADVISORS, INC., a Colorado corporation, d/b/a STONEBRIDGE COMPANIES

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
  

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
 Name: 

 	
  

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
 Title: 

 	
  

 	
  

 
	
  

 	
  

 	

 

 	
  

 

S - 2 – Management Agreement

SCHEDULE 1

HOTEL SPECIFIC DATA

1. Description
of Hotel: That certain hotel known as the Hilton Garden Inn Denver
Downtown, located at 1400 Welton Street, Denver, Colorado 80202, containing 221
Guest Rooms, a lobby, meeting rooms, administrative offices, restaurant,
parking and certain amenities and related facilities located on the Site,
including the following:

	
  

 	
  

 
	
  

 	
 a. Number
 of Guest Rooms: 221

 
	
  

 
	
  

 	
 b. Other
 Improvements/Amenities: Approximately 3,239 sq. ft. aggregate meeting
 room space; indoor swimming pool, exercise room, spa, business center

 

2. Franchise
Agreement: Hilton Garden Inn – Franchise License Agreement, dated as of the
date of this Management Agreement, between Hilton Garden Inns LLC as licensor,
and Owner, as licensee.

3. Funding
of Reserve for Repairs, Maintenance and Replacements: During the period
from the Effective Date to the expiration or earlier termination of this
Agreement, Manager shall transfer into the Reserve an amount equal to four
percent (4%) of Gross Revenues for each such Accounting Period.

4. Competitive
Set: [UNDER REVIEW]

          Crowne
Plaza

          Magnolia

          Courtyard

          Hampton Inn

          Curtis Hotel

          Embassy Suites

5. Landlord:
Apple Ten Hospitality Ownership, Inc., a Virginia corporation

6. Owner’s
Priority: Six Million One Hundred Forty-Two Thousand Five Hundred and
No/100 Dollars ($6,142,500.00)

7. Revenue
Index Threshold: 1.0

8. Excluded
Hotel: Potential Homewood Suites by Hilton

Schedule 1 – p. 1

EXHIBIT A

LEGAL
DESCRIPTION OF SITE

Exhibit A – p. 1

EXHIBIT B

REPRESENTATIONS AND WARRANTIES

Manager hereby represents and warrants to Owner as set forth below.

                    (a)
Authority; No Conflicts. Manager is a corporation duly formed, validly
existing and in good standing in the State of Colorado. Manager has obtained
all necessary consents to enter into and perform this Agreement and is fully
authorized to enter into and perform its obligations under this Agreement. No
consent or approval of any person, entity or governmental authority is required
for the execution, delivery or performance by Manager of this Agreement, and
this Agreement is hereby binding and enforceable against Manager. Neither the
execution nor the performance of, or compliance with, this Agreement by Manager
has resulted, or will result, in any violation of, or default under, or
acceleration of, any obligation under any existing corporate charter, certificate
of incorporation, bylaw, articles of organization, limited liability company
agreement or regulations, partnership agreement or other organizational
documents and under any, mortgage indenture, lien agreement, promissory note,
contract, or permit, or any judgment, decree, order, restrictive covenant,
statute, rule or regulation, applicable to Manager or to the Hotel.

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

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

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