**EXHIBIT 10.3****PURCHASE AND SALE AGREEMENT****HILTON DURHAM, DURHAM, NORTH CAROLINA**     **THIS PURCHASE AND SALE AGREEMENT**(this **“Agreement**”), dated as of October 31, 2005, is made byand between **MeriStar Hospitality Operating Partnership, L.P.**(successor by name change to AmericanGeneral Hospitality Operating Partnership, L.P.) **(“Seller**”), a Delaware limited partnership, havingan address at                     , and **Interstate Durham, LLC (“Purchaser**”), a Delawarelimited liability company, having an address at 4501 N. Fairfax Drive, Suite 800, Arlington, VA22203.**RECITALS**     A. Seller is the owner of the hotel located at 3800 Hillsborough Road, Durham, North Carolina,and known as the Hilton Durham near Duke University (the **“Hotel**”); and     B. Seller desires to sell the Hotel and certain related assets to Purchaser, and Purchaserdesires to acquire the same from Seller, on the terms and conditions set forth in this Agreement.     **NOW, THEREFORE**, in consideration of ten ($10.00) dollars and the agreements hereinafter setforth, and intending to be legally bound hereby, the parties agree as follows:**I.****Definitions; Sale and Purchase**     **1.01 Definitions.**In addition to terms defined elsewhere in this Agreement, the followingterms shall have the meanings indicated: (a) **“Bookings”**shall mean contracts or reservations for the use or occupancy ofguest rooms, meeting rooms and/or the banquet facilities of the Hotel, includingwithout limitation (i) volume transient agreements, and (ii) any assignable internetand travel agent reservation agreements and promotions, if any, in effect with respectto the Hotel.  (b) **“Books and Records”**shall mean all books, records, room rates, customer listsand banquet and function room records with respect to the Hotel (whether in electronicformat or reduced to paper, but with respect to items in electronic format (i)excluding software which is proprietary to Seller, MHL, the Manager, their respectiveaffiliates or any third party, or subject to a non-transferable license, (ii) only insuch form as they exist on the Closing Date, (iii) only to the extent the same are notconsolidated with items from other hotels owned, leased or managed by Seller, MHL,Manager or any of their respective affiliates not being conveyed to Purchaser and (iv)without any representation or warranty that the same are compatible with Purchaser’ssoftware), to the extent the same (x) are owned by Seller or MHL, (y) reflectoperations at the Hotel and not at other properties owned, leased or managed by Seller,MHL, Manager or any of their respective affiliates, and (z) are in Seller’s or MHL’spossession.  (c) **“Closing Date”**shall mean the date specified in Section 6.01.  (d) **“Consumables”**shall mean all opened and unopened food and beverages (alcoholicand non-alcoholic) owned by Seller or MHL and located at, or purchased to be used orsold at but not yet delivered to, the Hotel, excluding any alcoholic beverages whichmay not legally be transferred to Purchaser under applicable law.  (e) **“Cut-off Time”**shall mean 11:59 p.m. on the date preceding the Closing Date.
 

 
 (f) **“Effective Date”**shall mean the date of this Agreement.  (g) **“Environmental Laws”**shall mean any and all federal, state and local laws,statutes, ordinances, rules, regulations, judgments, orders, decrees, permits, licensesor other governmental restrictions or requirements now or hereafter in effect withrespect to the Property and relating to the environment and/or Hazardous Substances,including without limitation the Comprehensive Environmental Response, Compensation andLiability Act of 1986, as amended (42 U.S.C. §9601 et seq.), the Resource ConservationRecovery Act, as amended by the Hazardous and Solid Waste Amendments of 1984, as now orhereafter amended (42 U.S.C. §6901 et seq.), the Hazardous Materials TransportationAct, as amended (49 U.S.C. §1801 et seq.), the Clean Air Act, as amended (42 U.S.C.§7401 et seq.), the Clean Water Act, as amended (33 U.S.C. §1251 et seq.), and theToxic Substances and Control Act, as amended (15 U.S.C. §2601 et seq.).  (h) **“Escrow Agent”**shall mean First American Title Insurance Company, through itsNational Accounts Office in Washington, DC, in its capacity as holder of the EarnestMoney described in Section 2.02, with which Purchaser and Seller shall enter into aseparate escrow agreement substantially in the form of Exhibit H.  (i) **“Expendables”**shall mean all expendable supplies, including, but not limitedto, all china, glassware, linens, towels, washcloths, bedding, napkins, tablecloths,silverware, kitchen and bar small goods, paper goods, guest supplies, cleaning andmaintenance supplies, office supplies, operating supplies, printing, stationery anduniforms owned by Seller or MHL and located at, or purchased for use at but not yetdelivered to, the Hotel. In no event shall Expendables include any such items whichbear the trade name, trademark, service mark, logo or other identification of theFranchisor, but only to the extent that at Closing all of such items are removed fromthe Hotel, transferred to the Franchisor, and otherwise dealt with in accordance withthe Franchise Agreement.  (j) **“Franchisor”**shall mean Hilton Hospitality, Inc. or its successor under theFranchise Agreement.  (k) **“Franchise Agreement”**shall mean that certain Franchise Agreement datedNovember 21, 1986 between Franchisor and Seller.  (l) **“Furnishings”**shall mean all fixtures, furniture, furnishings, fittings,equipment, machinery, apparatus, appliances, computer hardware and equipment, software(to the extent such software is not proprietary to either Seller, MHL or Manager orsubject to a non-transferable license), reservations terminals (to the extent notlicensed to Seller by Franchisor under the Franchise Agreement or other applicabledocumentation), vehicles, building materials, telephones and other communicationequipment, copiers, facsimile machines, postal machines, televisions, signs, vacuumcleaners, video equipment and other similar articles of personal property (to theextent Seller or MHL have title to such items and such items are not leased pursuant toany Hotel Contract), located on or at the Property and used or usable in connectionwith the operation of the Hotel, subject to such depletions, substitutions andreplacements as shall occur and be made in the ordinary course of business consistentwith past practices prior to the Closing Date and in accordance with the terms of thisAgreement, excluding therefrom all items of personal property owned by Manager setforth on Exhibit A or a tenant under a Space Lease. In no event shallFurnishings include any such items which bear the trade name, trademark, service mark,logo or other identification of the Franchisor, but only to the extent that at Closingall of such items are removed from the Hotel, transferred to the Franchisor, andotherwise dealt with in accordance with the Franchise Agreement.  (m) **“Hazardous Substance”**shall mean any substance, material or waste which isregulated, or governed by any Environmental Law, including without limitation (a) anysubstance, material or waste defined, used or listed as “hazardous waste”, “extremelyhazardous waste”, “restricted hazardous waste”, “hazardous substance”, “hazardousmaterial”, “toxic substance” or similar or related term as defined, used or listed inany Environmental Laws, (b) any asbestos or asbestos
 

 
   containing materials, (c) any underground storage tanks or similar facilities, (d)petroleum, petroleum-based substances or polychlorinated biphenyl, (e) mold andsimilar organisms, and (f) any additional substances or materials which arehazardous or toxic substances under any Environmental Laws.  (n) **“Hotel Contracts”**shall mean all service and maintenance contracts, employmentagreements, purchase orders and other contracts or agreements, including withoutlimitation equipment leases, relating to the maintenance, operation, provisioning orequipping of the Hotel, together with all related written warranties and guaranties, asthe same may change after the date hereof but only to the extent permitted under thisAgreement. Hotel Contracts shall not include (i) the Franchise Agreement, (ii)Bookings or agreements relating to Bookings, (iii) the Management Agreement, (iv) anycontracts, equipment leases or purchase orders (except to the extent of Consumables,Expendables and/or Furnishings ordered prior to the Closing in the ordinary course ofbusiness consistent with past practices and not yet delivered to the Property) underwhich, or which are subject to master agreements under which, goods and/or services aresupplied or leased to more than one hospitality property owned, leased or managed bySeller, MHL, Manager or any of its or their respective affiliates, unless the same isspecifically set forth on Exhibit D, (v) the MHL Lease or (vi) the SpaceLeases.  (o) **“Hotel Employees”**shall mean the persons employed at the Hotel, whether bySeller, MHL or Manager, to operate the Hotel.  (p) **“Improvements”**shall mean the buildings, structures (surface and sub-surface),installations and other improvements, including such fixtures and appurtenances asshall constitute real property located on the Land.  (q) **“Land”**shall mean the land described on Exhibit B, together with allproperty rights, easements, tenements, hereditaments, rights-of-way, developmentrights, entitlements, unused densities, privileges and appurtenances thereto; allleases, rents, and profits derived therefrom; all right, title and interest of Sellerin and to any land lying in the bed of any street, road, highway or avenue, open orproposed, public or private, in front of or adjoining all or any part of the land tothe center line thereof; subject to the limitations herein, all right, title andinterest of Seller in and to any unpaid award or payment which may now or hereafter bepayable in respect of any taking by condemnation and all right, title and interest ofSeller in and to any unpaid award for damage to the Land or any part thereof by reasonof change of grade of any street, road, highway or avenue adjacent to such land and allstrips and gores adjoining and adjacent to such land.  (r) **“Management Agreement”**shall mean that certain Hotel Management Agreement datedas of January 1, 2001 between MHL and Manager.  (s) **“Manager”**shall mean Interstate Management Company, L.L.C., an affiliate ofPurchaser which is the current manager of the Hotel.  (t) **“MHL”**shall mean MeriStar Hotel Lessee, Inc., an affiliate of Seller which isthe current lessee of the Property.  (u) **“MHL Lease”**shall mean that certain operating lease with respect to theProperty between Seller, as owner, and MHL, as tenant, which such operating lease shallbe terminated at or prior to Closing.  (v) **“Miscellaneous Personal Property”**shall mean the Hotel’s website and webaddress (if any, and only to the extent such website and/or web address, relates solelyto the Hotel), the Hotel’s telephone numbers, printed marketing materials, if any,relating solely to the Hotel, and any slides, proofs or drawings used by Seller or MHLto produce such materials, to the extent such slides, proofs or drawings are inSeller’s or MHL’s possession and without any express or implied
 

 
   warranty of any kind by Seller or MHL in connection therewith. In no event shallMiscellaneous Personal Property include any property licensed for use under theFranchise Agreement, but only to the extent that at Closing all of such items areremoved from the Hotel, transferred to the Franchisor, and otherwise dealt with inaccordance with the Franchise Agreement.  (w) **“Permits”**shall mean all governmental licenses, permits, certificates,authorizations and approvals used in or relating to the ownership, occupancy oroperation of any part of the Hotel, including, without limitation, those necessary forthe sale and on-premises consumption of liquor and other alcoholic beverages.  (x) **“Property”**shall mean the Land and Improvements.  (y) **“Space Leases”**shall mean all leases and other agreements (written or oral) forthe use of space at the Property, including but not limited to, agreements for the useof rooftop space on the Hotel for the installation of cellular telephone antennas (but,with respect to such cellular antenna leases, net of brokerage commissions to thirdparties). The term “Space Leases” shall not include the MHL Lease or Bookings.  (z) **“Title Company”**shall mean First American Title Insurance Company, through itsNational Accounts Office in Washington, DC, in its capacity as title insurer.  (aa) **“Warranties”**shall mean any assignable warranties benefiting Seller or MHL withrespect to the Furnishings, Miscellaneous Personal Property and Improvements.     **1.02 Sale and Purchase.**Seller agrees to sell, transfer and convey the Property, theFurnishings, the Consumables, the Expendables, the Hotel Contracts, the Bookings, the Books andRecords, the Space Leases, the Warranties, the Miscellaneous Personal Property and the assignablePermits (all of the foregoing collectively, the **“Purchased Assets**”) to Purchaser, and Purchaseragrees to purchase the Purchased Assets from Seller, subject to the terms, covenants, conditionsand provisions set forth in this Agreement. Purchaser acknowledges and agrees that notwithstandinganything to the contrary in this Agreement, Seller is not conveying as part of such sale any cash,cash equivalents, bank accounts, reserve accounts, deposits and the like owned or held by Seller,Manager or MHL, other than cash in house banks being apportioned pursuant to Section 6.02(j) and,to the extent the same are credited to Seller and assigned to Purchaser pursuant to Section 6.02,accounts receivable and deposits.     **1.03 Condition of Property.**Purchaser acknowledges that (i) Manager is an affiliate ofPurchaser and Purchaser is knowledgeable about the Purchased Assets, (ii) Purchaser will have areasonable opportunity to inspect and investigate the Property, the other Purchased Assets and allmatters relating thereto, including, without limitation, all of the physical, environmental andoperational aspects of the Purchased Assets, either independently or through agents and experts ofPurchaser’s choosing and (iii) Purchaser will acquire the Purchased Assets based upon Purchaser’sown knowledge, investigation and inspection. SELLER AND PURCHASER AGREE THAT, EXCEPT AS EXPRESSLYPROVIDED FOR IN THIS AGREEMENT, THE PURCHASED ASSETS SHALL BE SOLD, AND PURCHASER SHALL ACCEPT THEPURCHASED ASSETS, ON THE CLOSING DATE “**AS IS”**, “**WHERE IS**”, “**WITH ALL FAULTS**” WITH NO RIGHT OFSET-OFF OR REDUCTION IN THE PURCHASE PRICE, AND THAT, EXCEPT AS EXPRESSLY PROVIDED IN THISAGREEMENT, SUCH SALE SHALL BE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS,IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, WARRANTY OF INCOME POTENTIAL,OPERATING EXPENSES, USES, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND SELLER DOESHEREBY DISCLAIM AND RENOUNCE ANY SUCH REPRESENTATION OR WARRANTY, EXCEPT AS EXPRESSLY PROVIDED INTHIS AGREEMENT. PURCHASER SPECIFICALLY ACKNOWLEDGES THAT, EXCEPT AS PROVIDED FOR IN THISAGREEMENT, PURCHASER IS NOT RELYING AND SHALL NOT RELY ON ANY REPRESENTATIONS OR WARRANTIES OF ANYKIND WHATSOEVER, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, FROM SELLER AS TO ANY MATTERSCONCERNING THE PURCHASED ASSETS, INCLUDING WITHOUT LIMITATION: (A) THE CONDITION OR SAFETY OF THEPURCHASED ASSETS, INCLUDING, BUT NOT LIMITED TO, PLUMBING, SEWER, HEATING AND ELECTRICAL SYSTEMS,ROOFING, AIR CONDITIONING, FOUNDATIONS, SOILS AND GEOLOGY INCLUDING HAZARDOUS
 

 
SUBSTANCES, LOT SIZE, OR SUITABILITY OF THE PROPERTY FOR A PARTICULAR PURPOSE; (B) THEHISTORICAL OR PROJECTED REVENUES, EXPENSES, OCCUPANCY RATES, ROOM RATES, PROFITABILITY OR OTHERFINANCIAL STATISTICS OF THE PURCHASED ASSETS; (C) THE LIVABILITY OR SUITABILITY FOR OCCUPANCY OFANY STRUCTURE AND THE QUALITY OF ITS CONSTRUCTION; (D) THE FITNESS OF ANY PERSONAL PROPERTY; OR (E)WHETHER THE IMPROVEMENTS ARE STRUCTURALLY SOUND, IN GOOD CONDITION, OR IN COMPLIANCE WITHAPPLICABLE CITY, COUNTY, STATE OR FEDERAL STATUTES, CODES OR ORDINANCES (INCLUDING, WITHOUTLIMITATION, THE AMERICANS WITH DISABILITIES ACT OR ANY SIMILAR STATE OR LOCAL LAW). PURCHASERFURTHER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER SHALLBE UNDER NO DUTY TO MAKE ANY AFFIRMATIVE DISCLOSURE REGARDING ANY MATTER WHICH MAY BE KNOWN TOSELLER, ITS OFFICERS, DIRECTORS, CONTRACTORS, AGENTS OR EMPLOYEES, AND THAT PURCHASER IS RELYINGSOLELY UPON ITS OWN INSPECTION OF THE PROPERTY AND NOT UPON ANY REPRESENTATIONS MADE TO IT BY ANYPERSON WHOMSOEVER. ANY REPORTS, REPAIRS OR WORK REQUIRED BY PURCHASER ARE TO BE THE SOLERESPONSIBILITY OF PURCHASER. PURCHASER AGREES THAT THERE IS NO OBLIGATION ON THE PART OF SELLERPURSUANT TO THIS AGREEMENT TO MAKE OR TO PAY FOR ANY CHANGES, ALTERATIONS, OR REPAIRS TO THEPROPERTY PRIOR TO OR AFTER THE CLOSING. PURCHASER AGREES AND ACKNOWLEDGES THAT PURCHASER’SOBLIGATIONS HEREUNDER SHALL REMAIN IN FULL FORCE AND EFFECT WITH PURCHASER HAVING NO RIGHT TO DELAYTHE CLOSING OR TERMINATE THIS AGREEMENT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, REGARDLESSOF ANY FACTS OR INFORMATION LEARNED BY PURCHASER AFTER THE EFFECTIVE DATE.     Seller’s Initials:                     Purchaser’s Initials:                          **1.04 CERCLA Release.**Except as may be expressly provided in this Agreement, Purchaser, foritself and its successors in interest, releases Seller from, and waives all claims and liabilityagainst Seller for, any structural, physical and/or environmental condition at the Property, andhereby releases Seller from, and waives all liability against Seller attributable to, thestructural, physical and/or environmental condition of the Property, including without limitationthe presence, discovery or removal of any Hazardous Substances in, at, about or under the Property,or connected with or arising out of any and all claims or causes of action based upon theComprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by SARASuperfund Amendment and Reauthorization Act of 1986 and as may be further amended from time to time(“**CERCLA**”) or any related claims or causes of action or any other federal or state based statutoryor regulatory causes of action for environmental contamination at, in or under the Property. Theprovisions of this Section shall survive the Closing.**II.****Consideration**     **2.01 Purchase Price.**In consideration of the sale of the Purchased Assets, Purchaser shallpay to Seller the amount of Fourteen Million Fifty Thousand Dollars ($14,050,000) (the **“PurchasePrice**”).     **2.02 Payments.**The Purchase Price shall be payable by Purchaser as follows: (a) Five Hundred Thousand Dollars ($500,000) as an earnest moneydeposit (together with any interest earned thereon, the **“Earnest Money”**), bycheck or wire transfer of good funds to the Escrow Agent within two (2)business days after the Effective Date;  (b) At Closing, the termination fee owed by Seller to Manager underthe Management Agreement, in the amount of Seven Hundred Fifty Thousand Dollars($750,000), will be waived by Manager;
 

 
 (c) At Closing, Seller will receive a credit from Manager in theamount of One Hundred Thousand Dollars ($100,000), which Seller and itsaffiliates may apply, at any time prior to the second anniversary of theClosing Date, to termination fees owed to Manager in connection with thetermination of any other hotel management agreement, provided that no more thanTwenty-Five Thousand Dollars ($25,000) shall be applied to the termination ofany individual hotel management agreement (the parties hereby agreeing thatthis credit shall be reflected in an amendment to that certain Master FeeAgreement dated as of January 1, 2001, as amended, between MHL (together withother affiliates of Seller) and Manager, in form and substance reasonablysatisfactory to the parties thereto, which shall be entered into at theClosing); and  (d) The balance of the Purchase Price (adjusted based on theprorations set forth herein) by wire transfer of immediately available goodfunds to Seller at the Closing.     **2.03 Earnest Money.**The Earnest Money shall be delivered to and held by Escrow Agent inescrow in an interest-bearing account pursuant to the terms of this Agreement. If the Closingoccurs in accordance with the terms and provisions of this Agreement, the Earnest Money shall bepaid to Seller and credited against the Purchase Price. If the Closing does not occur, the EarnestMoney shall be held and delivered as provided in this Agreement.     **2.04 Allocation.**The Purchase Price shall be allocated between the Property and the otherPurchased Assets as the parties may reasonably agree upon prior to the Closing.**III.****Title Matters**     **3.01 Survey.**Seller, at Purchaser’s cost, ordered from S.D. Puckett & Associates, Inc. anALTA (or local equivalent) survey of the Property (the **“Survey**”) dated August 8, 2005, anddelivered the Survey to Purchaser and the Title Company. On September 15, 2005, Seller providedPurchaser with Seller’s Survey Objections.     **3.02 Title Commitment.**Seller, at Purchaser’s cost, caused the Title Company to issue toPurchaser a commitment for ALTA Owner’s Policy of Title Insurance or local equivalent, withextended coverage and customary owner endorsements dated August 26, 2005 (the **“Title Commitment**”),with respect to the Property accompanied by, to the extent available, a legible copy of allrecorded documents relating to liens, easements, rights-of-way, restrictions and other mattersaffecting title to the Property.     **3.03 Title Objections.**Purchaser acknowledges that it has received and reviewed the TitleCommitment and all recorded documents referenced therein, and, in a letter dated August 18, 2005,Purchaser notified Seller of any items therein which are unacceptable to Purchaser (“**TitleObjections**”). Seller has agreed to cure all such Title Objections prior to Closing. Seller maycure any Title Objection by causing the Title Company, at Seller’s cost and expense, to omit suchTitle Objection from Purchaser’s and Purchaser’s lender’s title policy issued pursuant to the TitleCommitment (the **“Title Policy**”) or to “insure over” such Title Objection. If Seller fails to curesuch Title Objections at or before Closing, then Purchaser may as its sole remedy either (i) accepttitle to the Property subject to such Title Objections or (ii) terminate this Agreement by writtennotice to Seller, whereupon the Earnest Money shall be promptly returned to Purchaser and theparties shall have no further rights or liabilities under this Agreement except with respect tothose provisions that specifically provide that they survive the termination of this Agreement.Subject to the provisions of Section 3.06, any restrictions, liens, encumbrances, easements, rightsof way and other matters shown on the Title Commitment which are waived or are not objected to byPurchaser in the manner provided in this Section shall be deemed **“Permitted Exceptions”**.     **3.04 Survey Objections.**Purchaser acknowledges that it has received and reviewed the Survey,and, in a letter dated September 15, 2005, Purchaser notified Seller of any items therein which areunacceptable to Purchaser (“**Survey Objections**”). Seller has agreed to cure all such SurveyObjections prior to Closing. Seller may cure any Survey Objection by causing the Title Company, atSeller’s cost and expense, to omit such Survey Objection from the Title Policy or to “insure over”such Survey Objection. If Seller fails to cure such Survey
 

 
Objections at or before Closing, then Purchaser may as its sole remedy either (i) accept titleto the Property subject to such Survey Objections or (ii) terminate this Agreement by writtennotice to Seller, whereupon the Earnest Money shall be promptly returned to Purchaser and theparties shall have no further rights or liabilities under this Agreement except with respect tothose provisions that specifically provide that they survive the termination of this Agreement.Subject to the provisions of Section 3.06, any restrictions, liens, encumbrances, easements, rightsof way and other matters shown on the Survey which are waived or are not objected to by Purchaserin the manner provided in this Section shall be deemed **“Permitted Exceptions”**.     **3.05 Title Conveyed.**Subject to Sections 3.03 and 3.04, Seller shall on the Closing Dateconvey to Purchaser good and marketable title to the Property, subject only to the PermittedExceptions.     **3.06 Mortgage Liens.**Seller, at its expense, shall cure (by payment, bonding or escrowdeposit in a manner reasonably acceptable to the Title Company) at or before the Closing anymortgage, deed of trust or other monetary lien constituting a Title Objection, and Seller may notrefuse to cure the same.**IV.****Representations; Covenants and Conditions**     **4.01 Seller’s Representations and Warranties.**Seller represents and warrants to Purchaserthat as of the Effective Date and as of the Closing Date: (a) Seller is a duly organized and validly existing corporation ingood standing in the state of its formation and in the state in which theProperty is located. Seller has full power and authority to enter into thisAgreement, to perform its obligations under this Agreement and to own andoperate the Hotel and the Purchased Assets.  (b) The execution and delivery of this Agreement has been dulyauthorized by all necessary and appropriate action of Seller. This Agreementconstitutes a legal, valid and binding obligation of Seller, enforceableagainst Seller in accordance with its terms.  (c) The execution, delivery and performance of this Agreement bySeller and the consummation by Seller of the transactions contemplated herebywill not: (i) violate any organizational document of Seller; (ii) result in abreach or acceleration of or constitute a default or event of termination underthe provisions of any agreement or instrument by which the Hotel or Property isbound or affected (other than the Franchise Agreement) which would have amaterial impact on the ownership or operation of the Property by Purchaser,provided that Purchaser and Seller obtain all Required Consents; (iii) resultin the creation or imposition of any lien, charge or encumbrance, against theHotel or Property or any portion thereof; or (iv) constitute or result in theviolation or breach by Seller of any judgment, order, writ, injunction ordecree issued against or imposed upon Seller or result in the violation of anyapplicable law, rule or regulation of any governmental authority which, withrespect to any of the foregoing, would have a material impact on the ownershipor operation of the Hotel or Property by Purchaser.  (d) No consent or approval of any person, entity, or governmentalauthority is required with respect to the execution and delivery of thisAgreement by Seller or the consummation by Seller of the transactionscontemplated hereby or the performance by Seller of its obligations under thisAgreement, other than (i) consents or approvals listed on Exhibit I(collectively, the “**Required Consents**”), (ii) such consents or approvals as maybe required pursuant to the Franchise Agreement and (iii) such consents orapprovals as may be required under the Hotel Contracts which, if not obtained,would not have a material
 

 
   adverse effect on Purchaser’s ownership and operation of the Hotel or theProperty after the Closing.  (e) There are no Space Leases affecting all or any portion of theProperty except as set forth on Exhibit C. To Seller’s knowledge, (i)all of the Space Leases are in full force and effect, (ii) each of the SpaceLeases delivered, or to be delivered, to Purchaser is true and complete, and(iii) except as set forth on Exhibit C, there are no material defaultsby Seller or, to Seller’s knowledge, any other party under any of the SpaceLeases. The MHL Lease and the Management Agreement will be terminated bySeller on or prior to the Closing Date. Purchaser acknowledges and agrees thatrents received under any antenna leases encumbering the Property are net ofcommissions due to third party brokers arranging such leases.  (f) There are no Hotel Contracts affecting all or any portion ofthe Property except as set forth in Exhibit D, other than certainmulti-property agreements pursuant to which goods and/or services are suppliedto more than one property owned, leased or managed by Seller, MHL or Manager orits or their affiliates, which multi-property agreements Purchaser and Selleracknowledge and agree are not being assigned to Purchaser unless the same areset forth on Exhibit D. To Seller’s knowledge, (i) each of the HotelContracts is in full force and effect, (ii) each of the Hotel Contractsdelivered, or to be delivered, to Purchaser is true and complete, and (iii)except as set forth on Exhibit D, there are no material defaults bySeller or, to Seller’s knowledge, any other party under any of the HotelContracts. If there exists any Hotel Contract which is not reflected onExhibit D, the foregoing representation shall not be deemed incorrectto the extent such Hotel Contract is entered into after the Effective Date aspermitted hereunder.  (g) To Seller’s knowledge, all material Permits required for andrelating to the operation of the Hotel are set forth in Exhibit E. ToSeller’s knowledge (i) the Permits are in full force and effect, (ii) except asset forth on Exhibit F, Seller has received no written notice of anyviolations of the Permits, and (iii) each of the Permits delivered, or to bedelivered, to Purchaser is true and complete.  (h) Except as set forth on Exhibit F, Seller has notreceived written notice of any violation of laws within the past two (2) yearsfor any violation which has not been remedied. To Seller’s knowledge, Selleris not currently in violation of, any laws, ordinances, building codes, zoningcodes, orders, regulations or legal requirements, including without limitationEnvironmental Laws **(“Laws**”), of governmental or quasi-governmental authoritieswith respect to the Property or the ownership, use, maintenance or operation ofthe Hotel.  (i) Except as set forth in Exhibit G, there is nolitigation, action, investigation or proceeding (including, but not limited to,proceedings in respect to a condemnation) pending or, to Seller’s knowledge,threatened in writing relating to the Purchased Assets, the Hotel or theProperty or the transactions contemplated by this Agreement.  (j) Seller and/or MHL owns good and marketable title to theFurnishings, Consumables, Expendables and Miscellaneous Personal Property, freeand clear of all liens, claims and encumbrances other than (i) the PermittedExceptions, (ii) items which are leased as indicated in the Hotel Contracts(including without limitation any equipment leases for certain Furnishings setforth on Exhibit D) and (iii) the rights, if any, of the Franchisorunder the Franchise Agreement therein or thereto.  (k) Seller is not a “foreign person” as defined in the InternalRevenue Code of 1986, as amended.
 

 
 (l) Neither Seller nor any of its affiliates, or, to Seller’sknowledge, the funding sources for any of them, is a Specially DesignatedNational or Blocked Person (as defined herein). Neither Seller nor anyaffiliate is directly or indirectly owned or controlled by the government ofany country that is subject to an embargo by the United States government.Neither Seller nor any affiliate is acting on behalf of a government of anycountry that is subject to such an embargo. Seller agrees that it will notifyPurchaser in writing immediately upon the occurrence of any event which wouldrender the foregoing representations and warranties incorrect. For purposes ofthis Agreement, **“Specially Designated National or Blocked Person”**means (a) aperson or entity designated by the U.S. Department of Treasury’s Office ofForeign Assets Control from time to time as a “specially designated national orblocked person” or similar status, (b) a person or entity described in Section1 of U.S. Executive Order 13224, issued on September 23, 2001 (the **“ExecutiveOrder”**), or (c) a person or entity otherwise identified by government or legalauthority as a person or entity with whom a United States Person (as definedbelow) is prohibited from transacting business. As of the date hereof, a listof such designations and the text of the Executive Order are published underthe internet website address www.ustreas.gov/offices/enforcement/ofac.**“United States Person”**shall mean: (1) any individual or business entity,regardless of location, that is a resident of the United States; (2) anyindividual or business entity physically located within the United States; (3)any company or business entity organized under the laws of the United States orof any state, territory, possession, or district thereof; and (4) anyindividual or business entity, wheresoever organized or doing business, whichis owned or controlled by those specified in (1) or (3) above.     **4.02 Seller’s Knowledge.**Wherever the phrase **“to Seller’s knowledge”**or any similar phrasestating or implying a limitation on the basis of knowledge appears in this Agreement, unlessspecifically otherwise qualified, such phrase shall mean the present actual knowledge, after dueinquiry, of John Plunket, Bruce G. Wiles, Michael Linch and/or Kirk Pederson.     **4.03 Seller’s Possession.**Wherever the phrase **“in Seller’s possession”**, **“in the possession ofSeller”**or similar phrase appears in this Agreement, such phrase shall be deemed to mean to theextent the material or other item referred to by such phrase is located at the Hotel or in thecorporate headquarters of Seller.     **4.04 Imputation of Manager’s Knowledge to Purchaser.**Purchaser acknowledges that Manager isan affiliate of Purchaser. All information, documents and knowledge of Manager concerning thePurchased Assets shall be imputed to Purchaser. In no event shall Seller be in breach of any ofits representations and warranties for failure to provide Purchaser with any information ordocuments concerning the Purchased Assets to the extent such information, documents or knowledgeare in the possession of Manager.     **4.05 Purchaser’s Representations and Warranties.**Purchaser represents and warrants to Sellerthat as of the Effective Date and as of the Closing Date: (a) Purchaser is a duly organized and validly existing limitedliability company, is in good standing in the state of its formation and, as ofthe Closing Date, the state in which the Property is located, and has fullpower and authority to enter into this Agreement and to perform its obligationsunder this Agreement.  (b) The execution and delivery of this Agreement has been dulyauthorized by all necessary and appropriate action of Purchaser. ThisAgreement constitutes a legal, valid and binding obligation of Purchaser,enforceable against Purchaser in accordance with its terms.  (c) The execution, delivery and performance of this Agreement byPurchaser and the consummation by Purchaser of the transactions contemplatedhereby will not: (i) violate any organizational document of Purchaser; (ii)result in a breach or acceleration of or constitute a default or event oftermination under the provisions of any agreement or instrument by whichPurchaser is bound or affected which would have a material impact
 

 
   on the ownership or operation of the Property by Purchaser; or (iii)constitute or result in the violation or breach by Purchaser of any judgment,order, writ, injunction or decree issued against or imposed upon Purchaser orresult in the violation of any applicable law, rule or regulation of anygovernmental authority which, with respect to any of the foregoing, wouldhave a material impact on the ownership or operation of the Hotel or Propertyby Purchaser. (d) No consent or approval of any person, entity, or governmentalauthority is required with respect to the execution and delivery of thisAgreement by Purchaser or the consummation by Purchaser of the transactionscontemplated hereby or the performance by Purchaser of its obligations underthis Agreement, other than such consents or approvals as are contemplated bySection 4.11 and on Exhibit I.  (e) Neither Purchaser nor any of its affiliates, or, to Purchaser’sknowledge, the funding sources for any of them, is a Specially DesignatedNational or Blocked Person. Neither Purchaser nor any affiliate is directly orindirectly owned or controlled by the government of any country that is subjectto an embargo by the United States government. Neither Purchaser nor anyaffiliate is acting on behalf of a government of any country that is subject tosuch an embargo. Purchaser agrees that it will notify Seller in writingimmediately upon the occurrence of any event which would render the foregoingrepresentations and warranties incorrect.     **4.06 Remedies Regarding Representations and Warranties.** (a) Each party shall promptly after obtaining actual knowledgethereof disclose to the other any changes which results in any of itsrepresentations and warranties or the other party’s representations andwarranties becoming untrue or incorrect in any material respect. At theClosing, each of Seller and Purchaser shall deliver to the other a certificateaffirming, subject only to exceptions specified in such certificate, that therepresentations and warranties of such party contained in Section 4.01 or 4.05(as the case may be) are true and correct in all material respects as of theClosing, which such certificate shall be subject to all of the provisions ofthis Section 4.06. (i) Pre-Closing. In the event that Sellerbecomes aware (either upon written notice from Purchaser or otherwise)prior to Closing that any of Seller’s warranties or representations setforth in this Agreement are not true or accurate in any materialrespect, Seller may attempt to cure the same by Closing. If Seller isunable or unwilling to cure same by Closing, then Purchaser shall beentitled, as its sole remedy and subject to Section 5.02, either towaive the same and close this transaction or to terminate thisAgreement. If Purchaser elects to terminate this Agreement, Purchasershall give written notice thereof to Seller and Escrow Agent, EscrowAgent shall return the Earnest Money to Purchaser and neither party tothis Agreement shall thereafter have any further rights or liabilitiesunder this Agreement, except as provided in Section 5.02 and withrespect to those provisions that specifically survive the terminationof this Agreement. Notwithstanding the foregoing, Purchaser shall haveno right or remedy with respect to Seller’s breach of anyrepresentation or warranty if Purchaser had actual knowledge of suchbreach as of the date hereof.  (ii) Post-Closing. The representations andwarranties of Purchaser and Seller shall survive Closing for a periodof one (1) year, and, subject to the provisions of Sections 4.06(b) and4.06(c), Seller shall indemnify, defend and hold Purchaser harmlessfrom and against any loss, damage, liability, claim, demand, cause ofaction, cost or expense (including, without limitation, reasonableattorneys’ fees) that may be incurred by or asserted against Purchaserafter the Closing and arises from a breach of Seller’s representationor warranty, provided that
 

 
   Purchaser shall advise Seller in writing in reasonable detail of suchbreach within fifteen (15) months after Closing. (b) Notwithstanding any provision of this Agreement or of thecertificate delivered pursuant to Section 4.06(a) above to the contrary, Sellershall have no liability to Purchaser, and shall not be required to indemnifyPurchaser, for any breach or breaches by Seller of any representation orwarranty set forth in this Agreement or such certificate unless (i) the Closingoccurs, (ii) Purchaser had no actual knowledge of such breach at or prior toClosing and (iii) the aggregate monetary loss to Purchaser resulting from allbreaches of representations or warranties by Seller is more than Twenty-FiveThousand Dollars ($25,000). Notwithstanding any provision of this Agreement orof the certificate delivered pursuant to Section 4.06(a) above to the contrary,Purchaser shall have no liability to Seller, and shall not be required toindemnify Seller, for any breach or breaches by Purchaser of any representationor warranty set forth in this Agreement or such certificate unless (i) theClosing occurs, (ii) Seller had no actual knowledge of such breach at or priorto Closing and (iii) the aggregate monetary loss to Seller resulting from allbreaches of representations or warranties by Purchaser is more than Twenty-FiveThousand Dollars ($25,000).  (c) Notwithstanding any provision of this Agreement or of thecertificate delivered pursuant to Section 4.06(a) above to the contrary, theaggregate liability of Seller to Purchaser with respect to any and all breachesby Seller of representations and warranties under this Agreement and/or undersuch certificate shall not exceed Seven Hundred Fifty Thousand Dollars($750,000). Notwithstanding any provision of this Agreement or of thecertificate delivered pursuant to Section 4.06(a) above to the contrary, theaggregate liability of Purchaser to Seller with respect to any and all breachesby Purchaser of representations and warranties under this Agreement and/orunder such certificate shall not exceed Seven Hundred Fifty Thousand Dollars($750,000).  (d) The provisions of this Section 4.06 shall survive the Closing.     **4.07 Seller’s Covenants.**Seller covenants and agrees with Purchaser that prior to the Closing(and with respect to the applicable covenants in Section 4.07(f) below, from and after the Closingto the extent set forth therein): (a) Seller will not sell, exchange, assign, transfer, convey, leaseor otherwise dispose of all or any part of the Purchased Assets or any interesttherein except for any Furnishings, Consumables and Expendables which are sold,replaced or consumed in the ordinary course of business consistent with pastpractices, and shall maintain Furnishings, Consumables and Expendables at theProperty in a manner substantially consistent with Seller’s customary operatingpractices (taking occupancy levels into account) and historical practice at theProperty, it being understood that on the Closing Date, the levels ofInventory, Furnishings or Consumables at the Property may be greater or lessthan those levels on the Effective Date.  (b) Seller will keep the material Hotel Contracts and the Permits(including any such items entered into after the Effective Date in accordancewith Section 4.07(c), but excluding those which may be terminated in theordinary course of business consistent with past practices or as a result of adefault by the other party or which may expire by their terms) in full forceand effect, will pay all charges when due under such agreements and willperform all of its material obligations under such Hotel Contracts and Permits.Seller will comply with and pay all charges under the Franchise Agreementconsistent with past practices.  (c) Seller will not enter into, amend or (excluding those which maybe terminated in the ordinary course of business consistent with past practicesor as a result of a default by the
 

 
   other party or which may expire by their terms) terminate any contracts,leases, licenses, easements or other agreements relating to the Property,which will obligate Purchaser or be a charge or lien against the Property,except those which (i) are necessary to continue the operation of the Hotelin the ordinary course of business consistent with past practices, (ii) areterminable without payment or penalty on thirty (30) or fewer days notice or(iii) have otherwise been approved by Purchaser in its sole discretion.Purchaser shall advise Seller of its approval or rejection of any suchproposed contract, lease, license, easement or other agreement within five(5) business days after Seller has delivered the same to Purchaser.Purchaser’s failure to approve or reject the same within such five (5)business day period shall be deemed to be an acceptance of the submissionand an authorization for Seller to execute the applicable contract, lease,license, easement or other agreement. Nothing contained in this Section4.07 shall limit Seller’s rights to accept or contract for essentialProperty services, room reservations, bookings or other advanced commitmentsfor use of the Property’s facilities in accordance with its existingstandard of operation as of the Effective Date. (d) Seller will operate and maintain, or cause to be operated andmaintained, the Property in substantially the same manner in which it is beingoperated and maintained as of the Effective Date.  (e) Seller will permit Purchaser and its representatives,contractors, agents, personnel, lenders, employees, investors and partners toenter upon and inspect the Property and perform such investigations of thePurchased Assets and all Books and Records as Purchaser may from time to timedeem desirable. Provided Purchaser gives Seller reasonable prior notice,Seller shall arrange for Purchaser and Purchaser’s agents to have reasonableaccess to the Property during regular business hours until the Closing Date toconduct Purchaser’s due diligence, to prepare for Closing and to verify anychange in the condition of the Property since the Effective Date. Purchaserdoes hereby acknowledge and agree, regardless of whether such entry and/oractivities occurred before or after the Effective Date, that (i) the costs andexpenses of Purchaser’s access, whenever incurred, shall be borne solely byPurchaser, (ii) Purchaser has been obligated during all entries made prior tothe Effective Date and shall be obligated with respect to all entries made fromand after the Effective Date not to unreasonably disturb or interfere with theoperation, management or use of the Property by Seller, Seller’s agents, anytenant or any tenant’s customers, invitees or guests, (iii) Purchaser has beenobligated during all entries made prior to the Effective Date, and shall beobligated with respect to all entries made from and after the Effective Date,not to damage or adversely affect the physical structure or any of themechanical, electrical, plumbing or HVAC systems of the Property and/or theFurnishings and (iv) Purchaser shall be obligated with respect to all entriesmade from and after the Effective Date to give prior notice to Seller of anysuch entry and Seller shall have the right to require that Purchaser’srepresentative be accompanied by a representative of Seller during any suchvisit to the Property. Purchaser hereby agrees to indemnify, defend, and holdSeller, MHL, Manager and the Property harmless from any and all actual costs,loss, damages (excluding consequential and punitive damages) or expenses(including reasonable attorneys’ fees) arising out of any personal injury orproperty damage resulting from such entry and/or activities upon the Propertyby Purchaser, its agents, contractors and/or subcontractors, regardless ofwhether such entry and/or activities occurred before or after the EffectiveDate, which indemnity shall survive the Closing or any termination of thisAgreement. At all times that Purchaser is given access to the Property inconnection with its investigations under this Section 4.07(e), Purchaser shallcarry, and Purchaser shall cause all of its agents and contractors to carry,reasonably adequate liability insurance covering their respective activities atthe Property and Purchaser shall deliver evidence of such insurance to Sellerupon Seller’s request. In no event shall Purchaser or its agents undertake anyinvasive testing at the Property, other than a standard Phase I environmentaltype test, without the prior consent of Seller, which consent shall not beunreasonably conditioned, withheld or delayed.
 

 
   Purchaser shall have the right to communicate with Hotel Employees, providedthe same is coordinated through Seller, without the prior consent of Seller.  (f) Purchaser is the current holder of the liquor license for theHotel. Seller will cooperate with Purchaser in all reasonable respects inconnection with Purchaser’s retention of all liquor licenses used in connectionwith the operation of the Hotel.  (g) Until Closing (or any earlier termination of this Agreement),Seller shall not, directly or indirectly, solicit, discuss or negotiate withany person or entity (other than Purchaser), or accept, any proposal for theacquisition of Seller, the Hotel or the Property in whole or in part.     **4.08 Intentionally Omitted.**     **4.09 Conditions Precedent to Purchaser’s Obligations.**Purchaser’s obligations under thisAgreement are conditioned upon the satisfaction of the following conditions as of the Closing Date: (a) Purchaser shall not have terminated this Agreement.  (b) Seller’s representations and warranties set forth in thisAgreement shall continue to be true and accurate in all material respects as ofthe Closing Date subject to (i) Seller’s right to cure the same prior to theClosing as set forth in Section 4.06(a) above, (ii) any changes permittedpursuant to this Agreement, and (iii) such changes in such representations andwarranties as are actually known to Purchaser as of the date hereof.  (c) Seller shall have delivered all of the documents required underthis Agreement and performed in all material respects all of its covenants andobligations under this Agreement.  (d) The Title Company shall be prepared, upon or simultaneouslywith compliance by Purchaser of all requirements of Purchaser set forth in theTitle Report, to issue to Purchaser an owner’s policy of title insurance in theamount of the Purchase Price meeting the requirements of Section 3.03.  (e) Purchaser shall have received approval by Franchisor of anassignment of the Franchise Agreement or shall have received a new license orfranchise agreement from Franchisor or an Other Franchisor, in form andsubstance satisfactory to Purchaser in its sole discretion.  (f) Between the Effective Date and the Closing Date, there shallnot have been any material adverse change in the condition (financial orotherwise) or results of operations of the Hotel, the Property or the PurchasedAssets.The conditions precedent set forth in this Section 4.09 are solely for the benefit of Purchaser andmay be waived only by Purchaser, which waiver may be granted or withheld by Purchaser in its solediscretion. Without limiting and without prejudice to any of Purchaser’s other rights or remediesunder this Agreement in the event any such failure of condition is the result of or arises out ofSeller’s default under this Agreement, if any condition precedent to Purchaser’s obligations underthis Agreement has not been satisfied as of the Closing Date or waived by Purchaser, then Purchasershall be entitled in its sole discretion to terminate this Agreement by giving Seller and EscrowAgent written notice to such effect, whereupon Escrow Agent shall return the Earnest Money toPurchaser.     **4.10 Conditions Precedent to Seller’s Obligations.**Seller’s obligations under this Agreementare conditioned upon the satisfaction of the following conditions as of the Closing Date:
 

 
 (a) Purchaser’s representations and warranties set forth in thisAgreement shall continue to be true and accurate in all material respects,subject to such changes as are permitted under this Agreement.  (b) Franchisor shall have (i) either (A) approved Purchaser’schange of ownership application with respect to the Hotel, and agreed toPurchaser’s assumption of, and Purchaser shall have assumed, the FranchiseAgreement, or Franchisor shall have entered into a new license or franchiseagreement with Purchaser with respect to the Hotel, as required by Franchisor,or (B) terminated the Franchise Agreement, and, in either case, (ii) deliveredto Seller and any guarantor of or party to the Franchise Agreement a release(the **“Release**”) of their respective obligations under the Franchise Agreement(to the extent the same arise from and after the Closing), executed byFranchisor in Franchisor’s customary form, with such changes as may bereasonably requested by Seller.  (c) Purchaser shall have paid the Purchase Price, delivered all ofthe documents required under this Agreement and performed in all materialrespects all of its other covenants and obligations under this Agreement.The conditions precedent set forth in this Section 4.10 are solely for the benefit of Seller andmay be waived only by Seller, which waiver may be granted or withheld by Seller in its solediscretion. Without limiting and without prejudice to any of Seller’s other rights or remediesunder this Agreement in the event any such failure of condition is the result of or arises out ofPurchaser’s default under this Agreement, if any condition precedent to Seller’s obligations underthis Agreement has not been satisfied as of the Closing Date or waived by Seller, then Seller shallbe entitled in its sole discretion to terminate this Agreement by giving Purchaser and Escrow Agentwritten notice to such effect, in which event the Earnest Money shall be paid to the party entitledthereto under this Agreement.     **4.11 Franchise Agreement.** (a) Purchaser acknowledges that the Franchise Agreement providesthat, in the event of a proposed sale or lease of the Hotel, Franchisor shallhave a right of first offer with respect thereto. Promptly following theEffective Date, Seller shall use commercially reasonable efforts to obtainFranchisor’s waiver of such right. If Franchisor asserts that it has the rightto purchase the Hotel and notifies Seller that it intends to exercise its rightto purchase the Hotel, Seller shall so notify Purchaser within two (2) businessdays, this Agreement shall terminate, neither party to this Agreement shallthereafter have any further rights or liabilities under this Agreement exceptwith respect to those provisions that specifically provide that they survivethe termination of this Agreement, and Escrow Agent shall return the EarnestMoney to Purchaser and Purchaser shall be entitled to payment from Seller of(i) Purchaser’s actual third-party out of pocket due diligence costs, includingoutside legal fees, in connection with this transaction in an amount not toexceed Fifty Thousand Dollars ($50,000) and (ii) Purchaser’s actualnon-refundable fees and costs paid by Seller to Franchisor in connection withobtaining a new license or franchise agreement for the Property, in an amountnot to exceed Seventy Five Thousand Dollars ($75,000). If Franchisor exercisesits right to purchase the Hotel, but fails to consummate the purchase, thenPurchaser shall have the option (which may be exercised in Purchaser’s solediscretion within thirty (30) days after Purchaser’s receipt of notice thatFranchisor has failed to consummate the purchase) to reinstate theeffectiveness of this Agreement and to complete the purchase of the Hotel, inwhich case the date of reinstatement shall become the new Effective Date.  (b) Purchaser shall promptly and in good faith seek to obtain a newlicense or franchise agreement from Franchisor or from another hotel franchisor**(“Other Franchisor**”), or to assume the existing Franchise Agreement from theFranchisor, in accordance with all applicable provisions of the FranchiseAgreement, including without limitation providing such financial and otherinformation regarding Purchaser as may be reasonably required by the Franchisoror by the Other Franchisor, as appropriate. In connection therewith,
 

 
   Seller shall, at no cost to Seller, cooperate in all reasonable respectswith Purchaser in connection with such application for a new license orfranchise agreement or for the assumption of the existing FranchiseAgreement. At Seller’s expense, Seller has caused Franchisor to inspectthe Hotel and issue a property improvement plan which identifiesimprovements necessary to maintain a franchise agreement with Franchisorupon a sale of the Hotel (the **“PIP”**). Purchaser acknowledges and agreesthat it shall be Purchaser’s obligation to diligently pursue a transfer ofthe Franchise Agreement or a new license or franchise agreement for theHotel from Franchisor or an Other Franchisor. Purchaser shall pay allapplication fees, transfer fees and similar amounts as may be required byFranchisor or by such Other Franchisor, as appropriate, in connection withthe issuance of a new license or franchise agreement to Purchaser or theassumption of the existing Franchise Agreement by Purchaser; provided,however, that Seller shall pay any and all termination fees or terminationcosts relating to the existing Franchise Agreement, if any. Seller shallhave no obligation with respect to the PIP or other work requirement agreedto by Purchaser.  (c) Notwithstanding anything to the contrary set forth in Section4.11(b), Purchaser shall have the right not to assume the existing FranchiseAgreement or not to obtain a new license or franchise agreement from Franchisoror an Other Franchisor, as applicable.  (d) If Purchaser shall neither assume the Franchise Agreement norobtain a new license or franchise agreement from Franchisor, then at theClosing, Seller shall be entitled to remove from the Property and return toFranchisor in accordance with the Franchise Agreement all items of personalproperty marked with Franchisor’s name or other marks, such items shall not bea part of the Purchased Assets and Purchaser shall receive no credit againstthe Purchase Price as a result of the removal of such items from the Property.**V.****REMEDIES**     **5.01 PURCHASER’S DEFAULT/SELLER’S REMEDIES.**IF PURCHASER DEFAULTS UNDER THIS AGREEMENT OROTHERWISE FAILS TO CLOSE THE TRANSACTIONS SET FORTH IN THIS AGREEMENT, FOR ANY REASON EXCEPT (A)THE FAILURE OF ANY CONDITION PRECEDENT TO PURCHASER’S OBLIGATIONS UNDER THIS AGREEMENT OR (B)PURCHASER’S TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS, SELLER SHALL BE ENTITLED ASITS SOLE REMEDY UNDER THIS AGREEMENT TO TERMINATE THIS AGREEMENT AND RECOVER THE EARNEST MONEY (INADDITION TO ATTORNEYS’ FEES PURSUANT TO SECTION 5.03 BELOW, IF APPLICABLE) AS LIQUIDATED DAMAGESAND NOT AS A PENALTY (WHICH EARNEST MONEY SHALL BE PROMPTLY PAID BY ESCROW AGENT TO SELLER UPONSELLER’S AND PURCHASER’S JOINT WRITTEN NOTICE THEREOF TO ESCROW AGENT), IN FULL SATISFACTION OF ANYCLAIMS AGAINST PURCHASER UNDER THIS AGREEMENT. IN CONNECTION THEREWITH, SELLER WAIVES ITS RIGHT TOSEEK SPECIFIC PERFORMANCE OF THIS AGREEMENT FROM PURCHASER. SELLER AND PURCHASER AGREE THAT THESELLER’S DAMAGES RESULTING FROM PURCHASER’S DEFAULT ARE DIFFICULT TO DETERMINE AND THE AMOUNT OFTHE EARNEST MONEY IS A FAIR ESTIMATE OF THOSE DAMAGES. EACH PARTY HEREBY WAIVES ANY AND ALL RIGHTSTO CONTEST THE VALIDITY OF THE FOREGOING LIQUIDATED DAMAGES PROVISIONS FOR ANY REASON WHATSOEVER,INCLUDING, BUT NOT LIMITED TO, SUCH PROVISION BEING UNREASONABLE UNDER CIRCUMSTANCES EXISTING ONTHE EFFECTIVE DATE OR AT THE TIME OF DEFAULT. NOTWITHSTANDING THE FOREGOING, THE ASSERTION ORPAYMENT OF THE FOREGOING LIQUIDATED DAMAGES SHALL NOT BE DEEMED TO BE A WAIVER OF ANY RIGHTS ORREMEDIES THAT SELLER MAY HAVE AGAINST PURCHASER PURSUANT TO ANY PROVISION OF THIS AGREEMENT THATSPECIFICALLY PROVIDES THAT IT SURVIVES THE TERMINATION OF THIS AGREEMENT.
 

 
     Seller’s Initials:                     Purchaser’s Initials:                          **5.02 SELLER DEFAULT/PURCHASER’S REMEDIES.**IF SELLER DEFAULTS UNDER THIS AGREEMENT OROTHERWISE FAILS TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT ON OR PRIOR TO THE CLOSING, FOR ANYREASON EXCEPT THE FAILURE OF ANY CONDITION PRECEDENT TO SELLER’S OBLIGATIONS UNDER THIS AGREEMENT,THEN ANY ONE OF THE FOLLOWING, AND ONLY THE FOLLOWING, SHALL BE AVAILABLE TO PURCHASER AS ITS SOLEAND EXCLUSIVE REMEDY: (A) TO TERMINATE THIS AGREEMENT BY GIVING SELLER WRITTEN NOTICE OF SUCHELECTION PRIOR TO OR AT CLOSING WHEREUPON THE ESCROW AGENT SHALL PROMPTLY RETURN TO PURCHASER THEEARNEST MONEY, AND THE PARTIES SHALL HAVE NO FURTHER RIGHTS OR LIABILITIES UNDER THIS AGREEMENTEXCEPT (1) FOR THOSE PROVISIONS WHICH SPECIFICALLY PROVIDE THAT THEY SURVIVE THE TERMINATION OFTHIS AGREEMENT AND (2) SELLER SHALL REIMBURSE PURCHASER FOR (i) PURCHASER’S ACTUAL THIRD-PARTY OUTOF POCKET DUE DILIGENCE COSTS AND OUTSIDE LEGAL FEES, IN AN AMOUNT NOT TO EXCEED FIFTY THOUSANDDOLLARS ($50,000) and (ii) PURCHASER’S ACTUAL NON-REFUNDABLE FEES AND COSTS PAID BY SELLER TOFRANCHISOR IN CONNECTION WITH OBTAINING A NEW LICENSE OR FRANCHISE AGREEMENT FOR THE PROPERTY, INAN AMOUNT NOT TO EXCEED SEVENTY FIVE THOUSAND DOLLARS ($75,000); OR (B) TO WAIVE THE DEFAULT ANDCLOSE; OR (C) TO ENFORCE SPECIFIC PERFORMANCE OF THIS AGREEMENT.     Seller’s Initials:                     Purchaser’s Initials:                          **5.03 Attorneys’ Fees.**If any litigation between Seller and Purchaser shall arise inconnection with this Agreement, then the prevailing party shall be entitled to the payment by theother party of the prevailing party’s actual reasonable attorneys’ fees and costs related to suchlitigation. The provisions of this Section 5.03 shall be in addition to and not limited by theprovisions of Sections 5.01 and/or 5.02 above.**VI.****Closing Matters**     **6.01 Closing Date.**The delivery of the Deed and other documents required hereunder (the**“Closing”**) shall be held at the Title Company’s offices or by mail, or through escrow with theEscrow Agent, on the earlier of (i) November 10, 2005 and (ii) two (2) business days afterPurchaser receives Franchisor’s approval to assume the Franchise Agreement or Purchaser receives anew license from Franchisor (the **“Closing Date**”), or such other date as may be agreed to by Sellerand Purchaser in their sole discretion.     **6.02 Adjustment and Prorations.**The matters and items set forth below shall be apportionedbetween Seller and Purchaser or, where applicable, credited in total to a particular party: (a) **Taxes.**All real and personal property taxes and specialassessments, if any, whether payable in installments or not, payable in the taxyear in which the Closing Date occurs shall be prorated as of the Cut-Off Time.If such taxes for the tax year in which the Closing Date occurs have not beenfinally determined on the Closing Date, then such taxes shall be prorated on anestimated basis using the most current information available and shall not besubject to further adjustment (unless an actual bill is received within ninety(90) days after the Closing Date).  (b) **Room Rentals.**One-half (50%) of the room rentals and relatedtaxes attributable to the night prior to the Closing Date shall be credited atClosing to Seller and the remaining one-half (50%) shall be credited toPurchaser at Closing. Room rentals attributable to any night prior to thenight prior to the Closing Date shall be credited to Seller at Closing.  (c) **Reservation Deposits.**Prepaid and unearned reservationdeposits and other items prepaid by guests of the Hotel shall be credited ortransferred to Purchaser at the Closing.
 

 
 (d) **Utility and Permit Charges.**Utility charges for telephone,gas, electricity, sewer, water and other services shall not be prorated to theextent that Seller can make arrangements for the rendering of final bills basedon meter readings as of the Cut-Off Time. Seller shall be responsible for thepayment at the Closing of all bills for utility charges up to and including theCut-Off Time. To the extent that utility bills cannot be rendered as of theClosing Date, such charges for the period through the Cut-Off Time shall beprorated as of the Cut-Off Time based upon the most recent available bills andreadjusted on the basis of the actual bills as and when received. If Purchaserelects, any transferable utility deposits shall be transferred to Purchaser andcredited to Seller. Seller shall receive a credit at Closing for any prepaidPermit fees and similar prepaid expenses.  (e) **Operating Expenses and Trade Accounts.**Seller shall beresponsible for all operating expenses and trade accounts of the Property(including charges and fees payable under the Hotel Contracts) up to andincluding the Cut-Off Time. To the extent the amounts of such items are thenknown, Seller shall pay such items at Closing and shall pay the balance of suchamounts in the ordinary course of business consistent with past practices, butin no event later than forty-five (45) days after the Closing Date. Purchasershall assume responsibility for purchase orders made by Seller prior to theClosing Date in the ordinary course of business consistent with past practicesfor Expendables or Consumables not delivered to the Hotel as of the ClosingDate. Purchaser shall be deemed to have assumed any and all operating expensesand trade accounts to the extent Purchaser shall have received a credittherefor under this Section 6.02. All prepaid expenses shall be credited toSeller.  (f) **Food, Beverage and Other Income.**Revenues from food, beverageand banquet services, room service, public room revenues, health club revenues,vending machine revenues belonging to Seller or MHL, and other servicesrendered to guests of the Hotel shall be prorated as of the Cut-Off Time, if,as and when collected.  (g) **Rents.**All rentals under any Space Leases (including fixedrents and charges in respect of electricity, operating expenses and taxes)shall be prorated as of the Cut-Off Time if, as and when collected. Paymentsfrom tenants under the Space Leases for electricity, operating expenses andtaxes which are billed to tenants in arrears or on an estimated basis shall beprorated on such basis and readjusted if, as and when such amounts are finallydetermined and collected.  (h) **Employees.**All wages and earned but unpaid fringe benefits ofHotel Employees through the Cut-Off Time shall be paid to such Hotel Employeesby Seller as provided in Section 6.07 and shall not be prorated.  (i) **Security Deposits.**Any security deposits under the SpaceLeases shall be transferred to Purchaser at the Closing or credited against thePurchase Price.  (j) **Cash.**All cash on hand in house banks on the morning of theClosing Date shall become the property of Purchaser and the amount thereofshall be credited to Seller.  (k) **Ledger and Other Receivables.**All accounts receivableattributable to guests in the Hotel on the night preceding the Closing (the**“Ledger**”) shall be prorated as provided in this Agreement, Seller’s share shallbe credited to Seller and the Ledger shall become the property of Purchaser.All other accounts receivable shall be transferred and conveyed to Purchaser atClosing, and Seller shall be paid by Purchaser at Closing an amount equal tothe total amount of all such receivables, less a credit of Twenty-eightThousand Dollars ($28,000) on account of the receivables set forth onExhibit J (the “**Scheduled Receivables**”). From and after Closing,Purchaser shall undertake commercially reasonable efforts to collect theScheduled Receivables, and shall remit to Seller all such
 

 
   funds collected on account of the Scheduled Receivables promptly afterreceipt of payment.  (l) **Unopened Cases of Consumables.**Seller shall receive a creditfor the cost (i.e., the amount paid by Seller) of all unopened and unused casesof Consumables which are as of the Closing Date stored at the Hotel.  (m) **Delayed Adjustments.**If at any time following the Closing Datethe amount of an item listed in this Section 6.02 shall prove to be incorrect,the party in whose favor the error was made shall pay to the other party withinfifteen (15) days after request the sum necessary to correct such error uponreceipt of proof of such error, provided that such proof is delivered to theparty from whom payment is requested on or before ninety (90) days after theClosing Date. The acceptance of the closing statement by either party shallnot prevent later readjustment pursuant to this Section. After the ClosingDate, each party shall have reasonable access to the books and records of theother party with respect to all matters set forth in this Section 6.02 for thepurposes of determining the accuracy of all adjustments and the performance ofthe obligations of the parties under this Section.     **6.03 Guest Property in Seller’s Possession on Closing Date.**Property of guests of the Hotelin Seller’s care, possession or control (excluding that in guest rooms) on the Closing Date shallbe handled in the following manner: (a) **Safe Deposit Boxes.**On the Closing Date, Seller shall causenotice to be sent to all guests of the Hotel who have safe deposit boxesadvising them of the pending sale of the Property and requesting the removaland verification of the contents of such safe deposit boxes within three (3)days after the Closing Date. Seller may have a representative present at theHotel during such three (3) day period for the purpose of viewing such removaland verification. Boxes of guests not responding to the written notice shallbe listed at the end of such three (3) day period. Such boxes shall be openedon the following day in the presence of representatives of Seller and Purchaserto be agreed upon between Seller and Purchaser and the contents thereof shallbe recorded. Any property contained in the safe deposit boxes and so recordedand thereafter remaining in the hands of Purchaser shall be the responsibilityof Purchaser, and Purchaser hereby agrees to indemnify and save and hold Sellerharmless from and against any claim or obligation arising out of or withrespect to such property.  (b) **Baggage Inventory.**All guest baggage checked and left in thepossession, care and control of Seller shall be listed in an inventory to beprepared in duplicate and signed by Seller’s and Purchaser’s representatives onthe Closing Date. Purchaser shall be responsible from and after the ClosingDate for all baggage listed in inventory, and Purchaser hereby agrees toindemnify and save and hold Seller harmless from and against any claim arisingout of or with respect to the baggage listed in the inventory.  (c) **Other Property.**All other guest property left in thepossession, care or control of Seller prior to the Closing Date shall bereturned by Seller to guests prior to the Closing Date and if not so returnedprior to the Closing Date shall be the sole responsibility of Seller subsequentto the Closing Date.     The provisions of this Section 6.03 shall survive the Closing.     **6.04 Closing Documents.** (a) In addition to any other deliveries required of Seller pursuantto the terms of this Agreement, at Closing Seller shall deliver, or cause to bedelivered, to Purchaser the following:
 

 
 (i) a special warranty deed (or local equivalent)conveying the fee estate in the Property to Purchaser as set forth inSection 3.05 (the **“Deed”**).  (ii) bills of sale transferring to Purchaser all ofthe Furnishings, Expendables, Consumables, Miscellaneous PersonalProperty, Books and Records and Warranties owned by Seller or MHL withrespect to the Property free of all encumbrances except for thePermitted Exceptions, without representation or warranty other than asprovided herein.  (iii) one or more assignments conveying andtransferring to Purchaser all of the Bookings, the Space Leases, theHotel Contracts and any other Hotel Contract which Seller was permittedto enter between the date hereof and the Closing pursuant to aprovision of this Agreement, and the assignable Permits.  (iv) possession of the Property (subject to therights of tenants, guests and invitees).  (v) evidence reasonably acceptable to Purchaser andacceptable to the title company of the termination of the MHL Lease andthe Management Agreement.  (vi) a certified copy of such good standingcertificates, authorizations, approvals and incumbencies of Seller asthe Title Company shall reasonably require.  (vii) a FIRPTA Affidavit in form required by theInternal Revenue Service.  (viii) original counterparts of the Hotel Contracts, Space Leases andassignable Permits, all to the extent in Seller’s possession, and allBooks and Records relating to the Property and the Hotel in Seller’spossession (provided that Seller shall have the right to make copies ofsuch Hotel Contracts, Space Leases and assignable Permits and suchbooks and records, and after Closing to have reasonable access to thesame, to the extent required by Seller for accounting, tax reporting orother reporting purposes).  (ix) any and all plans and specifications for theImprovements on the Property in Seller’s possession.  (x) such notices of the sale to third parties asmay be reasonably requested by the Purchaser.  (xi) such affidavits, indemnities and relatedmatters as the Title Company may reasonably request, including withoutlimitation such affidavits and indemnities as may be required to permitthe Title Company to delete any exceptions for mechanic’s liens.  (xii) a certificate restating and reaffirmingSeller’s representations and warranties pursuant to Section 4.06(a)hereof, with such changes as shall be necessary to make suchrepresentations true, complete, and accurate in all material respectsas of the Closing Date.  (xiii) an amendment to the Master Fee Agreement as contemplated by Section2.02(c).  (xiv) all of the Required Consents for which Selleris responsible as set forth on Exhibit I.
 

 
 (b) In addition to any other deliveries required of Purchaserpursuant to the terms of this Agreement, at Closing Purchaser shall deliver orcause to be delivered to Seller the following: (i) the balance of the Purchase Price payablepursuant to Section 2.02(d).  (ii) such good standing certificates,authorizations, approvals and incumbencies as the Title Company shallreasonably require.  (iii) an assumption of the obligations (but not theobligations relating to any breach or default existing as of theClosing or which arose due to actions or events occurring prior to theClosing) of Seller from and after the Closing under the Bookings, SpaceLeases and Hotel Contracts (including those which Seller was permittedto enter into between the date hereof and the Closing pursuant to aprovision of this Agreement), and assignable Permits (collectively, the**“Assumed Obligations”**).  (iv) a certificate restating and reaffirmingPurchaser’s representations and warranties pursuant to Section 4.06(a)hereof, with such changes as shall be necessary to make suchrepresentations true, complete, and accurate in all material respectsas of the Closing Date.  (v) an amendment to the Master Fee Agreement ascontemplated by Section 2.02(c).  (vi) all of the Required Consents for whichPurchaser is responsible as set forth on Exhibit I.     **6.05 Closing Costs.** (a) Purchaser shall pay (i) all recording fees imposed inconnection with the recordation of the Deed and any deed of trust or mortgageon the Property securing Purchaser’s lender, (ii) Survey costs, (iii) thepremiums for the Title Policy, (iv) the costs of its due diligenceinvestigation of the Purchased Assets, (v) all amounts incurred in connectionwith the issuance of a new license or franchise agreement for the Hotel,including, but not limited to, application fees, transfer fees, and costs ofimplementing a property improvement plan, but excluding any and all terminationfees or costs, and (vi) the fees and disbursements of Purchaser’s attorneys.Purchaser shall pay one-half of the escrow fees of Escrow Agent.  (b) Seller shall pay (i) all transfer taxes and deed stamps imposedin connection with the conveyance of the Property, (ii) all recording feesimposed in connection with the recordation of documents necessary to removeencumbrances, (iii) the termination fees and costs payable under the ManagementAgreement, (iv) the termination fees and costs payable under the FranchiseAgreement, (v) sales taxes imposed in connection with any items of personalproperty, (vi) all fees and costs in connection with obtaining any RequiredConsent, and (vii) the fees and disbursements of Seller’s attorneys. Sellershall pay one-half of the escrow fees of Escrow Agent.  (c) Any other closing cost not specifically allocated by thisAgreement shall be allocated in accordance with closing customs for similarproperties in the metropolitan area of the Property.
 

 
 (d) The provisions of this Section 6.05 shall survive the Closingor any termination of this Agreement.     **6.06 Real Estate Commissions.**Seller and Purchaser each represent and warrant to the otherthat it has dealt with no broker or finder in the negotiation of this transaction other than Jones,Lang LaSalle (the **“Brokers**”). Each party agrees to and does hereby indemnify and hold the otherharmless against the payment of any commission or finder’s fee to any person or entity claiming by,through or under Seller or Purchaser, as applicable. Seller shall pay the commission of Brokerspursuant to separate agreement. The provisions of this Section 6.06 shall survive Closing.     **6.07 Staff.** (a) Seller shall pay all wages, payroll taxes and fringe benefits(including vacation pay and sick pay to the extent actually earned) as well associal security, unemployment compensation, health, life and disabilityinsurance and pension fund contributions, if any, through the Closing Date.Except as set forth in Section 6.07(b), Seller will indemnify, defend and holdPurchaser harmless from and against any loss, damage, liability, claim, cost orexpense (including, without limitation, reasonable attorneys’ fees) that may beincurred by, or asserted against, Purchaser after Closing which involves anymatter relating to a past or present Hotel Employee concerning acts oromissions occurring up to the Cut-Off Time, including, but not limited to, thepayments required under the prior sentence. Purchaser will indemnify, defendand hold Seller, MHL and Manager harmless from and against any loss, damage,liability, claim, cost or expense (including, without limitation, reasonableattorney’s fees) that may be incurred by, or asserted against, any such partyafter Closing which involves any matter relating to a Hotel Employee concerningacts or omissions occurring after the Cut-Off Time, including, withoutlimitation, any payment required to be made by Purchaser under this Section6.07.  (b) Purchaser acknowledges that Seller shall not be employing theHotel Employees upon the Closing and that Seller is not giving any noticeunder, or otherwise complying with, the Worker Adjustment and RetrainingNotification Act (together with all rules and regulations promulgatedthereunder, the **“WARN Act**”). Purchaser agrees to hire a sufficient number ofthe Hotel Employees, and on such terms and conditions, as to avoid anyviolation of the WARN Act and/or any other similar state or local Laws in theabsence of such notice, and agrees to indemnify and defend Seller, MHL andManager, and hold them harmless, from and against any and all loss, damage,liability, claim, cost or expense (including, without limitation, reasonableattorneys’ fees) incurred by any of such parties as a result of the failure togive such notice or otherwise comply with the WARN Act and/or any other similarstate or local Laws (including, but not limited to, the closing of the Hotel byPurchaser within a period of sixty (60) days after the Closing Date which wouldresult in either (a) a “plant closing” as defined in the WARN Act or (b) aviolation under other applicable Laws); provided, however, and without limitingthe foregoing, that Purchaser shall (i) not close the Hotel within sixty (60)days after the Closing Date and (ii) rehire at least eighty percent (80%) ofthe Hotel Employees.  (c) The provisions of Section 6.07 shall survive the Closing.     **6.08 Further Assurances.**Each party agrees that it will without further consideration executeand deliver such other documents and take such other action, whether prior or subsequent toClosing, as may be reasonably requested by the other party to consummate more effectively thepurposes or subject matter of this Agreement.     **6.09 Release**. Reference is made to that certain letter dated September 27, 2005 from Bruce G.Wiles of MeriStar Hospitality Company (**“MeriStar”**) to William Richardson of Interstate Hotels &Resorts, Inc. (**“Interstate”**) regarding management contracts for various hotels specified therein,as well as issues regarding the operation and sale of the Hotel (the **“Letter”**). Seller, on behalfof itself and each of its affiliates (including without
 

 
limitation MeriStar) (collectively, the **“Releasing Parties”**), hereby releases Interstate and eachof its affiliates (including without limitation Purchaser and the Manager), and their respectivedirectors, officers, shareholders, members, partners, managers, representatives, agents andemployees, from any and all claims, causes of action, liability, losses and damages which any ofthe Releasing Parties may have pursuant to the Letter or, except as otherwise provided in thisAgreement, in connection with the subject matter thereof, but only to the extent related to theHotel. The provisions of this Section shall survive the Closing or termination of this Agreement,as applicable.**VII.****Condemnation and Risk of Loss**     **7.01 Condemnation.**If, prior to Closing, any governmental authority or other entity havingcondemnation authority shall institute an eminent domain proceeding or take any steps preliminarythereto (including the giving of any direct or indirect notice of intent to institute suchproceedings) with regard to any material portion of the Property (including without limitation thetaking of any parking spaces or any access to the Property), and the same is not dismissed prior toClosing, Seller shall promptly notify Purchaser thereof, and Purchaser shall be entitled either toterminate this Agreement upon written notice to Seller or to waive such right of termination andreceive all such condemnation proceeds or an assignment thereof at the Closing. In the eventPurchaser elects to terminate this Agreement under this Section 7.01, Escrow Agent shall promptlyreturn to Purchaser the Earnest Money and the parties shall have no further rights or liabilitiesunder this Agreement except for those provisions which specifically provide that they survive thetermination of this Agreement.     **7.02 Risk of Loss.**Until Closing, Seller shall bear the risk of loss should there be damageto any of the Improvements by fire or other casualty. If prior to the Closing the Improvementsshall be damaged by fire or other casualty, Seller shall promptly take all actions reasonablynecessary to preserve and protect the Improvements from further loss or damage, and within five (5)business days after such loss deliver to Purchaser the following items (collectively **“Casualty LossInformation**”): (a) copies of all casualty and business interruption policies relating to theProperty; (b) the names, addresses and telephone numbers of the adjustors assigned to adjust theloss; (c) letters addressed to each insurance company issuing a policy covering such loss andexecuted by Seller authorizing said company and its adjustors to discuss all matters relating tosuch loss with Purchaser, its agents and attorneys; and (d) a reasonable written description of thedamages incurred and a good faith estimate of the cost of restoration. If the Improvements suffermaterial damage by a casualty, which, for the purpose of this Section, shall mean damage whichwould require an expenditure in excess of five percent (5%) or more of the Purchase Price torepair, Purchaser may within five (5) business days after delivery of the Casualty Loss Informationeither: (a) terminate this Agreement by delivering written notice of sameto Seller, in which event Escrow Agent shall promptly return to Purchaser theEarnest Money and the parties shall have no further rights or liabilities underthis Agreement except for those provisions which specifically provide that theysurvive the termination of this Agreement; or  (b) waive its right of termination, by delivering written notice ofsame to Seller, and proceed to close this transaction in accordance with theterms hereof.At Closing, (i) the amount of any deductibles under the applicable insurance policies and allinsurance proceeds received prior to Closing shall be delivered to Purchaser other than suchproceeds as shall have been applied to the restoration of the Property, (ii) Purchaser may notifyall appropriate insurance companies of its interest in the insurance proceeds, (iii) all casualtyinsurance proceeds payable as a result of the loss and Purchaser’s pro rata share of any rental orbusiness loss proceeds shall be assigned to Purchaser at Closing and (iv) Purchaser shall assumeall contracts or other agreements entered into by Seller with non-affiliated third parties topreserve and protect the Improvements pursuant to the second sentence of this Section and any othercontracts entered into by Seller and approved in writing by Purchaser with respect to therestoration of the Property.
 

 
**VIII.****Indemnities**     **8.01 Seller’s Indemnity.**For a period of two (2) years from and after the Closing, Sellershall indemnify, defend and hold Purchaser harmless from any and all actual costs, loss, damages(excluding consequential and punitive damages) or expenses (including without limitation reasonableattorneys’ fees) incurred by Purchaser with respect to (i) any breach by Seller of any of itscovenants in this Agreement, (ii) Seller’s failure to duly perform, pay and discharge any liabilityor obligation of Seller, other than the Assumed Obligations, and (iii) Seller’s ownership andoperation of the Hotel and the Property prior to the Closing.     **8.02 Purchaser’s Indemnity.**For a period of two (2) years from and after the Closing,Purchaser shall indemnify, defend and hold Seller harmless from any and all actual costs, loss,damages (excluding consequential and punitive damages) or expenses (including without limitationreasonable attorneys’ fees) incurred by Seller with respect to (i) any breach by Purchaser of anyof its covenants in this Agreement, (ii) Purchaser’s failure to duly perform, pay and discharge anyof the Assumed Obligations, and (iii) Purchaser’s ownership and operation of the Hotel and theProperty after the Closing.**IX.****Miscellaneous**     **9.01 Entire Agreement.**This Agreement supercedes the terms of the letter agreement betweenSeller and Purchaser dated July 7, 2005, and contains the entire agreement of the parties withrespect to the subject matter of this Agreement. There are no other agreements, oral or written,and this Agreement can be amended only by written agreement signed by Seller and Purchaser.     **9.02 Binding Effect; Assignment.**This Agreement shall inure to the benefit of and be bindingupon the successors and assigns of each of the parties to this Agreement. Purchaser may not assignthis Agreement without the prior written consent of Seller which may be withheld in Seller’s solediscretion, provided, however, that Purchaser may, with five (5) days prior notice to Seller,assign its rights under this Agreement without Seller’s consent to any entity, partnership orlimited liability company wholly owned (directly or indirectly) by Interstate Hotels & Resorts,Inc., provided that (a) no further assignment after the initial assignment by Purchaser shall bepermitted without Seller’s consent, (b) Purchaser shall remain primarily liable in all respects forits liabilities and obligations under this Agreement, (c) such assignment will not delay theClosing nor require Seller to obtain any additional third party consents, certificates orapprovals, and (d) Purchaser’s assignee must have a net worth reasonably acceptable to Seller. Noassignment of this Agreement shall release Purchaser from its obligations under this Agreement.Any assignee of this Agreement shall be jointly and severally liable for all obligations ofPurchaser hereunder.     **9.03 Notices.**Any notice, communication, request, reply or advice (collectively, **“Notice**”)provided for or permitted by this Agreement must be in writing. Notices shall be given by deliveryby national overnight courier or by facsimile transmission followed by delivery by nationalovernight courier. Notice by overnight courier shall be effective one (1) business day afterdeposit with the courier service. Notice given by confirmed facsimile transmission shall beeffective on the business date delivered. For the purposes of Notice, the addresses of the partiesshall be:                        Seller:                                         Fax No.:                     Phone:                     Attn:                              with copy to: Arnold & Porter LLP                                            
 

 
               Fax No.:                     Phone:                     Attn:                              Purchaser: 4501 N. Fairfax Drive        Arlington, VA 22203        Fax No.: (703) 387-3389        Phone: (703) 387-3332        Attn: Christopher L. Bennett, Senior Vice President and General Counsel               with copy to: Eckert Seamans Cherin & Mellott, LLC                                              Fax No.:                     Phone:                     Attn:                 The parties shall have the right from time to time to change their respective addresses for noticeby providing at least five (5) days’ written notice to the other party.     **9.04 Governing Law; Waiver of Jury Trial.**This Agreement shall be construed in accordancewith the laws of the state in which the Property is located, without regard to its conflict of lawsprinciples. Seller and Purchaser each hereby waives any right to jury trial in the event any partyfiles an action relating to this Agreement or to the transactions or obligations contemplated bythis Agreement.     **9.05 Section Headings.**The section headings contained in this Agreement are for convenienceonly and shall in no way enlarge or limit the scope or meaning of the various and several sectionsof this Agreement. Any reference in this Agreement to “Sections,” or “Exhibits” shall bereferences to Sections or Exhibits of this Agreement unless otherwise specified.     **9.06 Time of the Essence.**Time shall be of the essence with respect to the performance of allobligations of the parties under this Agreement.     **9.07 Nonrecordation.**Neither this Agreement nor any memorandum thereof shall be recorded.     **9.08 Confidentiality.** (a) Purchaser agrees that, until after the Closing, alldocumentation or other information delivered to Purchaser or itsrepresentatives or agents by Seller or Seller’s representatives or agentspertaining to the Purchased Assets shall be kept strictly confidential and willnot be used by Purchaser or its representatives or agents, directly orindirectly, for any purpose other than evaluating the Purchased Assets.Purchaser may however make appropriate disclosures to its investors and lendersand to its and their respective attorneys, accountants and consultants engagedin connection with this transaction or to such other persons or entities towhich disclosure is legally required.  (b) If Purchaser does not acquire the Property for any reasonwhatsoever, Purchaser shall deliver to Seller, promptly upon demand at no costto Seller, all materials and documents previously obtained by Purchaser fromSeller (with no retention by Purchaser of copies of any such materials anddocuments), and copies of all third-party engineering work, soils reports,environmental/biological studies, appraisals, and other materials pertaining tothe Property (other than information generated by its counsel) as Purchaser hasprepared or caused to be prepared. Such delivery shall be made withoutrepresentation or warranty by Purchaser as to the contents of such items andSeller shall not be entitled to rely on such items.
 

 
 (c) Prior to the Closing, neither party shall, without the priorwritten consent of the other party (which consent shall not be unreasonablywithheld), issue any press release or other public statement (except suchstatements as may be required by law) in connection with the transactionscontemplated hereby. From and after the Closing, the parties may issue such apress release or other public statement provided that the same does notdescribe the economic terms of this transaction except to the extent requiredby law.  (d) Each party is authorized to disclose the tax treatment and taxstructure of the transactions set forth in this Agreement.  (e) This Section 9.08 shall survive the Closing or any terminationof this Agreement.     **9.09 Counterparts; Execution by Facsimile.**This Agreement may be executed in two (2) or morecounterparts, each of which shall be deemed an original but all of which together shall constituteone and the same instrument. Executed counterparts of this Agreement exchanged by facsimiletransmission shall be fully enforceable.     **9.10 1031 Exchange.**Purchaser acknowledges that Seller has advised Purchaser that Seller isreserving its right to exchange the Property for other property of like kind and qualifying usewithin the meaning of Section 1031 of the Internal Revenue Code of 1986, as amended, and theregulations promulgated thereunder. Seller expressly reserves the right to assign its rights, butnot its obligations, under this Agreement to a “Qualified Intermediary” as provided in suchregulations on or before the Closing Date; provided, however, that the exchange contemplated bythis Section 9.10 shall in no event delay the Closing beyond the Closing Date. Purchaser agrees tocooperate with Seller to effectuate such exchange but Purchaser shall assume no liability or incurany expense in connection therewith. Seller shall pay all costs and advance all funds required inconnection with such exchange and shall indemnify, defend, and hold Purchaser harmless from allclaims, damages, liabilities, costs and expenses (including, but not limited to reasonable legalfees) in connection with such exchange. Purchaser shall in no event be required to take title tothe exchanged property.     **9.11 Bulk Transfers.**Seller and Purchaser specifically waive compliance with the UniformCommercial Code of the State in which the Property is located with respect to bulk transfers, withany similar provision under any applicable law of such State or the county and city in which theProperty is located. In the event such waiver is ineffective, Seller shall indemnify Purchaser forany claims made by creditors under the applicable bulk sales laws relating solely to anypre-Closing payment obligations to such creditors and only in the amount of the payments due suchcreditors. The provisions of this Section 9.11 shall survive the Closing.     **9.12 No Third-Party Beneficiaries.**Seller and Purchaser agree that there are no third partieswho are intended to benefit from or who are entitled to rely on any of the provisions of thisAgreement. No third party shall be entitled to assert any claims or to enforce any rightswhatsoever pursuant to this Agreement. The covenants and agreements provided in this Agreement aresolely for the benefit of Seller and Purchaser and their permitted successors and assignsrespectively.     **9.13 Contract Construction.**In the event of litigation between the parties hereto thisAgreement shall not be construed against any party on the basis of which party’s counsel draftedthis Agreement.     **9.14 Saturdays, Sundays, Legal Holidays.**If the time period by which any right, option, orelection provided under this Agreement must be exercised or by which any acts or payments requiredhereunder must be performed or paid, or by which the Closing must be held, expires on a Saturday,Sunday, legal or bank holiday, then such time period shall be automatically extended to the nextregularly scheduled business day.[Signatures appear on the following page.]
 

 
     **IN WITNESS WHEREOF**, this Agreement has been duly executed in multiple counterparts by theparties hereto as of the date and year first above written.                **SELLER:**           **MERISTAR HOSPITALITY OPERATING**    **PARTNERSHIP, L.P.**           By: MeriStar Hospitality Corporation,                its general partner           By: /s/ DONALD D. OLINGER           Name: Donald D. Olinger           Title: Chief Financial Officer                  **PURCHASER:**           **INTERSTATE DURHAM, LLC**           By: /s/ CHRISTOPHER L. BENNETT           Name: Christopher L. Bennett           Title: Senior Vice President and General Counsel       
 

 
**FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT**     THISFIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this“Amendment”) is made andentered into as of November 10, 2005, by and between MERISTAR HOSPITALITY OPERATING PARTNERSHIP,L.P., Delaware limited partnership (“Seller”), and INTERSTATE DURHAM, LLC, a Delaware limitedliability company (“Purchaser”).**RECITALS:**     WHEREAS, Purchaser and Seller are parties to that certain Purchase and SaleAgreement dated as of October 31, 2005 (the “Agreement”); and     WHEREAS, Purchaser and Seller now desire to amend the Agreement to extend the date on orbefore which the Closing must occur, all upon the terms and conditions set forth below.     NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained,the parties hereto, intending to be legally bound hereby, agree as follows:     1. DefinedTerms. Capitalized terms used but not defined herein have themeanings ascribed to them in the Agreement.     2. Amendmentof Section 6.01. Section 6.01 of the Agreement is herebyamended by deleting “November 10, 2005” and replacing it with “November 22, 2005.”     3. NoOther Amendment. All other provisions of the Agreement notspecifically referenced in this Amendment shall remain in full force and effect.     4. EntireAgreement. The Agreement, as amended by this Amendment,constitutes the entire agreement between the parties hereto with respect to the subject matterthereof and together supersede all prior agreements and understandings, whether oral orwritten, between the parties hereto with respect to the subject matter thereof.     5. GoverningLaw. This Amendment shall be governed by and construed inaccordance with the laws of the State of North Carolina, without regard to its conflicts oflaw principles.     6. Counterparts. This Amendment may be executed in any number ofcounterparts, each of which shall, when executed, be deemed to be an original and all of whichshall be deemed to be one and the same instrument. Signatures on this Amendment transmittedby facsimile shall be deemed to be original signatures for all purposes of this Amendment.[Signatures appear on the following page.]
 

 
     IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the datefirst above written.           MERISTAR HOSPITALITY OPERATING