AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT

Exhibit 2.1
EXECUTION COPY

AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT

     This AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT (this “ Amendment ”) dated as of November 19, 2005 amends that certain Asset Purchase Agreement dated as of October 25, 2005 (the “ Agreement ”), by and among Arlington Hospitality, Inc., a Delaware corporation, Arlington Hospitality Development, Inc., an Illinois corporation, Arlington Hospitality Management, Inc., an Illinois corporation, Arlington Hospitality Staffing, Inc., an Illinois corporation, Arlington Inns of America, Inc., a Delaware corporation, Arlington Inns of Ohio, Inc., an Ohio corporation, Arlington Lodging Group, Inc., a Delaware corporation, Arlington Office Group, Inc., an Illinois corporation, AP Hotels of Illinois, Inc., an Illinois corporation, AP Hotels of Mississippi, Inc., a Mississippi corporation, AP Hotels of Pennsylvania, Inc., a Pennsylvania corporation, AP Hotels of Wisconsin, Inc., a Wisconsin corporation, AP Hotels/Parkersburg, WVA, Inc., a West Virginia corporation, AP Properties of Ohio, Inc., an Ohio corporation, API/Athens, OH, Inc., an Ohio corporation, API/Lancaster, OH, Inc., an Ohio corporation, API, Logan, OH, Inc., an Ohio corporation, API/Metropolis, IL, Inc., an Illinois corporation, API/Washington C.H., OH, Inc., an Ohio corporation, Shorewood Hotel Investments Inc., an Illinois corporation, Athens Motel Associates Limited Partnership II, an Ohio limited partnership, Batesville MS 595 Limited Partnership, a Mississippi limited partnership, API/Hammond, IN, Inc., an Indiana corporation, AP Hotels of Missouri, Inc., a Missouri corporation, AP Hotels of Georgia, Inc., a Georgia corporation, and Decatur, IN 1297 LLC, an Indiana limited liability company (collectively, the “ Sellers ”), and Sunburst Hospitality Development, Inc., a Delaware corporation, Sunburst Hospitality Management, Inc., a Delaware corporation, Boulevard Motel Staffing Corp., a Delaware corporation, Sunburst Hotel Holdings, Inc., a Delaware corporation, Sunburst Metropolis, IL, Inc., an Illinois corporation, Sunburst Hammond, IN, Inc., an Indiana corporation, Sunburst Murray, KY, Inc., a Kentucky corporation, Sunburst Lansing, MI, Inc., a Michigan corporation, Sunburst Land, Mexico, MO, Inc., a Missouri corporation, Sunburst Batesville, MS, Inc., a Mississippi corporation, Sunburst Jeffersonville South, OH, Inc., an Ohio corporation, Sunburst Oxford, OH, Inc., an Ohio corporation, Sunburst Land, Oxford, OH, Inc., an Ohio corporation, Sunburst Lancaster, OH, Inc., an Ohio corporation, Sunburst Logan, OH, Inc., an Ohio corporation, Sunburst Wilmington, OH, Inc., an Ohio corporation, Sunburst Cambridge, OH, Inc., an Ohio corporation, Sunburst Winchester OH, Inc., an Ohio corporation, Sunburst Land, Athens, OH, Inc., an Ohio corporation, Sunburst Athens, OH, Inc., an Ohio corporation, Sunburst Land Wisconsin, Inc., a Wisconsin corporation, and Sunburst Parkersburg WV, Inc., a West Virginia corporation, (collectively, the “ Buyers ”).

     WHEREAS, the Parties desire to enter into this Amendment so as to make certain modifications to the Agreement, as set forth below.

     WHEREAS, Section 10.6 of the Agreement permits the Sellers and the Buyers to amend the Agreement only by a written instrument executed and delivered by the Sellers and the Buyers.

     NOW, THEREFORE, for good and valuable consideration and in consideration of the respective representations, warranties, covenants and agreements set forth in the Agreement, the Parties hereby agree as follows:

ARTICLE I
AMENDMENT

      Section 1.1 Excluded Liabilities. The introductory paragraph of Section 2.3(b) of the Agreement is hereby amended and replaced in its entirety, with the following corresponding sections:

     Except to the extent included in the Assumed Liabilities, the Buyers will not assume or become responsible for, and will not be deemed to have assumed or to have become responsible for, the following liabilities and obligations (collectively, the “ Excluded Liabilities ”):

      Section 1.2. Purchase Price. Section 3.2 of the Agreement is hereby amended and replaced in its entirety, with the following corresponding sections:

     (a) Subject to Section 3.2(b) below, on the terms and subject to the conditions set forth in this Agreement, at the Closing, the Buyers will pay and deliver to the Sellers (i) the sum of Seven Million Five Hundred Twenty Thousand Dollars ($7,520,000.00) in cash by wire transfer of immediately available funds to an account or accounts designated by the Sellers (the “ Cash Portion ”), (ii) the assumption of the Mortgages in the aggregate amount of principal and interest, which are owed on the Closing Date to the Other Secured Creditors identified on Schedule 2.3(a)(ii) as numbers 1 through 8, (iii) the liability in an amount up to $1,700,000 which is owed on the Closing Date to the Other Secured Creditors identified on Schedule 2.3(a)(ii) as number 14, (iv) either the assumption of the Mortgages or the payment of the aggregate amount of principal and interest, which are owed on the Closing Date to the Other Secured Creditors identified on Schedule 2.3(a)(ii) as numbers 9 and 10, and (v) subject to Section 6.8 , the assumption of the Mortgages in the aggregate amount of principal and interest, which are owed on the Closing Date to the Other Secured Creditors identified on Schedule 2.3(a)(ii) as numbers 11 through 13 (together with the Cash Portion, the “ Purchase Price ”), plus or minus the net proration of the Apportioned Obligations determined in accordance with Section 6.7 of this Agreement.

     (b) Notwithstanding Section 3.2(a) above, if the Purchased Assets include the Development Agreement (whether or not amended, modified or supplemented), the Cash Portion of the Purchase Price shall be increased to an amount equal to Eight Million Twenty Thousand Dollars ($8,020,000.00); provided that any amendment, modification or supplement of the Development Agreement must be acceptable to the Buyers in their sole discretion.

      Section 1.3 Bankruptcy Case. Clause (ii) of Section 6.6(b) of the Agreement is hereby amended and replaced in its entirety with the following:

     (ii) up until the day the Approval Order is entered by the Bankruptcy Court, the Buyers may elect, by written notice to the Sellers, to have any of the executory contracts or unexpired leases set forth on Schedule 2.2(a)(vi) not be assigned to and assumed by the Buyers, and any such contracts or leases so identified in such notice shall be removed from Schedule 2.2(a)(vi) and shall no longer constitute Assumed Contracts; provided that the Buyers may not remove the Development Agreement or any of the franchise agreements included in the Cendant Agreements from Schedule 2.2(a)(vi) without the

     prior written consent of the Sellers, which consent may be withheld in their sole discretion.

      Section 1.4 Prorations. Section 6.7(b) of the Agreement is hereby amended and replaced in its entirety with the following:

     (b) The Buyers shall promptly reimburse the Sellers for all fees, costs and expenses incurred by the Sellers in connection with transferring the Mortgages to the Buyers in an amount not to exceed $200,000.00; provided that the Sellers shall use their commercially reasonable efforts to minimize such fees, costs and expenses.

      Section 1.5 Personal Property and Equipment.

     (a)  Section 2.2(a) of the Agreement is hereby amended to add the following clause (xv) :

     (xv) the furniture, furnishings, equipment and office supplies located at the main headquarters office building of the Sellers, other than the items set forth on Schedule 2.2(a)(xv) .

     (b) The Disclosure Schedules are hereby amended to add a Schedule 2.2(a)(xv) , which is attached hereto as Appendix A .

      Section 1.6 Hotels. Schedule 2.2(a)(i)(A) of the Agreement is hereby amended and replaced in its entirety with the information set forth on Appendix B attached hereto.

      Section 1.7 Permits . Schedule 2.2(a)(iv) of the Agreement is hereby amended to add the Permits set forth on Appendix C attached hereto.

      Section 1.8 Assumed Contracts. Schedule 2.2(a)(vi) of the Agreement is hereby amended to add the Assumed Contracts set forth on Appendix D attached hereto.

      Section 1.9 Joint Ventures. Schedule 2.2(a)(xi) of the Agreement is hereby amended to add the Joint Venture set forth on Appendix E attached hereto.

      Section 1.10 Notes Receivables. Schedule 2.2(a)(xiv) of the Agreement is hereby amended and replaced in its entirety with the information set forth on Appendix F attached hereto.

Section 1.11 Excludable Mortgage Agreements.

     (a) The definition of “Excludable Mortgage Agreements” is hereby amended and replaced in its entirety with the following: “ Excludable Mortgage Agreements ” means the mortgages identified as items 11 through 13 listed on Schedule 2.3(a)(ii) .

     (b)  Schedule 2.3(a)(ii) of the Agreement is hereby amended and replaced in its entirety with the information set forth on Appendix G attached hereto.

     (c)  Article VI of the Agreement is hereby amended to add the following Section 6.8 :

      Section 6.8. Certain Excludable Mortgage Agreements . If the lenders under any of the Excludable Mortgage Agreements identified as items 11 through 13 on Schedule 2.3(a)(ii) fail to consent to the transfer thereof to the Buyers, the Buyers shall have the right to designate any such nontransferable Excludable Mortgage Agreement that would otherwise be a Purchased Asset as an Excluded Asset at any time prior to the Closing Date. Any such nontransferable Excludable Mortgage Agreements shall thereupon be deemed Excluded Assets for all purposes hereunder; provided that, in the event the Buyers designate any particular Excludable Mortgage Agreement under this Section 6.8 , the Hotels and any Assumed Contracts or Permits related solely thereto shall also be Excluded Assets.

      Section 1.12 Rejected Contracts. Schedule 6.6(b) of the Agreement is hereby amended to add the Rejected Contracts set forth on Appendix H attached hereto.

ARTICLE II
MISCELLANEOUS

      Section 2.1 Definitions . Capitalized terms used but not otherwise defined herein will have the meanings ascribed to them in the Agreement.

      Section 2.2 No Further Amendments . Except as expressly amended hereby, the provisions of the Agreement are and will remain unmodified and in full force and effect. Each reference to “hereof,” “herein,” “hereunder,” “hereby” and “this Agreement” will hereafter refer to the Agreement as amended by this Amendment. Notwithstanding the foregoing, unless the context requires otherwise, references in the Agreement to “the date hereof,” “the date of this Agreement” or similar references will continue to refer to October 25, 2005.

      Section 2.3 Counterparts. This Amendment may be executed in two or more counterparts, each of which will be deemed an original, but all such counterparts taken together will constitute one and the same Agreement.

      Section 2.4 Governing LawSection 2.5 . THIS AMENDMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF ILLINOIS TO BE APPLIED.

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     IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement on the date first written above.