AGREEMENT AND PLAN OF MERGER by and among

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

by and among

WINSTON HOTELS, INC.,

WINN LIMITED PARTNERSHIP,

INLAND AMERICAN REAL ESTATE TRUST, INC.

and INLAND AMERICAN ACQUISITION (WINSTON), LLC

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AGREEMENT AND PLAN OF MERGER

     This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of April 2, 2007, by and among Winston Hotels, Inc., a North Carolina corporation operating so as to qualify as a real estate investment trust (the “ Company ”), WINN Limited Partnership, a North Carolina limited partnership whose sole general partner is the Company (the “ Operating Partnership ” and together with the Company the “ Company Parties ”), Inland American Real Estate Trust, Inc., a Maryland corporation (the “ Parent ”), Inland American Acquisition (Winston), LLC, a Delaware limited liability company and a wholly-owned Subsidiary of Parent (“ MergerCo ” and together with Parent, the “ Buyer Parties ”).

RECITALS

     WHEREAS, the parties hereto wish to effect a business combination through a merger of the Company with and into MergerCo, on the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware Limited Liability Company Act (the “ DLLCA ”) and the North Carolina Business Corporation Act (the “ NCBCA ”), pursuant to which the separate corporate existence of the Company shall thereupon cease (the “ Merger ”);

     WHEREAS, the Special Committee has (a) determined that this Agreement, the Merger and the other transactions contemplated by this Agreement (the “ Contemplated Transactions ” and, together with the Merger, the “ Merger Transactions ”) are advisable and fair to, and in the best interests of, the Company and its shareholders on the terms and subject to the conditions set forth herein and (b) recommended the adoption and approval of this Agreement and the Merger Transactions by the board of directors of the Company (the “ Company Board ”);

     WHEREAS, the Company Board, based on the unanimous recommendation of the Special Committee, has (a) approved this Agreement and the Merger Transactions, (b) determined that this Agreement and the Merger Transactions are advisable and fair to, and in the best interests of, the Company and its shareholders on the terms and subject to the conditions set forth herein, (c) directed that this Agreement and the Merger and the Contemplated Transactions be submitted for consideration at a meeting of the Company’s shareholders (the “ Company Shareholders Meeting ”) and (d) recommended the adoption and approval of this Agreement and the Merger and the Contemplated Transactions by the Company’s shareholders;

     WHEREAS, the Company, as the sole general partner of the Operating Partnership, has approved this Agreement and deemed it advisable and in the best interests of the Operating Partnership to enter into this Agreement and to consummate the Merger Transactions on the terms and subject to the conditions set forth herein;

     WHEREAS, the board of directors of Parent have approved this Agreement, the Merger and the Contemplated Transactions and declared that this Agreement, the Merger and the Contemplated Transactions are advisable and in the best interests of Parent and its shareholders on the terms and subject to the conditions set forth herein;

     WHEREAS, Parent, as the manager and sole member of MergerCo, has approved this Agreement, the Merger and the Contemplated Transactions and declared that this Agreement, the Merger and the Contemplated Transactions are advisable and in the best interests of MergerCo and its sole member on the terms and subject to the conditions set forth herein;

     WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection with the Merger Transactions as set forth herein and to prescribe various conditions thereto as set forth herein.

     NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows.

ARTICLE I

     Section 1.1 Definitions . Each of the following terms is defined as follows:

     “ 2005 GE Loan Agreement ” has the meaning set forth in Section 7.14.

     “ Acquired Company ” means each of the Company and each Subsidiary of the Company, and “Acquired Companies” means the Company and the Subsidiaries of the Company, collectively.

     “ Acquisition Agreement ” has the meaning set forth in Section 6.3(c).

     “ Acquisition Proposal ” means any offer, proposal, inquiry or indication of interest (other than an offer, proposal, inquiry or indication of interest by Parent or its Affiliates) contemplating or otherwise relating to any Acquisition Transaction.

     “ Acquisition Transaction ” means, other than any of the Merger Transactions, any transaction or series of related transactions involving any (i) reorganization, dissolution, liquidation or recapitalization of any of the Acquired Companies, (ii) merger, consolidation, share exchange, business combination, tender offer, exchange offer or other similar acquisition of any of the Acquired Companies, (iii) sale, lease, exchange, transfer, license, acquisition or disposition of more than twenty percent (20%) of the assets of the Acquired Companies, taken as a whole, (iv) direct or indirect acquisition or purchase of more than twenty percent (20%) of the shares of capital stock, partnership interests or other equity interests of the Acquired Companies, taken as a whole, except for any purchase by the Company of Company Common Stock, (v) similar transaction or business combination involving any Acquired Company or any of their businesses, shares of capital stock, partnership interests, other equity interests or assets, (vi) public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing or (vii) any combination of any of the foregoing.

     “ Affiliate ” means, as to any specified Person, (i) any trust, shareholder, equity owner, officer or director of such Person and their associates (as defined in Rule 12b-2 under the Exchange Act) or (ii) any other Person which, directly or indirectly, through one or more intermediaries, controls, is controlled by, employed by or is under common control with, the specified Person. For the purposes of this definition and the definition of Subsidiary, “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by Contract or otherwise.

     “ Agreement ” has the meaning set forth in the preamble hereto.

     “ Articles of Merger ” has the meaning set forth in Section 2.2.

     “ Balance Sheet ” means the balance sheet of the Acquired Companies included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2006.

     “ Balance Sheet Date ” means December 31, 2006.

     “ Buyer Parties ” means Parent and MergerCo.

     “ CERCLA ” has the meaning set forth in Section 4.19(c).

     “ Certificate of Formation ” has the meaning set forth in Section 2.3(a).

     “ Closing ” has the meaning set forth in Section 2.4.

     “ Closing Date ” has the meaning set forth in Section 2.4.

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

     “ Common Unit Consideration ” has the meaning set forth in Section 3.2(b).

     “ Common Unit Holders ” means the holders of Common Units (other than the Company and Parent) immediately prior to the Merger Effective Time.

     “ Common Units ” means all partnership interests in the Operating Partnership that are not specifically designated as Series B Preferred Units in the Operating Partnership Agreement.

     “ Company ” means Winston Hotels, Inc., a North Carolina corporation operating so as to qualify as a real estate investment trust.

     “ Company Board ” has the meaning set forth in the Recitals hereto.

     “ Company Board Recommendation ” has the meaning set forth in Section 7.2(b).

     “ Company Common Share Merger Consideration ” has the meaning set forth in Section 3.1(c).

     “ Company Common Stock ” means the Company’s Common Stock, $0.01 par value per share.

     “ Company Expenses ” has the meaning set forth in Section 11.3(a)(v).

     “ Company Intellectual Property ” has the meaning set forth in Section 4.6.

     “ Company Parties ” means the Company and Operating Partnership.

     “ Company Plan ” means the Winston Hotels, Inc. Stock Incentive Plan.

     “ Company Series A Preferred Stock ” means the Company’s 9.25% Series A Cumulative Preferred Stock, $0.01 par value per share.

     “ Company Preferred Share Merger Consideration ” has the meaning set forth in Section 3.1(g).

     “ Company Series B Preferred Stock ” means the Company’s 8.00% Series B Cumulative Preferred Stock, $0.01 par value per share.

     “ Company SEC Reports ” has the meaning set forth in Section 4.4.

     “ Company Shareholders Meeting ” has the meaning set forth in the Recitals hereto.

     “ Company Termination Fee ” means an amount equal to $11,000,000 in cash.

     “ Company Triggering Event ” means (i) (x) the failure of the Company Board to recommend that the Company’s shareholders vote to adopt this Agreement, (y) a Recommendation Withdrawal or (z) any statement by the Company Board, the Special Committee or the Company, in any written material filed with the SEC, that the Company Board or the Special Committee does not believe that this Agreement and the Merger Transactions are in the best interests of the Company’s shareholders; (ii) the failure of the Company to include in the Proxy Statement the Company Board Recommendation or a statement to the effect that the Company Board and the Special Committee has determined and believes that this Agreement and the Merger Transactions are in the best interests of the Company’s shareholders; (iii) the approval, endorsement or recommendation of the Company Board and the Special Committee of, or the public announcement of its intent to approve, endorse or recommend, any Acquisition Proposal; (iv) the entry into a Contract (other than a confidentiality agreement entered into in compliance with Section 6.3(a)) by any of the Acquired Companies relating to an Acquisition Proposal, or the public announcement of its intent to do so; (v) the failure of the Company to comply with Section 6.3(a); or (vi) a tender or exchange offer relating to securities of any of the Acquired Companies shall have been commenced by someone other than Parent or its Affiliates and the Company shall not have sent to its security holders, within ten (10) business days after the commencement of such tender or exchange offer, a statement disclosing that the Company Board recommends rejection of such tender or exchange offer.

     “ Confidentiality Agreement ” has the meaning set forth in Section 6.1(b).

     “ Consent ” means any approval, consent, ratification, permission, waiver or authorization by, filing with or notification to, any Person (including any Governmental Authorization).

     “ Contemplated Transactions ” has the meaning set forth in the Recitals hereto.

     “ Continuing Employees ” has the meaning set forth in Section 7.4.

     “ Contract ” means any written, oral or other agreement, contract, subcontract, lease, understanding, arrangement, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature, including, in each case, any amendments, supplements or modifications thereto.

     “ Covered Parties ” has the meaning set forth in Section 7.5(a).

     “ Current Policy ” has the meaning set forth in Section 7.5(c).

     “ DLLCA ” has the meaning set forth in the Recitals hereto.

     “ Debt ” means, as to any Person, at a particular time, (i) indebtedness for borrowed money or for the deferred purchase price of property (which shall not include accounts payable incurred in the ordinary course of business) in respect of which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which such Person otherwise assures a creditor against loss, (ii) obligations under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases in respect of which obligations such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss, (iii) obligations of such Person to purchase or repurchase accounts receivable, chattel paper or other payment rights sold or assigned by such Person, (iv) obligations secured by a purchase money mortgage or other Encumbrance to secure all or part of the purchase price of the property or services subject to such mortgage or Encumbrance, (v) obligations for any amounts under any deferred compensation programs, (vi) indebtedness or obligations of such Person under or with respect to letters of credit, notes, bonds, debentures or other debt instruments, (vii) obligations of such Person under any interest rate swap, cap or collar agreement, currency or hedging arrangements or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in interest rates, in each case whether contingent or matured and including all breakage, termination or prepayment fees and (viii) obligations for penalty payments, redemption premiums, charges, breakage costs, yield maintenance amounts and other expenses relating to the prepayment of any obligations of the types referred to in this definition of Debt.

     “ Disclosure Letter ” means the disclosure letter in respect of the Acquired Companies as delivered by the Company to Parent on the date hereof simultaneously with the execution and delivery of this Agreement.

     “ DRIP ” has the meaning set forth in Section 3.5.

     “ Employee Benefit Plans ” has the meaning set forth in Section 4.12(a).

     “ Encumbrance ” means any lien, pledge, hypothecation, charge, mortgage, easement, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, preemptive right, community property interest or restriction of any kind or nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise, transfer or pledge of any other attribute of ownership of any asset).

     “ End Date ” has the meaning set forth in Section 11.1(b).

     “ Environmental Claim ” means any claim, action, cause of action, investigation or notice (written or oral) by any Person alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, or release into the environment, of any Hazardous Substance at any location, whether or not owned or operated by any of the Acquired Companies or JV Entities or (b) any violation, or alleged violation, of any Environmental Law.

     “ Environmental Laws ” means all applicable Legal Requirements relating to pollution or protection of human health or the environment, including ambient air, surface water, ground water, land surface or subsurface strata, including laws and regulations relating to emissions, discharges, releases or threatened releases of Hazardous Substances, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances.

     “ Environmental Permits ” has the meaning set forth in Section 4.19(a).

     “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

     “ ERISA Affiliate ” means, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.

     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “ Exchange Fund ” has the meaning set forth in Section 3.3(a).

     “ Facilities ” means any real property, including the Properties, leaseholds or other interests currently or formerly owned in fee simple or pursuant to a ground leasehold interest or operated by any Acquired Company, together with any buildings, plants, structures or equipment located thereon, including hotels, parking lots and structures, convention centers, meeting facilities, restaurant, bar and lounge facilities, and all furnishings, fixtures and equipment located therein or thereon.

     “ Franchise Agreements ” has the meaning set forth in Section 4.8(f).

     “ GAAP ” means the generally accepted accounting principles in the United States of America.

     “ Governmental Authorization ” means any (i) permit, license, certificate, franchise, approval, consent, ratification, waiver, certification, decree, decision, permission, variance, clearance, registration, qualification or authorization issued, granted, given or otherwise made available or the expiration or termination of any applicable waiting period by or under the authority of any Governmental Body or pursuant to any Legal Requirement or (ii) right under any Contract with any Governmental Body.

     “ Governmental Body ” means any (i) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature, (ii) federal, state, local, municipal, foreign or other government or (iii) governmental or quasi-governmental regulatory or administrative authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or other Person and any court, arbitral body, self-regulated entity or other tribunal).

     “ Ground Leased Properties ” has the meaning set forth in Section 4.8(a).

     “ Ground Leases ” has the meaning set forth in Section 4.8(a).

     “ H&W ” has the meaning set forth in Section 9.4.

     “ Hazardous Substances ” means chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, radioactive materials, asbestos, petroleum and petroleum products.

     “ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

     “ Indemnification Event ” has the meaning set forth in Section 7.5(a).

     “ Insurance Amount ” has the meaning set forth in Section 7.5(c).

     “ Intellectual Property ” means (i) trademarks, service marks, trade names and Internet domain names, together with all goodwill connected therewith or symbolized thereby, (ii) patents (including any continuations and continuations in part), (iii) copyrights, (iv) trade secrets and know-how, (v) copyrightable works and copyrights and (vi) registrations and applications for registration of any of the foregoing.

     “ IRS ” means the Internal Revenue Service of the United States federal government.

     “ JV Entities ” means the joint venture entities of the Company set forth on Exhibit A attached hereto, including the Minority JV Entities as specified on Exhibit A attached hereto.

     “ knowledge ”: An individual will be deemed to have “knowledge” of a particular fact or

other matter if such individual is actually aware of such fact or other matter, following reasonable inquiry. A Person (other than an individual) will be deemed to have “knowledge” of a particular fact or other matter if any individual who is currently serving as an executive officer (as defined in Rule 3b-7 promulgated under the Exchange Act and in the case of the Company Parties, limited to such Persons listed as such in the Company’s proxy statement for its 2006 annual meeting of shareholders filed with the SEC on March 17, 2006) of such Person is actually aware of such fact or other matter, following reasonable inquiry. Notwithstanding the foregoing, with respect to any Person’s knowledge concerning circumstances pertaining to or affecting the Minority JV Entities, the parties hereto hereby acknowledge and agree that such Person’s duty of reasonable inquiry shall not include a duty to make inquiries of the Minority JV Entities.

     “ Legal Proceeding ” means any action, suit, litigation, claim, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

     “ Legal Requirement ” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, executive order, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, applied, implemented or otherwise put into effect by or under the authority of any Governmental Body (or under the authority of NYSE or any other stock exchange, if applicable).

     “ Liabilities ” has the meaning set forth in Section 4.28.

     “ Limited Liability Company Agreement ” has the meaning set forth in Section 2.3(b).

     “ Loan Documents ” has the meaning set forth in Section 4.29.

     “ Loans ” has the meaning set forth in Section 4.29.

     “ Mailing Notice ” has the meaning set forth in Section 6.6.

     “ Management Agreement Documents ” has the meaning set forth in Section 4.9.

     “ Material Adverse Effect ”: An event, change, effect or development will be deemed to have a “Material Adverse Effect” on the Acquired Companies if such event, change, effect, development or other matter (a) has had, or would reasonably be expected to have, a material adverse effect, individually or in the aggregate, on the business, financial condition, capitalization, assets, liabilities, operations or financial performance of the Acquired Companies, taken as a whole, excluding any effects arising out of or resulting from any adverse change following the date of this Agreement in the financial credit or real estate markets, or other change following the date of this Agreement in general economic conditions, or an outbreak or escalation of hostilities, a national emergency or war, or the occurrence of any act of terrorism, in each case, except if the Acquired Companies, taken as a whole, are materially and disproportionately affected thereby, (b) has had, or would reasonably be expected to have, a material adverse effect on the ability of the Company Parties to timely consummate the Merger

Transactions or to timely perform any of their respective obligations under this Agreement, or (c) has prevented or materially delayed, or would reasonably be expected to prevent or materially delay, the consummation of the Merger Transactions. An event, change, effect, development or other matter will be deemed to have a “Material Adverse Effect” on Parent if such event, change, effect, development or other matter (i) has had, or would reasonably be expected to have, a material adverse effect on the ability of the Buyer Parties to timely consummate the Merger Transactions or to timely perform any of their respective obligations under this Agreement, or (ii) has prevented or materially delayed, or would reasonably be expected to prevent or materially delay, the consummation of the Merger Transactions. For purposes of clarification, no event, change, effect, development or other matter attributable to compliance with the terms of, or the taking of any action expressly required by, this Agreement or any of the Merger Transactions, including the payment of the Wilbur Break-up Fee and the loss by the Acquired Companies of certain customers, suppliers, franchisors or employees solely as a result of the performance of this Agreement or the announcement of the Merger Transactions, solely to the extent that such losses are reasonably consistent in scope and magnitude with the average losses experienced by companies operating in the industry in which the Company Parties operate in connection with change-of-control transactions, shall be deemed in itself, or in any combination, to constitute, and shall not be taken into account in determining whether there has been or will be, a Material Adverse Effect on the Acquired Companies; provided, however , that with respect to the representations and warranties set forth in Sections 4.2(d) and 5.4(b), only the language in the first two (2) sentences of this paragraph shall be applied in determining whether a “Material Adverse Effect” has occurred with respect to such Sections 4.2(d) and 5.4(b).

     “ Material Contract ” has the meaning set forth in Section 4.16(a).

     “ Merger ” has the meaning set forth in the Recitals hereto.

     “ Merger Effective Time ” has the meaning set forth in Section 2.2.

     “ Merger Transactions ” has the meaning set forth in the Recitals hereto.

     “ MergerCo ” means Inland American Acquisition (Winston), LLC, a Delaware limited liability company and wholly-owned Subsidiary of Parent.

     “ MergerCo Common Units ” has the meaning set forth in Section 3.1(a).

     “ Minority JV Entity ” means any JV Entity that does not qualify as a Subsidiary of the Company per the first sentence of the definition of “Subsidiary” and is therefore not a Subsidiary of the Company. The term “Minority JV Entity” shall include all Subsidiaries of such Minority JV Entity, and shall include each of the JV Entities specified as a Minority JV Entity on Exhibit A attached hereto.

     “ Multiemployer Plan ” has the meaning set forth in Section 4.12(g).

     “ NCBCA ” has the meaning set forth in the Recitals hereto.

     “ New Employee Benefit Plans ” has the meaning set forth in Section 7.4.

     “ NYSE ” has the meaning set forth in Section 7.1.

     “ Operating Partnership ” means WINN Limited Partnership, a North Carolina limited partnership whose sole general partner is the Company.

     “ Operating Partnership Agreement ” means that certain Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated July 11, 1997, as amended from time to time.

     “ Option Holder Notice ” has the meaning set forth in Section 3.1(d).

     “ Option Merger Consideration ” has the meaning set forth in Section 3.1(d).

     “ Options ” has the meaning set forth in Section 3.1(d).

     “ Organizational Documents ” has the meaning set forth in Section 4.1(b).

     “ Owned Real Properties ” has the meaning set forth in Section 4.8(a).

     “ Ownership Limitation ” has the meaning set forth in the Articles of Incorporation of the Company, as amended from time to time, as in effect on the date hereof.

     “ Parent ” means Inland American Real Estate Trust, Inc., a Maryland corporation.

     “ Parent Expenses ” has the meaning set forth in Section 11.3(a)(ii).

     “ Parent Termination Fee ” has the meaning set forth in Section 11.3(a)(v).

     “ Paying Agent ” has the meaning set forth in Section 3.3(a).

     “ Permits ” has the meaning set forth in Section 4.13(b).

     “ Permitted Encumbrances ” means (i) Encumbrances for Taxes, assessments, governmental charges or levies or mechanics and other statutory liens (A) that are not material in amount relative to the property affected and (B) that are not yet delinquent or are being contested in good faith and by appropriate proceedings in respect thereof during which collection or enforcement is stayed, (ii) inchoate mechanics’ and materialmen’s liens for construction in progress and arising in the ordinary course of business of the Acquired Companies, (iii) inchoate workmen’s, repairmen’s, warehousemen’s and carriers’ liens arising in the ordinary course of business of the Acquired Companies, (iv) with respect to real property, zoning restrictions, survey exceptions, utility easements, rights of way and similar Encumbrances that are imposed by any Governmental Body having jurisdiction thereon or that otherwise are typical for the applicable property type and locality and that, individually or in the aggregate, do not interfere materially, or would not reasonably be expected to interfere materially, with the current use and operation of such property (assuming its continued use in the manner in which it is currently used) or, with respect to unimproved or vacant real property, interfere materially with the intended use of such property, (v) with respect to real property, any title exception (whether material or immaterial) disclosed in any Title Policy provided or made available to Parent prior

to the date hereof, Encumbrances and obligations arising under the Material Contracts (including any Encumbrance securing mortgage debt disclosed in the Disclosure Letter), the Ground Leases and any other Encumbrance that does not interfere materially with the current use of such property (assuming its continued use in the manner in which it is currently used) or materially adversely affect the value or marketability of such property and/or (vi) other Encumbrances being contested in the ordinary course of business in good faith and which, individually or in the aggregate, do not materially impair, or would not reasonably be expected to impair, the continued use and operation of the assets to which they relate in the conduct of the business of any Acquired Company.

     “ Person ” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or Governmental Body.

     “ Pre-Closing Period ” has the meaning set forth in Section 6.1(a).

     “ Properties ” has the meaning set forth in Section 4.8(a).

     “ Proxy Statement ” has the meaning set forth in Section 4.23.

     “ Qualified Plans ” has the meaning set forth in Section 4.12(d).

     “ Qualifying Income ” has the meaning set forth in Section 11.3(b).

     “ Recommendation Withdrawal ” has the meaning set forth in Section 7.2(b).

     “ REIT ” has the meaning set forth in Section 4.11(b).

     “ Representatives ” means, with respect to any Person, the equity holders, partners, employees, consultants, officers, directors, agents, attorneys, accountants, advisors, debt and equity financing sources and representatives of such Person.

     “ Required Company Shareholder Vote ” has the meaning set forth in Section 4.2(b).

     “ Restricted Shares ” has the meaning set forth in Section 3.1(e).

     “ Sarbanes-Oxley Act ” has the meaning set forth in Section 4.14(a).

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

     “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     “ Series B Preferred Units ” means all partnership interests in the Operating Partnership specifically designated as Series B Preferred Units in the Operating Partnership Agreement.

     “ Space Leases ” has the meaning set forth in Section 4.8(c).

     “ Special Committee ” means the special committee of the Company Board appointed to evaluate, negotiate and recommend actions with respect to Acquisition Transactions involving the Company, including the Merger Transactions, and to represent the Company in connection therewith.

     “ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association, joint venture or other business entity of which (i) if a corporation, (x) a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof or (y) that Person otherwise has direct or indirect control thereof, by Contract or otherwise or (ii) if a limited liability company, partnership, association, joint venture or other business entity (other than a corporation), (x) a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof, and for this purpose, a Person or Persons own a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entity’s gains or losses, (y) that Person shall be or control any managing director or general partner of such business entity (other than a corporation) or (z) that Person otherwise has direct or indirect control thereof, by Contract or otherwise. The term “Subsidiary” shall include all Subsidiaries of such Subsidiary, and, when used with respect to the Company, shall include each of the Acquired Companies listed on Section 4.1(b) of the Disclosure Letter, including each of the JV Entities (except for the Minority JV Entities), in each case, as specified and listed on Exhibit A attached hereto.

     “ Superior Proposal ” means an unsolicited, bona fide written Acquisition Proposal (except that references to twenty percent (20%) within the definition of “Acquisition Proposal” will be deemed to be references to “more than fifty percent (50%)”) made by a third party on terms that the Company Board (acting through the Special Committee) determines, in its good faith judgment, after consultation with its or the Special Committee’s, as applicable, financial advisors and outside legal counsel, taking into account, among other things, all of the terms, conditions and circumstances of the Acquisition Proposal, to be more favorable to the Company’s shareholders from a financial point of view than the terms of the Merger Transactions (after giving effect to any modification to this Agreement proposed by the Buyer Parties) and to be reasonably capable of being consummated.

     “ Superior Proposal Notice ” means the at least three (3) business days’ written notice from the Company to Parent that the Company or its Special Committee is in receipt of an unsolicited Superior Proposal and is prepared to approve, authorize or recommend such Superior Proposal or the applicable amendment to a Superior Proposal, specifying the material terms and conditions of such Superior Proposal or amendment thereto (and a copy thereof, if available) and identifying the third party making such Superior Proposal or amendment thereto.

     “ Superior Proposal Termination Procedures ” has the meaning set forth in Section 11.1(f).

     “ Surviving Entity ” has the meaning set forth in Section 2.1(a).

     “ Tax ” means (i) any tax (including any income tax, franchise tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including any customs duty), (ii) any related charge or amount (including any fine, penalty or interest), imposed, assessed or collected by or under the authority of any Taxing Authority and (iii) any liability pursuant to any statute or agreement for an amount described in clauses (i) or (ii) above owed by another party.

     “ Tax Protection Agreement ” has the meaning set forth in Section 4.11(t).

     “ Tax Return ” means any return (including any information return), report, statement, estimate, schedule, notice, notification, form, election, certificate or other document filed with, or required to be filed with, any Taxing Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

     “ Taxing Authority ” means a Governmental Body responsible for the imposition, administration or collection of any Tax.

     “ Title Policies ” has the meaning set forth in Section 4.8(b).

     “ Transfer Taxes ” has the meaning set forth in Section 7.7.

     “ Treasury Regulations ” means the final and temporary income tax regulations promulgated under the Code, as such regulations may be amended from time to time. References to specific provisions of the Treasury Regulations shall be deemed to include the corresponding provisions of succeeding provisions of the Treasury Regulations.

     “ Tribeca Contract ” means the Agreement of Purchase and Sale, dated as of February 13, 2006 and amended as of May 2, 2006 and October 4, 2006, by and between the Operating Partnership and York Street, LLC, as amended as of February 21, 2007.

     “ Wilbur Break-up Fee ” means the Company Termination Fee and Parent Expenses, each as defined in the Wilbur Merger Agreement, that is to be paid to Wilbur Acquisition Holding Company, LLC at or prior to the time of the effectiveness of the termination of the Wilbur Merger Agreement.

     “ Wilbur Break-up Fee Reimbursement ” has the meaning set forth in Section 11.3(b).

     “ Wilbur Merger Agreement ” means the Agreement and Plan of Merger dated as of February 21, 2007 by and among the Company, the Operating Partnership, Wilbur Acquisition Holding Company, LLC and Wilbur Acquisition, Inc.

ARTICLE II
THE MERGER

     Section 2.1 General .

     (a) Subject to the terms and conditions of this Agreement, and in accordance with the DLLCA and the NCBCA, at the Merger Effective Time, MergerCo and the Company shall consummate the Merger pursuant to which (i) the Company shall be merged with and into MergerCo and the separate existence of the Company shall thereupon cease and (ii) MergerCo shall be the surviving entity in the Merger (the “ Surviving Entity ”). The Merger shall have the effects specified in the DLLCA and the NCBCA.

     (b) Subject to the terms and conditions of this Agreement, at the Merger Effective Time, Parent shall purchase one hundred (100) Common Units of the Operating Partnership for a cash purchase price of one hundred dollars ($100.00) and Parent shall become a limited partner of the Operating Partnership.

     Section 2.2 Effective Time . At the Closing and immediately prior to the Merger Effective Time, MergerCo and the Company shall duly execute and file a certificate of merger and articles of merger with respect to the Merger in a form that complies with the DLLCA and the NCBCA, respectively (collectively, the “ Articles of Merger ”) with the Secretary of State of the State of Delaware and the Secretary of State of the State of North Carolina, respectively, in accordance with the DLLCA and the NCBCA, respectively. The Merger shall become effective upon such time as the Articles of Merger have been accepted for record by the Secretary of State of the State of Delaware and the Secretary of State of the State of North Carolina, respectively, or such later time which the parties hereto shall have agreed upon and designated in such filing in accordance with the DLLCA and the NCBCA as the effective time of the Merger but not to exceed thirty (30) days after the Articles of Merger are accepted for record by the Secretary of State of the State of Delaware and the Secretary of State of the State of North Carolina, respectively (the “ Merger Effective Time ”).

     Section 2.3 Certificate of Formation; Limited Liability Company Agreement .

     (a) At the Merger Effective Time, the Certificate of Formation of MergerCo, as in effect immediately prior to the Merger Effective Time, shall be the Certificate of Formation of the Surviving Entity until thereafter amended as provided therein or by applicable law (the “ Certificate of Formation ”).

     (b) The limited liability company agreement of the Company, as in effect immediately prior to the Merger Effective Time, shall be the limited liability company agreement of the Surviving Entity until thereafter amended as provided therein or by applicable law (the “ Limited Liability Company Agreement ”).

     Section 2.4 Closing . Unless this Agreement shall have been terminated in accordance with Article XI, the closing of the Merger (the “ Closing ”) shall occur as promptly as practicable (but in no event later than the third business day) after all of the conditions set forth in Articles VIII, IX and X (other than conditions which by their terms are required to be satisfied or waived

at the Closing, but subject to the satisfaction or waiver thereof) shall have been satisfied or waived by the party hereto entitled to the benefit of the same, or at such other time and on a date as agreed to by the parties hereto (the “ Closing Date ”). The Closing shall take place at the offices of DLA Piper US LLP, Raleigh, North Carolina, or at such other place as agreed to by the parties hereto.

     Section 2.5 Manager and Officers; General Partner and Limited Partners .

     (a) (i) The manager of MergerCo immediately prior to the Merger Effective Time shall be the manager of the Surviving Entity, and (ii) the officers of MergerCo immediately prior to the Merger Effective Time shall be the officers of the Surviving Entity, in each case, to hold such position in accordance with the Certificate of Formation and Limited Liability Company Agreement.

     (b) The general partner of the Operating Partnership immediately after the Merger Effective Time shall be the Surviving Entity and the limited partner of the Operating Partnership immediately after the Merger Effective Time shall be Parent.

ARTICLE III
EFFECTS OF THE MERGER

     Section 3.1 Effects on Shares . At the Merger Effective Time, by virtue of the Merger and without any action on the part of Parent, MergerCo, the Company or any of their respective shareholders or unitholders:

     (a) Each common unit of MergerCo (the “ MergerCo Common Units ”), shall be converted into one validly issued, fully paid and nonassessable common unit of the Surviving Entity.

     (b) Except for each share of Company Common Stock as of the Merger Effective Time held in the name of the Company, as trustee, for the benefit of the individual participants in the Winston Hotels, Inc. Executive Deferred Compensation Plan, each share of Company Common Stock and Company Series B Preferred Stock that is owned by any of the Acquired Companies or by Parent, MergerCo or any other Subsidiary of Parent immediately prior to the Merger Effective Time shall automatically be canceled and retired and shall cease to exist, and no payment shall be made with respect thereto.

     (c) Each share of Company Common Stock issued and outstanding immediately prior to the Merger Effective Time (other than shares to be canceled in accordance with Section 3.1(b)) shall automatically be converted into, and canceled in exchange for, the right to receive an amount in cash to be paid by Parent equal to $15.00 without interest (the “ Company Common Share Merger Consideration ”).

     (d) Not later than the earlier of the time at which the Company gives notice of the Contemplated Transactions to its shareholders and the date that is thirty (30) days prior to the Merger Effective Time, the Company shall notify each holder of the options granted pursuant to the Company Plan (“ Options ”), in writing, of the Contemplated Transactions in accordance with the Company Plan (the “ Option Holder Notice ”). Immediately prior to the Merger Effective

Time, all such Options that remain unvested automatically shall become fully vested. The Option Holder Notice shall (i) apprise the holders of outstanding Options of their ability to exercise the Options in accordance with the Company Plan prior to the Merger Effective Time, (ii) disclose that, if not exercised, such Options will terminate at the Merger Effective Time and (iii) disclose that if any Options are not exercised prior to the Merger Effective Time and terminate as contemplated in clause (ii), the holders of such Options will be entitled to receive the Option Merger Consideration in respect of such Options. As of the Merger Effective Time, each outstanding Option shall be terminated by virtue of the Merger and each holder of an Option shall cease to have any rights with respect thereto, other than the right to receive, in respect of each such terminated Option, a single lump sum payment (without interest and subject to the deduction and withholding of such amounts as Parent, the Surviving Entity or the Paying Agent, as applicable, is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law) in cash an amount equal to the Company Common Share Merger Consideration, minus the exercise price for such Option (the “ Option Merger Consideration ”). Payment of the Option Merger Consideration to each of the holders of Options entitled thereto shall be made as soon as practicable after the Merger Effective Time, subject to the terms and conditions of this Agreement. Any amounts withheld and paid over to the appropriate taxing authority by Parent, the Surviving Entity or the Paying Agent will be treated for all purposes of this Agreement as having been paid to the holder of the Option in respect of whom such deduction and withholding was made. If the exercise price per share of any such Option is equal to or greater than the Company Common Share Merger Consideration, such Option shall be canceled without any cash payment being made in respect thereof. Prior to the Merger Effective Time, the Company shall take all actions required by the Company Plan under which such Options were granted to cause such Company Plan and all Options granted thereunder to terminate at the Merger Effective Time, including adopting any plan amendments and resolutions and obtaining any required Consents, without paying any consideration or incurring any debts or obligations on behalf of the Company or the Surviving Entity.

     (e) Immediately prior to the Merger Effective Time, all restricted share awards (“ Restricted Shares ”) granted pursuant to the Company Plan or otherwise that remain unvested automatically shall become fully vested and free of any forfeiture restrictions and each Restricted Share shall be considered an outstanding share of Company Common Stock for all purposes of this Agreement, including the right to receive the Company Common Share Merger Consideration. Prior to the Merger Effective Time, the Company will adopt such resolutions and will take such other actions, including adopting any plan amendments and obtaining any required Consents, as shall be required to effectuate the actions contemplated by this Section 3.1(e), without paying any consideration or incurring any debts or obligations on behalf of the Company or the Surviving Entity.

     (f) If, subsequent to the date of this Agreement but prior to the Merger Effective Time, the outstanding shares of Company Common Stock shall have been changed into a different number of shares as a result of a stock split, reverse stock split, stock dividend, subdivision, reclassification, split, combination, exchange, recapitalization, or any dividend or other distribution payable in stock or other securities is declared thereon or rights issued in respect thereof with a record date within such period, or other similar transaction, the Company

Common Share Merger Consideration, the Option Merger Consideration and the Common Unit Consideration shall be appropriately adjusted so that the aggregate amount payable pursuant to this Agreement to effect the Merger Transactions shall not have increased as a result of such adjustment.

     (g) Each share of Company Series B Preferred Stock issued and outstanding immediately prior to the Merger Effective Time (other than shares to be canceled in accordance with Section 3.1(b)) shall automatically be converted into, and canceled in exchange for, the right to receive an amount in cash to be paid by Parent equal to the sum of (i) $25.44 per share (if the Merger Effective Time occurs on or prior to June 30, 2007) or $25.38 per share (if the Merger Effective Time occurs after June 30, 2007 and on or prior to September 30, 2007) plus (ii) any accrued and unpaid dividends as of the Merger Effective Time (the “ Company Preferred Share Merger Consideration ”).

     Section 3.2 Effect on Partnership Units .

     At the Merger Effective Time:

     (a) Parent shall purchase one hundred (100) Common Units of the Operating Partnership for a cash purchase price of one hundred dollars ($100.00) and Parent shall be a limited partner of the Operating Partnership.

     (b) Each Common Unit issued and outstanding immediately prior to the Merger Effective Time that is held by the Common Unit Holders shall automatically be converted into, and canceled in exchange for, the right to receive, at the Merger Effective Time, an amount in cash to be paid by Parent equal to the Company Common Share Merger Consideration, without interest, multiplied by the Conversion Factor (as defined in the Operating Partnership Agreement) for each Common Unit held by such Common Unit Holder (the “ Common Unit Consideration ”).

     (c) Each Series B Preferred Unit outstanding under the Operating Partnership immediately prior to the Merger Effective Time shall automatically be canceled and retired and shall cease to exist, and no payment shall be made with respect thereto.

     Section 3.3 Exchange Procedures; Stock Transfer Books .

     (a) Prior to the Merger Effective Time, Parent shall appoint a bank or trust company reasonably acceptable to the Company to act as paying and exchange agent hereunder (the “ Paying Agent ”). At the Merger Effective Time, Parent shall, or shall cause any of the Acquired Companies to, deposit with the Paying Agent cash in an amount necessary to pay all of the Company Common Share Merger Consideration, Company Preferred Share Merger Consideration, Option Merger Consideration and Common Unit Consideration. The amounts deposited pursuant to the prior sentence shall hereinafter be referred to as the “ Exchange Fund. ” Parent shall cause the Paying Agent to make, and the Paying Agent shall make, payments of the Company Common Share Merger Consideration, Company Preferred Share Merger Consideration, Option Merger Consideration and Common Unit Consideration out of the Exchange Fund in accordance with this Agreement. The Exchange Fund shall not be used for any other purpose. Any and all interest earned on cash deposited in the Exchange Fund shall be

paid to the Surviving Entity.

     (b) As soon as reasonably practicable, and in no event more than five (5) business days after the Merger Effective Time, Parent shall cause the Paying Agent to send (i) to each Person who was, immediately prior to the Merger Effective Time, a holder of record of certificates of Company Common Stock, Common Units and/or Company Series B Preferred Stock (A) a letter of transmittal in customary form and containing such provisions as Parent may reasonably specify including (1) a provision confirming that delivery of certificates shall be effected, and risk of loss and title to certificates shall pass to the Paying Agent, only upon delivery of such certificates to the Paying Agent, and (2) a form of certification by the Person executing such letter of transmittal to the effect that either (x) such Person is not “foreign” for purposes of Sections 897 and 1445 of the Code or (y) such Person has not owned, directly or indirectly, more than five percent (5%) of the outstanding Company Common Stock or Company Series B Preferred Stock at any time during the five (5) years preceding the Merger Effective Time, and (B), if applicable, instructions for use in effecting the surrender of certificates in exchange for either Company Common Share Merger Consideration, Company Preferred Share Merger Consideration or Common Unit Consideration to which the holder thereof is entitled, and (ii) to each holder of an Option, a check in an amount equal to the Option Merger Consideration due and payable to such holder pursuant to Section 3.1(d) in respect of such Option. Upon surrender of a certificate for cancellation to the Paying Agent, if applicable, together with a duly executed letter of transmittal (completed in accordance with the instructions thereto) and such other documents as may be reasonably required by the Paying Agent or Parent, (A) the holder shall be entitled to receive in exchange therefor the applicable Company Common Share Merger Consideration, Company Preferred Share Merger Consideration or Common Unit Consideration payable in respect of the shares of Company Common Stock, Company Series B Preferred Stock or Common Units, as applicable, pursuant to the provisions of this Article III and (B) the certificates (if any) so surrendered shall be canceled. Until surrendered as contemplated by this Section 3.3(b), each certificate shall be deemed from and after the Merger Effective Time to represent only the right to receive, upon such surrender, the applicable Company Common Share Merger Consideration, Company Preferred Share Merger Consideration or Common Unit Consideration as contemplated by this Section 3.3(b). No interest shall be paid or accrue on any of the Company Common Share Merger Consideration, Company Preferred Share Merger Consideration, Option Merger Consideration or Common Unit Consideration. In the event of a transfer of ownership of Company Common Stock, Company Series B Preferred Stock or Common Units that is not registered in the transfer records of the Company or the Operating Partnership, if applicable, payment may be made to a Person other than the Person in whose name the certificate (if any) so surrendered is registered, if such certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of such certificate or establish to the satisfaction of Parent that such Tax has been paid or is not applicable. If any certificate shall have been lost, stolen or destroyed, Parent may, in its discretion and as a condition precedent to the payment of any portion of the Exchange Fund, require the owner of such lost, stolen or destroyed certificate to provide an appropriate affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as indemnity against any claims that may be made against the Paying Agent, Parent or the Surviving Entity with respect to such certificate.

     (c) As of the Merger Effective Time, all shares of Company Common Stock (other than shares of Company Common Stock to be canceled and retired in accordance with Section 3.1(b)) and Company Series B Preferred Stock (other than shares of Company Series B Preferred Stock to be canceled and retired in accordance with Section 3.1(b)) issued and outstanding immediately prior to the Merger Effective Time shall cease to be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of any such shares shall cease to be holders thereof and to have any rights with respect thereto, except the right to receive the Company Common Share Merger Consideration or Company Preferred Share Merger Consideration, as applicable, upon surrender of the certificate (if any) representing such shares in accordance with this Section 3.3. The Company Common Share Merger Consideration and Company Preferred Share Merger Consideration paid upon the surrender of certificates (if any) in accordance with the terms of this Section 3.3 shall be deemed to have been delivered (and paid) in full satisfaction of all rights and privileges pertaining to the Company Common Stock and Company Series B Preferred Stock exchanged therefor and, if applicable, represented by such certificates exchanged therefor. The Option Merger Consideration paid with respect to the Options in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights and privileges pertaining to the canceled Options, and on and after the Merger Effective Time the holder of an Option shall have no further rights with respect to any Option, other than the right to receive the Option Merger Consideration as provided in Section 3.1(d).

     (d) As of the Merger Effective Time, all Common Units shall cease to be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each Common Unit Holder shall cease to be a holder thereof and to have any rights with respect thereto, except the right to receive Common Unit Consideration. The Common Unit Consideration paid upon the surrender of certificates (if any) in accordance with the terms of this Section 3.3 shall be deemed to have been delivered (and paid) in full satisfaction of all rights and privileges pertaining to the Common Units to be redeemed therefor and, if applicable, represented by such certificates exchanged therefor.

     (e) At the Merger Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of shares of the Company Common Stock and Company Series B Preferred Stock on the records of the Company.

     (f) The Paying Agent shall invest any cash included in the Exchange Fund in liquid debt securities rated AA or higher by at least two nationally-recognized rating agencies or as otherwise directed by Parent; provided , that no such investment or loss thereon shall affect the amounts payable to the Company’s shareholders and Option holders pursuant to this Section 3.3. To the extent that there are losses with respect to such investments, or the Exchange Fund diminishes for any other reasons below the level required to make prompt payments of the Company Common Share Merger Consideration, Company Preferred Share Merger Consideration, Option Merger Consideration or Common Unit Consideration as contemplated hereby (other than as a result of the failure of the representation and warranty set forth in Section 4.3 to be true and correct), Parent shall promptly replace or restore the portion of the Exchange Fund lost though investments or other events so as to ensure that the Exchange Fund is, at all times, maintained at a level sufficient to make all such payments in full. Any interest

and other income resulting from such investments shall promptly be paid to Parent.

     (g) Any portion of the Exchange Fund that remains undistributed to holders of shares of Company Common Stock, Company Series B Preferred Stock, Common Units or Options as of the date twelve (12) months after the Merger Effective Time shall be delivered to Parent or the Surviving Entity, and any holders of shares of Company Common Stock, Company Series B Preferred Stock, Common Units or Options prior to the Merger who have not theretofore complied with this Section 3.3 shall thereafter look only to the Surviving Entity or Parent for payment of any portion of the Company Common Share Merger Consideration, Company Preferred Share Merger Consideration, Option Merger Consideration or Common Unit Consideration, as applicable.

     (h) None of the Buyer Parties, the Company Parties, the Paying Agent or the Surviving Entity, or any of their respective Representatives or Affiliates shall be liable to any holder or former holder of Company Common Stock, Company Series B Preferred Stock, Options, Common Units, or to any other Person, with respect to any portion of the Company Common Share Consideration, Company Preferred Share Merger Consideration, Common Unit Consideration or Option Merger Consideration, or for any cash amounts, if the Exchange Fund has properly been delivered to any public official pursuant to any applicable abandoned property law, escheat law or similar Legal Requirement. If any certificate has not been surrendered prior to three (3) years after the Merger Effective Time (or immediately prior to such earlier date on which any Company Common Share Merger Consideration, Company Preferred Share Merger Consideration, Common Unit Consideration or Option Merger Consideration in respect of such certificate would otherwise escheat to or become the property of any Governmental Body), any such shares, cash, dividends or distributions in respect of such certificate shall, to the extent permitted by applicable Legal Requirements, become the property of the Surviving Entity, free and clear of all claims or interest of any Person previously entitled thereto.

     Section 3.4 Withholding Rights . Parent, the Surviving Entity or the Paying Agent, as applicable, shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts required to be deducted and withheld with respect to the making of such payments under the Code, the rules and regulations promulgated thereunder or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld by Parent, the Surviving Entity or the Paying Agent, as applicable, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to such holder in respect of whom such deduction and withholding was made by Parent, the Surviving Entity or the Paying Agent, as applicable.

     Section 3.5 Termination of DRIP . The Company shall take all actions necessary to terminate its Dividend Reinvestment and Share Purchase Plan (the “ DRIP ”), effective as soon as possible after the date of this Agreement, and ensure that no purchase or other rights under the DRIP enable the holder of such rights to acquire any interest in the Surviving Entity or any other Company Party or Buyer Party as a result of such purchase or the exercise of such rights at or after such date.

     Section 3.6 Further Actions . If at any time after the Merger Effective Time, the Surviving Entity shall consider or be advised that any deeds, bills of sale, assignments or assurances or any

other acts or things are necessary, desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in the Surviving Entity its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of any of the Acquired Companies or MergerCo or (ii) otherwise to carry out the purposes of this Agreement, the Surviving Entity and its proper officers and directors or its designees shall be authorized to execute and deliver, in the name and on behalf of the Company, MergerCo and the Operating Partnership, all such deeds, bills of sale, assignments and assurances and do, in the name and on behalf of the Company, MergerCo and the Operating Partnership all such other acts and things necessary, desirable or proper to vest, perfect or confirm its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of any of the Acquired Companies or MergerCo, as applicable, and otherwise to carry out the purposes of this Agreement.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES

     Except as set forth in the Disclosure Letter, the Company and the Operating Partnership hereby (a) jointly and severally represent and warrant to the Buyer Parties as of the date hereof and (b) shall jointly and severally represent and warrant to the Buyer Parties as of the Closing Date (or, in each case, if made as of a specific date, as of such date), as follows:

     Section 4.1 Organization and Good Standing .

     (a) Each Acquired Company, and to the knowledge of the Acquired Companies, each Minority JV Entity, is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, with all requisite power and authority to conduct its business as now being conducted, to own or use the respective properties and assets that it purports to own or use, and to perform all of its obligations under all Material Contracts to which it is a party. Each Acquired Company, and to the knowledge of the Acquired Companies, each Minority JV Entity, is duly qualified to do business as a foreign corporation or other foreign entity and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a Material Adverse Effect on the Acquired Companies.

     (b) Section 4.1(b) of the Disclosure Letter lists all the Acquired Companies and indicates as to each its jurisdiction of organization, the percentage of its outstanding capital stock or other equity interests that is held by any Acquired Company, and, except in the case of the Company, its shareholders or unit holders. The Company has made available to Parent prior to the date hereof copies of the articles or certificate of incorporation, bylaws and other organizational documents, in each case, as amended to date and as currently in effect (collectively, the “ Organizational Documents ”), of each of the Acquired Companies.

     (c) Section 4.1(c) of the Disclosure Letter sets forth a complete list of Persons, other than those set forth in Section 4.1(b) of the Disclosure Letter, in which any Acquired Company has a direct or indirect interest, together with (i) the jurisdiction of organization of each Person listed, (ii) the names of the other members and partners in each Person listed and (iii) the respective

percentage interests of each such members or partners in each Person listed. The Company has made available to Parent prior to the date hereof copies of the Organizational Documents of each JV Entity listed in Section 4.1(c) of the Disclosure Letter.

     (d) All Organizational Documents of the Acquired Companies and, to the knowledge of the Acquired Companies, the Minority JV Entities are in full force and effect. None of the Acquired Companies are in material violation of the Organizational Documents of any of the Acquired Companies.

     (e) The Company has made available to Parent prior to the date hereof copies of the charters of each committee of the Company Board and any code of conduct or similar policy adopted by the Company.

     Section 4.2 Authority; No Conflict .

     (a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and, subject to the approvals described in Section 4.2(b), to consummate the Merger Transactions. The Company Parties have taken all steps necessary to (i) cause the Merger Transactions to comply with or be exempted from any Organizational Document of any of the Acquired Companies that would otherwise prohibit, hinder or delay such transactions and (ii) render any and all limitations on ownership of (A) Company Common Stock and (B) Common Units, including the ownership limit set forth in the Organizational Documents of the Company and the Operating Partnership Agreement, inapplicable to the Merger Transactions.

     (b) Except for the approvals described in the following sentence, the execution, delivery and performance by the Company of this Agreement and the consummation of the Merger Transactions have been duly and validly authorized by all necessary corporate action on behalf of the Company. No other corporate proceeding on the part of the Company is necessary to authorize this Agreement or to consummate the Merger Transactions, other than (i) the affirmative approval of the Merger by at least a majority of all the votes entitled to be cast on the matter by the holders of all outstanding shares of Company Common Stock (the “ Required Company Shareholder Vote ”) and (ii) the execution, filing with, and the acceptance for record by the Secretary of State of the State of North Carolina of the Articles of Merger as required by the Secretary of State of the State of North Carolina. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of the Buyer Parties, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws of general applicability relating to or affecting creditors’ rights or by general equitable principles.

     (c) The Operating Partnership (through the Company as its sole general partner) has all necessary partnership power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger Transactions. The execution, delivery and performance by the Operating Partnership of this Agreement and the consummation by the Operating Partnership of the Merger Transactions, have been duly and validly authorized by all

necessary partnership proceedings on behalf of the Operating Partnership, including by all necessary action of the general partner of the Operating Partnership, and no other partnership proceedings are necessary to authorize this Agreement or to consummate the Merger Transactions. Other than the approval of the general partner of the Operating Partnership, which approval has been obtained, and the Required Company Shareholder Vote, no other vote or approval of the holders of any class or series of the capital stock, partnership interests or other equity interest of any of the Acquired Companies are necessary to approve the Merger Transactions. This Agreement has been duly and validly executed and delivered by the Operating Partnership (and by the Company on behalf of the Operating Partnership) and, assuming the due authorization, execution and delivery by each of the Buyer Parties, constitutes a legal, valid and binding obligation of the Operating Partnership, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws of general applicability relating to or affecting creditors’ rights or by general equitable principles.

     (d) Subject to the Required Company Shareholder Vote, except as set forth in Section 4.2(d) of the Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation of any of the Merger Transactions do or will, directly or indirectly (with or without notice or lapse of time or both): (i) contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of any of the Acquired Companies or, to the knowledge of the Acquired Companies, the Organizational Documents of any of the Minority JV Entities, or (B) any resolution adopted by the board (or similar governing body) or the shareholders (or similar holders of equity therein) of any of the Acquired Companies or, to the knowledge of the Acquired Companies, such resolutions of any of the Minority JV Entities; (ii) contravene, conflict with or result in a violation of any Legal Requirement or any order, writ, injunction or decree to which any of the Acquired Companies or, to the knowledge of the Acquired Companies, any of the Minority JV Entities, or any of the assets owned or used by any of the Acquired Companies or, to the knowledge of the Acquired Companies, any of the Minority JV Entities, is or may be subject; (iii) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by any of the Acquired Companies or, to the knowledge of the Acquired Companies, any of the Minority JV Entities, or that otherwise relates to the business of, or any of the assets owned or used by, any of the Acquired Companies or, to the knowledge of the Acquired Companies, any of the Minority JV Entities; (iv) cause any of the Acquired Companies or, to the knowledge of the Acquired Companies, any of the Minority JV Entities, to become subject to, or to become liable for the payment of, any Tax; (v) cause any of the assets owned by any of the Acquired Companies or, to the knowledge of the Acquired Companies, any of the Minority JV Entities, to be reassessed or revalued by any Taxing Authority or other Governmental Body; (vi) contravene, conflict with or result in a violation or breach of any provision of, or result in the loss of any material right or benefit under, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Material Contract; (vii) require a Consent from any Person; or (viii) result in the imposition or creation of any Encumbrance, other than any Permitted Encumbrance, upon or with respect to any of the assets owned or used by any of the Acquired Companies or, to the knowledge of the Acquired Companies, any of the Minority JV Entities, except, in the case of clauses (iii), (iv),

(v), (vi), (vii) and (viii) above, for any such contraventions, conflicts, violations, breaches, defaults or other occurrences that would not, individually or in the aggregate, have a Material Adverse Effect on the Acquired Companies or any of the Merger Transactions.

     (e) The execution and delivery of this Agreement by the Company Parties does not, and the performance of this Agreement and the consummation of the Merger Transactions will not, require any Consent of, or filing with or notification to, any Governmental Body, except (i) for (A) applicable requirements, if any, of the Exchange Act, the Securities Act and state securities or “blue sky” laws, (B) the pre-merger notification requirements of the HSR Act, if any, (C) the filing with the SEC of the Proxy Statement relating to the Merger to be sent to the Company’s shareholders, (D) any filings required under any securities exchange or quotation service and (E) filing of the Articles of Merger as required by the DLLCA and the NCBCA, respectively, and appropriate corresponding documents with the appropriate authorities in other states in which the Company is qualified as a foreign corporation to transact business; and (ii) where the failure to obtain such Consents, or to make such filings or notifications, would not, individually or in the aggregate, have a Material Adverse Effect on the Acquired Companies or any of the Merger Transactions.

     Section 4.3 Capitalization .

     (a) The authorized capital stock of the Company consists of 50,000,000 shares of Company Common Stock, 3,000,000 shares of Company Series A Preferred Stock and 5,000,000 shares of Company Series B Preferred Stock. As of the date hereof, (i) 29,414,967 shares of Company Common Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable, (ii) no shares of Company Series A Preferred Stock are issued and outstanding, (iii) 3,680,000 shares of Company Series B Preferred Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable, (iv) 10,000 shares of Company Common Stock are reserved for issuance upon the exercise of outstanding Options granted pursuant to the Company Plan, (v) 1,298,480 shares of Company Common Stock are reserved for issuance upon the conversion of Common Units into shares of Company Common Stock pursuant to the terms of the Operating Partnership Agreement, and (vi) no shares of Company Common Stock are reserved for issuance upon the exercise of outstanding warrants. As of the date hereof, the Conversion Factor (as defined in the Operating Partnership Agreement) is equal to 1.0.

     (b) There are no bonds, debentures, notes or other Debt or, other than the capital stock and options described in Section 4.3(a), securities of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of the Company may vote.

     (c) Set forth in Schedule 4.3(c) of the Disclosure Letter is, with respect to each Option granted by the Company as of the date of this Agreement, information regarding the identity of the grantee, the number of Options subject to the grant, the exercise/conversion price and expiration date and the Company Plan under which it was issued. All shares of Company Common Stock subject to issuance as described in Section 4.3(a) will, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, be duly authorized, validly issued, fully paid, nonassessable and not subject to any preemptive rights.

All Options, when issued, had an exercise price equal to no less than the fair market value of the underlying shares of Company Common Stock. As of the Merger Effective Time, all outstanding Options will be terminated by virtue of the Merger and each holder of an Option shall cease to have any rights with respect thereto, other than the right to receive, in respect of each such terminated Option, the Option Merger Consideration.

     (d) Except as set forth in Section 4.3 of the Disclosure Letter, there are no outstanding contractual obligations of any of the Acquired Companies or, to the knowledge of the Acquired Companies, any of the Minority JV Entities to repurchase, redeem or otherwise acquire any shares of capital stock of any of the Acquired Companies.

     (e) The Company does not have a “poison pill” or similar stockholder rights plan.

     Section 4.4 SEC Reports . The Company has filed all forms, reports, schedules, statements and other documents (including all exhibits) required to be filed by it with the SEC since January 1, 2002 (as amended to date, collectively, the “ Company SEC Reports ”). The Company SEC Reports at the time they were filed, or if amended or restated prior to the date hereof, at the time of such later amendment or restatement, (a) complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and (b) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which such statements were made, not misleading. No Subsidiary of the Company is, or has been, subject to the periodic reporting requirements of the Exchange Act or is or has been otherwise required to file any forms, reports, schedules, statements or other documents with the SEC, any foreign Governmental Body that performs a similar function to that of the SEC or any securities exchange or quotation service. The Company has made available to Parent prior to the date hereof copies of all material correspondence between the SEC, on the one hand, and the Acquired Companies, on the other hand, since January 1, 2004 through the date of this Agreement. As of the date of this Agreement, the Company has no outstanding and unresolved comments from the SEC with respect to any of the Company SEC Reports.

     Section 4.5 Financial Statements . The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company and its consolidated Subsidiaries included or incorporated by reference into the Company SEC Reports (including, in each case, any notes thereto): (a) were prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by the applicable rules and regulations of the SEC) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), (b) complied in all material respects with applicable accounting requirements and the rules and regulations of the SEC and (c) fairly presented in all material respects the consolidated financial position, results of operations and cash flows of the Company and its consolidated Subsidiaries, as the case may be, as of the dates thereof and for the periods indicated therein except as otherwise noted therein (subject, in the case of unaudited statements, to normal year-end adjustments). Except as set forth in Section 4.5 of the Disclosure Letter, all of the Subsidiaries of the Company are consolidated in accordance with GAAP.

     Section 4.6 Intellectual Property . Except as disclosed in Section 4.6 of the Disclosure

Letter, (i) with respect to Intellectual Property used by, owned by or licensed to any of the Acquired Companies (“ Company Intellectual Property ”), the Acquired Companies own the entire right, title and interest in or have the valid right to use the Company Intellectual Property in the continued operation of its business as currently conducted, and (ii) all fees and filings required to maintain any registration of any Intellectual Property used by the Company have been paid or timely filed, are current and are not in default or in arrears. Except as would not, individually or in the aggregate, have a Material Adverse Effect on the Acquired Companies, to the knowledge of the Acquired Companies, (a) the conduct of the business of the Acquired Companies as currently conducted does not infringe or otherwise violate the Intellectual Property rights of any third party, and (b) no third party is infringing or otherwise violating the Company Intellectual Property rights.

     Section 4.7 Personal Property . Except as set forth in Section 4.7 of the Disclosure Letter, the Acquired Companies have good and marketable title to, or a valid and enforceable leasehold interest in, all personal assets owned, used or held for use by them, except as would not, individually or in the aggregate, have a Material Adverse Effect on the Acquired Companies. Except as set forth in Section 4.7 of the Disclosure Letter, none of the Acquired Company’s ownership of or leasehold interest in any such personal property is subject to any Encumbrances, except for (a) assets that, collectively, have a book value of less than $500,000, (b) Permitted Encumbrances or (c) Encumbrances that would not, individually or in the aggregate, have a Material Adverse Effect on the Acquired Companies.

     Section 4.8 Real Property; Leaseholds .

     (a) Section 4.8(a)(i) of the Disclosure Letter sets forth a true and complete list of the real property currently owned by any Acquired Company, or to the knowledge of the Acquired Companies, any Minority JV Entity, and sets forth the Acquired Company (or the Minority JV Entity, as applicable) owning such properties (collectively, the “ Owned Real Properties ”). Section 4.8(a)(ii) of the Disclosure Letter sets forth a true and complete list of the real property currently ground leased by any Acquired Company, and to the knowledge of the Acquired Companies, any Minority JV Entity (collectively, the “ Ground Leased Properties ” and, together with the Owned Real Properties, the “ Properties ”), and sets forth the Acquired Company (or the Minority JV Entity, as applicable) holding such leasehold interest, with the name of the lessor and the date of the lease, any subleases and assignments, any guarantees given and each amendment to any of the foregoing (collectively, the “ Ground Leases ”). The Acquired Company (or, to the knowledge of the Acquired Companies, the Minority JV Entity, as applicable) as set forth in Section 4.8(a)(i) of the Disclosure Letter owns good, valid and marketable fee simple title to the Owned Real Properties, and the Acquired Company (or, to the knowledge of the Acquired Companies, the Minority JV Entity, as applicable) set forth in Section 4.8(a)(ii) of the Disclosure Letter owns good, valid and subsisting leasehold title to the Ground Leased Properties, in each case, free and clear of all Encumbrances, except for Permitted Encumbrances, except as would not have a Material Adverse Effect on the Acquired Companies. None of the Properties is (i) subject to any decree or order of any Governmental Body to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefore or (ii) subject to any pending or, to the knowledge of the Acquired Companies, threatened rezoning proceedings, which would reasonably be expected to have a

Material Adverse Effect on the Acquired Companies (or, to the knowledge of the Acquired Companies, the applicable Minority JV Entity). No Acquired Company or, to the knowledge of the Acquired Companies, any Minority JV Entity, as applicable, has received notice of any violation in any material respect of any covenants, conditions or restrictions affecting any Properties.

     (b) Except as set forth in Section 4.8(b) of the Disclosure Letter, and except as would not have a Material Adverse Effect on the Acquired Companies, all Title Policies and surveys for the real property currently owned by any Acquired Company and, to the knowledge of the Acquired Companies, any Minority JV Entity have been provided or made available to Parent prior to the date hereof. No Acquired Company or, to the knowledge of the Acquired Companies, any Minority JV Entity, has received any written notice and is not otherwise aware that valid policies of title insurance or title commitments for which premiums have been paid (collectively, the “ Title Policies ”) insuring the Acquired Companies’ (or, to the knowledge of the Acquired Companies, the Minority JV Entities’, as applicable) fee simple or leasehold title to the Properties owned or ground leased by any Acquired Company (or, to the knowledge of the Acquired Companies, any Minority JV Entity, as applicable) are not in full force and effect.

     (c) Except as set forth in Section 4.8(c) of the Disclosure Letter, and except as would not have a Material Adverse Effect on the Acquired Companies, each real property lease or sublease (other than the Ground Leases) to which any Acquired Company and, to the knowledge of the Acquired Companies, any Minority JV Entity, is a party or subject, as either a tenant, landlord, lessee, lessor, sublandlord or subtenant, has been provided or made available to Parent prior to the date hereof (collectively, the “ Space Leases ”).

     (d) Except as would not have a Material Adverse Effect on the Acquired Companies, each of the Ground Leases and the Space Leases is valid, binding and in full force and effect as against the Acquired Companies (or, to the knowledge of the Acquired Companies, the Minority JV Entities, as applicable). No Acquired Company or, to the knowledge of the Acquired Companies, no Minority JV Entity, as applicable, has (i) received notice under any of the Ground Leases or the Space Leases of any default, and, to the knowledge of the Acquired Companies, no event has occurred which, with notice or lapse of time or both, would constitute a material default by any Acquired Company (or any Minority JV Entity, as applicable) thereunder or (ii) assigned its interest in any of the Ground Leases or Space Leases or sublet any part of the premises thereby or exercised any option or right thereunder except as, in each case, would not individually or in the aggregate, have a Material Adverse Effect on the Acquired Companies. No penalties are accrued or unpaid under any Ground Lease or Space Lease, except for penalties that would not, individually or in the aggregate, have a Material Adverse Effect on the Acquired Companies.

     (e) Except as set forth in Section 4.8(e) of the Disclosure Letter or as would not, individually or in the aggregate, have a Material Adverse Effect on the Acquired Companies, and except for capital improvements in the ordinary course of business consistent with past practice and reflected on the capital expenditures budget of the Acquired Companies as made available to Parent prior to the date hereof and ongoing product improvement plan (PIP) obligations as set forth in Section 4.8(e) of the Disclosure Letter, to the knowledge of the Acquired Companies, (i) there is no Property whose building systems are not in working order, (ii) there is no physical

damage to any Property, (iii) there is no pending and incomplete renovation or restoration to any Property, and (iv) there are no material structural defects relating to any Property.

     (f) Section 4.8(f) of the Disclosure Letter sets forth (i) a true and complete list of the real property in respect of which any Acquired Company, or to the knowledge of the Acquired Companies, any Minority JV Entity, has the right, pursuant to a franchise, license, satellite agreement, franchise development agreement, area development agreement, development incentive agreement or other Contract (together with any amendment, guarantees and any ancillary documents and agreements related thereto, the “ Franchise Agreements ”) to utilize a brand name or other rights of a hotel chain or system from any Person and (ii) the applicable brand of such property. Each such Franchise Agreement has been provided or made available to Parent prior to the date hereof and is valid, binding and in full force and effect as against the Acquired Companies (or the Minority JV Entities, as applicable). Except as expressly and specifically disclosed in the Company’s filings under the Exchange Act filed prior to the date hereof or as otherwise disclosed on Section 4.8(f) of the Disclosure Letter, no Acquired Company (or, to the knowledge of the Acquired Companies, the Minority JV Entities, as applicable) has received or delivered written notice under any of the Franchise Agreements of any material default, including any failure to meet any inspection under any Franchise Agreement, and, to the knowledge of the Acquired Companies, no event has occurred which, with notice or lapse of time or both, would constitute a material default by any Acquired Company (or any Minority JV Entity, as applicable).

     Section 4.9 Management Agreements . Section 4.9 of the Disclosure Letter lists each management agreement pursuant to which any third party manages or operates any Properties or Space Leases on behalf of any of the Acquired Companies (or, to the knowledge of the Acquired Companies, any of the Minority JV Entities, as applicable), and describes the property that is subject to such management agreement, the Acquired Company that is a party, the date of such management agreement and each material amendment, guaranty or other agreement binding on any Acquired Company and relating thereto (collectively, the “ Management Agreement Documents ”). True, correct and complete copies of all Management Agreement Documents have been made available to Parent prior to the date hereof. Each of the Management Agreement Documents is valid, binding and in full force and effect as against the Acquired Company that is a party thereto.

     Section 4.10 Unexpired Option Agreements . Except as set forth in Section 4.10 of the Disclosure Letter, as of the date of this Agreement neither the Acquired Companies nor, to the knowledge of the Acquired Companies, the Minority JV Entities have granted any unexpired option agreements or rights of first refusal with respect to the purchase of Properties or any portion thereof or any other unexpired rights in favor of any third party to purchase or otherwise acquire a Property which would be triggered by any of the Merger Transactions.

     Section 4.11 Taxes .

     (a) Each of the Acquired Companies (i) has timely filed (or had filed on their behalf) all material Tax Returns required to be filed by any of them (after giving effect to any filing extension granted by a Governmental Body) and (ii) has paid (or had paid on their behalf) or will timely pay Taxes (whether or not shown on such Tax Returns) that are required to be paid by it.

Such Tax Returns are true, correct and complete in all material respects. The most recent financial statements contained in the Company SEC Reports filed prior to the date hereof reflect an adequate reserve (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) for all Taxes payable by the Acquired Companies for all taxable periods and portions thereof through the date of such financial statements, and Taxes payable by the Acquired Companies on the Closing Date will not exceed such reserve as adjusted through the Closing Date in accordance with the past custom and practice of any of the Acquired Companies in filing their Tax Returns. True and complete copies of all federal Tax Returns that have been filed with the IRS by the Company Parties with respect to the taxable years commencing on or after January 1, 2004, have been provided or made available to Representatives of Parent prior to the date hereof. None of the Acquired Companies has executed or filed with the IRS or any other Taxing Authority any agreement, waiver or other document or arrangement extending the period for assessment or collection of material Taxes (including any applicable statute of limitation), which waiver or extension is currently in effect, and, except as set forth in Section 4.11(a) of the Disclosure Letter, no power of attorney with respect to any Tax matter is currently in force with respect to any of the Acquired Companies.

     (b) The Company, (i) for each taxable year of its existence has been subject to taxation as a real estate investment trust (“ REIT ”) within the meaning of Section 856 of the Code and has been organized and operated in conformity with the requirements for qualification and taxation as a REIT for such years, (ii) has operated to the date hereof in a manner that will permit it to qualify as a REIT for the taxable year that includes the date hereof, and (iii) shall continue to operate in such a manner as to permit it to continue to qualify as a REIT for the taxable year of the Company that includes the Closing Date (excluding, in the case of clause (iii), the distribution requirements). The Company has not taken any action or omitted to take any action that would reasonably be expected to result in a successful challenge by the IRS to its status as a REIT, and no challenge to the Company’s status as a REIT is pending or has been threatened in a writing delivered to the Company or, to the knowledge of the Acquired Companies, otherwise threatened. Excluding any Person in which the Company holds an equity interest of ten percent (10%) or less by both vote and value, within the meaning of Code Section 856(c)(4)(B)(iii), the Company does not own any interest (including through any Acquired Company) in any Person that is a corporation for U.S. federal income tax purposes, other than a corporation that qualifies as a “qualified REIT subsidiary,” within the meaning of Section 856(i)(2) of the Code, or as a “taxable REIT subsidiary,” within the meaning of Section 856(1) of the Code. The Company is not receiving or accruing any amount, directly or indirectly, that would be excluded from “rents from real property” pursuant to Section 856(d)(2)(B) of the Code.

     (c) Each Subsidiary of the Company that is a partnership, joint venture, or limited liability company and that has not elected to be a “taxable REIT subsidiary” within the meaning of Code Section 856(1) (i) has been since its formation treated for U.S. federal income tax purposes as a partnership or disregarded entity, as the case may be, and not as a corporation or an association taxable as a corporation and (ii) has not, since the later of its formation or the acquisition by the Company of a direct or indirect interest therein, owned any assets (including securities) that have caused the Company to violate Section 856(c)(4) of the Code or would cause the Company to violate Section 856(c)(4) of the Code on the last day of any calendar quarter after the date hereof.

     (d) None of the Acquired Companies holds any asset the disposition of which would be subject to rules similar to Section 1374 of the Code.

     (e) The Acquired Companies have not incurred any liability for material Taxes under sections 856(c), 856(g), 857(b), 860(c) or 4981 of the Code or any rules similar to Section 1374 of the Code and (ii) none of the Acquired Companies has incurred any liability for Taxes that have become due and that have not been previously paid other than in the ordinary course of business. To the knowledge of the Acquired Companies, no event has occurred, and no condition or circumstance exists, which would reasonably be expected to result in any Tax described in the preceding sentence being imposed on the Company. None of the Acquired Companies has engaged at any time in any “prohibited transactions” within the meaning of Section 857(b)(6) of the Code. To the knowledge of the Acquired Companies, none of the Acquired Companies has engaged in any transaction that would give rise to “redetermined rents, redetermined deductions and excess interest” described in section 857(b)(7) of the Code. To the knowledge of the Acquired Companies, no event has occurred, and no condition or circumstance exists, that presents a risk that any Tax described in the preceding two (2) sentences will be imposed on any of the Acquired Companies.

     (f) All deficiencies asserted or assessments made with respect to any of the Acquired Companies by the IRS or any other Taxing Authority covering or including any of the Acquired Companies have been fully paid, and, to the knowledge of the Company, there are no other material audits, examinations or other proceedings relating to any Taxes of the Acquired Companies by any Taxing Authority in progress. Except as set forth in Section 4.11(f) of the Disclosure Letter, none of the Acquired Companies has received any written notice from any Taxing Authority that it intends to conduct such an audit, examination or other proceeding in respect of Taxes or make any assessment for Taxes. To the knowledge of the Acquired Companies, no audit, examination, or other proceeding is threatened. None of the Acquired Companies is a party to any litigation or pending litigation or administrative proceeding relating to Taxes.

     (g) The Acquired Companies have complied, in all material respects, with all applicable Legal Requirements relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, and 3402 of the Code or similar provisions under any foreign Legal Requirements) and have duly and timely withheld and have paid over to the appropriate Taxing Authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Legal Requirements.

     (h) No claim has been made in a writing delivered to the Company or applicable Acquired Company by a Taxing Authority in a jurisdiction where any of the Acquired Companies does not file Tax Returns that any of the Acquired Companies is or may be subject to taxation by that jurisdiction, and to the knowledge of the Acquired Companies, no such claim is threatened.

     (i) Except as set forth in Section 4.11(i) of the Disclosure Letter, none of the Acquired Companies has requested any extension of time within which to file any material Tax Return, which material Tax Return has not yet been filed.

     (j) None of the Acquired Companies is a party to any Tax sharing or similar agreement or arrangement pursuant to which it could have any obligations after the Closing.

     (k) None of the Acquired Companies has requested a private letter ruling from the IRS or comparable rulings from other taxing authorities.

     (l) None of the Acquired Companies (other than an Acquired Company that is a “taxable REIT subsidiary” within the meaning of Section 856(l) of the Code) (i) is or has ever been a member of an affiliated group filing a consolidated federal income Tax Return or (ii) has any liability for the Taxes of another Person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign Legal Requirement), as a transferee or successor or by Contract or otherwise.

     (m) Other than Permitted Encumbrances, there are no Encumbrances for Taxes (other than Taxes not yet due and payable for which adequate reserves have been made in accordance with GAAP) upon any of the assets of any of the Acquired Companies.

     (n) There is no Tax Protection Agreement currently in force and, as of the date of this Agreement, no Person has raised in writing, or to the knowledge of the Acquired Companies, threatened to raise, a claim against any of the Acquired Companies for any breach of any Tax Protection Agreement.

     (o) None of the Acquired Companies is a party to any understanding or arrangement described in Section 6662(d)(2)(C)(ii) of the Code or Treasury Regulations Section 1.6011-4(b) or is a material advisor as defined in Section 6111(b) of the Code.

     (p) None of the Acquired Companies has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law).

     (q) Subject to the necessary conditions set forth in Section 4.11(q) of the Disclosure Letter, the Company has the right to make or to require, and, after the Merger Effective Time will continue to have the right to make or to require, each entity in which any Acquired Company owns an equity interest in and that is subject to federal income tax as a partnership to make an election under Section 754 of the Code (and any corresponding elections under state or local tax law) to adjust the basis of its property as provided in Sections 734(b) and 743(b) of the Code.

     (r) Section 4.11(r) of the Disclosure Letter sets forth each entity in which any of the Acquired Companies owns an equity interest and states whether such entity is classified as a partnership, disregarded entity, or a corporation for federal income tax purposes. In the case of an entity classified as a corporation for federal income tax purposes, such schedule states whether an effective election has been made to treat such entity as a “taxable REIT subsidiary” under Section 856(l) of the Code.

     (s) To the knowledge of the Acquired Companies, as of the date hereof, the Company is a “domestically controlled qualified investment entity” within the meaning of Section 897(h)(4)(B)

of the Code.

     (t) As used herein, “ Tax Protection Agreement ” means any written or oral agreement to which any of the Acquired Companies is a party or otherwise subject pursuant to which: (a) any liability to holders of partnership interests in any Subsidiary of the Company relating to Taxes may arise, whether or not as a result of the consummation of any of the Merger Transactions; (b) in connection with the deferral of income Taxes of a holder of partnership interests of any Subsidiary of the Company, any of the Acquired Companies has agreed to (i) maintain a minimum level of debt or continue a particular debt or allocate a certain amount of debt to a particular partner, (ii) retain or not dispose of assets for a period of time that has not since expired, (iii) make or refrain from making Tax elections and/or (iv) only dispose of assets in a particular manner; and/or (c) limited partners of the Operating Partnership (i) have guaranteed Debt of the Operating Partnership or any Subsidiary thereof or (ii) agreed to indemnify another Person with respect to such Person’s liability for Debt of the Operating Partnership or any Subsidiary thereof.

     Section 4.12 Employee Benefits .

   &